Deloitte Noraudit A/S v. Deloitte Haskins & Sells, 165
| Citation | 9 F.3d 1060 |
| Decision Date | 22 November 1993 |
| Docket Number | D,No. 165,165 |
| Parties | DELOITTE NORAUDIT A/S, Plaintiff-Appellee, v. DELOITTE HASKINS & SELLS, U.S. and J. Michael Cook, individually and as representatives of a defendant class consisting of (i) all members and member firms of Deloitte Haskins & Sells International as of July 1989 which themselves or through their successors became members or member firms of Deloitte Ross Tohmatsu International, and (ii) Deloitte Haskins & Sells International; Deloitte & Touche and J. Michael Cook, individually and as representatives of a defendant class consisting of (i) all members and member firms of Deloitte Ross Tohmatsu International which are successors of members or member firms of Deloitte Haskins & Sells International, and (ii) Deloitte Ross Tohmatsu International, Defendants-Appellants. ocket 93-7271. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Craig I. Celniker, New York City (Baker & McKenzie, Arthur W. Rovine, of counsel), for defendants-appellants.
William M. Murphy, New York City (Robinson Parnass Murphy & McDonald, of counsel), for plaintiff-appellee.
Before FEINBERG, CARDAMONE and ALTIMARI, Circuit Judges.
Defendants-appellants Deloitte Haskins & Sells, U.S. (DHS-US), Deloitte & Touche and J. Michael Cook (Cook) appeal from a March 1993 order of the United States District Court for the Southern District of New York, Thomas P. Griesa, J., denying appellants' motion to stay litigation and to compel arbitration of claims asserted against them by plaintiff-appellee Deloitte Noraudit Oslo A/S (Noraudit). The crux of Noraudit's suit is its claim that it has the right to use the name "Deloitte" in connection with its accounting practice in Norway. The sole issue on appeal is whether Noraudit is required to submit this claim to arbitration. We hold that it is, for reasons given below. We therefore reverse and remand for further proceedings.
In 1976, the accounting firm of Deloitte U.S. and its worldwide affiliates formed an international association called Deloitte Haskins & Sells International (DHSI). The affiliates entered into a series of agreements, the last in October 1988 (the Memorandum of Agreement). Plaintiff-appellee Noraudit was the regional affiliate of DHSI in Norway.
This dispute started with DHSI's July 1989 decision to merge with another international accounting organization--Touche Ross International (TRI). The two organizations agreed to merge globally by instructing their respective regional affiliates to negotiate local mergers.
The proposed merger hit a major snag when DHSI's regional affiliate in the United Kingdom (DHS-UK) decided to merge with rival firm Coopers & Lybrand instead of with the United Kingdom affiliate of TRI. According to Section 11.2 of the 1988 Memorandum of Agreement, all rights to the use of the name "Deloitte" were wholly vested in DHS-UK. 1 Thus, the continued use of the name "Deloitte" by DHSI and its member firms was threatened by the decision of DHS-UK to leave DHSI rather than participate in the global merger with TRI. Litigation then ensued both in the United States and in the United Kingdom.
These litigations were settled with the signing of an agreement effective January 1990 (the 1990 Agreement) which, among other things, gave DHSI member firms limited use of the name "Deloitte" and enabled DHSI to consummate the global merger with TRI.
According to appellants, the 1990 Agreement was signed by defendant-appellant Cook as Chairman of the Executive Committee of DHSI on behalf of all DHSI member firms, pursuant to the specific authority of the Executive Committee to "conduct the affairs of [DHSI]," and was approved by more than 75 percent of the total voting interests of the member firms of DHSI. Every member firm of DHSI, including Noraudit, received a copy of the 1990 Agreement and was asked to approve or object to it. No member firm of DHSI objected to the 1990 Agreement.
Noraudit apparently had its own problems with the global merger. As already noted, the global merger between DHSI and TRI was to take place through a series of local mergers between affiliates of the two organizations. Noraudit was unable to negotiate an arrangement with the Norwegian affiliate of TRI, Forum Touche Ross. In early 1990, Forum Touche Ross rather than Noraudit was selected as the Norwegian affiliate of the combined entity, Deloitte Ross Tohmatsu International (now known as Deloitte Touche Tohmatsu International).
