Opinion
No. CV 03 0826163 S
October 1, 2003
MEMORANDUM OF DECISION
The plaintiff Salem Saber Jarrar seeks to confirm an arbitration award; the defendant Colt's Manufacturing Company, Inc. ("Colt's") has filed a cross motion to vacate the award. The arbitration arises from a business relationship whereby Jarrar represented Colt's in the Middle East. Jarrar claimed that various commissions to which he was entitled had not been paid. A panel of three arbitrators found generally in Jarrar's favor.
Jarrar had performed services for Colt's in the Middle East for a period of time. In 1998, one arrangement was formalized. By letter agreement dated August 12, 1998, Colt's appointed Jarrar its exclusive representative for all agencies of the United Arab Emirates until December 31, 2003, and for every "contract or purchase order received" was to receive a "commission fee" of 15% payable in 30 days, a "service agreement fee" of 12.5% payable in 60 days, and a "marketing consulting fee" of 5.2% payable in 90 days. The one-page agreement was signed by Amaro Goncalves, Colt's executive director of international sales and marketing, and Jarrar, as "representative and consultant." The agreement stated that "this structured agreement remains in effect until December 31, 2003, and that the "proper representative, service and marketing consulting agreements" would be supplied shortly.
The agreements were supplied and dated September 1, 1998. The "exclusive representation" agreement, compensated by the commission fee of 15%, and the "service agreement," compensated by the 12.5% fee, contained unrestricted arbitration clauses. The former agreement contains, in paragraph 25, the following language:
In the event of any dispute between REPRESENTATIVE and CMC, or claim or demand by either of them which is not agreed to by the other, during or after the termination or expiration of this Agreement, they shall endeavor to settle their differences amicably. If and when either party deems that there has been a failure to do so, that party may, by thirty (30) days written notice to the other, submit the same for arbitration to the American Arbitration Association for settlement or award by the Association in accordance with its Commercial Arbitration Rules . . . Arbitration in accordance with this paragraph 25 shall be the exclusive means of resolving disputes arising under or in connection with this Agreement; provided, however, that either party may apply to a court of competent jurisdiction for injunctive relief or other equitable remedy.
Identical language, except for the last sentence, appears in paragraph 23 of the service agreement, and the service and exclusive representation agreements each contain standard integration clauses which specifically state that the other agreement shall remain in full force and effect. See paragraph 26 of the service agreement and paragraph 24 of the exclusive representation agreement.
The marketing consulting agreement is somewhat different from the other two. It is also dated September 1, 1998, and quite clearly was executed as a package with the other two. But this agreement, which is considerably shorter than the others, contains no reference to arbitration and does not specifically cross-reference the other two. The governing law is that of the "territory," defined previously as the "United Arab Emirates, Saudi Arabia and other future countries by mutual consent," and of the United States of America; whereas the governing law of the other two contracts is the State of Connecticut and the United States of America.
There are differences as well regarding the termination clauses in the several constituent agreements. The exclusive representation agreement states that the agreement shall terminate on December 31, 2003, subject to termination provisions, and may be extended by written agreement. The termination provisions state (paragraph 15) that this agreement may be terminated by Colt's upon thirty days prior written notice. In paragraph 16, it is stated that the agreement may be terminated at any time by Colt's for substantial and material breach of the agreement by Jarrar with five days notice, and termination was also provided for in case of the inability of a party to act. The service agreement, on the other hand, provides that the agreement shall be in effect for the same period of time and may be extended by written mutual agreement. During the extension period, the agreement may be terminated by thirty days written notice. The agreement may be terminated for substantial and material breach at any time by either party with five days written notice. See paragraphs 9-11. The marketing consulting agreement simply states that the term of the agreement is five years and four months (which is until December 31, 2003) and may be terminated by either side on thirty days written notice.
Colt's terminated the agreements and provided thirty days notice on December 18, 2001. Jarrar claimed that Colt's did not pay commissions that were due on various contracts and submitted the claim to arbitration. Colt's objected to the submission, at least as to the marketing consulting agreement, and also attempted to bring an injunctive action preventing the dispute from being arbitrated. Colt's was unable to accomplish personal jurisdiction over Jarrar, however, because Jarrar was a citizen of the Kingdom of Jordan, not a signatory to the Hague Convention.
Colt's quite properly and responsibly chose not to serve Jarrar while Jarrar was present for the arbitration proceedings.
