Arbitration Agreement
May Arbitration Clause Govern Disputes Predating
Its Enactment?
Waiver (of the Right to Arbitrate)
Contract Drafting
Michigan Law
The arbitration agreement UPS invokes is not
found in the contract in place during the period when Solo and BleachTech
assert they were charged the improper fee. The Original UPS Terms describe a
claim-filing process that serves as a prerequisite to seeking “any legal or
equitable relief whatsoever,” but the terms do not mention arbitration. The
Amended UPS Terms, enacted after the relevant shipments, require that “any
controversy or claim, whether at law or equity, arising out of or related to
the provision of services by UPS, regardless of the date of accrual of such
dispute, shall be resolved in its entirety by individual (not class-wide nor
collective) binding arbitration.” The question presented is, did the parties
intend the arbitration provision in the Amended UPS Terms to govern preexisting
disputes, or only disputes arising during that contractual period?
We have recognized that a broadly worded arbitration clause may govern
disputes predating its enactment. For example, when a contract requires the
parties to arbitrate “any dispute or claim arising from or in connection with
this agreement or the services provided by [the plaintiff],” the natural
reading is that “the language covers more than claims arising ‘out of the
agreement’” and so applies outside the agreement’s timeframe. Watson Wyatt
& Co. v. SBC Holdings, Inc., 513 F.3d 646, 650 (6th Cir. 2008) (quoting
the contract at issue) (quoting Kristian v. Comcast Corp., 446 F.3d 25,
33 (1st Cir. 2006)).
But we do not imply retroactivity where it is not contemplated in the
contractual language. Thus, when a contract required arbitration of “all
employment-related disputes . . . which . . . arise between [the parties],” the
use of present- and future-tense language led us to conclude that “the parties
signed this agreement to head off future lawsuits, not to cut off existing
ones.” Russell v. Citigroup, Inc., 748 F.3d 677, 679–80 (6th Cir. 2014)
(quoting the contract at issue). The presumption of arbitrability, moreover,
cannot bridge a textual gap. “While ambiguities in the language of the
agreement should be resolved in favor of arbitration, . . . we do not override
the clear intent of the parties, or reach a result inconsistent with the plain
text of the contract, simply because the policy favoring arbitration is
implicated.” GGNSC Louisville Hillcreek, LLC v. Est. of Bramer, 932 F.3d
480, 485 (6th Cir. 2019) (quoting EEOC v. Waffle House, Inc., 534 U.S.
279, 294 (2002)). In other words, courts may not “use policy considerations as
a substitute for party agreement,” Granite Rock Co. v. Int’l Bhd. of
Teamsters, 561 U.S. 287, 303 (2010), because the Supreme Court “has made
consent the cornerstone of arbitration,” GGNSC, 932 F.3d at 485.
To determine whether the parties intended the Amended UPS Terms to have
retroactive effect, we construe the two “contracts as a whole, giving
harmonious effect, if possible, to each word and phrase.” Wilkie v.
Auto-Owners Ins. Co., 664 N.W.2d 776, 781 n.11 (Mich. 2003). Here, the
critical language appears in the introduction to both versions of the Terms:
“In tendering a shipment for service, the shipper agrees that the version of
the Terms . . . in effect at the time of shipping will apply to the shipment
and its transportation.” This clear instruction answers the question before us:
the parties intended all disputes about shipping to be resolved according to
the “version of the Terms . . . in effect at the time of shipping,” not an
older or newer version. See Sec. Watch, Inc. v. Sentinel Sys., 176 F.3d
369, 374 (6th Cir. 1999) (“Given the fact that the arbitration provision in the
present case arises in a later contract, much more is needed to infer an
intention to apply the provision to previous contracts.”).
Consider, as an example, a customer who ships a package on the final day
the Amended UPS Terms are in effect. That package arrives damaged three days
later; she attempts to sue a year after that. Assuming annual contracts, she
shipped under one set of terms, her claim accrued under another, and she began
the suit under a third. The contract provides a clear guide for how to proceed.
