Titan Pro Sci, Inc. v. Eric Muff, Dan Fulton and New Ag Basics, LLC ( 2022 )

IN THE COURT OF APPEALS OF IOWA
No. 21-1622
Filed October 5, 2022
TITAN PRO SCI, INC.,
Plaintiff-Appellee,
vs.
ERIC MUFF, DAN FULTON and NEW AG BASICS, LLC,
Defendants-Appellants.
________________________________________________________________
Appeal from the Iowa District Court for Hancock County, DeDra Schroeder,
Judge.
The appellant-defendants challenge the district court’s denial of their motion
to compel arbitration. AFFIRMED.
Joseph G. Gamble of Duncan Green, P.C., Des Moines, for appellants.
Stephanie A. Koltookian and Martin J. Demoret of Faegre Drinker, Des
Moines, for appellee.
Heard by Vaitheswaran, P.J., and Greer and Schumacher, JJ.
2
GREER, Judge.
In this multi-party litigation, we are asked if the substantive claims raised in
the underlying proceedings fall outside the scope of arbitration clauses found in
other agreements between some of the parties or whether the dispute touches a
matter within the scope so that arbitration must be ordered. Starting with the
dispute, Titan Pro SCI, Inc. (Titan) brought a lawsuit against former employees
Dan Fulton and Eric Muff, who created New Ag Basics, LLC (collectively, the
appellants).1 Titan claimed the defendants breached confidentiality agreements
they signed as part of their employment with Titan, misappropriated its confidential
information, and engaged in tortious conduct. The appellants moved to compel
arbitration, relying on arbitration provisions in both a purchase agreement and
mutual general release between just Fulton and Titan. The district court denied
the motion.
The appellants challenge the district court’s denial of the motion to compel
arbitration, arguing the court wrongly concluded Titan’s claims against them do not
fall within the scope of the two arbitration clauses. More specifically, they argue
the district court improperly placed the burden on them to prove that the claims
were suitable for arbitration—rather than placing the burden on Titan to prove the
claims were not suitable; Titan’s legal claims “touch on” matters covered by the
broad arbitration provisions, which is enough to compel arbitration; and Muff and
New Ag have a sufficiently close relationship to Fulton to enforce the arbitration
1We refer to Muff, Fulton, and New Ag Basics, LLC (New Ag) as the appellants to
distinguish them from the larger group of defendants against whom Titan brought
suit (who are still part of the substantive case) but who are not parties to this appeal
because they did not move to compel arbitration.
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provisions in agreements Fulton entered into with Titan. The appellants ask us to
dismiss Titan’s lawsuit with prejudice or, in the alternative, stay it pending
arbitration. We affirm the district court’s denial of the motion to compel arbitration
and, with this decision, the lawsuit travels forward in the district court.
I. Background Facts and Proceedings.2
Titan is a farm marketing organization that sells seed, chemicals, fertilizer,
and insurance products to agricultural producers. Titan sells its products through
a network of independent-contractor dealers, who participate in the promotion,
marketing, and sale of the products in return for sales commissions. The network
of dealers, which Titan maintains as a confidential list, consists of approximately
150 individuals across seven states.
Titan owns the products its customers buy; any sale occurs between Titan
and the customer. The dealer facilitates the sale by communicating directly with
the customers; entering orders for products into Titan’s system; and receiving,
storing, and sometimes delivering the product from Titan to the customers.
According to Titan, it “makes a significant investment in its [d]ealerships, including
through training, infrastructure, access to [Titan] services, access to [Titan’s]
[c]ustomer base, and resources that help the [d]ealers grow” the customer base.
Titan gives dealers access to confidential and proprietary business information,
including confidential price lists and customer lists, along with other sales
information and data. The dealers enter into an “Independent Dealer Contract”
with Titan, which includes pre- and post-termination restrictions on competition.
2Like the appellants, we rely on the pleadings in Titan’s petition and amended
petition to explain the history and procedure up to this point in the proceedings.
4
As part of the pre-termination restrictions, dealers are required to sell products
exclusively on behalf of Titan unless another agreement explicitly allows otherwise.
