Glacier Park Iron Ore Props., LLC v. U.S. Steel Corp., A19-1923

• Decision Date: 27 July 2020
• Docket Number: A19-1923
• Citation: 948 N.W.2d 686
• Parties: GLACIER PARK IRON ORE PROPERTIES, LLC, Appellant, v. UNITED STATES STEEL CORPORATION, Respondent.
• Court: Minnesota Court of Appeals

948 N.W.2d 686

GLACIER PARK IRON ORE PROPERTIES, LLC, Appellant,

v.UNITED STATES STEEL CORPORATION, Respondent.

A19-1923

Court of Appeals of Minnesota.

Filed July 27, 2020

Granted October 20, 2020

Andy Borland, Sellman, Borland & Simon PLLC, Hibbing, Minnesota; and Richard E. Prebich, Hannah Forti, Prebich Law Offices P.C., Hibbing, Minnesota; and Beatrice C. Franklin (pro hac vice), Susman Godfrey L.L.P., New York, New York (for appellant)

Andrew M. Luger, Benjamin L. Ellison, Jones Day, Minneapolis, Minnesota; and Andrew R. Stanton (pro hac vice), Jones Day, Pittsburgh, Pennsylvania (for respondent)

Considered and decided by Bratvold, Presiding Judge; Segal, Chief Judge; and Kirk, Judge.^*

BRATVOLD, Judge

Appellant Glacier Park Iron Ore Properties LLC (Glacier Park), seeks review of a district court order denying its motion to stay litigation pending arbitration against respondent United States Steel Corporation (U.S. Steel) over their mineral lease. Glacier Park argues that the district court erred when it determined that (1) the court, and not an arbitrator, had authority to decide whether Glacier Park's claim for aiding and abetting breach of fiduciary duty was arbitrable under the parties’ mineral lease, and (2) Glacier Park's claim is outside the scope of the parties’ arbitration agreement. Glacier Park asks this court to reverse and remand for its claim to be submitted to mandatory arbitration.

On the first issue, we reject Glacier Park's reliance on Minnesota caselaw holding that an arbitrator determines arbitrability in the first instance because, Glacier Park argues, the parties’ intent about who decides arbitrability is "reasonably debatable." This caselaw predates Minnesota's adoption of the revised MUAA in 2010, and we conclude the reasonably debatable standard has been superseded. Minn. Stat. § 572B.06(b) expressly provides that a district court determines arbitrability, although Minn. Stat. § 572B.06(a) recognizes that the parties may agree otherwise. Because the parties’ lease is silent as to whether an arbitrator or district court decides arbitrability, we rely on section 572B.06(b) to conclude that the district court appropriately decided arbitrability of Glacier Park's claim against U.S. Steel. On the second issue, we conclude that Glacier Park's breach-of-fiduciary-duty claim is not subject to mandatory arbitration under the parties’ lease. Thus, we affirm.

FACTS

The Great Northern Iron Ore Properties Trust (trust) owned mineral interests in land in northeastern Minnesota, until the trust terminated in 2015. During the wind-down process, the trustees conveyed the remainder of the trust's assets, including its mineral rights and leases, to Glacier Park in accordance with Glacier Park's reversionary interest in the trust.

One of the leases conveyed to Glacier Park, the Carmi-Enterprise Lease (lease), was negotiated and executed in 2010 between the trust and U.S. Steel. In 2011, Glacier Park, "signed the consent" to the lease. In 2016, after receiving access to the trust records, Glacier Park became concerned about the lease's terms.

On March 27, 2019, Glacier Park served U.S. Steel with an arbitration demand, and, in April, the parties agreed to suspend arbitration while trying to resolve the dispute without litigation. The parties did not reach a resolution, and Glacier Park served U.S. Steel with a summons and complaint on August 26, 2019. In the complaint, Glacier Park alleged one count of aiding and abetting breach of fiduciary duty against U.S. Steel as the sole defendant. Glacier Park alleged that the trustees breached their fiduciary duties by signing the 2010 lease with U.S. Steel because the lease included "lower royalty rates and other unfavorable lease terms for 47 years beyond the trust's termination." Glacier Park also alleged that "U.S. Steel substantially assisted the trustees’ breach." Glacier Park requested equitable relief in the form of rescission of the lease.

Two days later, on August 28, Glacier Park moved the district court to stay litigation and refer the parties to mandatory arbitration under section 19 of the lease (arbitration provision). U.S. Steel asked the district court to deny the motion, arguing that Glacier Park's tort claim was outside the scope of the arbitration provision.

