United States Court of Appeals,
Eleventh Circuit.
No. 94-4984.
KOTAM ELECTRONICS, INC., Plaintiff-Appellee,
v.
JBL CONSUMER PRODUCTS, INC., Defendant-Appellant.
Aug. 19, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 94-779-CIV-FAM), Federico A. Moreno,
Judge.
Before TJOFLAT, Chief Judge, KRAVITCH, HATCHETT, ANDERSON,
EDMONDSON, COX, BIRCH, DUBINA, BLACK, CARNES and BARKETT, Circuit
Judges.
DUBINA, Circuit Judge:
We voted to rehear this case en banc to determine whether the
holding in Cobb v. Lewis,
488 F.2d 41 (5th Cir.1974),1 that
antitrust claims are non-arbitrable, remains controlling precedent
in this circuit in light of intervening decisions of the United
States Supreme Court. In 1985, the Supreme Court made clear that
antitrust disputes in the international context are arbitrable.
See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473
U.S. 614,
105 S.Ct. 3346,
87 L.Ed.2d 444 (1985). Today we hold
that antitrust disputes in the domestic context are arbitrable as
well.
I. BACKGROUND
Plaintiff-Appellee Kotam Electronics, Inc. ("Kotam") sells and
1
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir.1981) (en banc), this court adopted as binding precedent all
decisions of the former Fifth Circuit handed down prior to
October 1, 1981.
distributes consumer electronic products. From approximately 1984
to 1992, Kotam entered into annual dealer and distributor contracts
with Defendant-Appellant JBL Consumer Products, Inc. ("JBL"). Each
of these contracts contained the following arbitration clause
explicitly requiring the parties to submit antitrust claims to
binding arbitration:
22. GOVERNING LAW AND ARBITRATION
b. Any controversy or claim arising out of or relating to this
Agreement, or the breach or validity thereof, whether at
common law or under statute, including without limitation
claims asserting violation of the antitrust laws, shall be
settled by final and binding arbitration in accordance with
the Rules for Commercial Arbitration of the American
Arbitration Association ("AAA") in effect at the time of the
execution of this Agreement.
(emphasis added).
In 1994, despite its agreement to arbitrate, Kotam filed suit
in federal district court against JBL alleging price discrimination
2
in violation of the Robinson-Patman Act, 15 U.S.C. § 13(a). In
response, JBL moved to dismiss the complaint or, in the
alternative, to stay the judicial proceedings pending arbitration
pursuant to section 3 of the Federal Arbitration Act (FAA),
9
U.S.C. § 3. The district court, relying onCobb v. Lewis,
488 F.2d
41 (5th Cir.1974), denied JBL's motion.
JBL appealed, and a divided panel of this court affirmed the
district court's judgment. See Kotam Elecs., Inc. v. JBL Consumer
Products, Inc.,
59 F.3d 1155 (11th Cir.1995) (Gibson, J.,
dissenting). A majority of the judges of this court in regular
2
There is no dispute that Kotam's single claim for price
discrimination falls squarely within the terms of the parties'
agreement to arbitrate "claims asserting violation of the
antitrust laws."
active service voted to rehear the case en banc, see Kotam Elecs.,
Inc. v. JBL Consumer Products, Inc.,
69 F.3d 1097 (11th Cir.1995),3
and we now reverse the judgment of the district court.
II. JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction over this appeal pursuant to section 16
of the FAA, which provides that "[a]n appeal may be taken from an
order refusing a stay of any action under section 3 [of the FAA]."
9 U.S.C. § 16(a)(1)(A). The district court denied JBL's motion to
stay judicial proceedings pending arbitration based on its
resolution of a question of law. Therefore, we review the district
court's decision de novo. See Luckie v. Smith Barney, Harris Upham
& Co., Inc.,
999 F.2d 509, 512 (11th Cir.1993).
III. DISCUSSION
Kotam argues that the district court correctly held that Cobb
remains controlling precedent in the Eleventh Circuit. In
contrast, JBL argues that in light of intervening decisions of the
Supreme Court, specifically Mitsubishi and its progeny, Cobb's
holding that antitrust claims are non-arbitrable can no longer be
considered controlling precedent in this circuit. We agree with
JBL.