The arbitration panel heard extensive argument and evidence and rendered its set of awards in May 2003. As to each agreement, the arbitrators awarded fees with respect to four contracts, found in favor of Colt's as to others and found still others not ripe for adjudication. The amounts of the awards were, I determined through some simple math, exactly proportional to the fee percentage specified in the August 12, 1998, letter agreement. It is fairly clear, then, that the arbitrators determined what contracts qualified for payment of fees to Jarrar, and then simply calculated the fees pursuant to the letter agreement.
The awards as to the exclusive representation agreement and the service agreement state that the claimant (Jarrar) and the respondent (Colt's) were parties to those agreements and to the letter agreement, which agreements "either provide for the resolution of disputes in accordance with the Commercial Rules of the American Arbitration Association or which disputes were otherwise agreed to be, and were, submitted to arbitration." The award as to the marketing consulting agreement uses different language. It restates the language regarding being parties to the marketing consulting agreement and the letter agreement, and then states that the agreements "are integrally related to, arise out of, or were executed in connection with a certain exclusive Representation Agreement ("Representation Agreement") and a certain Service Agreement ("Service Agreement") each dated September 1, 1998. The Representation Agreement and the Service Agreement each provide for the resolution of a dispute, claim, or demand between the Claimant and the Respondent in accordance with the Commercial Rules of the American Arbitration Association."
The arbitrators, then, quite clearly read the agreements together as one comprehensive agreement. In addition to the face of the documents, the parties have provided portions of testimony of Goncalves, the Colt's employee who executed the agreements. He testified that the three agreements were functionally one agreement, that had been artificially split into parts for the purpose of satisfying certain governmental concerns. In his words, the three separate agreements were "fluff."
As noted above, Jarrar seeks to have the award confirmed pursuant to § 52-417 of the General Statutes and Colt's seek to have the award vacated pursuant to § 52-418 of the General Statutes. Colt's advances several primary arguments: a) the marketing consulting agreement was wrongfully submitted to arbitration, because it is absolutely silent as to arbitration; b) the award is not severable, so the entire award should be vacated; and c) the award is manifestly erroneous as to Contract 25B, because that contract was executed after the effective termination date of the agreement. Jarrar of course urges that the award be confirmed, and additionally urges that Colt's waived objection to submission to arbitration.
The black letter law regarding submissions to arbitration is well established and need not be repeated at length here. Suffice it to say that:
Unless statutorily mandated; see, e.g., American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 187, 530 A.2d 171 (1987); arbitration is a creature of contract. John A. Errichetti Associates v. Boutin, 183 Conn. 481, 488, 439 A.2d 416 (1981). "Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution." Garrity v. McCaskey, 223 Conn. 1, 4-5, 612 A.2d 742 (1992). Nevertheless, "a person can be compelled to arbitrate a dispute only if, to the extent that, and in the manner in which, he has agreed so to do." Marsala Page 472 v. Valve Corp. of America, 157 Conn. 362, 365, 254 A.2d 469 (1969). This limitation on contractual arbitration includes the requirement of satisfying any conditions precedent to arbitration. Frager v. Pennsylvania General Ins. Co., 161 Conn. 472, 477, 289 A.2d 896 (1971).
White v. Kampner, 229 Conn. 465, 471 (1994).
In this instance, over the objection of the respondent Colt's, the arbitration panel implicitly determined that it could decide the issue of arbitrability. The question of arbitrability is in the first instance a matter to be determined by the court, unless the parties have agreed to have the issue determined by arbitration:
On the facts presented, I find that Colt's did what it reasonably could do to preserve its objection to arbitrate. See, e.g., White v. Kampner, supra, 475-78.
"Whether a particular dispute is arbitrable is a question for the court, unless, by appropriate language, the parties have agreed to arbitrate that question, also . . . The intention to have arbitrability determined by an arbitrator can be manifested by an express provision or through the use of broad terms to describe the scope of arbitration, such as `all questions in dispute and all claims arising out of' the contract or `any dispute that cannot be adjudicated.' " (Citation omitted.) Welch Group, Inc. v. Creative Drywall, Inc., 215 Conn. 464, 467, 576 A.2d 153 (1990).
White v. Kampner, supra, 472. See also International Marine Holdings v. Stauff, 44 Conn. App. 664, 668 (1997).
