Court Opinion

ID: 9478700
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:55:37.845799+00
Date Added: 2024-06-11T17:46:34.332987
License: Public Domain

WIDENER, Circuit Judge,
dissenting:
I respectfully dissent for the reasons given in the thorough opinion of Judge Howard in the district court, many relevant portions of which I have copied and adopt as my own. They follow.
Defendants have moved for arbitration of plaintiffs eleven-count complaint under Section 4 of the Federal Arbitration Act, 9 U.S.C. § 4, relying on the arbitration clause contained in the Agreement reached between the parties on September 13, 1984.
Oversimplified, the anatomy of defendants’ argument is as follows. They point to Count I of plaintiff’s complaint which alleges that the Agreement was fraudulently induced. They also note that an allegation of fraud in the inducement of the arbitration clause of the Agreement is conspicuously absent from the complaint. Defendants then argue that the following passage from Prima Paint Corp. v. Flood & Conklin, 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), controls the disposition of the instant motion:
[I]f the claim is fraud in the inducement of the arbitration itself — an issue which goes to the “making” of the agreement to arbitrate — the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally.
Id. at 403-04, 87 S.Ct. at 1805-06. At first glance, defendants’ argument is compelling. However, before ruling on the motion, the Court believes it illuminating to set out relevant principles of law which control here.
In ruling on this motion, this Court does not write on a clean slate. Our course has been charted by AT & T Technologies v. Communications Workers of America, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). In that case, the Supreme Court set out four principles on the question of arbitration, three of which are apposite to this motion.1 Id. at 648-50, 106 S.Ct. at 1418-19. The three relevant rules are as follows:
*8151) “The first principle ... is that ‘arbitration 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.’ ” 475 U.S. at 648, 106 S.Ct. at 1418 (quoting Steelworkers v. Warrior & Gulf, 363 U.S. 574, 582, 80 S.Ct. 1347, 1352, 4 L.Ed.2d 1409 (I960)). 2) “The second rule ... is that the question of arbitrability — whether a collective-bargaining agreement creates a duty for the parties to arbitrate the particular grievance — is undeniably an issue for judicial determination.” 475 U.S. at 649, 106 S.Ct. at 1418.
3) Finally, it has been established that where the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that “[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” Warrior & Gulf 363 U.S., (sic) at 582-583, 80 S.Ct. at 1352-1353.
475 U.S. at 650, 106 S.Ct. at 1419.
With the AT & T dictates in mind, the Court turns to the heart of defendants’ argument for compelling arbitration.... In that portion of its brief, defendants cite nine cases which the Court will address seriatim.
Defendants cite Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). In that case, the Supreme Court affirmed the Court of Appeals’ decision to arbitrate the contractual dispute between the parties. The arbitration clause between the parties stated, in pertinent part:
All claims, disputes and other matters in question arising out of, or relating to, this contract or the breach thereof, ... shall be decided by arbitration....
Id. at 5, 103 S.Ct. at 931. The Court characterized the clause as “broad.” Id.
Defendants cite Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir.1959). In that case, the court held that fraud in the inducement of the agreement is arbitrable. The arbitration clause in that case stated, in pertinent part:
Any complaint, controversy or question which may arise with respect to this contract that cannot be settled by the parties thereto.
Id. at 404, 411 and 412. The court added, “It would be hard to imagine an arbitration clause having greater scope than the one before us.” Id. at 412.
Next, defendants cite Coleman v. National Movie-Dine, Inc., 449 F.Supp. 945 (E.D.Pa.1978). In that case, the court found arbitration proper where the plaintiff alleged fraud in the inducement of the agreement. Citing Prima Paint, supra, the court stated: “A claim of fraud in the inducement of the contract is insufficient to prevent invocation of the arbitration provision of the contract.” Id. at 948. That arbitration clause stated:
Any controversy, dispute or question arising out of any aspect of the Agreement, including the making thereof, shall be resolved by arbitration.
Id. at 947 n. 2. The court characterized the arbitration clause as “broad.” Id. at 945.
Defendants then cite Austin v. A.G. Edwards & Sons, Inc., 349 F.Supp. 615 (M.D. Fla.1972). That court found arbitration necessary where plaintiff alleged forgery of the agreement. The arbitration clause there provided:
Any controversy between you [the defendant] and the undersigned [the plaintiffs] arising out of this contract or the breach thereof, shall be settled by arbitration. ...
Defendants move on to Todd v. Oppenheimer & Co., Inc., 78 F.R.D. 415 (S.D.N.Y.1978). The court rejected plaintiff’s allegations of fraud or coercion, finding arbitration proper. The arbitration clause in that case stated:
Any controversy between you and the undersigned arising out of, or relating to this agreement, or the breach thereof, or arising out of transactions with you shall be settled by arbitration.
Id. at 425.
Defendants also rely on In re Oil Spill By Amoco Cadiz, etc., 659 F.2d 789 (7th *816Cir.1981). The court required plaintiffs’ claim of fraudulent inducement of the agreement to be arbitrable. The clause which compelled this result stated that “any difference arising out of this Ageement (sic) or the operations thereunder ...” were arbitrable.