A. Cobb v. Lewis
In 1974, the former Fifth Circuit held that, "as a general
matter, antitrust claims are not appropriate subjects of
arbitration." See Cobb, 488 F.2d at 47. Cobb involved an
3
This order vacated the panel's opinion. See 11th Cir.R.
35-11 ("Unless otherwise expressly provided, the effect of
granting a rehearing en banc is to vacate the panel opinion and
to stay the mandate.").
agreement between the franchiser of a nationwide chain of motion
picture theaters and the owners of individual theaters. Id. at 43.
The individual theater owners filed a class action alleging, among
other things, violations of the Sherman Act, 15 U.S.C. § 1, and the
Clayton Act,
15 U.S.C. § 14.
Id. at 43-44. In concluding that
antitrust claims are not appropriate subjects of arbitration, the
Cobb court followed the lead of the Second, Eighth, and Ninth
Circuits. See Cobb, 488 F.2d at 47, relying on American Safety
Equip. Corp. v. J.P. Maguire & Co.,
391 F.2d 821, 825 (2nd
Cir.1968); Helfenbein v. International Indus. Inc.,
438 F.2d 1068
(8th Cir.), cert. denied,
404 U.S. 872,
92 S.Ct. 63,
30 L.Ed.2d 115
(1971); A & E Plastik Pak Co. v. Monsanto Co.,
396 F.2d 710 (9th
Cir.1968).
Specifically, the Cobb panel expressly premised its holding on
"three major considerations" outlined by the Second Circuit in
American Safety: (1) the important role of private litigants in
enforcing the antitrust laws; (2) "the complexity of the issues
and the extensiveness and diversity of the evidence antitrust cases
usually involve;" and (3) "the questionable propriety of
entrusting the decision of antitrust issues to commercial
arbitrators, who "are frequently men drawn for their business
expertise,' when "it is the business community generally that is
regulated by the antitrust laws.' " Cobb, 488 F.2d at 47 (citing
American Safety, 391 F.2d at 826-27).4
4
The American Safety court also relied on two other
considerations not cited by the Cobb court: (1) that arbitration
clauses might be contracts of adhesion; and (2) that the claim
in American Safety was "that the agreement itself was an
instrument of illegality." 391 F.2d at 827. (emphasis added).
B. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.
In 1985, the Supreme Court explicitly rejected the American
Safety doctrine and each of the underlying considerations upon
which the Cobb court relied. See Mitsubishi,
473 U.S. 614,
105
S.Ct. 3346. In Mitsubishi, the parties entered into a sales
agreement containing an arbitration clause. The clause provided
for arbitration of all controversies arising out of the agreement
in accordance with the rules of the Japan Commercial Arbitration
Association.
Id.,
473 U.S. at 617,
105 S.Ct. at 3349. When
disputes arose among the parties, Soler resisted the arbitration of
its antitrust claims on the basis of the American Safety doctrine.
Id.,
473 U.S. at 620-23,
105 S.Ct. at 3350-52. However, the
Supreme Court explicitly rejected the American Safety
considerations and held that, in the international context,
antitrust claims are arbitrable.
First, the Court concluded that "[t]he importance of the
private damages remedy ... does not compel the conclusion that it
may not be sought outside an American court." Mitsubishi,
473 U.S.
at 635,
105 S.Ct. at 3358. The Mitsubishi Court reasoned that
arbitrators are bound, as are judges, to apply the antitrust laws,
and that there is no basis for assuming that arbitration will not
provide an adequate mechanism for enforcement of the antitrust
In Mitsubishi, the Supreme Court rejected the first
consideration, noting that "[t]he mere appearance of an antitrust
dispute does not alone warrant invalidation of the selected forum
on the undemonstrated assumption that the arbitration clause is
tainted." Mitsubishi,
473 U.S. at 632,
105 S.Ct. at 3357. While
the second rationale has not been called into question, it was
not relied upon by the Cobb court and does not apply under the
facts of this case.
laws.
Id.,
473 U.S. at 635-37,
105 S.Ct. at 3358-60. Second, the
Court dismissed the consideration that antitrust suits are "prone
to complications" and are therefore ill-suited for arbitration.
Id.,
473 U.S. at 633,
105 S.Ct. at 3357. The Court emphasized that
adaptability and access to expertise are hallmarks of arbitration
and noted that the "anticipated subject matter of the dispute may
be taken into account when the arbitrators are appointed."
