Triple I: International Investments, Inc. v. K2 Unlimited, Inc.

[DO NOT PUBISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
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U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 07-13003
July 14, 2008
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THOMAS K. KAHN
D. C. Docket No. 06-CV-80966-DTKH
TRIPLE I: INTERNATIONAL INVESTMENTS, INC.,
Counter-Claimant-Appellee,
versus
K2 UNLIMITED, INC., et al.,
Counter-Defendants-Appellants.
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Appeal from the United States District Court
for the Southern District of Florida
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(July 14, 2008)
Before BIRCH and FAY, Circuit Judges, and HINKLE,* District Judge.
HINKLE, District Judge:
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*Honorable Robert L. Hinkle, United States District Chief Judge for the Northern District
of Florida, sitting by designation.
This appeal raises the issue of the arbitrability of specific claims arising
from a commercial venture gone bad. The object of the venture was the
construction of a cement plant in Nigeria. The parties to this appeal are the owner
who proposed to build the plant and an agent the owner hired to help secure
financing. The owner and agent entered a written agreement setting forth their
respective rights and obligations. The owner later sued the agent for fraud (and on
related theories), asserting the agent helped dupe the owner into paying a fee for
nonexistent financing. The agent moved to compel arbitration based on a clause
in the parties’ agreement that required arbitration of “[a]ny legal dispute arising
from” the agreement. The district court denied the motion. We reverse.
I. Facts
Appellee Triple I: International Investments, Inc. (“Triple I”) wished to
build a cement plant in Nigeria. It needed a $520 million loan. It hired appellant
K2 Unlimited, Inc. (“K2”) to help find an entity that would issue a financial
guarantee bond as collateral for the contemplated loan. Triple I and K2 entered a
written agreement that was entitled “Intent-to-Collateralize and Fund
Memorandum.” R.1.71.12. The agreement called for K2 to “procure a Financial
Guaranty Bond” and for Triple I to pay K2 a fee of five percent — $26 million —
upon consummation of the loan transaction. Id. The agreement included a clause
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that required arbitration of “[a]ny legal dispute arising from” the agreement.
R.1.71.14.
K2 and others purportedly found a lender (Japan Venture Fund Group) and
an issuer of a financial guarantee bond (International Underwriters AG & Liberty
Re-Insurance Corporation, S.A. (“International”)). For issuance of the bond,
Triple I agreed to pay International a fee of $10.4 million, payable half in advance
and half upon Triple I’s receipt of the loan proceeds. Triple I made the $5.2
million advance payment through an escrow agent (W. E. Fielding and
Associates), but the lender did not fund the loan. Despite an agreement between
Triple I and International requiring all but $200 of the fee to be refunded if the
bond was not used, International did not refund the fee. Triple I thus was out $5.2
million.
International filed a lawsuit in which it denied that Triple I was entitled to a
refund of the entire $5.2 million but also sought to “interplead” that amount for a
determination by the court of the parties’ respective rights. Triple I
counterclaimed. In due course International voluntarily dismissed its complaint,
and Triple I twice amended its counterclaim. In the second amended
counterclaim, Triple I asserted that the whole deal was a sham from the outset.
Triple I named 11 counterclaim defendants, including K2, its chief executive
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officer Diane Glatfelter, and its chief operating officer Robert Rice. Triple I
sought recovery against K2 and the officers for fraud and under the Racketeer
Influenced and Corrupt Organizations Act.
K2 and its officers moved to compel arbitration based on the arbitration
clause in the “Intent-to-Collateralize and Fund Memorandum.” The district court
denied the motion. K2 and the officers filed this appeal. For convenience, in this
opinion we refer to K2 without continuing to refer to the officers; both sides
apparently agree that the officers’ fate on this appeal rises or falls with that of K2.
II. Standard of Review
We review de novo a district court’s decision on whether a dispute is
covered by an arbitration agreement. See, e.g., Employers Ins. of Wausau v. Bright
Metal Specialties, Inc., 251 F.3d 1316, 1321 (11th Cir. 2001).
III. Merits
A dispute ordinarily is arbitrable if the parties have agreed to arbitrate it. As
we have said:
Absent some violation of public policy, a federal court must refer to
arbitration any controversies covered by the provisions of an arbitration
clause. Chastain v. Robinson-Humphrey Co., 957 F.2d 851, 854 (11th
Cir.1992). Whether a party has agreed to arbitrate an issue is a matter of
contract interpretation: “[A] party cannot be required to submit to arbitration
any dispute which he has not agreed so to submit.” United Steelworkers of
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America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct.
1347, 4 L.Ed.2d 1409 (1960).
