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WEATHERLY CELLAPHONICS PTNRS. v. HUEBER

December 5, 1989

WEATHERLY CELLAPHONICS PARTNERS, Plaintiff,
v.
ELDON L. HUEBER, et al, Defendants



The opinion of the court was delivered by: RICHEY

 CHARLES R. RICHEY, UNITED STATES DISTRICT JUDGE

 The plaintiff, Weatherly Cellaphonics Partners ("Weatherly"), has sued the defendants, Eldon L. Hueber and Cellutech, Inc. ("Hueber"), *fn1" for fraud, breach of contract, and breach of fiduciary duty. Hueber now moves to dismiss and compel arbitration, arguing that this dispute should be resolved not by litigation but by arbitration as specified in the arbitration clause contained in the contract between the parties. The Court will grant Hueber's motion in part and will stay these proceedings pending arbitration because the arbitration clause covers this dispute.

 I. Background Facts

 Weatherly was interested in acquiring interests in certain cellular telephone markets being awarded through a lottery conducted by the Federal Communications Commission ("FCC"). In an attempt to improve its chances of profiting from the lottery, Weatherly joined forces with many other lottery participants. By way of the "Joint Agreement" ("Agreement") -- an umbrella agreement tying together over one hundred lottery participants -- Weatherly came to be contractually related with Hueber, operating through Cellutech. Under the Agreement, the parties that did not win the lottery were entitled to acquire minority interests in the markets awarded by the FCC to any other, more successful, party to the Agreement. Weatherly was not awarded a license while Hueber was awarded third place, a valuable runner-up position, in one of the markets.

 Since the "conditional buy-sell" arrangement between the parties was phrased in terms of "winning" the lottery, the question arose whether Hueber was required to share its runner-up interest with the other parties. Although Hueber's position was that ownership rights in his runner-up interest had not been created, Hueber sent each party to the Agreement a letter containing: (1) a proposed addendum "clarify[ing] the positions of the various parties," which each party was supposed to sign and (2) a capital call so that the parties could share the legal and other expenses needed to prosecute Hueber's application and perhaps displace the first- and second-placed selectees.

 Weatherly apparently never received the letter. After Hueber refused its somewhat belated tender of a $ 300 check in response to the capital call, Weatherly filed this action. *fn2" Weatherly alleges inter alia that Hueber failed to use reasonable efforts to give it timely notice of the capital call and that, although Weatherly attempted to tender the capital call immediately after belatedly receiving notice, Hueber has wrongfully refused the tender and prevented Weatherly from participating as a minority owner in Hueber's runner-up position. Hueber argues that an arbitrator and not a court must resolve this dispute because the Agreement contains the following arbitration clause: "Any disputes under this Agreement which cannot be resolved by the Parties shall be resolved by resort to the offices of the American Arbitration Association in Washington, D.C., and its rules and regulations applicable to commercial disputes."

 II. ANALYSIS

 A preliminary procedural matter is who decides -- the Court or an arbitrator -- whether there should be an arbitral or a judicial resolution of the merits of this dispute. It is well-established that, unless the parties have clearly and unmistakably provided otherwise, "the question of arbitrability -- whether [an agreement] creates a duty for the parties to arbitrate [a] particular grievance -- is undeniably an issue for judicial determination." National R.R. Passenger Corp. v. Boston & Maine Corp., 271 U.S. App. D.C. 63, 850 F.2d 756, 759 (D.C. Cir. 1988) (quoting AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649, 89 L. Ed. 2d 648, 106 S. Ct. 1415 (1986)). Moreover, even if the claim seems frivolous, a court deciding the arbitrability issue may not address the potential merits of the underlying claim. AT & T Technologies, 475 U.S. at 649-50. Thus, the only issue presently before the Court is whether this dispute over Hueber's alleged misconduct regarding the capital call and addendum to the Agreement falls within the scope of the Agreement's arbitration clause.

 A. Facially Broad Arbitration Clause

 The essence of Weatherly's argument is: (1) a party cannot be forced to arbitrate any dispute which it has not agreed to arbitrate; (2) Hueber's allegedly unilateral acts of fraud and breach of fiduciary duty were beyond the scope of the Agreement; and (3) therefore, Hueber may not use the arbitration clause as a "sword" to deny Weatherly its judicial remedies. The Court disagrees with all but the first of these propositions.

 Weatherly makes entirely too much of the axiomatic proposition repeatedly stated in the case law that parties to an arbitration agreement "cannot be required to submit to arbitration any matter that they did not agree would be subject to that manner of dispute resolution." Davis v. Chevy Chase Fin. Ltd., 215 U.S. App. D.C. 117, 667 F.2d 160, 165 (D.C. Cir. 1981) (citing United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960)). It is equally axiomatic that arbitration is a matter of contract. E.g., AT & T Technologies, 475 U.S. at 648; Warrior & Gulf, 363 U.S. at 582.

 The Court must therefore attempt to discern the intent of the parties at the time they entered into the Agreement. In this regard, Weatherly's post hoc contentions that it never intended the arbitration clause to cover this type of dispute are entitled to little weight. While Weatherly may not have contemplated the precise scenario by which it has allegedly been divested of any minority ownership rights it may have had in Hueber's runner-up position, Weatherly did enter into a contract with an expansive arbitration clause. *fn3" Contained in Paragraph 19 of the Agreement, to which both Weatherly and Hueber were parties, the arbitration clause covers "any disputes under this Agreement" without mentioning any exceptions.

 The Court fails to comprehend how this dispute could be beyond the scope of the Agreement when the Agreement provides the only basis for any of Weatherly's claims against Hueber. After all, Weatherly's Complaint alleges fraud, breach of contract, and breach of fiduciary duty, *fn4" and the various kinds of relief sought (money damages, a declaratory judgment, and an injunction) all revolve around redressing Hueber's alleged failure to live up to ...


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