Mehler and Russell v. Terminix Int'l Co.

• Decision Date: 01 August 1999
• Docket Number: Docket No. 98-9407
• Citation: 205 F.3d 44
• Parties: (2nd Cir. 2000) JEFFREY N. MEHLER and MARY S. RUSSELL, Plaintiffs-Appellees, v. THE TERMINIX INTERNATIONAL COMPANY L.P., Defendant-Appellant
• Court: U.S. Court of Appeals — Second Circuit

Page 44

205 F.3d 44 (2nd Cir. 2000)

JEFFREY N. MEHLER and MARY S. RUSSELL, Plaintiffs-Appellees, v. THE TERMINIX INTERNATIONAL COMPANY L.P., Defendant-Appellant.

Docket No. 98-9407

August Term, 1999

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: September 30, 1999

Decided: February 24, 2000

Appeal from an order of the United States District Court for the District of Connecticut (Alvin W. Thompson, Judge), denying The Terminix International Company L.P.'s motion to dismiss or in the alternative to stay the litigation and compel arbitration, pursuant to the Federal Arbitration Act, in light of an arbitration clause contained in a written agreement between the parties for termite control services. We conclude that the agreement containing the indisputably broad arbitration clause encompassed the entire contractual relationship between the parties, and that, in any event, the claims relate to the agreement, irrespective of the agreement's temporal or substantive breadth. Therefore, we reverse the order of the District Court denying Terminix's motion and remand with instructions to stay the proceedings and direct the parties to proceed to arbitration.

Reversed and remanded.

Thomas F. Harrison, Day, Berry & Howard LLP, Hartford, CT (Peter R. Knight, of counsel), for Defendant-Appellant.

MARGARET A. LITTLE, Stratford, CT (Martha A. Dean, Hartford, CT, of counsel), for Plaintiffs-Appellees.

(Richard Blumenthal, Attorney General of Connecticut (Garry Desjardins, Assistant Attorney General, of counsel), submitted a brief for amicus curiae the State of Connecticut).

Before: MINER, PARKER, and STRAUB, Circuit Judges.

Judge Parker dissents in a separate opinion.

STRAUB, Circuit Judge:

Defendant and Appellant the Terminix International Company L.P. ("Terminix") appeals from an order of the United States District Court for the District of Connecticut (Alvin W. Thompson, Judge), denying its motion to dismiss or in the alternative to stay the litigation and compel arbitration, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. 1 et seq., in light of an arbitration clause contained in a written agreement between the parties for termite control services. See Mehler v. Terminix Int'l Co., No. 397CV2390, 1998 WL 893149 (D. Conn. Sept. 28, 1998). We conclude that the agreement containing the indisputably broad arbitration clause encompassed the entire contractual relationship between the parties and that, in any event, the claims relate to the agreement, irrespective of the agreement's temporal or substantive breadth. Therefore, we reverse the order of the District Court denying Terminix's motion and remand with instructions to stay the proceedings and direct the parties to proceed to arbitration.

BACKGROUND

This dispute arises out of an accident that occurred while Terminix was providing termite extermination services at the home of Jeffrey N. Mehler and Mary S. Russell. Terminix performed the first of a two-day extermination treatment of the plaintiffs' home on July 19, 1996, and returned to complete the treatment on July 24, 1996. The plaintiffs contend, and Terminix does not dispute, that in the course of performing these services, the Terminix technician punctured their underground home heating oil line, resulting in the discharge of oil to the plaintiffs' and their neighbors' property.

Also on July 19, the Terminix representative provided the plaintiffs with a document ("Agreement"), with the heading "Termite Protection Plan" on the first page, which was signed by Mehler on that date. The Agreement provides: "Effective UPON COMPLETION through 2 YEARS, for the sum of $1500.00 + TAX, Terminix will provide the necessary service to protect the identified property against the attack of subterranean termites . . . ." (The words in all caps were filled in by hand by the Terminix representative). The Agreement further contains a note to the customer in the upper right-hand corner stating that: "This is a service order and copy of the Termite Protection Plan. This service order is contingent on approval of the Terminix branch manager. You will receive written confirmation that your contract is in effect when the work is completed and Terminix has been paid in full." Further, the Agreement specifies that "[t]his plan provides protection against new subterranean termite damage to the structure and contents. If new damage occurs during the contract term, Terminix will . . . arrange for the necessary repairs or replacement . . . ."

