Maine Sch. Admin. Dist. No. 68 v. Johnson Controls, No. CIV.02-43-B-S.

• Citation: 222 F.Supp.2d 50
• Decision Date: 30 August 2002
• Docket Number: No. CIV.02-43-B-S.
• Parties: MAINE SCHOOL ADMINISTRATIVE DISTRICT NUMBER 68, Plaintiff v. JOHNSON CONTROLS, INC., Defendant
• Court: U.S. District Court — District of Maine

222 F.Supp.2d 50

MAINE SCHOOL ADMINISTRATIVE DISTRICT NUMBER 68, Plaintiff v. JOHNSON CONTROLS, INC., Defendant

No. CIV.02-43-B-S.

United States District Court, D. Maine.

August 30, 2002.

Christopher B. Branson, Esq., John B. Shumadine, Esq., Murray, Plumb & Murray, Portland, ME, for Maine School Administrative District Number 68, plaintiff.

Phillip D. Buckley, Luke M. Rossignol, Esq., Rudman & Winchell, Bangor, ME, for Johnson Controls, Inc., defendant.

ORDER AFFIRMING THE RECOMMENDED DECISION OF THE MAGISTRATE JUDGE.

SINGAL, District Judge.

The United States Magistrate Judge filed with the Court on July 30, 2002, her Recommended Decision. Plaintiff filed its objections to the Recommended Decision on August 15, 2002 and Defendant filed its response to those objections on August 29, 2002. I have reviewed and considered the Magistrate Judge's Recommended Decision, together with the entire record; I have made a de novo determination of all matters adjudicated by the Magistrate's Judge's Recommended Decision; and I concur with the recommendations of the United States Magistrate Judge for the reasons set forth in her Recommended Decision, and determine that no further proceeding is necessary.

It is therefore ORDERED that the Recommended Decision of the Magistrate Judge is hereby AFFIRMED.

It is further ORDERED that Defendant's motion to stay the present action and compel arbitration is GRANTED.

RECOMMENDED DECISION

KRAVCHUK, United States Magistrate Judge.

Defendant Johnson Controls, Inc. ("JCI") filed this Motion to Compel Arbitration pursuant to 9 U.S.C. §§ 3 and 4, asserting that the operative contract between it and Plaintiff Maine School Administrative District Number 68 ("MSAD 68") requires all disputes not resolved by negotiation to be resolved by arbitration. (Docket No. 5.) I recommend that the Court GRANT JCI's motion to stay the present action and to compel arbitration.

Applicable Legal Framework

MSAD 68 filed a five-count complaint in the Maine Superior Court against JCI in February, 2002, seeking damages and restitution for JCI's alleged negligence, misrepresentation, unjust enrichment, breach of contract, and breach of warranty. According to the complaint, JCI, a Wisconsin corporation, released friable asbestos while performing services at the SeDoMoCha Middle School in Dover Foxcroft under three contracts. The action was removed to this Court upon JCI's petition for removal which was filed soon after the complaint was filed. On April 16, 2002, JCI filed the present motion to stay proceedings and to compel arbitration asserting that the claims relate to services JCI provided pursuant to the Service Agreement which contains an arbitration clause.

JCI brings this motion pursuant to §§ 3 and 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16. Section 3 of the FAA states that where a suit or proceeding brought in the court is referable to arbitration pursuant to a written agreement by the parties, the court upon being satisfied that the issue is referable should stay the trial until arbitration has been had.¹ 9 U.S.C. § 3. Section 4, in part, states that the court shall issue an order directing the parties to arbitrate the dispute as required by the parties' agreement to arbitrate. 9 U.S.C. § 4. The Court's consideration of a motion to compel arbitration involves the determination of whether there is an agreement to arbitrate, whether the dispute in question falls within the scope of that arbitration agreement, and whether the party seeking arbitration has waived the right to compel arbitration. Bangor Hydro-Electric Co. v. New England Tel. & Tel. Co., 62 F.Supp.2d 152, 155 (D.Me.1999) (citing Brennan v. King, 139 F.3d 258, 263-67 (1st Cir.1998)). "[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration." Unionmutual Stock Life Ins. Co. of Am. v. Beneficial Life Ins. Co., 774 F.2d 524, 528 (1st Cir.1985) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). All doubts concerning the scope of arbitrable issues are resolved in favor of arbitration. Id. "However, `arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'" Large v. Conseco Finance Servicing Corp., 292 F.3d 49, 52 (1st Cir.2002) (citing McCarthy v. Azure, 22 F.3d 351, 354 (1st Cir.1994)). A motion to compel arbitration will be granted "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." See Unionmutual Stock Life Ins., 774 F.2d at 528.

