Combined Energies v. Cci, Inc.

• Decision Date: 01 February 2008
• Docket Number: No. 07-1766.,07-1766.
• Citation: 514 F.3d 168
• Parties: COMBINED ENERGIES, Plaintiff, Appellee, v. CCI, INC., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

514 F.3d 168

COMBINED ENERGIES, Plaintiff, Appellee, v. CCI, INC., Defendant, Appellant.

No. 07-1766.

United States Court of Appeals, First Circuit.

Heard November 6, 2007.

Decided February 1, 2008.

Ronald W. Schneider, Jr., with whom Bernstein Shur Sawyer & Nelson were on brief, for appellant.

Thomas G. Rohback, with whom James J. Reardon, LeBoeuf, Lamb, Greene & MacRae, LLP, John J. Aromando and Pierce Atwood, LLP, were on brief, for appellee.

Before BOUDIN, Chief Judge, SELYA and STAHL, Senior Circuit Judges.

STAHL, Senior Circuit Judge.

This lawsuit arises from a business partnership gone sour. Plaintiff-appellee Combined Energies ("CE") filed suit in Maine federal district court against Defendant-appellant CCI, Inc. ("CCI"), alleging various contract and tort claims related to what CE describes as a raid on CE's work-force subsequent to a failed take-over attempt by its erstwhile business partner CCI. CCI moved to stay the proceedings and compel arbitration. The district court denied the motion and, holding that CE's claims do not fall within the scope of the parties' arbitration agreement, we affirm.

I. Background

CE is a Maine construction and energy services subcontractor. CCI is an Alaskan prime contractor. CE and CCI entered into a business relationship for the purposes of developing and performing projects for the U.S. Navy. The business relationship was formalized in three key agreements. The Teaming Agreement ("TA"), signed in late December 2004, established CCI as the prime contractor and CE as the subcontractor for a project proposal to be submitted to the U.S. Navy. The TA also contemplated other Navy contract opportunities. After the Navy accepted the proposal and awarded the contract to CCI, CCI and CE concluded a Strategic Alliance Agreement ("SAA") on August 23, 2005, a short document in which the parties stated their intention "to strategically align themselves with one another in order to promote and utilize their respective expertise for the purpose of developing and performing projects...." That same day, the parties also entered into a Purchase Order Agreement ("POA") laying out the standard terms and conditions applicable to each party's performance of the Navy contract.

It appears that the parties proceeded to perform as directed by the above triumvirate of agreements until their relationship broke down irretrievably in late 2006. CE alleges that CCI inquired about purchasing its business on October 15, 2006, an offer that CE declined. According to CE, CCI then set out to "raid what it could not buy," by "preventing CE from performing its obligations under existing contracts, preventing CE from obtaining new contracts, damaging CE's good reputation," and filching CE's entire workforce. CE was subject to a spate of mass resignations in early January 2007; the majority of the resignation letters, which are attached to CE's complaint, state that the sender had accepted or intended to accept a position with CCI.

On February 1, 2007, CE filed suit against CCI in the United States District Court for the District of Maine, alleging tortious interference with its business; unjust enrichment; breach of the TA and SAA; breach of implied covenants including the duty of good faith and fair dealing; and defamation and slander per se. Arguing that an arbitration clause in the POA mandated the submission of CE's claims to arbitration, CCI timely moved to stay the proceedings and compel arbitration; CE opposed the motion. On March 14, 2007, the district court denied CCI's motion, Ending that it could not conclude that "the arbitration clause in a construction contract encompasses a law suit alleging multiple violations of tort and contract law from the unsavory tactics CE claims CCI used in a bid to take-over its business."

Pursuant to the Federal Arbitration Act ("FAA"), this court has jurisdiction to review the district court's interlocutory order denying CCI's request for a stay and motion to compel arbitration. See 9 U.S.C. §§ 16(a)(1)(A), 16(a)(1)(B); Campbell v. Gen. Dynamics Gov't Sys. Corp., 407 F.3d 546, 550 (1st Cir.2005).¹

II. Discussion

We are not now tasked with deciding upon the merits vel non of CE's claims against CCI, but rather upon their arbitrability. "[A]rbitrability depends on contract interpretation, which is a question of law." Keystone Shipping Co. v. New England Power Co., 109 F.3d 46, 50 (1st Cir.1997)(alteration in original)(quoting PaineWebber Inc. v. Elahi, 87 F.3d 589, 592 (1st Cir.1996))(internal quotation marks omitted). Accordingly, "[w]e evaluate the district court's denial of a motion to compel arbitration de novo." Kristian v. Comcast Corp., 446 F.3d 25, 31 (1st. Cir.2006)(citing Campbell 407 F.3d at 551).

