Court Opinion

ID: 2803235
Source: CourtListenerOpinion
Date Created: 2015-05-26 15:02:14.349516+00
Date Added: 2024-06-11T09:13:15.494208
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 14-1892
                        ___________________________

                                  Unison Co., Ltd.

                        lllllllllllllllllllll Plaintiff - Appellee

                                           v.

Juhl Energy Development, Inc.; Juhl Energy, Inc.; Winona Wind Holdings, LLC;
  Winona County Wind, LLC; Daniel Juhl; John Mitola; John Brand; Bartly J.
                   Loethen; Audrey Loethen; Jeff Bendel

                     lllllllllllllllllllll Defendants - Appellants
                                      ____________

                    Appeal from United States District Court
                   for the District of Minnesota - Minneapolis
                                  ____________

                           Submitted: February 11, 2015
                              Filed: May 26, 2015
                                 ____________

Before GRUENDER, SHEPHERD, and KELLY, Circuit Judges.
                        ____________

KELLY, Circuit Judge.

      Juhl Energy Development, Inc. (JEDI), appeals from the district court’s order
denying its motion to compel arbitration for contract disputes between JEDI and
Unison Co., Ltd. (Unison). Because the arbitration clause in the Turbine Supply
Agreement (TSA) covers the parties’ dispute, we reverse the judgment.
                                 I.    Background

      Unison is a South Korean company that manufactures, sells, delivers, and
services Wind Turbine Generators (WTGs). JEDI is a corporate subsidiary of another
named defendant, Juhl Energy, Inc., and is incorporated and located in Minnesota.
JEDI and Unison are parties to the contractual agreements at issue; the other
defendants are not.1 There are two agreements between JEDI and Unison that are
relevant in this case: the TSA and the Financing Agreement (FA). In the TSA,
Unison agreed to design, manufacture, and sell two WTGs to JEDI for installation in
Minnesota in exchange for $2,574,900; the effective date for the TSA was April 16,
2010. In the FA, Unison agreed to lend to JEDI the amount of the TSA contract
price—$2,574,900; the effective date for the FA was April 14, 2010.

       Unison brought suit against JEDI in federal court in Minnesota, asserting
17 claims for relief, all of which relate to the FA. JEDI filed a motion to compel
arbitration, based on an arbitration clause in the TSA, and to dismiss Unison’s
complaint. Following a hearing, the district court denied the motion, and JEDI timely
appealed. This court has jurisdiction pursuant to 28 U.S.C. § 1294 and 9 U.S.C. §
16(a)(1)(C).

                                 II.    Discussion

      “We review de novo the district court’s denial of a motion to compel arbitration
based on contract interpretation.” Indus. Wire Prods., Inc. v. Costco Wholesale
Corp., 576 F.3d 516, 520 (8th Cir. 2009) (quotation omitted). “If the district court’s

      1
      The parties concede all other defendants’ rights regarding arbitration will be
decided based on JEDI’s right to compel arbitration, because the claims against all
named defendants should be heard in one forum.

                                         -2-
order concerning arbitrability is based on factual findings, we review such findings
for clear error.” Lyster v. Ryan’s Family Steak Houses, Inc., 239 F.3d 943, 945 (8th
Cir. 2001). “[A]rbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so to submit.” AT&T
Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986) (quotation
omitted). “The [Federal Arbitration Act] limits a district court’s initial role in any
challenge to an arbitration agreement to . . . 1) whether the agreement for arbitration
was validly made and 2) whether the arbitration agreement applies to the dispute at
hand, i.e., whether the dispute falls within the scope of the arbitration agreement.”
Indus. Wire Prods., 576 F.3d at 520 (internal quotation omitted). The parties concede
the arbitration clause in the TSA is valid; they disagree about whether it applies to
Unison’s complaint.

       We must liberally construe a valid arbitration clause, “resolving any doubts in
favor of arbitration . . . unless it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation that covers the asserted
dispute.” 3M Co. v. Amtex Sec., Inc., 542 F.3d 1193, 1199 (8th Cir. 2008) (quotation
omitted). In making this determination, we must decide whether the arbitration clause
is broad or narrow. Fleet Tire Serv. of N. Little Rock v. Oliver Rubber Co., 118 F.3d
619, 621 (8th Cir. 1997) (finding the arbitration clause at issue was broad, because
arbitration was available for claims both “arising from” and “relating to” the
agreement). If the clause is broad, the “liberal federal policy favoring arbitration
agreements requires that a district court send a claim to arbitration . . . as long as the
underlying factual allegations simply touch matters covered by the arbitration
provision.” 3M Co., 542 F.3d at 1199 (quotations and internal citation omitted).

