Dex Media v. National Management Services

• Decision Date: 03 January 2007
• Docket Number: 0402-01435.,A128010.
• Parties: DEX MEDIA, INC., a foreign corporation, Appellant, v. NATIONAL MANAGEMENT SERVICES, INC., an Oregon corporation, Respondent.
• Court: Oregon Court of Appeals

150 P.3d 1093

210 Or. App. 376

DEX MEDIA, INC., a foreign corporation, Appellant, v. NATIONAL MANAGEMENT SERVICES, INC., an Oregon corporation, Respondent.

0402-01435.

A128010.

Court of Appeals of Oregon.

Argued and Submitted July 10, 2006.

Decided January 3, 2007.

COPYRIGHT MATERIAL OMITTED

Michael H. Simon, Portland, argued the cause for appellant. With him on the briefs were Sarah J. Crooks, Portland, and Perkins Coie LLP and Greg A. Pfister, Portland.

Kevin H. Kono, Portland, argued the cause for respondent. With him on the brief were John F. McGrory Jr., Portland, and Davis Wright Tremaine LLP.

Before EDMONDS, Presiding Judge, and WOLLHEIM, Judge, and CRAMER, Judge pro tempore.

EDMONDS, P.J.

Plaintiff DEX Media, Inc. (DEX) brought claims against defendant National Management Services, Inc. (NMS) for breach of contract and for services sold and delivered. NMS brought a counterclaim alleging breach of a separate agreement. DEX appeals from the trial court's order denying its motion to compel arbitration of NMS's counterclaim. We reverse and remand for entry of an order compelling arbitration.

DEX publishes yellow pages directories. NMS is an independent certified market representative authorized by various yellow pages publishers to solicit and sell advertising for placement in directories. The parties did business together for a number of years without a written agreement. In March 2003, the parties executed a written certified marketing representative agreement (the Agreement), which authorized NMS to sell national yellow pages advertising to be published in DEX's directories.

The Agreement was effective as of March 25, 2003. Pursuant to the Agreement, NMS would solicit and sell advertising. NMS would submit the solicited advertising to DEX for approval and acceptance. NMS would bill national advertisers for the advertising, and DEX, in turn, would bill NMS for all advertising that DEX accepted. Unless otherwise stipulated by DEX, NMS was required to pay DEX within 30 days of receiving an invoice. NMS earned a commission on advertising orders, which appeared as deductions on the bills that DEX sent to NMS. The Agreement reserved to DEX the right to accept late payments. The Agreement further provided that it

"(a) supersedes any and all prior understandings, whether verbal or oral, express or implied concerning the subject matter hereof, (b) constitutes the entire agreement between the parties concerning the subject matter hereof, and (c) may not be waived, amended or modified by either party[.]"

NMS became delinquent in its payments to DEX. In June 2003, DEX's customer service representative sent to NMS a letter setting forth a previously agreed-to payment schedule for past due invoices and requiring that NMS "maintain current balances." We refer to this document as the Payment Plan.¹ NMS allegedly failed to comply with the schedule set forth in the Payment Plan. In August 2003, DEX declared NMS to be in default and terminated the Agreement. DEX then began to cancel NMS's outstanding orders and notified NMS's customers of the cancellations.

DEX filed a complaint against NMS alleging two claims. The first claim, for services sold and delivered, was based on NMS's delinquency for advertising sold by NMS from December 2002 through March 13, 2003, and sought damages of over $1,000,000, plus interest. The second claim, for breach of contract, was based on NMS's failure to pay for advertising services "as set forth in" the Agreement, and sought damages of $530,650, plus interest.

NMS filed a counterclaim, asserting that DEX had "a longstanding contractual relationship through which NMS sold national yellow page advertising for DEX and its predecessors in interest." NMS alleged that DEX "breached its agreement to a payment plan, as well as its covenant of good faith and fair dealing" by (1) withdrawing from the payment plan and demanding full and immediate payment; (2) cancelling or threatening to cancel unpublished orders that NMS had received from its customers; (3) contacting NMS's customers and telling them they did not have to pay NMS; and (4) threatening NMS's customers that they would lose all advertising if they did not reorder their advertising through DEX. NMS alleged that, as a result of DEX's breach, it has been damaged due to its inability to continue to make sales, to continue to collect from its customers, and to continue in business.