When deciding a motion to compel arbitration, a court must determine whether "(i) there exists a written agreement to arbitrate, (ii) the dispute falls within the scope of that arbitration agreement, and (iii) the party seeking an arbitral forum has not waived its right to arbitration." Bangor Hydro-Electric Co. v. New England Tel. & Tel. Co., 62 F.Supp.2d 152, 155 (D.Me.1999). Only, if all three prongs of the test are satisfied will a motion to compel arbitration be granted. Here, prongs (i) and (iii) are not at issue; the outcome of this case, therefore, turns entirely on whether the dispute is of a kind that the parties had agreed to submit to arbitration.

Whether a claim falls within the reach of a particular arbitration clause is a question for the district court to determine initially as a matter of law. See Acevedo Maldonado v. PPG Indus., Inc., 514 F.2d 614, 616 (1st Cir.1975). Federal policy favors arbitration. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)("The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration ....")(internal quotations omitted). However, "arbitration is simply a matter of contract between the parties; it is a way to resolve disputes—but only those disputes—that the parties have agreed to submit to arbitration." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). CCI exhorts us that arbitration clauses must be construed liberally, while. CE cautions that it cannot be compelled to arbitrate claims that it did not consent to arbitrate. At bottom, however, federal policy merely "guarantee[s] the enforcement of private contractual arrangements" by creating "a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate." Mitsubishi, 473 U.S. at 625, 105 S.Ct. 3346 (internal quotations omitted).

Therefore, "[w]hen deciding whether the parties agreed to arbitrate a certain matter ..., courts generally ... should apply ordinary state-law principles that govern the formation of contracts." First Options, 514 U.S. at 944, 115 S.Ct. 1920. Under Maine law, a contract

is to be construed in accordance with the intention of the parties, which is to be ascertained from an examination of the instrument as a whole. All parts and clauses must be considered together that it may be seen if and how far one clause is explained, modified, limited, or controlled by the others.

Peerless Ins. Co. v. Brennon, 564 A.2d 383, 385 (Me.1989).

In support of its argument that the parties' arbitration agreement requires arbitration of CE's claims, CCI relies on two clauses in the POA, which it contends must be read in tandem to mandate an expansive agreement to arbitrate all disputes between the parties. Paragraph 6.3 of the POA provides:

All unresolved claims, disputes, and other matters in question between [CCI] and [CE] not relating to claims included in Paragraph 6.2² shall be resolved in the manner provided in Article 14.

Paragraph 14.1, the relevant provision of Article 14, states:

All claims, disputes and matters in question arising out of, or relating to, this POA or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect unless the parties mutually agree otherwise.

Precedent may counsel us to construe arbitration clauses liberally, but it does not permit us to read out of an arbitration clause an explicit limit upon the scope of that clause that has been agreed to by both parties. Reading 6.3 and 14.1 together as Maine law requires produces not an expansive agreement to arbitrate but rather an arbitration clause clearly and on its face limited to "[a]ll claims, disputes and matters in question arising out of or relating to, this POA or the breach thereof ...." (emphasis added).

The key question remaining, then, is whether CE's claims arise out of, or relate to, the POA or breach of the POA. CE's contract-related claims reference the TA and the SAA, not the POA; however, it is true that CE cannot avoid arbitration by dint of artful pleading alone. See, e.g., Acevedo Maldonado, 514 F.2d at 616 (finding that arbitration clause covered "contract-generated or contract-related disputes between the parties however labeled: it is immaterial whether claims are in contract or in tort"); Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 910 (7th Cir.1999)(noting that arbitrability of particular claim does not "turn on the label—`tort' or `contract'—a party chose to affix to the claim"). Nevertheless, we agree with the district court that the complaint filed by CE cannot be fairly said to arise out of, or relate to, the POA in the sense that would be necessary to confer arbitrability in this case. As the district court observed, "[t]he Complaint does not claim any disputes between CCI and CE about the work CE performed under the POA, about payment in accordance with that work, about change orders, delay, quality of workmanship, or the myriad of other...