Court Opinion

ID: 62974
Source: CourtListenerOpinion
Date Created: 2010-04-26 04:49:44+00
Date Added: 2024-06-11T17:20:11.016670
License: Public Domain

[DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS
                                                                               FILED
                            FOR THE ELEVENTH CIRCUITU.S. COURT OF APPEALS
                              _______________________ ELEVENTH CIRCUIT
                                                                          JULY 14, 2008
                                                                        THOMAS K. KAHN
                                     No. 07-11326                           CLERK
                               _______________________

                         D. C. Docket No. 06-80966-CV-DTKH

TRIPLE I: INTERNATIONAL INVESTMENTS, INC.,

                                                          Counter-claimant-Appellee,

                                            versus

W. E. FIELDING and MYRON H. BUDNICK,

                                                        Counter-Defendants-Appellants.

                                ______________________

                     Appeals from the United States District Court
                         for the Southern District of Florida
                             ______________________

                                     (July 14, 2008)

Before BIRCH and FAY, Circuit Judges, and HINKLE,* District Judge.

HINKLE, District Judge:

___________________________
        *Honorable Robert L. Hinkle, United States District Chief Judge for the Northern District
of Florida, sitting by designation.
      This appeal raises the issue of the arbitrability of specific claims arising

from a commercial venture gone bad. The object of the venture was the

construction of a cement plant in Nigeria. The parties to this appeal are the owner

who proposed to build the plant and two individuals who, according to the owner,

participated in a fraudulent scheme under which the owner paid a fee to a surety in

connection with a sham financing arrangement. The two individuals were the sole

shareholder and the attorney, respectively, of a corporate escrow agent through

which certain documents were to be delivered and the surety’s fee was to be paid.

The individuals assert that the owner’s dispute with the surety must be arbitrated

based on an arbitration clause in the escrow agreement — an issue raised in a

separate appeal involving the owner and the surety — and the individuals assert

that the owner’s related claims against the individuals therefore must be arbitrated

as well. In the separate appeal, we hold that the owner’s claims against the surety

are not subject to arbitration. In this appeal we therefore reject the individuals’

assertion as well.

                                       I. Facts

      Appellee Triple I: International Investments, Inc. (“Triple I”) wished to

build a cement plant in Nigeria. It needed a $520 million loan. Financial advisors

purportedly found a lender (Japan Venture Fund Group (“Japan Venture”)) and an

issuer of a financial guarantee bond (International Underwriters AG & Liberty Re-

Insurance Corporation, S.A. (“International”)).

      Triple I and International agreed that Triple I would pay International a fee

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of $10.4 million for issuing the bond and that International would refund all but

$200 of the fee if the bond was not used. International confirmed the agreement in

its written bond commitment. There was no agreement to arbitrate.

      Triple I and International eventually agreed that the $10.4 million fee would

be payable half in advance and half after Triple I’s receipt of the loan proceeds.

The parties intended to close the transactions remotely, not in person. To facilitate

that approach, they engaged an escrow agent (W. E. Fielding and Associates

(“WEF”)) and entered a written escrow agreement. Among the terms were that

International would tender to WEF the $5.2 million payable to International in

advance, that International would tender to WEF the appropriate bond documents,

and that — upon confirmation that Japan Venture had funded the loan — WEF

would disburse the $5.2 million to International. The escrow agreement included

a clause calling for arbitration of “any dispute arising pursuant to or in any way

related to this Agreement or the transactions contemplated hereby.” Escrow

Agreement, R.1.1.8 ¶12.

      Triple I tendered the $5.2 million to WEF. International tendered the bond

documents to WEF. Japan Venture never funded the loan, but WEF disbursed the

$5.2 million to International. Triple I demanded return of the fee, but International

balked. Triple I thus was out $5.2 million.

      International filed a lawsuit in which it denied that Triple I was entitled to a

refund of the entire $5.2 million but also sought to “interplead” that amount for a

determination by the court of the parties’ respective rights. Triple I

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counterclaimed. In due course International voluntarily dismissed its complaint,

and Triple I twice amended its counterclaim. In the second amended

counterclaim, Triple I asserted that the whole deal was a sham from the outset.

Triple I named 11 counterclaim defendants, including International and the two

appellants now before the court: WEF’s sole shareholder William Fielding and

WEF’s attorney Myron Budnick (collectively “the appellants”). Triple I sought

recovery against all of the counterclaim defendants for fraud and under the

Racketeer Influenced and Corrupt Organizations Act. Triple I also sought

recovery against International for breach of the contract for issuance of the

financial guarantee bond and on a related theory of promissory estoppel. Triple I

expressly did not seek recovery against International or the other counterclaim

defendants for breach of the escrow agreement:

            By this Second Amended Counterclaim, [Triple I] hereby
      makes no claim against International or the Additional Counterclaim
      Defendants for breach of the Escrow Agreement or based upon the
      escrow transaction contemplated in the Escrow Agreement.