DEX filed a motion for an order to stay or abate NMS's counterclaim, arguing that it is subject to arbitration under the Agreement's arbitration clause, pursuant to the Federal Arbitration Act, 9 USC sections 1 to 15(FAA). The trial court denied DEX's motion, reasoning that a breach of the Payment Plan was not subject to the Agreement's arbitration provision and that the Payment Plan had no provision for arbitration. Believing that it had no right to an immediate appeal of the trial court's ruling, DEX filed a petition for writ of mandamus in the Oregon Supreme Court. It then withdrew its petition and filed a petition to compel arbitration pursuant to ORS 36.625, which the trial court denied, ruling that NMS's counterclaim is not subject to an agreement to arbitrate. DEX appeals that ruling under ORS 36.730.²

NMS moved to dismiss the appeal as untimely, on the ground that the notice of appeal was filed more than 30 days after the initial ruling denying DEX's motion to stay the counterclaim. We denied the motion by order. Initially, NMS asks us to reconsider our order denying its motion to dismiss the appeal, contending that the ruling under appeal is identical in substance to the trial court's previous ruling on DEX's motion to abate, and that the petition to compel arbitration was simply a mechanism for generating a new 30-day window in which to file an appeal. In the order denying the motion to dismiss, Chief Judge Brewer explained that there is no right to an immediate appeal from an order denying a stay and that DEX therefore could not have sought review of the trial court's order denying the stay until after the entry of final judgment. See Budget Rent-A-Car v. Todd Investment Co., 43 Or.App. 519, 521, 603 P.2d 1199 (1979) (order denying stay of judicial action not appealable). Accordingly, the 30-day period for appealing did not run from that order. In contrast, there is a right to a direct appeal of an order denying a petition to compel arbitration, and DEX timely appealed that order. For that reason, the court denied the motion to dismiss. We decline to reconsider that order.

In its single assignment of error, DEX contends that the trial court erred in denying its petition to compel arbitration of NMS's counterclaim. The parties have incorporated the provisions of the FAA into the Agreement.³ As the Supreme Court said in Industra/Matrix Joint Venture v. Pope Talbot, 341 Or. 321, 142 P.3d 1044 (2006), arbitration under the FAA is based on contract. In construing a valid arbitration agreement within the coverage of the FAA, the court applies ordinary principles of state contract law to determine whether the parties have agreed to arbitrate a particular dispute. Id. at 331, 142 P.3d 1044. Before a court may compel arbitration under the FAA, the court must determine both that the parties are bound by a valid arbitration agreement and that the particular type of controversy between the parties is within the scope of that agreement. Id.

The Agreement provides that the laws of the State of Colorado govern its interpretation. Accordingly, to the extent that Colorado law does not undermine the policies of the FAA, it governs our interpretation of the Agreement. Volt Info. Sciences v. Leland Stanford Jr. U., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989); Industra/Matrix Joint Venture, 341 Or. at 330, 142 P.3d 1044; Allen v. Pacheco, 71 P.3d 375, 378 (Colo.2003); City & County of Denver v. Dist. Court, 939 P.2d 1353, 1361 (Colo.1997).

Most of the issues on appeal relate to whether NMS's counterclaim is within the scope of the arbitration clause of the Agreement, and we therefore address that question first. The determination entails, initially, an interpretation of the arbitration clause. The arbitration clause provides, in part:

"Any claim, controversy or dispute between [NMS] and [DEX], whether in contract, statute, tort, fraud, or otherwise (other than an action by [DEX] for the collection of amount[s] due hereunder), which is not resolved through good faith negotiations, shall be resolved by arbitration in accordance with the Federal Arbitration Act, 9 U.S.C. Sects. 1-15, the provisions of which are incorporated herein by reference."

The Agreement further provides that the arbitration clause "shall survive any termination of this Agreement." The arbitration clause, read in the context of the survival provision, would appear to encompass any future dispute between the parties on any matter, with the exception of DEX's claims for the collection of amounts due under the Agreement.

NMS asserts that the parties cannot conceivably have intended the clause to have such a sweeping application, so as to require in perpetuity that the parties submit all future claims of any nature, including those involving events unrelated to and occurring after termination of the agreement. The literal meaning of the clause is indeed so broad. However, DEX's counsel acknowledged in oral argument that, as a practical matter, the arbitration clause is reasonably understood to apply to any dispute arising between the parties, as long as it relates to the Agreement. DEX also acknowledges that, strictly speaking, NMS's counterclaim is not pleaded as a breach of the Agreement; rather, the counterclaim asserts a breach of the Payment Plan. DEX declines, however, to characterize the Payment Plan as a contract separate from the Agreement. In DEX's view, the Payment Plan, as evidenced by the letter, is simply an implementation of DEX's right under the Agreement...