      The arbitration clause at issue in this case is located in the TSA. The relevant
paragraphs of the TSA read as follows:

                                           -3-
      16.1 Negotiation of Disputes. The Parties agree that in the event any
           dispute arises between them under or in connection with this
           Agreement or any legal relationship associated with or
           contemplated by this Agreement (the “Dispute”), the Parties shall
           first promptly make all reasonable efforts to resolve the Dispute
           by amicable negotiations involving senior representatives of the
           Parties. . . .

      16.2 Arbitration. If the Parties fail to resolve the Dispute within 21
           days pursuant to Section 16.1 (or any such longer period as
           Parties may mutually agree to in writing), then either Party may
           submit the Dispute for binding arbitration by delivering to the
           other Party a written notice (a “Notice of Arbitration”) . . . .

       According to the terms of the TSA, a Dispute is “any dispute” arising between
the parties “under or in connection with [the TSA] or any legal relationship associated
with or contemplated by [the TSA].” A party may then submit any such Dispute, if
not resolved in a specified time, “for binding arbitration . . . .” The FA, in contrast,
contains no such provision.

        The arbitration clause in the TSA is at least as broad as the arbitration clauses
this court has considered in two instructive cases. In Fleet Tire, the clause stated that
“[a]ny controversy or claim arising out of or relating to this Agreement or any breach
of its terms shall be settled by arbitration . . . .” 118 F.3d at 620. We found in Fleet
Tire that the clause “constitutes the broadest language the parties could reasonably
use to subject their disputes to that form of settlement, including collateral disputes
that relate to the agreement containing the clause.” Id. at 621. Similarly, in 3M Co.,
the arbitration clause at issue required arbitration if the parties disputed “the
existence, cause, or value of any change to the scope of services Amtex was to
provide.” 542 F.3d at 1196 (paraphrasing the clause at issue). We concluded this
language, too, was broad in scope. Id. at 1199.

                                          -4-
      The arbitration clause in the TSA covers any dispute that arises “in connection
with” the TSA or “any legal relationship associated with or contemplated by” the
TSA. We conclude that this language renders the arbitration clause in the TSA broad,
not narrow, in scope.2

       Because the arbitration clause is broad, we must then determine whether the
underlying factual allegations touch on matters covered by the arbitration clause.
See id. at 1199. As noted, the arbitration clause in this case covers disputes that arise
in connection with “any legal relationship associated with or contemplated by [the
TSA].” The question, then, is whether the FA—which makes no mention of
arbitration—embodies a “legal relationship” that is either “associated with or
contemplated by” the TSA.

      The TSA specifically addresses the financing arrangement between Unison and
JEDI, which is the subject matter of the legal dispute between the parties.3 The TSA

      2
        Unison contends the TSA clause is permissive, rather than mandatory, and that
this distinction requires us to construe the arbitration clause narrowly. However,
whether an arbitration clause is permissive or mandatory does not, at least in this
case, speak to whether the clause is broad or narrow.
      3
          TSA ¶ 3.4 reads, in part, as follows:

      Unison will provide financing to Purchaser for the purchase price of the
      WTGs

      The loan proceeds shall be used solely for the payment of the Contract
      Price due Unison for the WTGs for the Project. . . .

      The obligations of Purchaser under the Financing Documents shall be
      secured by a first-priority security interest in Purchaser’s note from the
      user of the WTG. . . .

                                           -5-
is contingent on finalizing the financing documents on or before the effective date of
the TSA, and the FA expressly states that the parties have “entered into a Turbine
Supply Agreement.” The FA also limits the amount of JEDI’s loan to “the aggregate
amount of all payments due and payable to [Unison] under the Turbine Supply
Agreement . . . .” And the FA conditions Unison’s obligation to loan this money on,
among other things, Unison having received a copy of “each Project Document.” The
FA, in turn, defines “Project Documents” to include the TSA. These cross-references,
along with the interdependent nature of the parties’ obligations under both the TSA
and the FA, make it difficult to read these documents without reaching the conclusion
that they are two parts of one overarching business plan between the same parties.4
The TSA and the FA each embodies a legal relationship that is associated with, and
contemplated by, the other. Any dispute regarding the FA would, therefore, be a
dispute that is covered by the arbitration clause in the TSA.