The language regarding arbitration in the exclusive representation agreement and the service agreement is surely broad and unrestricted enough to submit the question of arbitrability to the arbitrators. Indeed, this proposition by itself is not contested by Colt's. This does not resolve, in ipso, the issue of whether the arbitrators or the court should have decided whether fees claimed to be due under the marketing consulting agreement were to be decided in arbitration. For the analysis of the question of who should decide whether those fees should be determined in arbitration, we examine several principles of law. First, as previously noted, the issue of arbitrability is to be decided by the court unless there is contractual language sufficiently broad and unrestricted to indicate an intent that the arbitrators are to decide all issues, including arbitrability. Read by itself, the marketing consultant agreement would clearly not be so decided, because that agreement, if considered in isolation, is silent as to arbitration altogether. If, however, the entire transaction is viewed as "the agreement," and the various specific "agreements" are functionally components of the overall agreement, then the position that unrestricted arbitration is called for becomes tenable.
"The authority of an arbitrator to adjudicate the controversy is limited only if the agreement contains express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review. In the absence of any such qualifications, an agreement is unrestricted. Carroll v. Aetna Casualty Surety Co., 189 Conn. 16, 20, 453 A.2d 1158 (1983); Bic Pen Corporation v. Local No. 134, 183 Conn. 579, 584-85, 440 A.2d 774 (1981); Bridgeport v. Bridgeport Police Local 1159, 183 Conn. 102, 106-07, 438 A.2d 1171 (1981)." Garrity v. Mccaskey, 223 Conn. 1, 5 (1992)
In the procedural posture of this case, the issue of who decides arbitrability, as opposed to whether the decision to arbitrate the issue was correct, is almost but not entirely academic. If the decision was properly within the province of the arbitrators, then the correctness of the decision to arbitrate is almost beyond review for errors of fact or law. If properly a question for the court, the usual standard of review prevails.
I agree with the arbitrators that for reasons included in this decision the decision to arbitrate the fee arising under the marketing consulting agreement was properly submitted to and decided by the panel.
In analyzing this proposition, we consider two arguably inconsistent principles. First there is the "positive assurance test," enunciated by the United States Supreme Court and adopted by our courts:
We initially note that, because we favor arbitration, we will defer to this alternative method of dispute resolution if the contractual arbitration provisions fall within the grey area of arbitrability, employing the "positive assurance" test as set out in United Steelworkers of America v. Warrior Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). Under this test, "judicial inquiry . . . must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance . . . An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." (Emphasis in original.) Board of Education v. Frey, 174 Conn. 578, 582, 392 A.2d 466 (1978), quoting United Steelworkers of America v. Warrior Gulf Navigation Co., supra, 582-83.
White v. Kampner, supra, 472-73 (1994).
Similarly, the Appellate Court has stated:
The United States Supreme Court has declared that "[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." United Steelworkers of America v. Warrior Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). In Board of Education v. Frey, 174 Conn. 578, 582, 392 A.2d 466 (1978), our Supreme Court adopted the "positive assurance" test as the law for Connecticut. Previously, in Board of Police Commissioners v. Maher, 171 Conn. 613, 621, 370 A.2d 1076 (1976), the court had approved of the statement in United Steelworkers of America that "[d]oubts should be resolved in favor of coverage." "Under the positive assurance test, judicial inquiry . . . must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance." (Internal quotation marks omitted.) Weitz Co. v. Shoreline Care Ltd. Partnership, supra, 39 Conn. App. 644. Therefore, to resolve this issue, the positive assurance test must be applied. We hold that the court properly concluded that it could not be determined with positive assurance that issues of timeliness were intended by the parties to be excluded from the arbitration agreement.
Carlin Pozzi Architects, P.C. v. Town of Bethel, 62 Conn. App. 483, 489 (2001).
Legitimate doubts are, then, to be resolved in favor of submitting issues to arbitration. But, as applied to the case at hand, there is also authority to the effect that language in one contract is, generally, not to be used to justify submitting a dispute arising under a second contract to arbitration. See, e.g., Weitz Co., Inc. v. Shoreline Care Ltd. Partnership, 39 Conn. App. 641 (1995); Scinto v. Sosin, 51 Conn. App. 222 (1998). Neither side cited authority deciding the issue where there is an overall agreement, and some subparts contain unrestricted arbitration clauses and others are entirely silent.
The policy favoring arbitration is even stronger in the area of international commerce. See Threlkeld Co., Inc. v. Metalgesellschaft Ltd., 923 F.2d 245, 248 (2d Cir. 1991).