Additionally, dealers are prohibited from selling competing products to Titan’s
customers for a certain period of time after termination of the dealer’s employment
with Titan. To protect its confidential information, Titan applies a unique watermark
for each dealer it sends confidential information—allowing it to determine the
cause of a breach.
Titan also has a number of employees that assist with its business
operations. At one point, Muff, Fulton, Samuel Bunk, and Richard Welsh were
employees of Titan. As part of their employment, each signed a confidentiality
agreement with Titan, promising to “not, during (except to perform my job duties
for [Titan]) or at any time after my employment with [Titan], disclose or use
[c]onfidential [i]nformation for [their] own or another’s benefit.” The agreement
defined “confidential information” to include “information about [Titan’s] customers,
customer lists, pricing, costing, purchasing, profits, markets, products capabilities,
business ventures, sales, sales histories, data processing, compensation,
finances,” and more. The agreement also contained a provision that the
employees would—upon the termination of their employment—“immediately
deliver to [Titan]” all of Titan’s property, “including but not limited to all materials in
my possession or control that contain [c]onfidential [i]nformation.” The restrictions
in the agreement “survive[d] the termination of [the employee’s] employment,” and
the agreement could only “be cancelled, modified, or otherwise changed . . . by
another written agreement signed by [the employee] and [Titan’s] President/CEO.”
5
In May 2016, Fulton purchased Midwest Agronomy, LLC (MWA) from Titan
with a confidential purchase agreement. The agreement provided that Fulton was
purchasing a corporate form and certain assets, liabilities, and property. This
included a customer list, which was attached to the purchase agreement as
“Exhibit E.” The agreement provided that Fulton’s, Muff’s, and Bunk’s employment
with Titan would terminate with the sale of MWA, and those employees would be
offered employment by MWA.
In October 2019, Titan brought suit against Welsh, who worked as an
employee of Titan from 2009 to 2017 selling agriculture insurance. Titan alleged
that immediately before Welsh’s employment was terminated in September 2017,
Welsh “improperly extracted significant amounts of [c]onfidential [i]nformation
from” Titan, including attempting to download a file with nearly a decade of
information about Titan’s customers and sales and a 2017 spreadsheet listing all
of Titan’s 2017 crop insurance customers, which he then sent to his personal
email. Titan claimed Welsh organized CAVER Corporation, which does business
as Premier Crop Services, Inc. (Premier), to sell competing agricultural input
products to both Titan’s dealers and customers and that Welsh used the
confidential information he took from Titan “to intentionally target [Titan’s] [d]ealers”
and “solicit [them] to breach their contracts with” Titan to provide Welsh and
Premier access to those customers. Titan brought claims that Welsh breached his
confidentiality agreement; Welsh and Premier tortiously interfered with Titan’s
independent dealer contract with at least one specific dealer; Welsh and Premier
tortiously interfered with Titan’s prospective business relationships with customers;
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and Welsh and Premier were unjustly enriched through improper use of
confidential information.
Welsh and Premier answered, and the two sides agreed to a trial scheduling
and discovery plan. Based on information learned while conducting discovery, in
April 2021 Titan moved to amend its petition at law. Titan wished to add new
parties—Bunk, Muff, Fulton, and New Ag—and claims, including a claim of civil
conspiracy.
