Court Opinion

ID: 5137613
Source: CourtListenerOpinion
Date Created: 2021-12-21 14:40:56.846984+00
Date Added: 2024-06-11T08:24:03.423242
License: Public Domain

2013 UT App 28
_________________________________________________________

             THE UTAH COURT OF APPEALS

   MARIPOSA EXPRESS, INC.; COLD SPRING INVESTMENTS, LLC;
COLD SPRING INVESTMENTS NO. 1, LP; COLD SPRING INVESTMENTS
NO. 2, LP; NEWBURYPORT CAPITAL, LLC; HANNAH ENTERPRISES,
  INC.; USS HOLDINGS, LLC; USS COLUMBIA, LLC; METRO MAR
      VENTURES LLC; MICHAEL JONES, LLC; STIRLING LLC;
MICHAELSON VENTURES INC.; USS O’BRIEN, INC.; USS HIGHLAND
PARK, INC.; SHARON MCWILLIAMS; GEORGE AMMIRATO; WILLIAM
 DEMET; ROBERT HARRIS; MICHAEL JONES; TED MICHAELSON; JIM
             O’BRIEN; AND STEFAN TRIANDAFILOU,

                   Plaintiffs and Appellants,

                               v.

    UNITED SHIPPING SOLUTIONS, LLC; USS LOGISTICS, LLC;
       ROBERT ROSS; CHARLES DERR; AND JESSE MOORE,

                   Defendants and Appellees.

                           Opinion
                       No. 20110829‐CA
                    Filed January 31, 2013

             Third District, Salt Lake Department
              The Honorable William W. Barrett
                        No. 110915908

           Karthik Nadesan and Ivan W. Lependu,
                  Attorneys for Appellants
   David J. Jordan, Cameron L. Sabin, and Joseph W. Loosle,
                    Attorneys for Appellees

       JUDGE GREGORY K. ORME authored this Opinion,
    in which JUDGE MICHELE M. CHRISTIANSEN concurred.
     JUDGE CAROLYN B. MCHUGH concurred in the result.
                   Mariposa v. United Shipping

ORME, Judge:

¶1     While many of the plaintiffs (collectively, the Mariposa
franchisees) have now settled, the remaining plaintiffs appeal from
a district court order dismissing their complaint and compelling
them to participate in arbitration with United Shipping Solutions,
LLC (USS). We affirm the district court’s basic ruling but remand
to the district court for further proceedings.

                        BACKGROUND

¶2     USS operates a franchising system in which franchisees
resell small parcel shipping services. USS and its affiliate USS
Logistics, LLC (USSL) (collectively, the USS parties) arranged for
shipping services primarily from DHL Express USA, Inc. (DHL).
DHL provided its services to the USS franchise system under a
reseller agreement, which required that each of the Mariposa
franchisees pay USS for DHL’s services and then USS would
provide an aggregate payment to DHL.

¶3      On November 10, 2008, DHL announced that it was
discontinuing its express and ground domestic shipping services
effective January 30, 2009—a breach of the reseller agreement. The
non‐compete provisions of the franchise agreements apparently
foreclosed the Mariposa franchisees from contracting with other
providers for replacement services or products. Following DHL’s
breach of the reseller agreement, the Mariposa franchisees stopped
paying USS for the DHL services still being utilized by their
customers. As a result, USS terminated the franchises of the
Mariposa franchisees.

¶4     On December 3, 2008, the Mariposa franchisees brought suit
against the USS parties in Utah state court (the Mariposa lawsuit),
seeking to avoid all obligations under their franchise agreements.
The USS parties counterclaimed, seeking enforcement of the
franchise obligations and payment for the freight and DHL

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                    Mariposa v. United Shipping

shipments provided to the Mariposa franchisees and their
customers through the USS franchise system. A couple of weeks
after the suit was filed, the district court entered a temporary
restraining order that required, inter alia, (1) that the Mariposa
franchisees stop soliciting employees of the USS parties; (2) that the
Mariposa franchisees not use or disclose any of the USS parties’
confidential or proprietary information in any way; and (3) that the
Mariposa franchisees discontinue all use of the USS parties’
trademarks and any claimed association with the USS franchise
system.

¶5      Later that same month, USSL—and through a later amended
complaint, USS and some of its franchisees—filed suit against DHL
in Utah state court (the DHL lawsuit). The DHL lawsuit alleged,
inter alia, that DHL breached the reseller agreement and thereby
caused significant damages to the USS franchise system. DHL
counterclaimed, asserting that USSL was liable for the unpaid
shipping services received by the Mariposa franchisees. The
Mariposa franchisees also filed their own lawsuit against DHL in
New York (the franchisee lawsuit) in March 2009, claiming that
DHL was liable to the Mariposa franchisees for DHL’s breach of
the reseller agreement.