The authority cited by Colt's for the proposition that disputes under the marketing consultant agreement were not arbitrable are not especially persuasive because of the facts of the particular cases. In White v. Kampner, supra, for example, there was an express condition precedent to arbitration, that specific negotiations take place first, that had not been satisfied prior to the submission. In Welch Group, Inc. v. Creative Drywall, Inc., 215 Conn. 464 (1990), for example, there was an express limitation as to the dollar amount regarding claims submitted to arbitration; that is, there was no unrestricted submission. The point is that there consistently has been some contractual limitation expressed when arbitration is found to be inappropriate.
On the other hand, Threlkeld, supra, is very close to being on point. There, arbitration of disputes arising under ancillary contracts was compelled where a "genesis contract" required arbitration, even if the specific ancillary contracts do not require arbitration. Where contracts cover the same subject matter and are integrally related, the intent to arbitrate can be inferred to extend to all. See also Pervel Industries, Inc. v. TM Wallcovering, Inc., 871 F.2d 7 (2d Cir. 1989).
I believe that the appropriate resolution is, first, to view the four documents executed on September 1, 1998, as one agreement. This is consistent with the reported view of Goncalves and it is consistent with the documents themselves. Most glaringly, each of the three detailed "agreements" is woefully incomplete without the letter of August 12, which ties the agreements together and which provides for Jarrar's compensation. The August 12 agreement is the "genesis agreement." Goncalves' parol evidence is certainly consistent. I also believe that it was the intention of the parties, as expressed in the overall agreement, to have disputes resolved by arbitration. Language in paragraph 25 of the exclusive representation agreement specifically states that disputes "arising under or in connection with" the agreement shall be resolved by arbitration. (Emphasis added.) There is no intention expressed in the marketing consulting agreement that disputes not be decided by arbitration. I conclude that it was proper for the arbitrators to consider the issue of whether fees were to awarded under the marketing consulting agreement; at the least it is a grey area, and I have no positive assurance that the matter was not intended to be arbitrated. See also International Marine Holdings, supra, 666-69.
The remaining issues are less thorny. Colt's claims that the entire award should be vacated because it was improper to arbitrate the marketing consultant agreement, and, relying principally upon Geneva Securites, Inc. v. Johnson, 138 F.3d 688 (7th Cir. 1998), urges that an award is invalid if part of the submission was improper and the panel "may" have relied on the claim invalidly submitted in determining the award. I find Geneva Securites not germane to the issues in this case. There, the issues involved arbitration of complaints by a customer of a broker regarding inappropriate investments, and the Seventh Circuit determined that one of the claims was barred by the terms of the agreement from being arbitrated. The award was expressed in one sum, and the court simply held that the entire award had to be vacated because it was impossible to tell with assurance what part of the total award was attributable to the claim which should not have been submitted. That is not the case here. I find, then, that if my decision should be incorrect as to whether the panel properly addressed the issue of fees pursuant to the marketing consultant agreement, then the award is separable and should stand as to the other two portions.
Finally, Colt's argues that the awards as to Contract 25B were "manifestly erroneous," because the contract was executed more than thirty days after Colt's terminated the agreement. That contract was indeed executed more than thirty days after Colt's action. Jarrar claims that the termination was not effective, because of contract language, as noted above, regarding terminations for cause and not for cause, in conjunction with the termination dates of the contract. One also might view the various contracts as purchase orders or options governed, at least in part, by one previously executed contract.
In any event, it is clear that the claim for fees pursuant to Contract 25B has some colorable basis. It is true that awards may be vacated when made in excess of the arbitrators' powers; § 52-418 (a)(4); and that the statutory provision has been applied with a view to the "manifest error" common-law doctrine. See Garrity v. McCaskey, 223 Conn. 1, 8-11 (1992). It is clear from a reading of Garrity, Saturn Construction Company v. Premier Roofing Co., 238 Conn. 293, 303-05 (1996), and authority cited therein, that the error has to be truly egregious, virtually made with intentional disregard for the law and in bad faith in order to be set aside under an unrestricted submission. In light of the facts cited above, there was at least some basis for the panel to consider the claim and I find that the award should not be set aside on this basis.
Masarjian v. Mark Lighting Fixtures Co., Inc., 595 F. Sup. 869 (D.Conn. 1984), relied upon by Colt's, is not an arbitration case.
I conclude that because the issue of whether the parties intended that fees pursuant to the marketing consulting agreement were to be submitted to arbitration is at least a grey area, subject to the positive assurance test, and in any event not expressly excluded from arbitration, the panel properly considered the issue. The panel did not commit manifest error in disregard of the law in rendering an award for contract 25B. The motion to confirm is granted and the motion to vacate denied.
Beach, J.