In the amended petition, Titan alleged that Fulton, Muff, and Bunk were
former employees of Titan’s who (like Welsh) regularly communicated with Titan’s
dealers as part of their employment. As laid out in the purchase agreement, the
trio left Titan to operate the competing business MWA on May 18, 2016. But, Titan
alleged, since August or September 2017, Fulton, Muff, and Bunk “worked in
concert [with Welsh] to develop a system to target” Titan’s dealers and customers
“and misappropriate [c]onfidential [i]nformation of [Titan’s] to provide [d]efendants
an improper competitive advantage.” Titan claimed the individual defendants and
Premier organized a system to sell competing agricultural input products to Titan’s
dealers and customers, of which Welsh’s 2017 extraction of confidential
information from Titan was “part of [the] concerted plan.” According to Titan, each
of the individual defendants aided, assisted, and were directly involved in Welsh
and Premier’s actions of soliciting, selling, and distributing agricultural products to
Titan’s dealers and customers. In doing so, the defendants targeted Titan’s
dealers to breach their pre- and post-termination contracts with Titan. The
individual defendants requested and obtained confidential information from
dealers, such as Titan’s price list, which the defendants then used to undercut
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Titan’s pricing. Titan asserted that Muff and Fulton created New Ag to sell
competing agricultural input products, which it continued to do through Welsh and
Premier. In the amended petition, Titan claimed that each individual defendant
breached their confidentiality agreement with Titan and all defendants tortiously
interfered with Titan’s contracts with dealers, including but not limited to a dealer
who, in a separate proceeding in federal court, admitted he violated his non-
compete and so agreed to stop his business and to pay Titan damages for the
violations. Additionally, all defendants tortiously interfered with Titan’s prospective
business relationships with customers by targeting Titan’s dealers and
encouraging them to breach their contracts by giving the defendants access to
Titan’s customers, and all defendants engaged in a civil conspiracy against Titan.
Titan maintained that, due to their actions, all defendants were unjustly enriched
at Titan’s expense.
Welsh and Premier resisted Titan’s request to amend its petition, but on
May 4, 2021, the district court allowed Titan to amend.
Then in August, the appellants moved to compel arbitration. They asserted
that Titan’s claims were subject to binding arbitration agreements and asked the
district court to either dismiss Titan’s lawsuit with prejudice or, in the alternative,
stay the lawsuit pending the completion of arbitration. More specifically, the
appellants admitted that Muff and Fulton signed confidentiality agreements with
Titan as part of their employment but claimed the issue was controlled by the
confidential purchase agreement Fulton entered into with Titan in 2016, which
“expressly allowed Fulton and MWA, and all [appellants] as MWA employees, to
compete with Titan.” (Citation omitted.) The appellants also relied on a mutual
8
general release that Fulton and Titan signed in 2017, claiming the parties “released
all claims against each other arising out of or in any way related to the [c]onfidential
[p]urchase [a]greement.”3 Both the purchase agreement and the mutual general
release contain arbitration provisions, which state in part: “The parties agree to
resolve any claims relating to the Agreement through final and binding arbitration.”
To access the arbitration process, the appellants claimed they “intend[ed] to show
that if they used any confidential information, it was the confidential information
Fulton purchased from [Titan] pursuant to the” purchase agreement so—according
to the appellants—Titan was required to submit to arbitration. Although the
appellants recognized only Fulton signed the agreements containing the arbitration
provisions, they argued Muff and New Ag had a “sufficiently close” relationship to
Fulton to compel arbitration as to them as well.
3The release provides that:
each party hereby forever generally and completely releases and
discharges the other party, except for the Confidentiality Agreements
attached (Exhibit A-1 with Sam Bunk, Exhibit A-2 with Dan Fulton,
Exhibit A-3 with Eric Muff), and its servants, agents, directors,
officers and employees, and all others, of and from any and all claims
and demands of every kind and nature, in law, equity or otherwise,
known and unknown, suspected and unsuspected, disclosed and
undisclosed, for damages actual and consequential, past, present
and future, arising out of or in any way related to (a) that certain
Confidential Purchase Agreement between the parties dated
effective May 18, 2016 (the “Purchase Agreement”) including the
MWA payment obligation of $500,000 under Section 1(b)b of the
Purchase Agreement, (b) obligations as to rebates for the 2016
growing season payable by any party to the other, (c) product returns
or re-evaluations, and (d) obligations of any of the parties with
respect to accounts payable and accounts receivable.
Notwithstanding the foregoing, the release contained in this
paragraph does not release, discharge, amend or modify the
obligations, rights and responsibilities of the parties under Sections
2 through 13 of the Purchase Agreement.
(Emphasis added.)