After a hearing, the district court denied Glacier Park's motion to stay the lawsuit pending arbitration. The district court determined that a district court, not an arbitrator, must decide whether Glacier Park's claim is arbitrable, relying on the Federal Arbitration Act (FAA) and the revised MUAA. And the district court found "[t]here is nothing in the [lease] that suggests otherwise." The district court also determined that Glacier Park's claim—that the lease is invalid because U.S. Steel aided and abetted the trust in its breach of fiduciary duties—is not covered by the arbitration provision that requires specific types of disputes be arbitrated.

Glacier Park appeals. The district court stayed proceedings pending the outcome of this appeal.

ISSUES

I. Did the district court err when it determined that a court, and not an arbitrator, was authorized to decide arbitrability of the parties’ dispute?

II. Did the district court err when it determined that Glacier Park's claim for breach of fiduciary duty was not subject to arbitration under the lease's arbitration provision?

ANALYSIS

I. A district court determines whether the parties’ dispute is arbitrable under the lease.

Glacier Park argues that the FAA and the revised MUAA "permit parties to delegate arbitrability questions by contract" and that the "broad language of the arbitration clause" demonstrates that "the parties intended threshold questions of arbitrability to be decided by the arbitrators, not the court." Glacier Park also argues Minnesota caselaw provides that "if the language of the [arbitration] clause makes the parties’ intent reasonably debatable, the arbitrability question goes to the arbitrators." Applying this caselaw—commonly called the "reasonably debatable standard"—to the parties’ lease, Glacier Park contends that we must conclude that an arbitrator decides whether the parties’ dispute is arbitrable.

U.S. Steel responds that, under the FAA and the revised MUAA, "the presumption is that courts determine arbitrability." U.S. Steel also contends that the reasonably debatable standard is based upon "a repealed Minnesota statute." And U.S. Steel argues that "[t]he plain language" of the lease's arbitration provision supports the district court's conclusion that the district court determines arbitrability. Glacier Park replies that the reasonably debatable standard "survives the revision of Minnesota's Uniform Arbitration Act." We address each argument in turn.

A. The revised MUAA supersedes caselaw adopting the reasonably debatable standard.

First, we consider Glacier Park's argument that the reasonably debatable standard is applicable here, and to do so, we begin by identifying the controlling statutory law. We apply de novo review to arbitration clauses and to the interpretation of statutes. Onvoy, Inc. v. SHAL, LLC , 669 N.W.2d 344, 349 (Minn. 2003) (arbitration clauses); Getz v. Peace , 934 N.W.2d 347, 353 (Minn. 2019) (statutory interpretation).

The parties agree that the FAA, the revised MUAA, and Minnesota caselaw govern the parties’ lease.¹ The FAA provides that a court decides whether a claim is arbitrable. See 9 U.S.C. § 3 (2018) ("[T]he court ... upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement ...."). But, under the FAA, "arbitration is a matter of contract," and parties "may agree to have an arbitrator decide not only the merits of a particular dispute, but also ‘gateway’ questions of ‘arbitrability.’ " Henry Schein, Inc. v. Archer & White Sales, Inc. , ––– U.S. ––––, 139 S. Ct. 524, 529, 202 L.Ed.2d 480 (2019) (quotation omitted).

In 2010, Minnesota amended its arbitration statute and adopted the revised MUAA, which provides that:

The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate, except in the case of a grievance arising under a collective bargaining agreement when an arbitrator shall decide.

Minn. Stat. § 572B.06(b). The revised MUAA also provides that "[a]n agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of contract." Minn. Stat. § 572B.06(a). Therefore, like the FAA, the revised MUAA provides that the parties may agree that an arbitrator determines arbitrability in the first instance, instead of the district court, as provided in section 572B.06(b).

The district court concluded that the FAA and revised MUAA "clearly establish that a court, not arbitrators, must decide whether a particular issue is arbitrable," unless the parties have agreed otherwise. We agree. The revised MUAA states that the court "shall decide" whether a dispute "is subject to" an arbitration agreement. Minn. Stat. § 572B.06(b). The revised MUAA provides an exception for "a grievance arising under a collective bargaining agreement." See id. But the parties’ dispute concerns a lease, and not a collective bargaining agreement, so this exception does not apply. The revised MUAA also recognizes that the parties may expressly agree that an arbitrator decides arbitrability. Minn. Stat. § 572B.06(a).

Glacier Park argues that the arbitration provision includes an express agreement to have the arbitrator decide arbitrability. Glacier Park also contends that this court should apply the reasonably debatable standard when interpreting the parties’ arbitration...