Defendants cite Merrill Lynch, Pierce, Fenner v. Hayden, 637 F.2d 391 (5th Cir.1981). That court commented on the plaintiffs allegations of coercion, confusion, undue influence and duress in signing the contract. Id. at 398 n. 11. The court stated that those claims would be proper for arbitration. The clause in that case stated, in pertinent part:
Any controversy between us arising out of ... this Agreement shall be settled by arbitration....
Id. at 394 n. 1.
Finally, defendants cite Brener v. Becker Paribas, Inc., 628 F.Supp. 442 (S.D.N.Y. 1985). There, plaintiffs allegations of “Customer Consents” obtained by fraud were for the arbitrator. The “Customer Consent” arbitration clause stated:
It is agreed that any controversy between us arising out of [Becker’s] business or this agreement shall be submitted to arbitration....
Id. at 445.
On December 11, 1987, the Court received defendants’ reply to plaintiff’s opposition to defendants’ motion to compel arbitration. In this paper, defendants cite two cases from this Court. In Shotto v. Laub, 632 F.Supp. 516 (D.Md.1986), the court required plaintiffs to submit their claims to arbitration. Id. at 523. The “Customer Agreements” at issue in that case contained the following arbitration clause:
SIXTEENTH: Any controversy between you and the undersigned arising out of said account or relating to this contract or breach thereof, shall be settled by arbitration....
Defendants also urge the Court to consider Fisher v. Prudential-Bache Securities, Inc., 635 F.Supp. 234 (D.Md.1986). Arbitration was proper, Judge Young ruled, and he noted further that “the language of the arbitration clause was clear and all-inclusive_” Id. at 236. The arbitration clause stated, in pertinent part:
14... .Any controversy arising out of or relating to ... this Agreement or or [sic] the breach thereof ... shall be settled by arbitration....
All of these cases relied upon by defendants are harmonious in that broad contractual arrangements for arbitration require arbitration when attacked with a claim of fraud in the inducement. Indeed, defendants have established this principle with clarity and force. Before turning to the instant dispute, the Court believes it instructive to again review the principles governing this dispute.
Arbitration is a creature of contract. United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1352, 4 L.Ed.2d 1409 (1960). And whether a certain issue is arbitrable is governed “on the basis of the contract entered into by the parties.” Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8 L.Ed.2d 462 (1962); United Steelworkers of America v. Logan Park, 634 F.Supp. 182, 183 (S.D.W.Va.1986). Indeed, "... the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute.” Mitsubishi Motors v. Solar Chrysler-Plymouth, 473 U.S. 614, 626, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985). For the issue now before the Court, the key inquiry is to determine whether the Agreement, dated September 13, 1984, covers the asserted dispute. The Court turns to the arbitration clause in the Agreement. [The arbitration provisions are set out in detail in the majority opinion and are omitted here.]
Defendants have characterized this clause as a “broad” one. (Defendants’ Reply to Plaintiff’s Memorandum in Opposition to Defendants’ Motion to Compel Arbitration, filed on December 11, 1987 at 4). Defendants argue further that the arbitration clause applies to “any question, charge, complaint or grievance” which is alleged to constitute a violation of the *817Agreement. Id. at 6. It is an interesting characterization and interpretation.
******
“When the claim of invalidity goes to the entire contract containing the agreement to arbitrate, the court’s sole responsibility is to determine whether the scope of the arbitration clause is broad enough to encompass a claim of fraud in the inducement. See, e.g., Prima Paint, 388 U.S. at 406, 87 S.Ct. at 1807; Schacht v. Beacon Ins. Co.], 742 F.2d [386] at 390 [7th Cir.1984].” Slomkowski v. Craig-Hallum, Inc., 644 F.Supp. 132, 134-135 (D.Minn.1986); see also, Int’l. Longshoreman’s Ass’n. v. Delta S.S. Lines, 636 F.Supp. 722, 736 (S.D.N.Y.1986).
In discharging its responsibility, the Court believes neither party agreed to arbitrate the issue of fraud in the inducement of the Agreement. If they had so agreed, there would be language such as that found in the arbitration clause before the Court in Prima Paint, which provided:
Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbi-tration_
388 U.S. at 398, 87 S.Ct. at 1803.
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I leave the text of Judge Howard’s opinion at this point and note that the very broadest language which is found in the arbitration provisions is that “[a]ny question, charge, complaint or grievance believed to constitute a breach or violation” of the agreement shall be communicated to the other side and then be submitted to arbitration. (Italics added). That language obviously does not include fraud in the inducement either of the agreement or the arbitration clause thereof, and is a far cry from the contract provisions in Prima Paint.
In sum, I would affirm.

. The one principle not necessary for disposition of this case is that a court is not to rule on the potential merits of the underlying claims. 475 U.S. 643, 106 S.Ct. 1415. Earlier this month, the Supreme Court reaffirmed it. See United Paperworkes (sic) International Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 108 S.Ct. 364, 370, 98 L.Ed.2d 286 (1987).