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Titan resisted arbitration, arguing its lawsuit was premised on the theory
that Welsh used Titan’s confidential information to improperly undercut Titan’s
position in the marketplace by selling products sourced through Muff, Fulton, and
Bunk. Titan claimed it would prove that Welsh sold more than $2 million in
competing products from September 2017 through May 2021 to at least eight
current or former Titan dealers—none of whom were included in the customer list
that was part of Fulton’s purchase of MWA. Pointing to “Exhibit E,” the list of
customers attached to the purchase agreement, Titan asserted that the “scope of
the [d]ealers and [c]ustomers at issue [was] defined by the customer list
[d]efendants Welsh and Premier have produced in this case” and asked the court
to compare the customers Welsh and Premier listed in response to supplemental
interrogatories with the list of customers Fulton purchased as part of MWA.
In a supplemental brief, the appellants took another approach and claimed
“that all obligations under those 2014 [c]onfidentiality [a]greements were released
in the May 18, 2016” purchase agreement. The appellants cited to section 4 of the
purchase agreement, which contains the “general release” of the agreement and
states:
General Release. Seller hereby releases, compromises and
discharges and holds harmless the Company, Buyer and its and their
respective affiliates, and each of their respective shareholders,
members, partners, managers, directors, officers, actual or potential
debt or equity funding sources, employees, successors, attorneys,
representatives and assigns (the “Company Released Parties”) from
and against any and all liabilities, claims, causes of action, damages,
costs, obligations or liabilities and all expenses (including, without
limitation, attorneys’ fees) of any type or description, whether known
or unknown, accrued or un-accrued, asserted or un-asserted (any of
the foregoing, a “Claim”), arising out of or related to any actions of
the Company Released Parties prior to the date of this Agreement,
but excluding any Claims based on fraud of any Company Released
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Party or any Claims by Seller arising out of or relating to this
Agreement (including, without limitation, in connection with a breach
of a representation or warranty of Buyer contained herein).
Additionally, the appellants relied on section 8 of the purchase agreement, claiming
it established that the purchase agreement “supersedes all prior agreements
between the parties.” That section states:
Entire Agreement and Modification. This Agreement
constitutes the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes any prior
agreement between or among the parties with respect to the subject
matter hereof. This Agreement shall not be modified or amended in
any manner other than by the written agreement of all of the parties
hereto.
Finally, the appellants cited to paragraph (l) of section 1, which provides, “No
Restriction. Nothing contained in this Agreement will restrict either Party from
competing one with the other, in Nebraska or otherwise.”
Titan submitted a reply brief, arguing the appellants’ contention that the
2016 purchase agreement released them from their confidentiality agreements
was “plainly incorrect,” as the release stated it was limited to claims “arising out of
or related to any actions of the Company Released Parties prior to the date of this
[a]greement” and Titan’s claims involved alleged actions from 2017 onward.
(Emphasis added.) Moreover, the “release” was from “liabilities, claims, causes of
actions, damages, costs, obligations or liabilities and all expenses”—not from a
previous agreement. And Titan emphasized only Fulton was a party to the
purchase agreement. As for the integration clause, it did not apply to supersede
the confidentiality agreements because it was limited to “the subject matter of [the
purchase] Agreement.” Plus, according to Titan, the express terms of the 2017
mutual general release between Fulton and Titan make it clear the confidentiality
11
agreements survived the 2016 purchase agreement, as the 2017 general release
references the confidentiality agreements and explicitly excludes them from the
release: “It is understood and agreed that except as expressly provided in the
second sentence of the preceding paragraph or in the [c]onfidentiality [a]greement
attached, this is a full, complete, and final general release of any and all claims
described as aforesaid . . . .” (Citation omitted.)
Following a September 2021 hearing, the district court denied the
appellants’ motion to compel arbitration. The court concluded the purchase
agreement did not release the appellants from their confidentiality agreements and
Titan’s legal claims did not relate to the substantive information it sold Fulton in the
purchase agreement. So Titan’s claims against the appellants were not related to
the purchase agreement, which contained the arbitration clause upon which the
appellants relied. As the district court put it:
The crux of [Titan’s] grievances are that Defendant Welsh breached
his confidentiality agreement with [Titan] by conspiring with [the
appellants], who then consequently also breached their
confidentiality agreements. . . . [Titan] does not allege that the
[p]urchase [a]greement has been violated and does not seek to
enforce the terms of the [p]urchase [a]greement.
