Dale Supply Company v. York International Corp.
| Decision Date | 09 October 2003 |
| Docket Number | No. M2002-01408-COA-R3-CV.,M2002-01408-COA-R3-CV. |
| Parties | DALE SUPPLY COMPANY v. YORK INTERNATIONAL CORP., ET AL. |
| Court | Tennessee Court of Appeals |
Appeal from the Circuit Court for Davidson County, No. 02C432, Carol Soloman, Judge.
Judgment of the Circuit Court Reversed.
Ronald George Harris, Nashville, Tennessee, for the appellant, York International Corp.
John Anthony Wolf, Baltimore, Maryland, for the appellant, York International Corp.
Joel Randall Hooper, Brentwood, Tennessee, for the appellee, Dale Supply Company.
OPINION
The sole determinative issue on appeal is whether an agreement which mandates arbitration in the event of claims or disputes "arising out of or relating in any way to the relationship of the parties or this Agreement, or the breach thereof," requires arbitration of tort claims including acts arising after the parties' contractual relationship ended. We hold that arbitration of claims of tortious interference with contracts or business relations is required under the terms of the parties' agreement and reverse the judgment of the trial court.
Plaintiff-Appellee, Dale Supply Company ("Dale Supply"), is a former distributor of products manufactured by Defendant-Appellant, York International Corporation ("York"). Following York's termination of the parties' Distributor Sales Agreement (the "Agreement"), Dale Supply filed a five count complaint in Davidson County Circuit Court and asserted claims against both York and Team Air Distributing, Inc. ("Team Air"), the company that succeeded Dale Supply as York's distributor in Middle Tennessee.
The first three counts named only York as a defendant. Dale Supply asserted that the termination was a breach of the Agreement and a violation of Tenn.Code. Ann 47-25-1301, et seq., that York was liable for wrongful termination of the Agreement and that York was liable for misrepresentation because York allegedly misrepresented its intention in continuing its relationship with Dale Supply under the Agreement.
Claims in Counts IV and V asserted that York and Team Air tortiously interfered with Dale Supply's existing contracts with its customers and with Dale Supply's business relations with its customers and dealer. Specifically, Dale Supply alleged that York did this by terminating the Agreement with Dale Supply and by allowing Team Air to sell York products in Dale Supply's former distributorship territory to Dale Supply's former customers.
Relying on an arbitration clause in the Agreement, York responded to the Complaint on March 20, 2002, by filing a Motion To Stay Litigation And To Compel Arbitration, Or In The Alternative, To Dismiss. That motion asked the trial court to compel arbitration of all claims against York and to stay all proceedings. In the alternative, York sought dismissal of the Complaint against it on the ground that the trial court lacked subject matter jurisdiction to adjudicate Dale Supply's claims against York because of the arbitration clause.
In its response to the Motion To Compel Arbitration, Dale Supply conceded that the Federal Arbitration Act applied to the Agreement and that the first three counts should be arbitrated. Nevertheless, Dale Supply asserted that the tort claims in Counts Four and Five of the Complaint should not be arbitrated on the ground that those claims did not arise out of the Agreement.
On May 8, 2002, the Davidson County Circuit Court granted York's motion in part and denied it in part. The trial court ordered Counts I and III to arbitration, but did not order arbitration of the tortious interference claims asserted in Counts IV and V, the trial court stating that the tort claims "shall proceed in this court." On June 6, 2002, York appealed the partial denial of its Motion To Compel Arbitration and filed a Notice of Appeal pursuant to Tenn.R. App.P.3, the Federal Arbitration Act ("FAA"), 9 U.S.C. 16 (1999 & Supp. 2002), and the Tennessee Uniform Arbitration Act ("TUAA"), Tenn. Code. Ann. 29-5-319 (2001). On appeal, York asserts that the lower court erred in refusing to compel arbitration of all counts of the Complaint, including Counts Four and Five.
York is in the business of manufacturing residential and commercial heating and air conditioning products. York's HVAC products are sometimes distributed by independent distributors, and Dale Supply was one such distributor for York. In January 1980, Dale Supply entered into its first contract with York for the purchase, sale and distribution of residential and commercial York HVAC products, as well as related accessories and parts. York and Dale Supply entered into a subsequent Distributor Sales Agreement on December 16, 1997. That contract superseded any earlier agreement between the parties and was in force at the time of events giving rise to Dale Supply's lawsuit.