Second Amended Counterclaim, R.1.32.7 ¶35.

      International moved to compel arbitration based on the arbitration clause in

the escrow agreement. The district court denied the motion. The appellants also

filed motions to compel arbitration. The district court denied their motions as

well. International filed an appeal that we have addressed in a separate opinion.

The appellants filed the appeals now before the court.

                             II. Standard of Review

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      We review de novo a district court’s decision on whether a dispute is

covered by an arbitration agreement. See, e.g., Employers Ins. of Wausau v. Bright

Metal Specialties, Inc., 251 F.3d 1316, 1321 (11th Cir. 2001).

                                    III. Merits

      A dispute ordinarily is arbitrable if the parties have agreed to arbitrate it. As

we have said:

             Absent some violation of public policy, a federal court must
      refer to arbitration any controversies covered by the provisions of an
      arbitration clause. Chastain v. Robinson-Humphrey Co., 957 F.2d
      851, 854 (11th Cir.1992). Whether a party has agreed to arbitrate an
      issue is a matter of contract interpretation: “[A] party cannot be
      required to submit to arbitration any dispute which he has not agreed
      so to submit.” United Steelworkers of America v. Warrior & Gulf
      Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409
      (1960).

Telecom Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109, 1114 (11th Cir.

2001). The canons of construction run in favor of arbitration. See, e.g., Moses H.

Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927,

74 L. Ed. 2d 765 (1983) (“any doubts concerning the scope of arbitrable issues

should be resolved in favor of arbitration”).

      Triple I entered no agreement with the appellants at all. They are not parties

to any relevant agreement to arbitrate any dispute. They make no claim to the

contrary.

      As the appellants correctly note, however, a nonparty sometimes can

enforce an arbitration agreement entered by others. See, e.g., Blinco v. Green Tree

Servicing LLC, 400 F.3d 1308, 1312 (11th Cir. 2005); MS Dealer Serv. Corp. v.

                                          5
Franklin, 177 F.3d 942, 947 (11th Cir. 1999). Thus, for example, in Blinco, we

said that an arbitration clause in a note was “sufficiently broad to allow non-

signatories to invoke the clause where, as here, they face claims derived from the

Note.” Blinco, 400 F.3d at 1312. And we cited MS Dealer, 177 F.3d at 947-48,

for the proposition that where a signatory’s claims against a non-signatory

“depend on a contract containing an arbitration clause,” the signatory must

arbitrate with the non-signatory. Blinco, 400 F.3d at 1312.

      These principles would allow the appellants to compel arbitration if Triple I

had sued them on grounds “derived from” or “depend[ent] on” the escrow

agreement. But Triple I did not do so. Instead, Triple I asserted a claim for breach

of the escrow agreement only against WEF. Triple I readily consented to

arbitration of that claim.

      Triple I asserted claims against the appellants for fraud in connection with a

separate agreement — International’s agreement to issue a financial guarantee

bond in support of a loan purportedly available from Japan Venture. Triple I

asserted that the appellants, individually, developed the scheme, in concert with

International and Japan Venture. Triple I asserted that the appellants fraudulently

represented that they had successfully worked with International and Japan

Venture on other transactions and that Japan Venture was a large, well established

private equity fund. Triple I says that all of this was untrue and that International

and Japan Venture were only shells.

      The appellants assert that the claims against them are arbitrable because

                                          6
derived from or dependent on Triple I’s claims against International. The

appellants assert that the claims against International are arbitrable based on the

arbitration clause in the separate escrow agreement. As we hold in International’s

separate appeal, however, Triple I’s claims against International are not covered

by the escrow agreement’s arbitration clause and thus need not be arbitrated. The

appellants’ entire premise thus is faulty.

      The appellants assert no other grounds for their effort to compel arbitration.

Nor could they prevail on any other basis. Although they are the shareholder and

attorney, respectively, of the corporate escrow agent, they face claims in this

action not as agents or representatives of the escrow agent but as individuals who

participated in a fraud separate and apart from the escrow agreement or escrow

transactions. There was no agreement between Triple I and anyone for arbitration

of those claims.

                                  IV. Conclusion

      The appellants are individuals who seek to glom onto an arbitration clause

in a contract to which they were not parties. The effort fails not because

glomming is not allowed, but because the arbitration clause the appellants invoke

does not apply to the claims at issue. The district court’s order denying the

appellants’ motions to compel arbitration is AFFIRMED.

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