United States Court of Appeals
For the First Circuit
No. 01-1383
SUMMIT PACKAGING SYSTEMS, INC.,
Plaintiff, Appellee,
v.
KENYON & KENYON,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella, Circuit Judge,
and Stahl, Senior Circuit Judge.
Emily Gray Rice, with whom Orr & Reno, P.A. and Philip S. Bixby,
were on brief, for appellant.
Jack B. Middleton, with whom McLane, Graf, Raulerson & Middleton,
Professional Association and Scott H. Harris, were on brief, for
appellee.
December 3, 2001
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TORRUELLA, Circuit Judge. Appellant Kenyon & Kenyon
("Kenyon") provided appellee Summit Packaging Systems, Inc. ("Summit")
legal representation in a patent infringement lawsuit. Dissatisfied
with the legal services it received, Summit brought suit against
Kenyon in New Hampshire Superior Court. After removing the case to
federal court, Kenyon filed a motion to stay the proceedings in favor
of arbitration. Kenyon argued that the case should be submitted to
arbitration pursuant to a written agreement between the parties. The
district court denied Kenyon's motion, finding the arbitration clause
to be permissive rather than mandatory. Because we conclude that the
arbitration clause is mandatory, we reverse.
BACKGROUND
In 1994, Summit retained Kenyon, an intellectual property law
firm, to represent it in a patent infringement lawsuit. A letter dated
April 28, 1994, signed by both parties, memorialized the terms of the
retainer agreement. The April 28 letter incorporated by reference the
terms of a 1991 retainer agreement between Summit and Kenyon. The 1991
retainer agreement contains an arbitration clause that states:
In the event any dispute arises between us
concerning our representation or payment of our
fees and disbursements which cannot be promptly
resolved to our mutual satisfaction, you agree
that the dispute will be submitted to
arbitration, and for that purpose referred to the
President of the Association of the Bar of the
City of New York . . . or to such Trustee or
other member of that Association as the President
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any [sic] designate, as a tribunal for resolution
of the dispute (and decision of the tribunal
shall be final) or, if you prefer, submitted to
the Courts of the State of New York, on condition
that you promptly indicate your preference upon
request, and promptly appear therebefore.
Displeased with Kenyon's legal representation, Summit filed
suit in New Hampshire Superior Court alleging, inter alia, legal
malpractice and unfair billing practices. Kenyon successfully removed
the case to federal court and shortly thereafter filed for summary
judgment. Kenyon argued that all disputes regarding its representation
of Summit should be submitted to arbitration pursuant to the written
agreement between the parties. On December 28, 2000, the district
court denied Kenyon's motion for summary judgment and characterized the
arbitration clause as follows:
The clause [Kenyon] relies on permits but does
not require Summit to submit disputes concerning
Kenyon & Kenyon's representation of it to
arbitration. Further, although Kenyon & Kenyon
does not raise the issue, the language in the
clause authorizes Summit to file claims in the
New York state courts which permits, but does not
require Summit to bring suit in New York State
Court.
Summit Packaging Sys., Inc. v. Kenyon & Kenyon, No. 00-131, slip. op.
at 1 (D.N.H. Dec. 28, 2000).
On January 10, 2001, Kenyon filed a motion to reconsider the
trial court's summary judgment order or, in the alternative, for a stay
of the proceedings under the Federal Arbitration Act, 9 U.S.C. § 1 et
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seq. The court denied these combined motions. Summit, No. 00-131,
slip. op. at 1 (D.N.H. Jan. 31, 2001). Kenyon now appeals the district
court's denial of its motion to stay the proceedings in favor of
arbitration.
DISCUSSION
Pursuant to the Federal Arbitration Act ("FAA"), federal
appellate courts have jurisdiction to review a district court's denial
of a motion to stay proceedings in favor of arbitration. 9 U.S.C. §
16(a)(1)(A). As a condition precedent to exercising its jurisdiction
under § 16(a)(1)(A), the appeals court must find that the requirements
set forth in 9 U.S.C. § 3 have been met. Section 3 states, in relevant
part:
If any suit or proceeding be brought in any of
the courts of the United States upon any issue
referable to arbitration under an agreement in
writing for such arbitration, the court in which
such suit is pending, upon being satisfied that
the issue involved in such suit or proceeding is
referable to arbitration under such an agreement,
shall on application of one of the parties stay
the trial of the action until such arbitration
has been had in accordance with the terms of the
agreement . . . .