The Agreement governed the sale by York and the purchase and distribution by Dale Supply of residential and commercial HVAC products and related accessories and parts in specified counties in Tennessee. The Agreement contained a broad dispute resolution provision that required the parties to arbitrate all claims in the event of disputes, to-wit:
All claims, disputes, and controversies arising out of or relating in any way to the relationship of the parties or this Agreement, or the breach thereof, whether arising in tort, equity, contract or otherwise, or under any law of the United States or any state or municipality, shall, in lieu of court action, be submitted to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and the award rendered by the arbitrator(s) shall be final and binding on the parties and judgment thereon may be entered in any court of competent jurisdiction. The site of the arbitration shall be York, Pennsylvania, unless another site is mutually agreed between the parties.
The distributorship relationship between York and Dale Supply continued in effect until terminated by York's giving Dale Supply sixty days' notice. The Agreement explicitly provided that it could be terminated by either party, without cause, upon sixty (60) days' notice. York then entered into a contract with Team Air to distribute York products in the geographic area previously assigned to Dale Supply and the lawsuit followed.
In its tortious interference claims Dale Supply alleged that York and Team Air (1) contacted Dale Supply's customers who had placed orders with Dale Supply and offered those customers discounts, rebates, advertising and other incentives to induce them to end their existing business dealings with Dale Supply and take their business to Team Air; (2) used Dale Supply's proprietary information to invite Dale Supply's customers to a meeting during which they introduced Team Air as York's new distributor in the area; and (3) offered Dale Supply's dealers and customers substantial discounts, rebates, advertising and other incentives (which were more favorable than those offered or authorized by York to Dale Supply) to induce Dale Supply's dealers and customers to end their business relationships with Dale Supply and instead place their orders with Team Air. Dale Supply further alleged that as a result of York's incentives to Dale Supply's customers, it suffered a substantial loss of sales and profits that it otherwise would have realized under the Agreement.
The trial court split the resolution of the dispute between Dale Supply and York into two forums. The focus of this Court's inquiry is whether the tort claims in those two counts fall within the scope of the parties' arbitration agreement and therefore are to be arbitrated pursuant to the guiding principles of the FAA. This Court reviews this question of law de novo, without a presumption of correctness. Pyburn v. Bill Heard Chevrolet, 63 S.W.3d 351, 356 (Tenn.App.2001).
This Court is of the opinion that the FAA applies to the arbitration agreement contained in the parties' Distributor Sales Agreement. The FAA applies in all cases where there is "[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . ." See 9 U.S.C. section 2; see also Frizzell Constr. Co. v. Gatlinburg, L.L.C., 9 S.W.3d 79, 83 (Tenn.1999). Thus, the FAA governs the enforcement of any agreement to arbitrate in contracts that involve interstate commerce. This is an incontestable proposition, established by the United States Supreme Court and followed by both federal and Tennessee state courts. See, e.g., Tennessee River Pulp & Paper Co. v. Eichleay Corp., 637 S.W.2d 853, 855 (Tenn. 1982); Berkley v. H & R Block E. Tax Servs., Inc., 30 S.W.3d 341, 343 (Tenn.App. 2000); see also Volt Info. Sciences, Inc. V. Bd. Of Trs. Of Leland Stanford Jr. Univ., 489 U.S. 468, 476, 103 S.Ct. 1248, 1254 (1989) (interstate construction contract); Southland Corp. v. Keating, 465 U.S. 1, 11, 104 S. Ct. 852, 858 (1984) (interstate franchise agreement); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 400, 87 S.Ct. 1801, 1804 (1967) ().
The parties' Agreement plainly involves interstate commerce. Dale Supply is a Tennessee corporation incorporated in Delaware and authorized to do business in Tennessee. The Agreement specifically notes that York's principal place of business is located in York, Pennsylvania. Clearly, the Agreement involved substantial reliance upon interstate transactions, including the flow of goods, services, reports and payments between Pennsylvania and Tennessee. The Complaint makes it clear that the Agreement called for the interstate sale and shipment of goods by York to Dale Supply, as well as the purchase and distribution of York goods by...
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