Municipality v. Corporacion Para El Fomento

• Citation: 415 F.3d 145
• Decision Date: 14 July 2005
• Docket Number: No. 04-2303.,04-2303.
• Parties: MUNICIPALITY OF SAN JUAN, Plaintiff, Appellant, v. CORPORACIÓN PARA EL FOMENTO ECONÓMICO DE LA CIUDAD CAPITAL, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 145

415 F.3d 145

MUNICIPALITY OF SAN JUAN, Plaintiff, Appellant, v. CORPORACIÓN PARA EL FOMENTO ECONÓMICO DE LA CIUDAD CAPITAL, Defendant, Appellee.

No. 04-2303.

United States Court of Appeals, First Circuit.

Heard May 2, 2005.

Decided July 14, 2005.

Francisco J. Amundaray-Rodriguez with whom Mercado & Soto, P.S.C. was on brief for appellant.

Roberto Abesada-Agüet with whom Harold D. Vicente and Vincente & Cuebas were on brief for appellee.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and HOWARD, Circuit Judge.

COFFIN, Senior Circuit Judge.

The Municipality of San Juan, plaintiff-appellant in this action, contends that defendant-appellee Corporación para el Fomento Económico de la Ciudad Capital (COFECC) misused federal block grant funds the agency was assigned to disburse, and the Municipality consequently seeks the return of all remaining federal funds held by COFECC, damages, and declaratory and injunctive relief establishing that the trustee relationship between the two entities was properly terminated. The district court granted COFECC's motion to compel arbitration of all issues and dismissed the case without prejudice. After careful review of the facts and relevant legal principles, we affirm.

I. Background

In July 1982, the Municipality and the Government Development Bank of Puerto Rico executed a deed of trust ("Deed of Trust No. 5" or "Deed of Trust") that designated the Bank, as trustee, to administer funds granted to the Municipality by the United States Department of Housing and Urban Development (HUD). The Deed of Trust contains a broad arbitration clause requiring that disputes that arise between the parties "with regard to their responsibilities and obligations under this contract" shall be resolved through arbitration. The Deed of Trust also provides that the Municipality can terminate the contract upon sixty days' notice and after appointment of a successor trustee.

In 1983, COFECC succeeded the Bank as trustee, and the transition was effectuated through a series of one-year delegation contracts between the Municipality and COFECC that renewed automatically unless written notice was given thirty days before expiration. Deed of Trust No. 5 remained the governing document for the trusteeship and was explicitly incorporated into the first several delegation agreements. Annual contracts between the Municipality and COFECC were executed through 1992, with the last written agreement terminating on June 30, 1992.¹ The parties continued their relationship beyond that point, however, through "tacit" extension of their contractual arrangement.² In May 2003, the Municipality sent a letter terminating the trustee agreement, giving the sixty days notice required by the Deed of Trust and thus intended to take effect on July 30, 2003. The Municipality asserts that COFECC improperly used thousands of dollars of federal money and failed to comply with regulatory requirements governing the use of federal grant funds, including maintaining an adequate accounting and auditing system. The Municipality sought return of all unused funds.

COFECC disputed the termination of its trustee status and did not turn over any funds to the Municipality. In August 2003, the Municipality filed this action, seeking breach of contract damages, the return of any remaining federal funds held by COFECC, and injunctive and declaratory relief terminating both the parties' relationship and COFECC's authority to use the federal monies. COFECC argued that all of the issues were arbitrable, and the district court ultimately agreed.³ On appeal, we review only the court's ruling that the duration of the trusteeship — i.e., the validity of the Municipality's attempt to terminate the relationship — must be arbitrated. The arbitrability of the breach of contract issues is not before us.⁴

We briefly address a preliminary jurisdictional issue before explaining why we conclude that the district court correctly referred the termination issue to the arbitrator.

II. Discussion

A. Finality of a Dismissal Without Prejudice

COFECC argues that the district court's decision compelling the parties to arbitrate, accompanied by dismissal of the case without prejudice, resulted in a judgment that was not final and appealable under the Federal Arbitration Act, 9 U.S.C. § 16(a)(3).⁵ COFECC's cursory argument is arguably insufficient to warrant our full attention, see, e.g., Smilow v. Southwestern Bell Mobile Sys., Inc., 323 F.3d 32, 43 (1st Cir.2003) ("Issues raised on appeal in a perfunctory manner (or not at all) are waived."), but since we view the agency's assertion as plainly without merit, we choose to take the opportunity to state so explicitly.

In Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 86-87, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), the Supreme Court held that a district court's order directing arbitration and dismissing all of the claims before it was "final" within the meaning of section 16(a)(3) and therefore appealable. The action in Green Tree had been dismissed with prejudice, and COFECC asserts that the Supreme Court's ruling consequently is inapplicable to dismissals without prejudice. We agree with the reasoning of other courts that have rejected this distinction. See Hill v. Rent-A-Center, Inc., 398 F.3d 1286, 1288 (11th Cir.2005); Blair v. Scott Specialty Gases, 283 F.3d 595, 602 (3d Cir.2002); Salim Oleochemicals v. M/V Shropshire, 278 F.3d 90, 91 (2d Cir.2002); Interactive Flight Techs., Inc. v. Swissair Swiss Air Transp. Co., 249 F.3d 1177, 1179 (9th Cir. 2001). In brief, these courts concluded that both types of dismissal are equivalent with respect to the Supreme Court's rationale in Green Tree — that the arbitration order "plainly disposed of the entire case on the merits and left no part of it pending before the court," 531 U.S. at 86, 121 S.Ct. 513. Cf. Mirpuri v. ACT Mfg., Inc., 212 F.3d 624, 628-29 (1st Cir.2000) (a dismissal without prejudice that entirely terminates the litigation is a final order). We therefore hold that the Municipality's appeal is properly before us.⁶

B. Arbitrability of the Termination Dispute

We think it most helpful to begin this discussion by reviewing several basic arbitration principles noted by the Supreme Court in AT & T Techs., Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), and derived from prior case law. See id. at 648, 106 S.Ct. 1415 (referring to the Steelworkers Trilogy).⁷ First, "`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.'" Id. at 648, 106 S.Ct. 1415 (citation omitted). Second, "the question of arbitrability... is undeniably an issue for judicial determination." Id. at 649, 106 S.Ct. 1415. Third, a court deciding whether the parties have agreed to submit a particular grievance to arbitration is "not to rule on the potential merits of the underlying claims." Id. And, finally, when a contract contains an arbitration clause, "`[d]oubts should be resolved in favor of coverage.'" Id. at 650 (citation omitted); see also, e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944-45, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). In other words, "`[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.'" AT & T Techs., 475 U.S. at 650, 106 S.Ct. 1415 (citation omitted); see also Mobil Oil Corp. v. Local 8-766, Oil, Chemical & Atomic Workers Int'l Union, 600 F.2d 322, 328 (1st Cir. 1979) ("`In the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail, particularly where ... the arbitration clause [is] quite broad.'" (quoting United Steelworkers of Amer. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 584-85, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960))).

The middle two principles pose no difficulty here. Both parties agree that the arbitrability question is for the court and that the merits do not play a role in that determination. The parties pit the first and fourth principles against each other, however — with the Municipality claiming that the termination issue is outside the contractual arbitration provision and COFECC maintaining that, in the absence of its explicit exclusion, termination falls within the clause. Like the district court, we conclude that COFECC has the better argument. Our review of the court's decision is de novo. See InterGen N.V. v. Grina, 344 F.3d 134, 141 (1st Cir. 2003)

We first dispense with the Municipality's argument that this case implicates Supreme Court precedent on the arbitrability of post-termination disputes. See, e.g., Litton Fin. Printing Div. v. N.L.R.B., 501 U.S. 190, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991). The dispute here is not over matters that arose following the acknowledged end of the parties' agreement, but the issue is whether termination has, in fact, properly occurred. Post-termination case law is simply inapposite in this setting.

Our focus, rather, must be on whether the arbitration provision in Deed of Trust No. 5 is reasonably construed to embrace disputes over the termination of the trustee relationship. The entire arbitration provision, section 702 of the Trust document, states as follows:

In the event any controversy arises between the parties with regard to their responsibilities and obligations under this contract, said differences shall be resolved by arbitration. The parties should mutually agree to consent to the designation of the arbiter and shall be bound by his decision. The parties will equally share the costs of the arbitration.

The "responsibilities and obligations" outlined in the contract appear to include those related to the agreement's...