9 U.S.C. § 3 (emphasis added).
Summit argues that this Court does not have jurisdiction over
Kenyon's appeal because the parties' issues are not "referable to
arbitration." Summit claims that the retainer agreement is entirely
permissive, allowing Summit to resolve its dispute with Kenyon through
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arbitration or litigation in any forum. Because the arbitration clause
does not constrain Summit's choice of forum whatsoever, the issues
cannot properly be "referable to arbitration" according to Summit.
In the alternative, Summit claims that if the retainer
agreement constrains its choice of forum - requiring Summit to choose
between arbitration and New York state court - arbitration is still not
mandatory. The arbitration clause remains permissive in the sense that
Summit continues to have a choice between arbitration and litigation in
New York state court. Summit, then, cannot be forced to arbitrate
against its will because the arbitration clause permits, but does not
require, arbitration. Summit thus concludes that under either reading
of the retainer agreement, the issues at stake are not "referable to
arbitration," thereby leaving this Court without jurisdictional
authority.
We agree with Summit that a party cannot be forced to
arbitrate when it has not agreed to do so. See, e.g., AT & T Techs.,
Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986). We
further agree that a party cannot be forced to arbitrate against its
will if the arbitration clause permits, but does not require,
arbitration. Thus, the crucial underlying question in Summit's
jurisdictional challenge is whether the arbitration clause at issue is
mandatory or permissive. Interestingly, this is the same question that
is presented by the merits of the appeal. As the two questions are
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identical, resolution of Summit's jurisdictional challenge will
determine the outcome of Kenyon's appeal.
Summit's first argument is that the arbitration clause is
entirely permissive, allowing Summit to file suit in any forum it
desires. However, this position, which was also adopted by the
district court, is belied by the very language of the arbitration
clause. The plain language of the arbitration clause offers Summit
only two forums in the event of a dispute: arbitration or litigation in
New York state court. In the retainer contract, Summit agreed that any
dispute "will be submitted to arbitration . . . or . . . to the Courts
of the State of New York . . . ." (Appellant's Brief app. at 14)
(emphasis added). The language of the retainer agreement simply does
not allow for an interpretation that permits filing suit outside of New
York. The parties' choice of the word "will" - a word "commonly having
the mandatory sense of 'shall' or 'must,'" Black's Law Dictionary 1102
(6th ed. 1991) - demonstrates their exclusive commitment to the two
named forums. Most succinctly, the plain meaning of the phrase "will
be submitted" is that the course of action is required, not
discretionary.
To construe the phrase "will be submitted to arbitration .
. . or . . . to the Courts of the State of New York" to permit the
parties to choose any forum imaginable would be to render the phrase
"will be" meaningless. Since it is a basic principle of contract law
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that constructions that render contract terms meaningless should be
avoided, see, e.g., Systemized of New England, Inc. v. SCM, Inc., 732
F.2d 1030, 1034 (1st Cir. 1984) (applying the "familiar principle" that
every part of a contract should be given "meaning and effect"), we
interpret the arbitration clause to require Summit to choose one of the
two named forums.
In interpreting the arbitration clause to allow Summit to
file suit in any forum, the district court mistakenly relied on Dancart
Corp. v. St. Albans Rubber Co., 474 A.2d 1020 (N.H. 1984). In Dancart,
the court was presented with a forum selection clause in a commercial
contract that stated, "This Quotation and any contract as a result
thereof . . . shall be subject to the jurisdiction of the English
Courts." Id. at 1020. The court interpreted this clause as conferring
jurisdiction on English courts, but not limiting jurisdiction
exclusively to them. In reaching its conclusion, the Dancart court was
clear: "[T]he clause in question here is not a mandate to act, or to
refrain from acting. It is a grant of authority, and jurisdictional
authority is not necessarily exclusive jurisdictional authority." Id.
at 1022.