¶6    In June 2009, the district court in the Mariposa
lawsuit—having been provided evidence indicating that certain
Mariposa franchisees had violated the temporary restraining
order—entered an order enjoining the Mariposa franchisees “from
using or charging shipments to USS’s accounts with its shipping
providers.” The court scheduled an evidentiary hearing to
determine whether those Mariposa franchisees should be held in
contempt.

¶7    The district court held the evidentiary hearing in September
2009 and ruled that those Mariposa franchisees had violated the
temporary restraining order. After granting the USS parties’
motion for contempt, the district court took the question of
appropriate sanctions under advisement and proceeded with a

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                    Mariposa v. United Shipping

multi‐day evidentiary hearing on the parties’ cross‐motions for a
preliminary injunction. Near the end of that hearing, the Mariposa
franchisees approached the USS parties about settling the Mariposa
lawsuit.

¶8      Two weeks later, the USS parties and the Mariposa
franchisees settled the Mariposa lawsuit by entering into a
settlement agreement in which the Mariposa franchisees agreed,
inter alia, to make three types of payments to the USS parties. The
Mariposa franchisees agreed (1) to pay the USS parties a settlement
payment, (2) to pay USS for all amounts owed for unpaid freight
shipments, and (3) to indemnify the USS parties against any
amounts that the USS parties were determined to owe DHL for
shipping services provided to the Mariposa franchisees or their
customers, regardless of whether the determination was made
through adjudication or settlement of the DHL lawsuit. All other
issues between the Mariposa franchisees and the USS parties were
resolved, and the Mariposa lawsuit was dismissed.

¶9     As part of the settlement agreement, the USS parties and the
Mariposa franchisees agreed that the USS parties would provide
the Mariposa franchisees with access to certain shipping data,
consistently referred to by the parties in the course of their dealing
as the CAMS data, as a means to determine the outstanding
amount owed for freight services. After the CAMS data was
disclosed, the Mariposa franchisees were to be given time to review
the data and indicate whether they disputed the amounts owed, in
accordance with procedures and deadlines set forth in the
settlement agreement. If there was a dispute regarding the amounts
due for freight, the parties agreed to resolve it through binding
arbitration. Paragraph 3 of the settlement agreement provides:

       [T]he respective Mariposa Franchisees agree to
       indemnify and hold USS harmless for any and all
       amounts the USS Parties are determined to owe DHL
       through judgment or settlement for DHL services
       provided to the respective Mariposa Franchisees

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                   Mariposa v. United Shipping

      and/or their customers and which the respective
      Mariposa Franchisees or their customers have not
      already paid to USS or DHL (regardless of whether
      that determination is by judgment or through
      settlement, and regardless of whether the amount is
      determined through set‐off amounts that may reduce
      any judgment in favor of the USS Parties and against
      DHL). The respective Mariposa Franchisees further
      agree to pay to USS all royalties, Wasatch Billing fees,
      and late fees charged by DHL resulting from non‐
      payment by the respective Mariposa Franchisees, on
      the shipments the USS Parties are determined to owe
      to DHL.

The parties agreed that the USS parties would “provide the
Mariposa Franchisees with access to the CAMS Data . . . necessary
to show the DHL services provided to the Mariposa Franchisees
and/or their customers.” The agreement further states:

      If the Mariposa Franchisees do not agree with the
      amount identified by the USS Parties, the USS Parties
      shall nevertheless have the right to proceed with the
      settlement and any dispute between the USS Parties
      and the Mariposa Franchisees concerning these
      amounts shall be resolved in accordance with the
      dispute resolution procedure set forth in Paragraph
      1.c above. Likewise, if the USS Parties are determined
      to owe DHL, through a judgment, any amount for
      services provided to the Mariposa Franchisees and/or
      their customers, any dispute between the USS Parties
      and the Mariposa Franchisees concerning such
      amounts shall be resolve[d] in accordance with the
      dispute resolution procedure set forth in Paragraph
      1.c above. In the event of such a dispute, the USS
      Parties shall provide the Mariposa Franchisees with
      access to the CAMS Data (of the same type and
      nature set forth in Paragraph 1 above) necessary to

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                    Mariposa v. United Shipping

       show the DHL Services provided to the Mariposa
       Franchisees and/or their customers.

The “dispute resolution procedures” applicable to freight disputes
and disputes concerning the Mariposa franchisees’ indemnification
obligation were set forth in paragraph 1.c of the settlement
agreement. That provision required that “any dispute” be resolved
“exclusively by binding arbitration” on an expedited basis. While
paragraph 1.c itself referred to freight payments, paragraph 1.c was
also incorporated by reference into paragraph 3.a, which addressed
dispute resolution related to the indemnification provision.