Additionally, the mutual release—which also contained a valid arbitration
provision—did not incorporate by reference the confidentiality agreements, so a
claim the confidentiality agreements were breached did not trigger the arbitration
provision in the release.
The appellants appeal.4
4 “The denial of a motion to compel arbitration is a final judgment for purposes of
appeal.” Heaberline Farms, Inc. v. IGF Ins. Co., 641 N.W.2d 816, 817 (Iowa 2002)
(emphasis added).
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II. Standard of Review.
The parties agree the Federal Arbitration Act (FAA) governs the written
arbitration agreements.5 See ING Fin. Partners v. Johansen, 446 F.3d 777, 779
(8th Cir. 2006) (“[T]he construction of an agreement to arbitrate is governed by the
[FAA] unless an agreement expressly provides that state law should govern.”); see
also 9 U.S.C. § 2. So “[w]e review de novo the district court’s interpretation of the
contract provision[s] regarding arbitration.” Kelly v. Golden, 352 F.3d 344, 349 (8th
Cir. 2003). “To the extent the district court’s ruling on arbitration is based on factual
findings, we review those findings for clear error.” Duncan v. Int’l Mkts. Live, Inc.,
20 F.4th 400, 402 (8th Cir. 2021).
III. Discussion.
A. Motion to Compel Arbitration: General Principles.
The FAA “reflects ‘a liberal federal policy favoring arbitration.’” Zetor N.
Am., Inc. v. Rozeboom, 861 F.3d 807, 810 (8th Cir. 2017) (quoting AT&T Mobility
LLC v. Concepcion, 563 U.S. 333, 319 (2011)). But as a matter of contract, “a
party cannot be required to submit to arbitration any dispute which he has not
agreed so to submit.” Id. (citation omitted). “The FAA does not mandate arbitration
per se; it mandates that arbitration agreements be enforced.” Rent-A-Center, Inc.
v. Iowa Civ. Rts. Comm’n, 843 N.W.2d 727, 741 (Iowa 2014). That means the
court can “order arbitration of a particular dispute only where the court is satisfied
that the parties agreed to arbitrate that dispute.” Granite Rock Co. v. International
5 If our state arbitration act controlled, we would review for correction of errors at
law. See Gen. Conf. of Evangelical Methodist Church v. Faith Evangelical
Methodist Church, 809 N.W.2d 117, 120 (Iowa Ct. App. 2011).
13
Brotherhood of Teamsters, 561 U.S. 287, 297 (2010). Therefore, “[a] court’s role
under the FAA is . . . limited to determining (1) whether a valid agreement to
arbitrate exists and, if it does, (2) whether the agreement encompasses the
dispute.” Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868, 871 (8th Cir. 2004);
accord Medcam, Inc. v. MCNC, 414 F.3d 972, 975 (8th Cir. 2005) (providing that
the court “asks only whether the parties have agreed to arbitrate a particular claim
and does not reach the potential merits of the claim”). “By its terms, the FAA
‘leaves no place for the exercise of discretion by a district court, but instead
mandates that district courts shall direct the parties to proceed to arbitration on
issues as to which an arbitration agreement has been signed.’” Pro Tech Indus.,
377 F.3d at 871 (citation omitted).
In considering the motion to compel arbitration, “the [c]ourt is free to
consider materials beyond the pleadings.” Brondyke v. Bridgepoint Educ., Inc.,
985 F. Supp. 2d 1079, 1089–90 (S.D. Iowa 2013) (citation omitted), accord id. at
1090 n.4 (“Eighth Circuit law . . . specifies that in ruling on a motion to compel
arbitration, a court must conduct a limited review of the arbitration provision, and
thus necessarily anticipates consideration of documents that may lay outside the
pleadings.”). “When parties submit affidavits in conjunction with the motion to
compel arbitration, the district court treats the motion akin to a motion for summary
judgment, viewing the record in the light most favorable to the nonmovant.”6
6 The appellants maintain Titan has the burden to prove its claims do not fall within
the arbitration provisions, relying on Green Tree Financial Corp.-Alabama v.