Unlike the contract in Dancart, the arbitration clause in the
instant case is both a provision for jurisdiction and venue. It
creates a "mandate to act" - that is, it requires the parties to
resolve their disputes through arbitration or litigation in New York.
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In contrast to jurisdictional authority, forum selection is necessarily
exclusive. In other words, when parties agree that they "will submit"
their dispute to a specified forum, they do so to the exclusion of all
other forums. See, e.g., Nascone v. Spudnuts, Inc., 735 F.2d 763, 765
(3d Cir. 1984) (holding that the language "venue for any proceeding .
. . shall be Salt Lake County, State of Utah," constituted a mandatory
forum selection clause); Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342,
1345-46 (10th Cir. 1992) (holding that the language "venue shall be
proper under this agreement in Johnson County, Kansas" constituted a
mandatory forum selection clause).
Having determined that the arbitration clause requires Summit
to choose one of the named forums to resolve its dispute, we turn to
Summit's second argument. Summit argues that even if the retainer
agreement constrains its choice of forum, arbitration is still not
mandatory. The arbitration clause remains permissive in the sense that
Summit continues to have a choice between arbitration and litigation in
New York state court. Summit, then, cannot be forced to arbitrate
against its will, as the arbitration clause permits, but does not
require, arbitration. See AT & T Techs., 475 U.S. at 648 (noting that
"'a party cannot be required to submit to arbitration any dispute which
he has not agreed so to submit'") (quoting United Steelworkers of Am.
v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)).
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We disagree, however, with Summit's characterization of the
arbitration clause for two reasons. First, as a matter of logic, when
a person must choose between two options and decides to forego one of
them, then the second option necessarily becomes mandatory. This
simple syllogism describes the scenario that Summit has created for
itself. The retention agreement presented Summit with two options:
arbitration or litigation in New York state court. When Summit filed
this action in New Hampshire Superior Court, it decided to forego
bringing suit in New York. In so doing, arbitration became the
mandatory, and exclusive, forum for dispute resolution.
Furthermore, the cases that Summit cites for the proposition
that it cannot be forced to arbitrate are inapposite. Those cases
revolve around the question of whether the parties involved ever
intended to arbitrate certain issues in the first place. See AT & T
Techs., 475 U.S. at 649-50 (analyzing collective bargaining agreement
to determine what issues are covered by the arbitration clause); United
Steelworkers, 363 U.S. at 584 (same). There is no doubt in the instant
case that Summit agreed to resolve its disputes with Kenyon through
litigation in New York or arbitration; and when Summit abandoned the
former, the latter became mandatory.
Second, forcing Summit to arbitrate is consistent with the
spirit and intent of the FAA. The Supreme Court described the FAA's
purpose as "ensuring that private arbitration agreements are enforced
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according to their terms." Volt Info. Scis, Inc. v. Bd. of Trs. of
Leland Stanford Jr. Univ., 489 U.S. 468, 478 (1989). Arbitration thus
is "a matter of consent, not coercion, and parties are generally free
to structure their agreements as they see fit." Id. at 479. Summit
agreed to include in its arbitration clause two named forums for
dispute resolution, and it decided to forego the New York litigation
alternative. Consistent with its own agreement, and in furtherance of
the FAA's purpose, Summit must now submit to the only option that
remains under the contract it negotiated - arbitration.
CONCLUSION
Because Summit is required under the agreement with Kenyon
to arbitrate its claims (unless Summit resorted to New York courts--
which it failed to do), we conclude that this Court has jurisdiction
over the appeal under 9 U.S.C. § 16(a)(1)(A) and that the district
court erred in characterizing the arbitration clause as permissive. We
reverse the district court's decision to deny Kenyon's motion to stay
the proceedings in favor of arbitration and remand the matter for
action consistent with these proceedings.
Costs assessed against appellee.
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