In obvious conflict with the new combined entity and its designated affiliate in Norway, Forum Touche Ross, Noraudit continued to use the name "Deloitte" in connection with its accounting practice in Norway. In May 1991, Noraudit brought the instant litigation in the Southern District seeking monetary and injunctive relief against defendants-appellants for breach of contract and interference with contractual relations, and a declaration of Noraudit's right to use the name "Deloitte" in Norway. Appellants then sought to compel arbitration of the controversy on the basis of an arbitration clause in the 1990 Agreement. In the district court, Noraudit contended--and the court agreed--that Noraudit's claims arise under the 1988 Memorandum of Agreement, that the 1990 Agreement merely settled the earlier litigations, and that because Noraudit was neither a party to those litigations nor a signatory to the 1990 Agreement it is not bound by the arbitration clause in the latter agreement. We turn to examine these two agreements.
The 1988 Memorandum of Agreement conferred the right to use the name "Deloitte" on all member firms of DHSI. As indicated above, this was the last in a series of such agreements, commencing in 1976. Article 11 is entitled "Use of the Name Deloitte Haskins & Sells." Section 11.1 requires each member firm to "reaffirm[ ] that the right to use the name Deloitte Haskins & Sells is subject to the conditions and obligations described in this Agreement." Section 11.4 confers on each member firm the right to use the name "so long as such firm shall be a party to this Agreement." Section 11.2 provides that "all rights in and to the use of [the name Deloitte] are wholly vested in [DHS-UK]...." Thus, it appears that the withdrawal of DHS-UK from DHSI in 1989 could have terminated the rights of the remaining members of DHSI, including Noraudit, to use the name "Deloitte." Article 6 provides for an Executive Committee to act as the governing body of DHSI. The Memorandum of Agreement contains no arbitration clause.
As we have noted, the 1990 Agreement settled the litigations concerning DHS-UK's decision to withdraw from DHSI and to take the name "Deloitte" with it. However, the 1990 Agreement is a broad-ranging document. Thus, although Paragraph 13 of the 1990 Agreement expressly preserves prior agreements--including the 1988 Memorandum of Agreement--the 1990 Agreement contains provisions, e.g., Paragraphs 4, 6-8 and 10, that regulate the use of the name "Deloitte" internationally.
Paragraph 4 gives DHSI member firms, identified in exhibit A of the Agreement, the "right to use the name Deloitte ... in its Professional Practice in its territory, free of Interference by DHS-UK or Coopers." Noraudit is identified in exhibit A as the DHSI affiliate in Norway. Paragraph 6(d) gives the international organization and member firms resulting from the combination of DHSI and TRI the right to use the name "Deloitte" in their respective territories. Paragraph 7 conditions the right of DHSI member firms to use the name "Deloitte" on their giving effect to the 1990 Agreement. Paragraph 8 regulates the use of the name in any territory where no affiliate had been established as of the effective date of the 1990 Agreement, and Paragraph 10 regulates the use of the name in Europe.
Finally, the 1990 Agreement contains an arbitration clause in Paragraph 12, which is reproduced in pertinent part in the margin. 2 Paragraph 12(e) requires arbitration of "any Dispute or any other disagreement concerning this Agreement." The term "Dispute" is defined in Paragraph 12(a) as "disputes which might arise between DHS-UK or Coopers on the one hand and DHSI, any DHSI Member Firm or [Touche Ross (UK) ] on the other hand concerning matters contemplated hereunder." The parties agree that this controversy is not a "Dispute" under the 1990 Agreement. The parties disagree on the meaning of the phrase "any other disagreement" and the applicability of the clause to the present controversy.
The Federal Arbitration Act, 9 U.S.C. Secs. 1 et seq. (1988), requires the federal courts to enforce arbitration agreements, reflecting Congress' recognition that arbitration is to be encouraged as a means of reducing the costs and delays associated with litigation. Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir.1987). The federal policy favoring arbitration is even stronger in the context of international transactions. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 629-31, 105 S.Ct. 3346, 3355-56, 87 L.Ed.2d 444 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 516-18, 94 S.Ct. 2449, 2455-56, 41 L.Ed.2d 270 (1974); David L. Threlkeld & Co. v. Metallgesellschaft Ltd., 923 F.2d 245, 248 (2d Cir.), cert. dismissed, --- U.S. ----, 112 S.Ct. 17, 115 L.Ed.2d 1094 (1991).
This Court has recently noted that "[i]n determining the arbitrability of a particular dispute, a court must decide 'whether the parties agreed to arbitrate, and, if so, whether the scope of that agreement encompasses the asserted claims.' " Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 45 (2d Cir.1993) (quoting from David L. Threlkeld & Co., 923 F.2d at 249). Bearing in mind the...
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