¶10 After the execution of the settlement agreement, the USS
parties continued the DHL litigation. In September 2010, DHL
moved for partial summary judgment on its counterclaim that
USSL was liable to DHL for all amounts due for shipping,
including the amounts that had not been paid by the Mariposa
franchisees. The next month, the district court granted DHL’s
motion and ruled that USSL was liable to DHL for all unpaid
shipping services provided to the USS franchise system. The
district court did not, however, determine the amount owed to
DHL for those services.

¶11 After the district court’s ruling on DHL’s motion, DHL and
the USS parties entered into settlement negotiations and eventually
executed a settlement agreement resolving the DHL lawsuit (the
DHL settlement agreement). That settlement agreement specified
that the payment from DHL to the USS parties was to be offset by
the amount owed to DHL for unpaid shipping services, including
the amount resulting from the Mariposa franchisees’ failure to pay.
After entering the DHL settlement agreement, the USS parties
informed the Mariposa franchisees of the agreement in a letter
dated February 16, 2011. The letter informed the Mariposa
franchisees of their indemnification obligation and provided the
Mariposa franchisees, for their respective franchises, with the
CAMS data showing the amounts owed for unpaid DHL services,

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                    Mariposa v. United Shipping

as the parties had previously done for resolving the issue of the
freight payments.

¶12 The Mariposa franchisees responded by letter in March 2011.
The letter asked that the USS parties “provide additional
information with which [the Mariposa franchisees] can evaluate the
claims made by USS relating to the settlement of the Mariposa
action.” Two days later, the USS parties sent a second letter, which
explained that “USS and USSL received payment in an amount that
was offset by the amounts owing to DHL for shipping services
provided to USS and its franchisees.” The USS parties’ letter also
stated:

              Your letter does not constitute a “dispute”
       under the Mariposa Settlement Agreement. Under
       that agreement, if a Mariposa Franchisee disputes
       any of the amounts set forth in the CAMS data
       provided by USS, he or she was required to provide
       notice of the dispute, together with documentation
       showing the basis for the dispute, to USS within 20
       days of my letter. As they have elected not to do so,
       in accordance with the Mariposa Settlement
       Agreement, they are deemed to have not disputed
       the shipping amounts contained in the CAMS data
       provided to them by USS, and USS will pursue its
       rights under the Mariposa Settlement Agreement.

A number of the Mariposa franchisees then started making
payments to the USS parties to satisfy their indemnification
obligation. Counsel for the still noncompliant Mariposa franchisees
sent another letter to the USS parties. In early June 2011, the USS
parties sent a third letter to the noncompliant Mariposa franchisees,
identifying the specific amounts owed by each and requesting that
each indicate whether that amount was disputed.

¶13 After the third letter, a few more Mariposa franchisees
fulfilled their indemnification obligation by executing a promissory

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                    Mariposa v. United Shipping

note, as required by the settlement agreement. The remaining
noncompliant franchisees did not respond. In July 2011, the USS
parties served the remaining Mariposa franchisees with “Disputed
Notices,” initiating the expedited arbitration proceedings set forth
in the settlement agreement. In anticipation of the notices, the
Mariposa franchisees filed the complaint commencing the lawsuit
now before us on appeal. The complaint disputed the amounts
owed, the accuracy of the information provided by the USS parties,
and the Mariposa franchisees’ indemnification obligation itself. The
complaint sought declaratory and injunctive relief. Ten days later,
the Mariposa franchisees sent a letter to the USS parties’ counsel,
stating that the Mariposa franchisees would not participate in
arbitration.

¶14 The USS parties moved to compel arbitration in early
August 2011, and the Mariposa franchisees opposed the motion.
The district court determined that, as a matter of law, the terms of
the settlement agreement required that the parties resolve their
disputes in accordance with the arbitration procedure set forth in
paragraph 1.c of the agreement. The district court then dismissed
the Mariposa franchisees’ complaint, and they appealed.

              ISSUE AND STANDARD OF REVIEW

¶15 We must determine whether the district court erred in its
interpretation of the parties’ settlement agreement and its
subsequent grant of the USS parties’ motion to compel mandatory
arbitration. “A determination of which claims the parties intended
to be subject to arbitration requires that we interpret the arbitration
clause of the contract. This we do as a matter of law unless we find
ambiguity in the plain language of the agreement.” See Peterson
& Simpson v. IHC Health Servs., Inc., 2009 UT 54, ¶ 18, 217 P.3d 716.
“In evaluating whether the plain language is ambiguous, we
attempt to harmonize all of the contract’s provisions and all of its
terms. . . . Accordingly, we first look to the plain language within
the four corners of the agreement to determine the intentions of the

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                    Mariposa v. United Shipping

parties, and we attempt to harmonize the provisions . . . of the
agreement.” Central Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3,
¶ 12, 40 P.3d 599 (internal citations and quotation marks omitted).

