General Electric Capital Corp. v. Union Corp. Financial Group Inc.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 04-1467

GENERAL ELECTRIC CAPITAL CORPORATION,

Plaintiff - Appellee,

versus

UNION CORP FINANCIAL GROUP INCORPORATED, a/k/a
Lion Financial, a/k/a S and S Financial, a/k/a
Chase Banking and Trust, formerly known as
BancUnion Trust; HECTOR ESTRADA; MARTHA
ESTRADA, a/k/a Martica Estrada, a/k/a Marta
Estrada; MICHAEL SAGARO,

Defendants - Appellants,

and

ATHENA BEAUTY INCORPORATION, and its
Directors-Trustees; BEAUTICIAN DESIGN CENTER
INCORPORATED; BEAUTICIAN SUPPLY AND EQUIPMENT
COMPANY, and its Directors-Trustees; INDOFF
INCORPORATED, t/a Salon Depot; DONALD E.
GERTLER; DOE INCORPORATED, 1 through 10; JOHN
AND JANE DOES, 1 through 10,

Defendants.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Peter J. Messitte, District Judge. (CA-
03-3285-PJM)

Argued: May 25, 2005 Decided: July 21, 2005
Before LUTTIG and SHEDD, Circuit Judges, and Eugene E. SILER, Jr.,
Senior Circuit Judge of the United States Court of Appeals for the
Sixth Circuit, sitting by designation.

Reversed and remanded by unpublished opinion. Senior Judge Siler
wrote the opinion, in which Judge Luttig and Judge Shedd joined.

ARGUED: Joseph Peter Drennan, Alexandria, Virginia; Ronald I.
Strauss, Miami, Florida, for Appellants. Steven Neal Leitess,
LEITESS, LEITESS, FRIEDBERG & FEDDER, P.C., Owings Mill, Maryland,
for Appellee. ON BRIEF: Patrick M. Donahue, Annapolis, Maryland,
for Appellants. Gordon S. Young, Andrew L. Cole, LEITESS, LEITESS,
FRIEDBERG & FEDDER, P.C., Owings Mill, Maryland, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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SILER, Senior Circuit Judge:

Plaintiff General Electric Capital Corporation (“GE”) sued

Florida defendants Union Corp Financial Group Incorporated, Hector

Estrada, Martha Estrada, and Michael Sagaro (collectively

“BancUnion”) in the United States Court for the District of

Maryland alleging, inter alia, fraud, breach of contract, and

violations under the Racketeer Influenced and Corrupt Organizations

Act (“RICO”). The district court denied BancUnion’s motion to

compel arbitration, holding that the agreement did not apply to the

current dispute. We reverse and remand.

I.

In May 2000, GE and BancUnion executed a Broker Agreement,

under which BancUnion would solicit customers who needed to obtain

lease financing and then assign the leases to GE. The Broker

Agreement states, “In return for [BancUnion’s] efforts in

connection with any transaction submitted by [it] and accepted by

[GE, GE] shall, if the transaction is [accepted], pay [to BancUnion

GE’s] standard brokerage fee thereon in accordance with [GE’s] then

current brokerage fee schedule.”

The Broker Agreement purported to apply to “all transactions

submitted by [BancUnion] to [GE] after the execution hereof.

However, in the event that separate assignment agreements are

entered into with respect to specific transactions, the terms of

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the separate assignment agreements shall prevail.” Furthermore,

the Broker Agreement contained an Oregon choice of law clause and

stated that any “controversy or claim arising out of or related to

this Agreement or the breach hereof shall be settled by

arbitration.” Furthermore, a party seeking to enforce any portion

of the Broker Agreement in litigation “shall be entitled to a

reasonable attorney fee . . . with all costs and expenses incurred

in pursuit hereof.” After the agreement was executed, GE allowed

BankUnion to access standard forms, including the assignment form.

The assignment form designated that BancUnion would give GE

the right to receive “all rental payments, renewal rental payments,

claims and rights to monies due and to become due under the Lease,”

and BancUnion warranted that the leases assigned would be “genuine

and enforceable.” Unlike the Broker Agreement, the assignments do

not contain an arbitration clause. Instead, the assignment states

that in “the event of legal action with regard to the terms of this

Assignment, the parties hereto agree that any court of general

jurisdiction in the State of Oregon shall have jurisdiction over

such controversy.”

In November 2003, GE filed a complaint against BancUnion

alleging, inter alia, RICO violations and fraud with respect to

several assignments. BancUnion filed a motion to stay the

proceeding and compel arbitration, which the district court denied

because the assignments do not mandate arbitration.

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 II.

We review de novo the district court’s conclusions regarding

arbitrability. Long v. Silver, 248 F.3d 309, 315 (4th Cir. 2001).

To determine if a dispute should be arbitrated, we must

affirmatively answer two questions: 1) did the parties have a valid

agreement to arbitrate? if so, 2) does the arbitration agreement

apply to the dispute at hand? See, e.g., Alamria v. Telcor Int’l,

Inc., 920 F. Supp. 658, 663 (D. Md. 1996). Because “arbitration is

a matter of contract,” parties cannot “be required to submit to

arbitration any dispute which [they have] not agreed so to submit.”

AT&T Tech., Inc. v. Comm. Workers of Am., 475 U.S. 643, 648 (1986).