      The financing documents shall be prepared and negotiated on or before
      April 16th, 2010, and this Agreement shall be contingent upon finalizing
      such documents on or before said date.
      4
        Dakota Gasification Co. v. Natural Gas Pipeline Co. of America, 964 F.2d 732
(8th Cir. 1992), is distinguishable from the present matter. There were two relevant
agreements in that case—a gas purchase agreement and a financing agreement.
However, the parties to the two agreements were not the same. The gas purchase
agreement was executed between a partnership and four companies. The financing
agreement was executed between the four companies and the U.S. Department of
Energy—not the partnership. The court in that case held that the parties could not be
compelled to arbitrate based on “the conditions under which the Secretary of Energy
agreed to guarantee the financing for the gasification plant” in the financing
agreement, because it was evident that any disputes with the Secretary of Energy were
intended to be brought in federal court, rather than an arbitral forum. Dakota, 964
F.2d at 735–36. In this case, the parties to the TSA are also the parties to the FA, the
agreements were contingent on one another, and there is no showing that any party
required litigation in federal court as opposed to arbitration when entering into the
agreements.

                                          -6-
       Unison contends, nevertheless, that the TSA arbitration clause cannot be
interpreted to cover the present dispute without making the jurisdiction clause in the
FA a nullity. We disagree because the jurisdiction clause answers a different question
than does the arbitration clause. The FA jurisdiction clause reads as follows:

      Section 10.8         Submission to Jurisdiction; Service of Process.

             (a)     Borrower hereby submits to the jurisdiction of courts of the
                     State of Minnesota in the County of Hennepin and of the
                     United States for the Western District of Minnesota for any
                     legal action or proceeding brought against it in connection
                     with this Agreement and any other Financing Document.
                     By execution and delivery of this Agreement, Borrower
                     hereby irrevocably accepts for itself and in respect of its
                     property, generally and unconditionally, the jurisdiction of
                     the aforesaid courts.5

The TSA arbitration clause permits a party to submit a dispute to binding arbitration,
while the FA jurisdiction clause simply identifies the agreed-upon jurisdiction “for
any legal action or proceeding brought against it in connection with this Agreement
and any other Financing Document.” Notably, the jurisdiction clause does not
address whether, or under what circumstances, a dispute must be litigated and
resolved in court. As we read these two clauses, they are not in conflict: If a party
wants to settle a dispute through arbitration, it may initiate arbitration proceedings
under the TSA arbitration clause; if the parties choose not to arbitrate a dispute under
the FA, or seek to enforce an arbitration decision, then the parties have consented to
the jurisdiction of the state and federal courts in Minnesota for all litigation relating
to that dispute. Had both documents included separate arbitration and jurisdiction

      5
      As the district court recognized at the hearing, there is no Western District of
Minnesota in the federal system. Further, Hennepin County is not in western
Minnesota.

                                          -7-
clauses, the parties may have negotiated a different contractual agreement. But as the
documents are written, enforcing the arbitration clause in the TSA in a dispute
alleging violations of the FA does not render the jurisdiction clause in the FA a
nullity.6

       “When the parties have agreed on an arbitration clause that appears to cover
their dispute, it should be upheld.” 3M Co., 542 F.3d at 1199. The arbitration clause
in the TSA is a broad one. And the dispute concerning the FA, at a minimum,
touches on matters subject to the arbitration clause. The TSA arbitration clause
therefore covers the disputes alleged in this case.

                                  III.    Conclusion

       We reverse the denial of JEDI’s motion to compel arbitration. On remand, the
district court may decide in the first instance whether it is appropriate at this juncture
to dismiss Unison’s complaint or stay the action in federal court pending the outcome
of the arbitration proceedings. See Green v. SuperShuttle Int’l, Inc., 653 F.3d 766,
769–70 (8th Cir. 2011).

SHEPHERD, Circuit Judge, concurring.

       I concur in the court’s opinion reversing the denial of JEDI’s motion to compel
arbitration. I write separately to reiterate my view that section 3 of the Federal
Arbitration Act unambiguously directs a district court to stay an action and does not
give a district court the discretion to dismiss an action. See Green v. SuperShuttle

      6
        The parties also disagree about the meaning of TSA ¶ 18.3, the “Conflicting
Provisions” section of the TSA, and what effect it has on the application of the FA
jurisdiction clause in this case. Because the TSA arbitration clause and FA
jurisdiction clause do not conflict and can be applied harmoniously, we need not
address this issue.
                                          -8-
Int’l, Inc., 653 F.3d 766, 770-71 (8th Cir. 2011) (Shepherd, J., concurring); see also
9 U.S.C. § 3 (district courts “shall . . . stay the trial of the action until such arbitration
has been had in accordance with the terms of the agreement”). Recognizing,
however, that we are bound by prior panel decisions from our court, I also concur in
the direction that the district court may decide whether it is appropriate to dismiss or
stay the action.
                         ______________________________

                                             -9-