Randolph, 531 U.S. 79 (2000). But in Green Tree, the dispute centered on a party
who had agreed to submit to arbitration attempting to invalidate the arbitration
agreement on the ground that arbitration would be prohibitively expensive to her.
531 U.S. at 89–92. The Supreme Court ruled, “[W]e believe that where, as here,
14
Duncan, 20 F.4th at 403; accord Nebraska Mach. Co. v. Cargotec Sols., LLC, 762
F.3d 737, 742 (8th Cir. 2014) (“Given that both parties relied on matters outside
the pleadings and sought summary judgment-type rulings, a summary judgment
standard—viewing the evidence and resolving all factual disputes in the
nonmoving party’s favor—should have been used to evaluate the motions.”). That
said, “[t]he question is not whether there was a way to interpret the claims as falling
outside the scope of the agreements.” Parm v. Bluestem Brands, Inc., 898 F.3d
869, 878 (8th Cir. 2018). “[I]nstead, where a valid arbitration agreement exists, the
claims are arbitrable ‘unless it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation that covers the asserted
dispute.’” Id. (quoting Unison Co. v. Juhl Energy Dev., Inc., 789 F.3d 816, 818 (8th
Cir. 2015)).
If there are genuine issues of material fact that must be decided to
determine whether arbitration should take place for this specific dispute, then there
needs to be a trial to determine those facts. See Howard v. Ferrellgas Partners,
L.P., 748 F.3d 975, 977–80 (10th Cir. 2014) (providing that under the FAA, the
district court must “proceed summarily to the trial” of relevant facts “[w]hen . . . a
quick look at the case suggests material disputes of fact do exist on the question
whether the parties agreed to arbitrate[;] round after round of discovery and
motions practice isn’t the answer”); see also Foster v. Walmart, Inc., 15 F.4th 860,
864–65 (8th Cir. 2021). “Without factual findings about . . . whose story to
a party seeks to invalidate an arbitration agreement on the ground that arbitration
would be prohibitively expensive, that party bears the burden of showing the
likelihood of incurring such costs.” Id. at 92. That is not the issue in this case.
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credit . . . , we don’t know whether the parties agreed to arbitrate a dispute like this
one.” Howard, 748 F.3d at 979. At such a trial—as opposed to the typical
proceeding on the motion to compel arbitration—“the court must lift that thumb
from the scales, evaluate the conflicting evidence even-handedly, and decide
which side’s account is more likely true.” Id. at 980.
B. The Appellant’s Motion to Compel Arbitration.
As previously stated, our role is “limited to determining (1) whether a valid
agreement to arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute.” Pro Tech Indus., 377 F.3d at 871. If the answer to
both of those questions is yes, we order the parties to submit their disputes to
arbitration. Here, as in the district court, the parties do not dispute that both the
purchase agreement and the mutual general release include valid agreements to
arbitrate. So we proceed to consider whether those agreements encompass the
disputes at issue.
We start by considering how broadly or narrowly the arbitration clauses
involved are written. See United Steelworkers of Am., AFL-CIO-CLC v. Duluth
Clinic, Ltd., 413 F.3d 786, 788 (8th Cir. 2005) (“This court first decides whether the
arbitration clause is narrow or broad.”). “Arbitration clauses covering claims
‘arising out of’ or ‘relating to’ an agreement are broad.” Zetor, 861 F.3d at 810.
“[W]ith a broad arbitration clause[, we] ‘send a claim to arbitration as long as the
underlying factual allegations simply touch matters covered by the arbitration
provision.’” Id. (citation omitted). In other words, even “collateral disputes that
relate to the agreement containing the clause” are arbitrable when the arbitration
provisions are broad. Parm, 898 F.3d at 874 (citation omitted).
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The valid arbitration provisions in the purchase agreement and the mutual
release are identical, stating, “The parties agree to resolve any claims relating to
the Agreement through final and binding arbitration.” (Emphasis added.) These
are broad provisions. See, e.g., id. (providing that arbitration clauses covering
claims “relating to” an agreement “constitutes the broadest language the parties
could reasonably use to subject their disputes” to arbitration (citation omitted)). But
concluding the provisions are broad does not answer the ultimate question—
whether those broad arbitration agreements encompass the disputes Titan
actually raised.