Id.
Third, the Court declined to assume that arbitration panels will be
hostile to the constraints on business conduct that antitrust law
imposes. As the Court stated, "We decline to indulge the
presumption that the parties and arbitral body conducting a
proceeding will be unable or unwilling to retain competent,
conscientious, and impartial arbitrators."
Id.,
473 U.S. at 634,
105 S.Ct. at 3358.
It is true, as Kotam points out, that the Mitsubishi Court
noted at the outset of its opinion that it found it "unnecessary to
assess the legitimacy of the American Safety doctrine as applied to
agreements to arbitrate arising from domestic transactions."
473
U.S. at 629,
105 S.Ct. at 3355; see
id. ("we conclude that
concerns of international comity ... require that we enforce the
parties' agreement, even assuming that a contrary result would be
forthcoming in a domestic context"). However, we do not think that
this language decides the issue currently pending before this
court. While limited to the international context by its own
facts, Mitsubishi nevertheless substantially weakened the decision
in Cobb by dismantling all of the American Safety policy
considerations underlying the former Fifth Circuit's holding in
Cobb.
The American Safety doctrine, and consequently Cobb, is
further undermined by Mitsubishi's emphasis on the "federal policy
favoring arbitration." As the Supreme Court explained, " "the
preeminent concern of Congress in passing the [FAA] was to enforce
private agreements into which parties had entered,' a concern which
"requires that we rigorously enforce agreements to arbitrate.' "
Mitsubishi, 473 U.S. at 625-26,
105 S.Ct. at 3353 (citing Dean
Witter Reynolds, Inc. v. Byrd,
470 U.S. 213, 221,
105 S.Ct. 1238,
1242,
84 L.Ed.2d 158 (1985)). Moreover, the Mitsubishi Court
stated that a party, having agreed to arbitrate, should be held to
that agreement unless Congress has "evinced an intention to
preclude a waiver of judicial remedies for the statutory rights at
issue." Mitsubishi,
473 U.S. at 628, 105 S.Ct. at 3354-55.
Finally, the Mitsubishi Court could find no evidence of
Congressional intention to preclude arbitration of antitrust claims
in the text or legislative history of either the Sherman Act or the
FAA. See id.,
473 U.S. at 628-29, 105 S.Ct. at 3355. Thus, we
conclude that JBL is correct in its contention that the decision in
Mitsubishi casts considerable doubt on the viability of Cobb in
this circuit.
C. Mitsubishi's Progeny.
The Supreme Court itself has acknowledged that its rejection
of the American Safety considerations in Mitsubishi has application
outside the international context. Two years after the Mitsubishi
decision, the Supreme Court rendered its decision in
Shearson/American Express, Inc. v. McMahon,
482 U.S. 220,
107 S.Ct.
2332,
96 L.Ed.2d 185 (1987) (hereinafter "McMahon"). In McMahon,
the Supreme Court again rejected the American Safety
considerations; however, it also discarded the distinction between
domestic and international transactions with respect to arbitration
of § 10(b) of the Securities Exchange Act of 1934, and civil RICO
claims. Most notably, the Supreme Court rejected the Second
Circuit's holding that the American Safety doctrine was still good
law, despite Mitsubishi, on the ground that Mitsubishi pertained
only to international transactions. Id.,
482 U.S. at 238-42,
107
S.Ct. at 2344-46. The Supreme Court concluded that "[a]lthough the
holding in Mitsubishi was limited to the international context,
much of its reasoning is equally applicable [to domestic civil RICO
claims]." McMahon,
482 U.S. at 239,
107 S.Ct. at 2344; see also
id.