"New damage" is defined in the Protection Plan as "damage done by subterranean termites subsequent to the inception date of this contract; the definition excludes damage existing at the inception date." "[O]ld damage . . . is not covered under this Plan." Paragraph 8 of the Terms and Conditions states: "ENTIRE AGREEMENT. The Service Order signed at the time of purchase, the Termite Protection Plan and the Inspection Graph constitute the entire agreement between the parties and no other representations or statements will be binding upon the parties." Paragraph 9 of the Terms and Conditions contains an arbitration provision, which states in relevant part: "The Purchaser and Terminix agree that any controversy or claim between them arising out of or relating to this agreement shall be settled exclusively by arbitration."

The Protection Plan attaches, and expressly incorporates, two graphs dated July 12, 1996, and signed by Mehler on July 19, 1996, one showing the plaintiffs' stand-alone garage and one showing their residence and reflecting the pre-existence or non-existence of termite activity and damage on that date. According to Terminix, the numbers on the graph, i.e. "117," reflect specifications for initial treatment of the property. Lastly, the Agreement states that "Terminix has provided the Purchaser with a copy of the manufacturer's specimen label . . . for the termiticide(s) which will be used to treat the above-named property."

At some point after the initial two-day treatment was completed, Terminix sent the plaintiffs a document entitled "Termite Guarantee," which references and restates in part the Protection Plan in the Agreement, and states that the Protection Plan "provides for arbitration of any controversy or claim arising out of or [relating] to the Plan." Also at some point after the completion of the two-day July termite service, Terminix provided, and Russell signed, a "Completion Certificate," stating that the work at her home had been performed "according to specifications submitted to [her] by Terminix." Finally, the plaintiffs do not dispute that only one $1500 fee, as specified in the Agreement, was paid to Terminix for all work done by Terminix, including that on July 19 and July 24.

On October 30, 1997, Terminix initiated arbitration proceedings to resolve the plaintiffs' claim that Terminix is liable for the discharge of oil to their and their neighbors' property, and the plaintiffs filed an Answering Statement with the American Arbitration Association ("AAA") asserting that the AAA lacks jurisdiction to hear their claims because they never agreed to arbitrate the dispute placed before the AAA.

On November 12, 1997, the plaintiffs filed a complaint in the District of Connecticut seeking, inter alia, compensation for property damage and personal injury under various tort theories; punitive damages under the Connecticut Unfair Trade Practices Act ("CUTPA"), Conn. Gen. Stat. 42-110a et seq.; invalidation of the contract between the parties as unfair, oppressive and unconscionable; and declaratory relief that the claims at issue do not fall within the arbitration clause contained in the Agreement between the parties. Terminix filed a motion to dismiss or in the alternative to stay the litigation pending arbitration, pursuant to the FAA in the District Court, which was denied on September 28, 1998.

This timely appeal followed.

DISCUSSION

I. Applicability of the FAA and Standard of Review

The FAA creates a "body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [FAA]." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). There is no dispute on appeal that the FAA applies to the arbitration agreement at issue, which affects interstate commerce. See id.; 9 U.S.C. 1 & 2. Section 3 of the FAA provides for stays of federal proceedings pending arbitration under appropriate circumstances. See generally 9 U.S.C. 3.

A court asked to stay proceedings pending arbitration must resolve two issues relevant here: "first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement." Oldroyd v. Elmira Sav. Bank, 134 F.3d 72, 75 (2d Cir. 1998). The plaintiffs assert that the District Court concluded that the first element was not satisfied in this case. Clearly, this assertion is incorrect. While stating the general principle that "parties may not be compelled to submit a dispute to arbitration unless they have agreed to do so," the court framed the issue before it as the "scope of the parties' arbitration agreement." Thus, the District Court correctly concluded that there was an arbitration clause to which the parties had agreed, and the relevant question, addressed by the District Court and on review, is whether the claims are within the scope of that clause, either because the claims arise under the contract containing the broad arbitration clause, or because they relate to the contract containing the clause. We review a district court's determinations on these issues de novo. See id. at 76.

II. The Scope of the Agreement

A. The Agreement Between the Parties Is a Unified Contract

The District Court rested its decision on a finding that, although there was a broad agreement to arbitrate between the parties, the plaintiffs' claims were not within the scope of that agreement. The District Court's main concern was that...