When making this determination, we should apply “ordinary state-law

principles that govern the formation of contracts.” First Options

of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Because the

contract so specifies, Oregon law applies to this dispute.

An agreement to arbitrate clearly exists between GE and

BancUnion in the Broker Agreement, so we must next determine its

scope, keeping in mind the presumption favoring arbitration, see

Alamria, 920 F. Supp. at 663 (“However, if an agreement is silent

or ambiguous regarding whether a particular dispute is arbitrable,

. . . it is assumed that the dispute is subject to arbitration.”)

(citing First Options, 514 U.S. at 945) (emphasis in original),

which flows from the “liberal federal policy favoring arbitration

agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,

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460 U.S. 1, 24-25 (1983) (noting that “any doubts concerning the

scope of arbitrable issues should be resolved in favor of

arbitration”). Additionally, “the heavy presumption of

arbitrability requires that when the scope of the arbitration

clause is open to question, a court must decide the question in

favor of arbitration.” Am. Recovery Corp. v. Computerized Thermal

Imaging, Inc., 96 F.3d 88, 92 (4th Cir. 1996) (citation omitted)

(noting that this presumption is a matter of federal law). Indeed,

we will not deny a request to arbitrate unless “it may be said with

positive assurance that the arbitration clause is not susceptible

of an interpretation that covers the asserted dispute.” Id.

(citation omitted).

The scope of an arbitration clause in one contract can extend

to a dispute arising under a second contract, provided that the

dispute “significantly relates” to the first agreement. 96 F.3d at

93; see also Long, 248 F.3d at 316. In American Recovery, the

parties entered into an overarching contract which contained an

arbitration clause, 96 F.3d at 90, and a separate, non-compete

agreement which did not. Id. When a dispute arose under the non-

compete agreement, we held that the dispute should be arbitrated

because “the test for an arbitration clause of this breadth is not

whether a claim arose under one agreement or another, but whether

a significant relationship exists between the claim and the

agreement containing the arbitration clause.” Id. at 94; see also

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Cara’s Notions, Inc. v. Hallmark Cards, Inc., 140 F.3d 566, 571

(4th Cir. 1998) (applying an arbitration clause in one contract to

a dispute originating from another contract because the arbitration

clause purported to apply to all disputes between the parties). As

in American Recovery, GE and BancUnion have an overarching Broker

Agreement which contains an arbitration clause. Even though GE

sued BancUnion under the assignments, the arbitration agreement

extends to such disputes arising under the assignments because they

“significantly relate” to the Broker Agreement.

Oregon contract law also mandates reversal because the terms

of an unambiguous contract should be enforced. See Joseph Educ.

Ass’n v. Joseph Sch. Dist. No. 6, 43 P.3d 1187, 1190 (Or. App.

2002); see also Yogman v. Parrott, 937 P.2d 1019, 1021 (Or. 1997)

(en banc). A contractual provision is ambiguous if it is

“reasonably capable of more than one construction.” Joseph Educ.

Ass’n, 43 P.3d at 1190 (citation omitted). If there is an

ambiguity, then we should interpret the contract by looking to

extrinsic evidence and “maxims of construction,” with “any doubts

about arbitrability . . . resolved in favor of arbitration.” Id.

The assignments are silent on the issue of arbitration, despite

the presence of a clause in each referencing litigation as a

potential dispute-resolution forum. However, nothing in the

assignments prevents the arbitration clause from being read into the

assignments, and the Broker Agreement contemplates that its terms

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will supplement the assignments. Additionally, the assignments

state that in “the event of legal action,” the parties agree to

litigate the case in court in Oregon. The arbitration clause in the

Broker Agreement does not contradict the litigation clause because

“the event of legal action” may still exist either to compel

arbitration or to raise post-arbitration legal challenges. At best,

the assignments’ silence on this issue is a latent ambiguity and

must be resolved in favor of arbitration. Cara’s Notions, 140 F.3d.

at 571 (“[I]f the arbitration clause [is] ambiguous as to its scope,

our decision would be guided by the strong federal policy favoring

arbitrability, based on the Arbitration Act and repeatedly

recognized by the Supreme Court and this Circuit.”); see also

Portland Fire Fighters’ Ass’n, Local 43 v. City of Portland, 45 P.3d

162, 168 (Or. App. 2002). Accordingly, we reverse the decision of

the district court.

The individual defendants, too, are afforded the protections

of BancUnion’s arbitration clause because they are BancUnion’s

officers, directors, or shareholders. See Long, 248 F.3d at 320 (“A

non-signatory may invoke an arbitration clause under ordinary state-

law principles of agency or contract.”); see also Int’l Paper Co.

v. Schwabedissen Machinsen & Anlagen, 206 F.3d 411, 417 (4th Cir.

2002) (noting that an agency relationship would allow a non-

signatory to enforce an arbitration agreement by the principal)

(citing Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 776

(2d Cir. 1995)).

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 Finally, BancUnion is entitled to attorney’s fees for defending

this action in litigation. The contract clearly states that if

“action is taken to enforce any term of this Agreement, the

prevailing party in such action shall be entitled to a reasonable

attorney fee.”

Reversed and remanded to the district court with instructions

to compel arbitration and award attorney’s fees consistent with this

opinion.

REVERSED AND REMANDED

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