Titan sued the appellants for the following: (1) breach of contract (Muff &
Fulton); (2) tortious interference with a contract (all appellants); (3) tortious
interference with prospective business relationships (all appellants); (4) civil
conspiracy (all appellants); and (5) unjust enrichment (all appellants). “Under the
[FAA], we generally construe broad language in a contractual arbitration provision
to include tort claims arising from the contractual relationship, and we compel
arbitration of such claims.” Hudson v. ConAgra Poultry Co., 484 F.3d 496, 499–
500 (8th Cir. 2007). In deciding whether each particular dispute falls within the
arbitration agreements, “[o]ur task is to look past the labels the parties attach to
their claims to the underlying factual allegations and determine whether they fall
within the scope of the arbitration clause.” 3M Co. v. Amtex Sec., Inc., 542 F.3d
1193, 1199 (8th Cir. 2008).
So, how does Titan’s claim over appellants’ breach of the confidentiality
agreement “relate to” or “touch upon” the purchase agreement, mutual general
release, or both (as the agreements that contain the arbitration provisions)? The
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appellants contend there are “interconnections of the parties’ agreements”
because the purchase agreement “is a defense” to Titan’s claim they breached the
confidentiality agreement. We conclude these issues can be properly decided in
a motion-to-compel-arbitration setting as opposed to a factual dispute review
requiring a trial. See Howard, 748 F.3d at 977–80; see also Pillsbury Co. v. Wells
Dairy, Inc., 752 N.W.2d 430, 435–36 (Iowa 2008) (“[C]onstruction of a contract is
the process a court uses to determine the legal effect of the words used. We
always review the construction of a contract as a legal issue.” (internal citation
omitted)).
First, the appellants broadly contend that Titan’s allegations they breached
their respective confidentiality agreements “are rebutted by the express terms of
the [p]urchase agreement, which specifically provides for employment of the
[i]ndividual [d]efendants by MWA and expressly allows MWA and its employees to
compete with” Titan. The appellants’ argument misses the mark. Even assuming
the section (1), paragraph (i) of the purchase agreement—which provides that
Fulton and Muff will stop working for Titan and will begin working for MWA—and
section (1), paragraph (k)—which says, “Nothing contained in this Agreement will
restrict either Party from competing one with the other, in Nebraska or otherwise”—
combine to “expressly allow” Fulton and Muff to compete with Titan, being allowed
to compete is not necessarily the same thing as being allowed to use and disclose
confidential information. And the confidentiality agreement Fulton and Muff signed
did not preclude them from competing with Titan; it prevented them from using or
disclosing Titan’s confidential information. Put another way, nothing in the
confidentiality agreement restricted Fulton and Muff from starting their own
18
company and engaging in the same type of sales and services as Titan, so the
purchase agreement’s provisions allowing them to do so did not necessarily
contradict or undo the confidentiality agreement. This reading is supported by the
“No Restriction” provision of the purchase agreement, which stated that “[n]othing
contained in this [a]greement will restrict either party from competing”—leaving
open the possibility that some other agreement may provide some restriction.
(Emphasis added.)
Second, the appellants claim that the assets Fulton purchased from Titan
are “the same as the confidential information as defined in the confidentiality
agreements between [Titan]” and them. The purchase agreement provides the
complete list of assets Fulton purchased from Titan; he bought the shell company
of MWA and its interests in the company’s Agricultural Commodity Purchasing
Power plus the following:
(A) the inventory identified on Exhibit A (“Purchased Inventory”),
(B) the personal property and intangible assets (trade names, trade
secrets, website domain name) identified on Exhibit B, (C) the
accounts receivable (after all unapplied cash and prepay amounts
are applied to open invoices on each accounts receivable account)
identified on Exhibit C (the “Accounts Receivable”), and (D) the
customer list attached as Exhibit E, in all cases free and clear of all
liens, claims, options to sell or purchase, security interests,
mortgages, pledges, restrictions or encumbrances of any kind.