Telecom Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109, 1114 (11th Cir.
2001). The canons of construction run in favor of arbitration. See, e.g., Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927,
74 L. Ed. 2d 765 (1983) (“any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration”).
Triple I and K2 agreed to arbitrate “[a]ny legal dispute arising from” their
agreement. R.1.71.14. The question thus is whether the disputes at issue — that
is, the claims set forth in the second amended counterclaim — “arise from” the
agreement. They do.
Triple I has sued K2 for fraud (and on related theories), not for breach of the
agreement. But the agreement defined the parties’ entire relationship. Had K2
performed the agreement by finding an actual issuer of a financial guarantee bond,
Triple I would have had nothing to complain about. Instead, at least according to
the allegations of the second amended complaint, K2 participated in a charade.
K2’s failure to perform the agreement is squarely at the heart of Triple I’s fraud
claims.
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In Gregory v. Electro-Mechanical Corp., 83 F.3d 382, 384 (11th Cir. 1996),
the parties entered an agreement with a clause requiring arbitration of “any dispute
between any of the Parties which may arise hereunder.” A dispute arose, and one
set of parties filed a lawsuit against another set of parties asserting claims for fraud
and for other torts as well as for breach of contract. The district court refused to
compel arbitration, but we reversed. We framed the issue as “the meaning of the
words ‘arising hereunder’ in the context of an arbitration provision contained in a
larger agreement.” Gregory, 83 F.3d at 383. We held that the phrase encompasses
not only breach of contract claims, but also tort claims of the type at issue. We
said that if the party accused of wrongdoing “had fully complied with the contract,
as interpreted by the plaintiffs, there would be no tort claims.” Gregory, 83 F.3d
at 384.
The case at bar is not meaningfully distinguishable from Gregory. There
the arbitration clause applied to “any dispute . . . which may arise hereunder,” that
is, under the larger agreement of which the arbitration clause was a part. In the
case at bar, the arbitration clause applies to “[a]ny legal dispute arising from” the
agreement. There is no substantive difference. In Gregory, the lawsuit alleged
fraud, other torts, and breach of contract, but the court addressed the arbitrability
of the tort claims without suggesting that the presence of an express breach of
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contract count was important to the analysis. Here the lawsuit alleges fraud and
other torts. And here, as in Gregory, if the party accused of wrongdoing “had
fully complied with the contract, . . . there would be no tort claims.” Gregory, 83
F.3d at 384.1 If, as we held in Gregory, the district court was required to compel
arbitration of the fraud and other tort claims at issue there, then the district court
was equally required to compel arbitration of the fraud and other tort claims at
issue here.
More recent decisions are fully consistent with this conclusion. In Telecom
Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109 (11th Cir. 2001), we
summarized our decisions addressing an arbitration clause applicable to disputes
“arising from” or “related to” an underlying agreement. Citing Gregory, we said,
“We have required arbitration where the tort could not have occurred but for a
breach of contract.” Telecom Italia, 248 F.3d at 1114-15. And we said that, under
Gregory and our other decisions, a dispute “arises out of” a contract if it is “related
— with at least some directness — to performance of duties specified by the
1
Finding that a tort could not have occurred but for a breach of a contract is different
from finding that the tort could not have occurred but for the existence of the contract. A tort that
could not have occurred but for the existence of the contract does not necessarily arise from the
contract. See Seaboard Coast Line R.R. Co. v. Trailer Train Co., 690 F.2d 1343, 1351 (11th Cir.
1982) (saying that a dispute does not “arise out of or in connection with” a contract just because
the dispute would not have arisen if the contract “had never existed”), quoting Necchi v. Necchi
Sewing Machine Sales Corp., 348 F.2d 693, 698 (2d Cir. 1965).
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contract.” Telecom Italia, 248 F.3d at 1116. See also Blinco v. Green Tree
Servicing LLC, 400 F.3d 1308, 1311 (11th Cir. 2005) (broadly construing
agreement to arbitrate any dispute “arising from or relating to” the contract at
issue).
The case at bar easily comes within the Telecom Italia formulations of the
test for determining whether a claim “arises from” an agreement. The torts alleged
by Triple I “could not have occurred but for” K2’s failure to perform the
agreement. And the dispute is “related — with at least some directness — to”
K2’s performance (or, more accurately, failure to perform) the agreement. Triple
I’s claims thus arise from the agreement and must be arbitrated.
IV. Conclusion
The parties agreed to arbitrate disputes of the kind now at issue. The order
denying the motion to compel arbitration is REVERSED and the case is
REMANDED for entry of an order compelling arbitration.
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