Vetco Sales, Inc. v. Vinar , 98 F. App'x 264 ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS January 28, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
_____________________ Clerk
No. 03-10527
Summary Calendar
_____________________
VETCO SALES, INC.;
Plaintiff - Counter Defendant - Appellee;
versus
VANCE VINAR, SR.; BARBARA V. VINAR; CABLE CONNECTION & SUPPLY CO.
INC;
Defendants - Third Party Plaintiffs - Counter Claimants -
Appellants;
versus
TROY MURPHY;
Third Party Defendant - Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas, Dallas Division
District Court Cause No. 02-CV-1767
_________________________________________________________________
Before HIGGINBOTHAM, DAVIS and PRADO, Circuit Judges.1
PRADO, Circuit Judge.
This appeal arises from an order denying the defendant-
appellants' motion to stay trial proceedings pending arbitration.
1
Pursuant to 5th Cir. R. 47.5, this Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5th Cir. R.
47.5.4.
1
In its order, the district court determined that the plaintiff-
appellee's claims were not covered by an arbitration agreement
and denied the request to stay. In response, the defendant-
appellants filed a notice of appeal.
Jurisdiction
The plaintiff-appellee contends this Court lacks
jurisdiction over this appeal because the order the defendant-
appellants challenge is not a final decision under section
16(a)(3) of the Federal Arbitration Act (the Act).2 Although the
challenged order is not a final decision, this Court has
jurisdiction over the appeal because section 16(a)(1)(A) provides
for appellate review of an order "refusing a stay of any action
under section 3" of the Act.3 Section 3 directs a district
court, upon request from one of the parties, to stay proceedings
on issues subject to arbitration until the arbitration is
completed.4 Here, the defendant-appellants moved for a stay of
proceedings on the grounds that the plaintiff-appellee's claims
were subject to an arbitration agreement. Because the district
court refused to stay proceedings, the order is appealable.5
2
See 9 U.S.C. § 16(a)(3) (providing for appeals of final
decisions with respect to arbitration).
3
See 9 U.S.C. § 16(a)(1)(A).
4
See 9 U.S.C. § 3.
5
The defendant-appellants’ motion could be characterized as
a motion to compel arbitration, but this Court would still have
jurisdiction over the appeal because section 16 also provides for
2
Whether the Dispute Is Subject to Arbitration
The defendant-appellants maintain the district court erred
in denying the motion for a stay because the underlying dispute
is subject to an arbitration agreement. The disputed arbitration
provision is included in a Buy-Sell Agreement and Shareholder’s
Control Agreement (the Buy-Sell Agreement) between Vance Vinar,
one of the defendants below and an appellant in this appeal; Troy
Murphy, a third party defendant in the underlying lawsuit; and
Vetco Sales, Inc., the plaintiff and appellee. At the time, the
parties entered into the Buy-Sell Agreement, Murphy owned 100% of
shares in Vetco. Under the Buy-Sell Agreement, Murphy sold 49%
of his shares to Vinar. The Buy-Sell Agreement provided that
Murphy would control Vetco’s day-today operations, and contained
a sales agreement which required Vetco to pay certain commissions
to Cable Connection, Inc., a company owned by Vinar and his wife,
Barbara, another defendant-appellant. The Buy-Sell Agreement
contained an arbitration clause.
Ultimately, the business relationship between the parties
deteriorated, and the parties decided to end their relationship.
The parties memorialized their agreement to end their
relationship on April 26, 2002 in a Buy-Out Agreement and
Settlement (the Buy-Out Agreement). Under the Buy-Out Agreement,
an appeal of an order denying a motion to compel arbitration.
See 9 U.S.C. § 16(a)(1)(B) & (C).
3
Vinar sold his shares in Vetco back to Murphy, and Cable
Connection agreed to provide adequate administrative services to
Vetco during a contractually defined transition period. The Buy-
Out Agreement did not contain an arbitration clause.
In the lawsuit underlying this appeal, Vetco alleges that
Vinar, Vinar’s wife, and Cable Connection breached the Buy-Out
Agreement by failing to provide adequate administrative services
and by refusing to deliver certain documents and other property.
Although the Vinars and Cable Connection maintain these claims
are subject to the arbitration clause of the original Buy-Sell
Agreement, the district court correctly disagreed.
Arbitration is a matter of contract between the parties.6
Although the parties’ intentions control, a court must generously
construe issues of arbitrality.7 To determine whether to compel
arbitration, a court must first determine whether the parties
agreed to arbitrate the dispute.8 In determining whether a
dispute is arbitrable, the court must employ the rules of
contract construction to determine the intent of the parties.9
The court must resolve any doubts concerning the scope of
6
See Pennzoil Exploration and Prod. Co. v. RAMCO Energy
Ltd., 139 F.3d 1061, 1064 (5th Cir. 1998) (citations omitted).
