Eukor Car Carriers Inc. v. Chemoil Corporation

Filing 49

ORDER RE MOTION TO DETERMINE SCOPE OF ARBITRATION. Signed by Magistrate Judge Bernard Zimmerman on 11/17/2011. (bzsec, COURT STAFF) (Filed on 11/17/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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EUKOR CAR CARRIERS INC.,

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Plaintiff(s),
v.
CHEMOIL CORPORATION,
Defendant(s).

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No. C10-0408 BZ

ORDER RE MOTION TO DETERMINE
SCOPE OF ARBITRATION

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Before the court is Plaintiff Eukor Car Carriers Inc.’s

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(“Eukor”) motion to determine the scope of arbitration.

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Previously, Defendant Chemoil Corporation (“Chemoil”) moved

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the court for an order staying this action pending

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arbitration.

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motion was whether the arbitration clause in the contract to

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which Chemoil and non-party Wilhelmsen are signatories is

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binding on Eukor.

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granted Chemoil’s motion, staying the case pending resolution

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of any arbitration.

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motion to lift the stay, “for the limited purpose of

(Docket No. 8.)

The primary issue in Chemoil’s

I found that it is binding on Eukor, and I

(Docket No. 27.)

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Eukor then filed a

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allowing a full briefing on certain preliminary questions

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of law that are outside the scope of arbitration” to be

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determined by the court.

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Eukor’s motion to the lift the stay to permit Eukor to file

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a motion to establish that certain issues are outside the

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scope of the anticipated arbitration.1

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For the reasons set forth below, I find that the issues

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identified by Eukor either fall within the scope of the

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arbitration clause or are for the arbitrator to decide.

(Docket No. 28.)

I granted

(Docket No. 36.)

“[A]rbitration is a matter of contract and a party

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cannot be required to submit to arbitration any dispute

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which he has not agreed so to submit.”

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Inc. v. Communications Workers of America, 475 U.S. 643,

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648 (1986).

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provide otherwise, the question whether they agreed to

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arbitrate the particular dispute is to be decided by the

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court, not the arbitrator.

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v. Kaplan, 514 U.S. 938, 944 (1995).

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law’s permissive policies with respect to arbitration,

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issues will be deemed arbitrable unless “it is clear that

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the arbitration clause has not included” them.2

AT&T Technologies,

Unless the parties clearly and unmistakably

First Options of Chicago, Inc.
However, given the

Id. at

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Notably, neither party briefed the narrow issue
before the court, which is whether the dispute over the
validity of the terms of the operative contract is one that
should be decided by the court or the arbitrator. Instead,
both parties presumed that this issue is for the court to
decide. For this reason, neither party’s briefing was terribly
helpful. That said, the court has not found any cases on this
issue.
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The Federal Arbitration Act reflects a “liberal
federal policy favoring arbitration agreements . . . [and] any
doubts concerning the scope of arbitrable issues should be
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945.
Here, the operative contract contains an arbitration

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clause which states that “[a]ny controversy or claim

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between Buyer and Seller, or between Buyer and the fuel

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barge contractor, relating solely to the quality or

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quantity of marine fuels delivered or to be delivered ...

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shall be settled by arbitration ... .”3

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Exh. H.)

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by the complaint, clearly relates to the quality of bunker

(Docket No. 9,

The dispute between Eukor and Chemoil, evidenced

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fuel provided by Chemoil and used by Eukor for the

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operation of a chartered vessel.

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No. 1 at ¶¶ 6-20.)

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within the scope of the arbitration clause, and must be

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submitted to arbitration.

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International Broth. Of Teamsters, 130 S. Ct. 2847, 2856

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(2010) (“[A] court may order arbitration of a particular

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dispute only where the court is satisfied that the parties

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agreed to arbitrate that dispute.”) (emphasis in original);

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Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126,

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1130 (9th Cir. 2000) (quoting Dean Witter Reynolds Inc. v.

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Byrd, 470 U.S. 213, 218 (1985) (the FAA “‘leaves no place for

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the exercise of discretion by a district court, but instead

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mandates that district courts shall direct the parties to

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proceed to arbitration on issues as to which an arbitration

(See Complaint, Docket

The dispute therefore squarely falls

Granite Rock Co. v.

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resolved in favor of arbitration.” Moses H. Cone Meml. Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
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As stated above, I previously ruled that Eukor is
subject to this arbitration clause under the doctrine of
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agreement has been signed.’”).

By its motion, Eukor challenges a number of other

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provisions contained in the operative agreement (referred

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to by the parties as the “Standard Terms”) relating to the

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limitation of liability, exclusive remedy, and exclusion

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clauses.

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arbitration clause, it is clear that questions regarding

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the validity of these remedy provisions falls outside the

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scope of any arbitration.

Eukor argues that given the limited scope of the

Eukor’s argument is not well-

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taken.

The Supreme Court has recognized that a party

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opposing arbitration may raise two types of validity

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challenges: (1) a challenge specifically to the validity of

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the agreement to arbitrate, and (2) a challenge to the

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validity of the contract as a whole (i.e., the substance of a

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contract). Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct.

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2772, 2778 (2010); see also Rosenthal v. Great Western Fin.

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Securities Corp., 14 Cal. 4th 394, 419 (1996) (distinguishing

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between “fraud in inducing consent specifically to the

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arbitration agreement” and “claims that the contract as a

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whole was obtained through fraud in the inducement”).4

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well-established that only the first type of challenge is

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relevant to the court’s determination of arbitrability, and

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thus a claim of invalidity as to the substance of the contract

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does not prevent a court from enforcing a specific agreement

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to arbitrate.

It is

Rent-A-Center, 130 S.Ct. at 2778; see also

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In determining whether there is a valid agreement,
state law affirmative defenses, including unconscionability,
apply. See Ingle v. Circuit City Stores, Inc., 328 F.3d 1165,
1170 (9th Cir. 2003).
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Hopkins & Carley, ALC v. Thomson Elite, 2011 U.S. Dist. LEXIS

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38396 (N.D. Cal. Apr. 6, 2011).

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Eukor does not challenge the validity of the arbitration

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clause.

Rather, it argues that eleven terms of the operative

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agreement are unenforceable as a matter of law due to, among

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other things, procedural and substantive unconscionablility.

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But when a party contends that the substance of a contract is

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unconscionable without challenging the validity of the

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arbitration clause, the issue is for the arbitrator.

Nagrampa

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v. MailCoups, Inc., 469 F.3d 1257, 1263-64 (9th Cir. 2006);

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Davis v. O’Melveny & Meyers, 485 F.3d 1066 (9th Cir. 2007);

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see also Cotchett, Pitre, & McCarthy v. Universal Paragon

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Corp., 187 Cal. 4th 1405 (2010).

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which holds that the court should decide, before sending a

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case to arbitration, such matters as whether a limitation on

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liability is enforceable, and the court has found none.

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will the court presume that the arbitrators will not correctly

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decide these issues.

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Eukor has cited no case

For these reasons, Eukor’s motion is DENIED.

Nor

The parties

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are ORDERED to commence arbitration forthwith.

Eukor shall

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file a report on the status of arbitration on March 1, 2012.

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Dated: November 17, 2011

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Bernard Zimmerman
United States Magistrate Judge

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