Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Kan.: Arbitration clause in dealer agreement valid and enforceable, (Oct 17, 2014)

By Jody Coultas, J.D.

An arbitration clause in a dealer agreement between The G.W. Van Keppel Co. (G.W.) and Dobbs Imports, LLC was enforceable to resolve claims brought by G.W. for a breach of the agreement by Dobbs, the federal district court in Kansas City has held (The G.W. Van Keppel Co. v. Dobbs Imports , LLC, October 15, 2014, Robinson, J.).

G.W. and Dobbs entered into a dealer agreement, granting G.W. a non-exclusive right to sell and market Dobbs’ products in Kansas, Missouri, and Illinois. The dealer agreement provided for arbitration of disputes. G.W. alleged that the dealer agreement terminated no later than March 11, 2014. After that date, G.W. demanded that Dobbs repurchase equipment and parts pursuant to its alleged obligations under the dealer agreement, the Kansas Outdoor Power Equipment Dealer Act, and similar acts passed in Missouri and Illinois. When Dobbs refused, G.W. filed suit for breach of the dealer agreement and one each for violations of the Kansas, Missouri, and Illinois statutes. Dobbs sought to enforce the arbitration provisions of the dealer agreement.

The Federal Arbitration Act (FAA) provides for arbitration where a valid arbitration agreement exists between the parties and the dispute falls within the scope of the arbitration agreement.

In this instance, the arbitration agreement was valid, according to the court. G.W. argued that the section of the agreement requiring arbitration of all disputes conflicted with another section stating that the parties “may submit [a] controversy, claim or dispute to an arbitrator.” These sections, G.W. argued, created an ambiguity as to whether the parties agreed on mandatory or merely optional arbitration. Tennessee law requires ambiguities to be construed strictly against the drafter of a contract, but only after attempting to interpret the contract “so as to avoid the conflict.” The purpose of the “may” language was to give an aggrieved party the choice between arbitration and the abandonment of its claim. The permissive language did not present a second remedy to the parties.

The forum-selection clause did not render the arbitration agreement unenforceable, according to the court. G.W. argued that the arbitration provisions conflicted with the forum-selection clause, creating an ambiguity as to whether the parties agreed on mandatory arbitration or mandatory litigation of their disputes. Courts have found forum-selection and arbitration clauses to conflict where both clauses apply to the same types of claims. Here, the arbitration provisions applied broadly to any “controversy, claim or dispute,” while the forum-selection clause applied only to a “suit, action or proceeding.” The court read the forum-selection clause to apply only to actions that are necessarily non-arbitrable, such as suits to enforce an arbitral award. All other events fell under the sections requiring arbitration. Thus, there was no conflict between the different provisions that would render the agreement unenforceable.

G.W.’s statutory claims fell within the scope of the arbitration agreement, according to the court. Courts are strongly in favor of arbitration. The presumption in favor of arbitration applies with even greater force when the arbitration clause is broad. The dealer agreement at issue was “broad.” The statutory claims arose out of and related to the dealer agreement.

The case is No. 2:14-CV-02236-JAR.

Attorneys: Christopher Marshall McHugh (Seigfreid Bingham PC) for The G.W. Van Keppel Co. Wade P. K. Carr (Dentons U.S., LLP) for Dobbs Imports, LLC.

Companies: The G.W. Van Keppel Co.; Dobbs Imports, LLC

Cases: FranchisingDistribution KansasNews