7
See Pennzoil Exploration, 139 F.3d at 1065.
8
See id.
9
See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 626 (1985).
4
arbitrable issues in favor of arbitration.10 Although federal
law favors arbitration, a court may not compel a party to
arbitrate a dispute it did not agree to arbitrate.11 This Court
reviews a district court order refusing to stay an action pending
arbitration de novo.12
In the instant case, the disputed arbitration clause
provided that “[e]ach dispute, claim and controversy (whether
arising during or after the term hereof) arising out of this
Agreement or breach thereof (including but not limited to the
validity of the agreement to arbitrate and the arbitrality of any
matter) shall be settled, upon demand and written notice by
arbitrator agreed upon by the parties.” The “arising out of”
language indicates the parties intended to limit the
applicability of this clause.13 Because the clause was included
in the Buy-Sell Agreement, and the clause refers to the Buy-Sell
Agreement, the “arising out of” language indicates the parties
intended to arbitrate disputes that might arise out of the Buy-
Sell Agreement. Because the arbitration clause applies to
10
See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 25 (1983).
11
See Neal v. Hardee’s Food Sys., 918 F.2d 34, 37 (5th Cir.
1990).
12
See Steel Warehouse Co. v. Abalone Shipping Ltd., 141 F.3d
234, 236-37 (5th Cir. 1998).
13
See Pennzoil Exploration, 139 F.3d at 1067 (discussing the
effect of arbitration language).
5
disputes arising from the Buy-Sell Agreement, the purpose of that
agreement is relevant to determining whether the clause applies
to the plaintiff-appellee’s claims.
Notably, the Buy-Sell Agreement indicates the parties
entered into their agreement to restrict transfers of Vetco stock
and to provide for the management and control of Vetco. Under
the Buy-Sell Agreement, Vinar and Murphy gave each other the
right of first refusal in the event the other received an offer
for the purchase of their respective shares. Thus, the
arbitration provision indicates the parties intended to arbitrate
any disputes relating to the transfer of Vetco stock. The
plaintiff-appellee’s claims, however, do not relate to the
transfer of Vetco stock. Instead the plaintiff-appellee
complains about the breach of the Buy-Out Agreement.
The Buy-Out Agreement indicates the parties intended to
settle and compromise disputes that arose under the Buy-Sell
Agreement between Murphy and Vetco, and between Vinar and Cable
Connection. As part of that compromise, the parties agreed that
Cable Connection would provide administrative services to Vetco
during a transition period. Although the defendant-appellants
insist the Buy-Out Agreement is merely a document governing the
termination of the Buy-Sell Agreement, the Buy-Out Agreement
clearly indicates that the parties intended to compromise and
settle any dispute that may have arisen under the Buy-Sell
Agreement. Indeed, the Buy-Out Agreement specifically provided
6
for the termination of the Buy-Sell Agreement. As a result, the
Buy-Sell Agreement’s arbitration provision does not apply to the
plaintiff-appellee’s claims.
Rather than complain about actions that occurred during the
parties’ relationship under the Buy-Sell Agreement, Vetco alleges
in its complaint that Cable Connection and the Vinars failed to
perform their contractual obligations under the Buy-Out Agreement
by (1) failing to provide Vetco with financial, accounting,
inventory, invoicing, shipping, ordering, data processing and
administrative records; (2) failing to provide administrative
services; and (3) by assessing and collecting commissions and/or
finance charges in excess of their contractual rate. The Buy-Out
Agreement specifically provided for these services. Vetco
further complained that Cable Connection and the Vinars breached
their contractual duty of good faith and fair dealing in
performing the Buy-Out Agreement. Although Vetco refers to its
relationship to Cable Connection and the Vinars under the Buy-
Sell Agreement, the complaint clearly complains about obligations
arising from the Buy-Out Agreement, not the Buy-Sell Agreement.
And because the Buy-Out Agreement did not contain an arbitration
clause, the plaintiff-appellee’s claims are not subject to
arbitration.
7
Conclusion
Because the Buy-Sell Agreement’s arbitration clause does not
apply to the plaintiff’s claims, and because the Buy-Out
Agreement did not include an arbitration clause, the plaintiff-
appellee’s claims are not subject to an arbitration clause.
Consequently, the district court did not err by denying the
defendant-appellees’ motion to stay the plaintiff-appellee’s
lawsuit pending arbitration. As a result, this Court AFFIRMS the
district court’s order and REMANDS this case to the district
court for further proceedings.
AFFIRMED and REMANDED.
8