The Amended UPS Terms that were “in effect at the time of shipping” govern her
claim, and “regardless of the date of accrual,” she must arbitrate her suit
under those terms. If she had sent her shipment a year earlier, just before the
Amended UPS Terms went into effect (like Solo and BleachTech), the same
analysis would apply. The version “in effect at the time of shipping” would
still control, and she would not be obligated to arbitrate. As we have
recognized before, parties entering into a series of contracts can and do
change dispute resolution mechanisms over time, opting for litigation under one
contract and arbitration under another.
Next, UPS argues that the Original UPS Terms contemplate modifications.
Specifically, the Terms “comprise the complete and exclusive agreement of the
parties, except as modified by any existing or future written agreement between
the parties.” But we have already rejected the argument that a boilerplate
merger clause renders an arbitration provision from one contract applicable to
another. See Sec. Watch, 176 F.3d at 372. And while subsequent modifications
to the operative contract might be relevant if a new contract entirely subsumes
the original, see Highlands Wellmont Health Network v. John Deere Health
Plan, 350 F.3d 568, 575 (6th Cir. 2003), the Amended UPS Terms reiterate
that the version in effect at the time of shipping controls.
The dispositive issue here is not whether the Amended UPS Terms amount
to “a valid agreement to arbitrate”; it is whether shipments that predate those
Terms “fall within the substantive scope of the agreement.” Hergenreder,
656 F.3d at 415–16 (quoting Mazera, 565 F.3d at 1001). Both contracts
direct that the version of the Terms “in effect at the time of shipping”
governs. That instruction amounts to “forceful evidence” that the parties did
not agree to arbitrate disputes that predated the Amended UPS Terms. See
Russell, 748 F.3d at 681 (quoting Watson Wyatt, 513 F.3d at 650). “The
FAA does not require parties to arbitrate when they have not agreed to do so.” Volt
Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S.
468, 478 (1989). They have not agreed to do so here.
Waiver:
Even if the scope of the arbitration agreement in the Amended UPS Terms
were ambiguous, the district court properly concluded that UPS waived its right
to arbitrate.
The benefits of “efficient and speedy” arbitration are lost if a party
seeks arbitration only after insisting upon court process. Thus, although “we
will not lightly infer a party’s waiver of its right to arbitration,” we may
find waiver if a party (1)“takes actions that are completely inconsistent with
any reliance on an arbitration agreement; and (2) ‘delays its assertion to such
an extent that the opposing party incurs actual prejudice.’” Hurley v.
Deutsche Bank Tr. Co. Ams., 610 F.3d 334, 338 (6th Cir. 2010) (quoting O.J.
Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 356 (6th Cir. 2003)).
We begin with the first prong—action that is inconsistent with reliance
on arbitration— and UPS’s motion to dismiss. “Not every motion to dismiss
is inconsistent with the right to arbitration.” Hooper v. Advance Am., Cash
Advance Ctrs. of Mo., Inc., 589 F.3d 917, 922 (8th Cir. 2009) (collecting
cases). For example, the Eighth Circuit has held that a motion to dismiss
raising “jurisdictional and quasi-jurisdictional grounds” but seeking “no
action with respect to the merits of the case” is not inconsistent with later
seeking arbitration. Dumont v. Sask. Gov’t Ins., 258 F.3d 880, 886–87
(8th Cir. 2001). Similarly, where a complaint asserts a mix of arbitrable and
nonarbitrable claims, “the portions of the motion [to dismiss] addressed to
nonarbitrable claims do not constitute a waiver.” Sweater Bee by Banff, Ltd.
v. Manhattan Indus., 754 F.2d 457, 463 (2d Cir. 1985). On the other hand, a
motion to dismiss that seeks “a decision on the merits” and “an immediate and
total victory in the parties’ dispute” is entirely inconsistent with later
requesting that those same merits questions be resolved in arbitration.
We turn next to the prejudice prong. We have previously found prejudice
where, “in addition to an eight-month delay and expenses involved with numerous
scheduling motions and court-supervised settlement discussions, plaintiffs also
engaged in discovery.” Johnson Assocs., 680 F.3d at 720; see also
Hurley, 610 F.3d at 340.
(U.S. Court of Appeals for the Sixth Circuit, January 23, 2020,
BleachTech LLC, v. United Parcel Service Co., Docket No. 17-2244, Recommended for
Publication)
No comments:
Post a Comment