The agreement does not broadly include any and all “confidential information” of
Titan’s—it includes a list of specific customers as provided in exhibit E. And Titan’s
lawsuit does not touch upon the customers whom MWA purchased.7 The fact that
7 Titan’s petition and amended petition do not include lists of specific dealers or
customers it alleges the defendants improperly targeted, and Titan did not explicitly
exclude the customers from Exhibit E of the purchase agreement from being at
issue in the suit. But in later filings with the district court and at the hearing on the
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Fulton purchased a subset of confidential information from Titan does not give
MWA and its employees free rein to use or disclose any and all of Titan’s
confidential information.
And finally, the appellants claim that the mutual general release is “touched
by” the claim they breached their confidentiality agreements because the mutual
release “provides that Fulton, MWA, and Titan Pro released each other and each
other’s employees from all claims for past, present and future damages, arising
out of or in any way related to the Purchase Agreement.” This is an attempt to
bootstrap the mutual release to the disputes by its connection to the purchase
agreement, but—as we have already decided the purchase agreement is not a
defense to and does not cover Titan’s breach-of-contract claim against the
appellants—the mutual release’s relation to the purchase agreement does not
make it pertinent to the dispute at issue.
motion to compel, Titan took the position that its lawsuit was limited to those
customers Welsh and Premier listed in their supplemental answer to
interrogatory 8. As the district court did, we have confirmed that those customers
are not included in the list of customers Fulton purchased. Importantly, we base
our conclusion that Titan’s lawsuit does not relate to any substantive information it
sold Fulton in 2016—and therefore the dispute does not “touch upon” the purchase
agreement—on Titan’s later representations. Titan may not take a different,
adverse position on this issue in the future. See State v. Duncan, 710 N.W.2d 34,
43 (Iowa 2006) (“A party who has, with knowledge of the facts, assumed a
particular position in judicial proceedings is estopped to assume a position
inconsistent therewith to the prejudice of the adverse party.” (citation omitted));
Wilson v. Liberty Mut. Grp., 666 N.W.2d 163, 166 (Iowa 2003) (describing judicial
estoppel as “a ‘common sense’ rule, designed to protect the integrity of the judicial
process by preventing deliberately inconsistent—and potentially misleading—
assertions from being successfully urged in succeeding tribunals”); see also Gray
v. City of Valley Park, Mo., 567 F.3d 976, 981 (8th Cir. 2009) (recognizing the
doctrine of judicial estoppel and its purpose).
20
The appellants do not offer a separate, specific argument as to how the
factual allegations supporting Titan’s tort claims touch on matters covered by the
arbitration provisions in the purchase agreement and mutual general release.
While we read the arbitration provisions broadly, we reiterate that we “may order
arbitration of a particular dispute only where the court is satisfied that the parties
agreed to arbitrate that dispute.” Granite Rock, 561 U.S. at 297. And we do not
start with the presumption that the dispute falls within the parties’ agreement to
arbitrate. Cf. id. at 301 (providing that we only apply the presumption of arbitrability
“where a validly formed and enforceable arbitration agreement is ambiguous about
whether it covers the dispute at hand”). Here, the arbitration clauses in the
purchase agreement and mutual general release are not susceptible to an
interpretation that covers Titan’s claims under breach-of-contract or any tort
theories. Therefore, we agree with the district court’s denial of the appellants’
motion to compel arbitration.8
AFFIRMED.
8Because we conclude the agreements signed by Fulton do not require Titan to
arbitrate its claims, we need not determine whether Muff and New Ag have a
sufficiently close relationship to Fulton to also enforce the arbitration provisions
against Titan. See, e.g., CD Partners, LLC v. Grizzle, 424 F.3d 795, 798 (8th Cir.
2005) (allowing a nonsignatory to enforce an arbitration clause against a signatory
when “the relationship between the signatory and nonsignatory defendants is
sufficiently close that only by permitting the nonsignatory to invoke arbitration may
evisceration of the underlying arbitration agreement between the signatories be
avoided” (citation omitted)).