Discussion

1. Does an Agreement to Arbitrate Exist Between the Parties?

The parties do not dispute that they entered into the Service Agreement and that the Service Agreement contains an arbitration clause. However, MSAD 68 raises an issue relevant at this juncture: whether the arbitration clause remains effective after the contract has expired. (See Pl.'s Additional Resp. to Mot. to Compel Arbitration.) The Service Agreement expired by its own terms on July 1, 2001. (Id.) The asbestos release forming the basis of this action allegedly occurred in 1999 and the complaint was filed in February of 2002. JCI ceased providing services to MSAD 68 in 1999, although all of the contracts between the parties were not formally terminated until 2000. (Id.) MSAD 68 argues that between its December 2000 Notice of Claim and the Service Agreement's expiration on July 1, 2001, JCI had the opportunity to request arbitration before the Service Agreement expired, but did not do so. In MSAD 68's view, the expiration of the Agreement terminates JCI's ability to request arbitration under the Agreement.

This argument has no merit based on the facts of this case. Disputes that arise under a contract prior to its expiration are subject to the arbitration clause contained within the contract. See Nolde Brothers, Inc. v. Local No. 358 Bakery and Confectionery Workers Union, 430 U.S. 243, 251, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977) (rejecting the notion that an arbitration clause contained in an expired contract is not effective against a claim arising during the life of the contract and citing John Wiley & Sons v. Livingston, 376 U.S. 543, 555, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964)). A claim brought after the expiration of a contract is found to "arise under a contract only where it involves facts and occurrences that arose before expiration, where an action taken after expiration infringes a right that accrued or vested under the agreement, or where under normal principles of contract interpretation, the disputed contractual right survives expiration of the remainder of the agreement." Litton Financial Printing Division, Inc. v. NLRB, 501 U.S. 190, 205-206, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991). Here the dispute involves facts and occurrences that arose in 1999 (i.e. the release of asbestos), therefore the claims arose prior to the July 1, 2001 expiration of the contract. Thus, the arbitration clause survives the expiration of the contract.

As the parties agree that an agreement to arbitrate existed, this case focuses on whether the claims against JCI fall within the scope of the arbitration clause and whether JCI has waived its right to compel arbitration.

2. Does the Dispute Fall Within the Scope of the Arbitration Agreement?

A preliminary issue must be addressed prior to determining the scope of the arbitration clause. MSAD 68 argues that asbestos was released at a time when JCI was performing services for MSAD 68 under three separate written contracts. According to MSAD 68, the injury-causing services were performed under one of the contracts that does not contain an arbitration clause. The parties agree that at the relevant time frame three contracts were in effect: the Equipment Lease, the Service Agreement, and the Comprehensive Energy Conservation Program. The Equipment Lease relates to the oil burner and the heating, ventilation, and air conditioning ("HVAC") management system. (Pl.'s Resp. to Mot. to Compel Arbitration (PRMCA) at 9; Ex. A.) The Service Agreement covers maintenance of certain portions of the HVAC system and is the only contract containing the arbitration clause. (Id.; Ex. B.) The Assurance Performance Guarantee (also referred to as the Comprehensive Energy Conservation Program) is an energy conservation contract that includes annual inspection of the HVAC system and other work related to the HVAC system. (Id.; Ex. C.) This work generally does not consists of a great deal of physical labor; it consists of tasks such as taking samples, changing light bulbs, installing the management energy system, and completing energy reports. (Elliott Dep. at 21, 23, 26.)

Although MSAD 68 suggests that the three contracts do not relate to each other (PRMCA at 9), the contracts, each signed in April of 1994, indicate otherwise. The warranty language in paragraph ten of the Equipment Lease is crossed out and paragraph five of the attached addendum provides substitute warranty language. This new language states that the equipment installed under the Equipment Lease has a warranty of eighty-four months "so long as JCI's Standard Maintenance Agreement is in full force [and] in effect with Lessee, or maintenance with JCI's written consent." (Ex. A at Addendum ¶ 5.) The Assured Performance Guarantee (Ex. C) has "84" typed in the blank indicating the guarantee term. (Ex. C at 1.) The Equipment Lease further states that the lessee "at its expense shall enter into, and maintain in full force and effect for the duration of this Agreement, JCI's Standard Maintenance Contract, and shall comply with all Lessee's obligations thereunder" and that "[a]n alternative source of maintenance may be used with JCI's prior written consent." (Ex. A ¶ (11).) A subparagraph immediately following states "Notwithstanding...