482 U.S. at 232,
107 S.Ct. at 2341 (declining to limit its
earlier decision in Scherk v. Alberto-Culver Co.,
417 U.S. 506,
94
S.Ct. 2449,
41 L.Ed.2d 270 (1974), which involved the arbitrability
of § 10(b) claims, to cases arising in an international setting).5
Furthermore, the Supreme Court has since cited Mitsubishi for
5
In McMahon, the Supreme Court also revisited an earlier
case, Wilko v. Swan,
346 U.S. 427,
74 S.Ct. 182,
98 L.Ed. 168
(1953), and that Court's concerns about arbitration. The McMahon
Court noted that Wilko stood for the proposition that arbitration
would "weaken [a plaintiffs'] ability to recover" under the
securities laws, and that the arbitration agreement in that case
was unenforceable "only because arbitration was judged inadequate
to enforce the statutory rights created by § 12(2) [of the
Securities Act, 15 U.S.C. § 77l(2) ]." McMahon,
482 U.S. at 228-
31,
107 S.Ct. at 2338-40. Questioning that reasoning, the Court
stated "[i]t is difficult to reconcile Wilko's mistrust of the
arbitral process with this Court's subsequent decisions involving
the Arbitration Act." McMahon,
482 U.S. at 231-32,
107 S.Ct. at
2340 (citing Mitsubishi). Ultimately, the Court overruled Wilko
in Rodriguez de Quijas v. Shearson/American Express Inc.,
490
U.S. 477,
109 S.Ct. 1917,
104 L.Ed.2d 526 (1989), relying largely
on McMahon and Mitsubishi.
the general proposition that antitrust claims are arbitrable.
Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 28,
111 S.Ct.
1647, 1652,
114 L.Ed.2d 26 (1991) ("claims under [the Sherman Act]
are appropriate for arbitration"). See also Matsushita Elec.
Indus. Co. v. Epstein, --- U.S. ----, ----, 116 S.Ct. 873, 883,
134
L.Ed.2d 6 (1996) ("As [McMahon ] demonstrates, a statute conferring
exclusive federal jurisdiction for a certain class of claims does
not necessarily require resolution of those claims in federal
court.").
D. Other Circuits' Treatment Of This Issue.
Finally, we find it persuasive that since the Supreme Court's
ruling in Mitsubishi, four other circuits have expressed the view
that the American Safety doctrine is incompatible with the Supreme
Court's intervening decisions and that domestic antitrust claims
are therefore arbitrable. The Ninth Circuit found that:
Given the Court's meticulous step-by-step disembowelment of
the American Safety doctrine, this circuit will no longer
follow American Safety. We hold that Mitsubishi effectively
overruled American Safety and its progeny.
Nghiem v. NEC Elec., Inc., 25 F.3d 1437, 1441-42 (9th Cir.), cert.
denied, --- U.S. ----,
115 S.Ct. 638,
130 L.Ed.2d 544 (1994)
(citations omitted). Likewise, the Second Circuit affirmed,
without opinion, a district court's holding that "the reasoning of
Mitsubishi should apply with equal force to domestic claims" and
that " "none of the justifications for the American Safety doctrine
retain their vigor.' " Hough v. Merrill Lynch,
757 F.Supp. 283,
286 (S.D.N.Y.), aff'd without op.,
946 F.2d 883 (2d Cir.1991)
(citations omitted).
The Seventh Circuit, while not explicitly deciding the issue,
has stated in dicta that companies "may agree to arbitrate their
antitrust disputes—certainly so for international transactions, ...
and likely so for domestic transactions." Sanjuan v. American Bd.
of Psychiatry and Neurology, Inc.,
40 F.3d 247, 250 (7th Cir.1994),
cert. denied, --- U.S. ----,
116 S.Ct. 1044,
134 L.Ed.2d 191
(1996); see also Smokey Greenhaw Cotton Co., Inc. v. Merrill
Lynch, Pierce, Fenner and Smith, Inc.,
785 F.2d 1274, 1282 (5th
Cir.1986) (per curiam, on petition for rehearing and suggestion for
rehearing en banc ), cert. denied,
482 U.S. 928,
107 S.Ct. 3211,
96
L.Ed.2d 698 (1987) (stating, though not in an antitrust context,
that "although Mitsubishi arose in an international antitrust
dispute and its holding purports to be limited to that context, we
believe that its broad language may carry significance for domestic
disputes as well").
IV. CONCLUSION
In light of Mitsubishi and its progeny, as well as the
persuasive authority from our sister circuits, we hold that Cobb is
no longer controlling precedent in this circuit and that
arbitration agreements concerning domestic antitrust claims are
enforceable. Accordingly, we reverse the district court's judgment
denying JBL's motion to stay judicial proceedings pending
arbitration and remand this case for further proceedings consistent
with this opinion.
REVERSED and REMANDED.