                            ANALYSIS

    I. The District Court Correctly Construed the Arbitration
                            Provision.

A. Utah Favors Arbitration.

¶16 We begin our analysis with the Utah Uniform Arbitration
Act. See Utah Code Ann. §§ 78B‐11‐101 to ‐131 (LexisNexis 2012).1
The Act provides that in the event of a disagreement about whether
there is an applicable agreement to arbitrate a dispute, “the court
shall proceed summarily to decide the issue and order the parties
to arbitrate unless it finds that there is no enforceable agreement to
arbitrate.” See id. § 78B‐11‐108(1)(b).

¶17 Utah courts have consistently recognized Utah’s policy
favoring arbitration.

       [I]f there is any question as to whether the parties
       agreed to resolve their disputes through arbitration
       or litigation, i.e., through the filing of a complaint
       and recording of a lis pendens, we interpret the
       agreement keeping in mind our policy of
       encouraging arbitration. It is the policy of the law in
       Utah to interpret contracts in favor of arbitration, in
       keeping with our policy of encouraging extrajudicial

1. The Utah Arbitration Act was enacted in 2002, with an effective
date of May 15, 2003. See Utah Code Ann. §§ 78‐31a‐1 to ‐20
(LexisNexis 2002). The Act was renumbered in 2008. See id. §§ 78B‐
11‐101 to ‐131 (LexisNexis 2008).

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                    Mariposa v. United Shipping

       resolution of disputes when the parties have agreed
       not to litigate.

Parkwest Assocs., 2002 UT 3, ¶ 16 (citations and internal quotation
marks omitted). In short, if the settlement agreement’s arbitration
clause supports an interpretation favoring arbitration, the district
court ruled correctly in interpreting the provision as governing the
dispute between the USS parties and the Mariposa franchisees.

B. Scope of The Settlement Agreement’s Arbitration Clause

¶18 At the time of the settlement between the Mariposa
franchisees and the USS parties, all outstanding issues had been
resolved except for two amounts that they left for resolution at a
future date: (1) the amount that the USS parties were owed for
unpaid freight and (2) the amount that the Mariposa franchisees
were obligated to pay to indemnify the USS parties for unpaid
DHL shipments. In paragraphs 1.c and 3.a of the agreement, the
parties clearly indicated their intention that “any dispute” be
resolved through the binding arbitration procedure set out in
paragraph 1.c. Reading the agreement in its entirety in an attempt
to harmonize all provisions, see Parkwest Assocs., 2002 UT 3, ¶ 12, it
is logical to conclude that the parties intended for the settlement
agreement to resolve all the issues that could be resolved at that
time and to leave the two remaining issues to be addressed at a
later date, with ultimate resolution through arbitration in the event
of a dispute. Because the district court in the DHL lawsuit found
that the USS parties were liable for the DHL shipments resold by
the Mariposa franchisees and for which payment had not been
made, it was clear that the indemnification provision of the
settlement agreement had already been triggered. Therefore, any
dispute that the Mariposa franchisees had regarding that
indemnification amount was to be resolved by arbitration.2

2. We note that section 78B‐11‐107(3) of the Utah Arbitration Act
states: “An arbitrator shall decide whether a condition precedent
                                                     (continued...)

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                    Mariposa v. United Shipping

    II. The District Court Erred in Dismissing the Mariposa
    Franchisees’ Complaint When It Compelled Arbitration.

¶19 The Utah Arbitration Act requires that when a district court
orders arbitration, the court should stay the underlying lawsuit
rather than dismiss it. See Utah Code Ann. § 78B‐11‐108(7) (“If the
court orders arbitration, the court on just terms shall stay any
judicial proceeding that involves a claim subject to the
arbitration.”). Therefore, the district court should have stayed the
action rather than dismiss the Mariposa franchisees’ complaint
after it ordered the parties to arbitrate their dispute.

                          CONCLUSION

¶20 The district court correctly ordered the parties into
arbitration to resolve their dispute relating to the amounts owed
for DHL shipments. We affirm that ruling. We reverse the
dismissal of the underlying complaint and remand with
instructions to reinstate the action, which may then be dealt with,
as appropriate, following arbitration.3

2. (...continued)
to arbitrability has been fulfilled and whether a contract containing
a valid agreement to arbitrate is enforceable.” Utah Code Ann.
§ 78B‐11‐107(3) (LexisNexis 2012).

3. We were advised at oral argument that the arbitration has now
been completed. It may well be that confirmation of the arbitration
award is now in order.

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