338 F.3d 609 (6th Cir. 2003), 01-4244, Bratt Enterprises, Inc. v. Noble Intern. Ltd.

Docket Nº:01-4244
Citation:338 F.3d 609
Party Name:Bratt Enterprises, Inc. v. Noble Intern. Ltd.
Case Date:July 31, 2003
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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338 F.3d 609 (6th Cir. 2003)

BRATT ENTERPRISES, INCORPORATED, Plaintiff-Appellant,

v.

NOBLE INTERNATIONAL LTD.; SET Enterprises Inc., Defendants Appellees.

No. 01-4244.

United States Court of Appeals, Sixth Circuit

July 31, 2003

Argued March 13, 2003.

Rehearing and Rehearing En Banc Denied Oct. 9, 2003.

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John B. Pinney (argued and briefed), Graydon, Head & Ritchey, Cincinnati, OH, for Plaintiff-Appellant.

Robin E. Harvey (argued and briefed), Baker & Hostetler, Cincinnati, OH, for Defendant-Appellees.

Before CLAY and ROGERS, Circuit Judges; COFFMAN, District Judge.[*]

ROGERS, J., delivered the opinion of the court, in which COFFMAN, D.J., joined. CLAY, J. (pp. 614-15), delivered a separate dissenting opinion.

OPINION

ROGERS, Circuit Judge.

Noble International Ltd. ("Noble") asserted a breach of contract claim against Bratt Enterprises, Inc. ("Bratt") in connection with Noble's purchase of Bratt's steel processing business. The district court ordered the parties to arbitrate "any

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and all disputes related to" the claim based upon an arbitration provision contained in the parties' agreement. We conclude that the district court erred by compelling the arbitration of an issue that the parties had not agreed to arbitrate.

FACTS

On September 30, 1998, Bratt 1 sold its steel processing business to Noble 2 under an asset purchase agreement. Noble agreed to purchase most of the business's assets and agreed to assume most of the business's liabilities, including its accounts payable. One provision of the agreement, however, provided that Bratt would retain all accounts payable in excess of $1.2 million, effectively capping Noble's liability for the accounts payable.

This assumption of liability was only one portion of the purchase price, which included other forms of consideration. Given the fluid values associated with some elements of the purchase price, including the business's accounts payable, the parties agreed to a post-closing adjustment of the purchase price, so that the price would more accurately reflect closing-day values. Under the parties' agreed method of adjustment, the elements would be valued as of the closing day, with the valuations being reflected on a balance sheet, and adjustments would be made based on the balance sheet values. The agreement also provided that, in the event a dispute arose with regard to any amount reflected on the balance sheet, the parties would arbitrate the dispute.3

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After Noble submitted the closing balance sheet, along with its proposed adjustments, numerous disputes arose between Noble and Bratt. Unable to resolve these disputes, Bratt filed a complaint in the district court below. Noble filed its answer and a four-count counter-claim. The parties have settled all disputes between them except the first count of Noble's counterclaim, which is the focus of this appeal.

The first count of Noble's counterclaim asserted a breach of contract claim in which Noble sought to recover the difference between the accounts payable balance, over $1.8 million as reflected on the closing balance sheet, and the $1.2 million limit of its liability. Noble simultaneously moved the district court to compel arbitration of this claim. Bratt opposed submitting this counterclaim to arbitration. Bratt argued that the $1.2 million cap was a result of a mutual mistake and that the contract should accordingly be reformed before any disputes regarding the account amounts could be submitted to arbitration. The district court granted Noble's motion to compel arbitration, concluding that the claim "relate[d] to adjustments to the Closing Balance Sheet." In accordance with the lower court's order, the parties proceeded to arbitrate, and the arbitrator ruled in Noble's favor on the breach of contract claim. Bratt then filed a motion for reconsideration of the order compelling arbitration, which the district court denied. The district court then entered a judgment reflecting the arbitrator's decision. Bratt now appeals, asserting that the district court erred by compelling arbitration of all disputes related to Noble's breach of contract claim.

STANDARD OF REVIEW

We review de novo a district court's decision to compel arbitration under the Federal Arbitration Act. Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003).

ANALYSIS

"Before compelling an unwilling party to arbitrate, [a] court must engage in a limited review to determine whether the dispute is arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement." Javitch, 315 F.3d at 624 (6th Cir. 2003) (citing AT & TTechs. v. Communications Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). The district...

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