Cales v. Armstrong World Indus., Unpublished Decision (3-28-2003)
Cales v. Armstrong World Indus., Unpublished Decision (3-28-2003)
Opinion of the Court
FIRST ASSIGNMENT OF ERROR:
"The court of common pleas erred by refusing to order arbitration of the dispute over the liability of appellant Certainteed Corporation for amounts allocated to but unpaid by another party to the settlement agreement, where the settlement agreement requires arbitration of `any disputes that may arise while carrying out the terms and conditions of this agreement.'"
SECOND ASSIGNMENT OF ERROR:
"The court of common pleas erred by entering judgment against appellant Certainteed Corporation for amounts allocated to but unpaid by another party to the settlement agreement, where the settlement agreement unambiguously both states that each party thereto, including Certainteed Corporation, `shall be liable under this settlement agreement only for its individual share' of the settlement payments and bars the appellees-plaintiffs from seeking to hold certainteed corporation liable for any other company's unpaid share."
{¶ 2} Appellees are part of a group of 1,185 plaintiffs who brought asbestos related lawsuits against various companies in a number of states, including Ohio. Appellant is a member of the Center for Claims Resolution (CCR) which is a non-profit company created in 1988 by various asbestos producers, including appellant and Armstrong World Industries (Armstrong), to handle asbestos related litigation.2 Relations between CCR and its members are governed by a "Producer Agreement Concerning Center for Claims Resolution" (Producer Agreement) which specifies, among other things, that CCR acts as sole agent for its member companies with respect to "settlement, payment or defense of all asbestos-related claims" against those members.
{¶ 3} On June 11, 2000, appellees and CCR entered into a Settlement Agreement which called for each appellee to be paid $2,500 (for a total of $20,000)in settlement of their claims.3 Later that year, Armstrong filed bankruptcy and did not fund its share of those proceeds. On February 15, 2001, CCR sent a check to appellees for $10,426.72 representing the amount of the settlement, less the share owed by Armstrong. Appellees negotiated that check.
{¶ 4} On March 20, 2001, appellees asked the trial court to enforce the previous Settlement Agreement and to order appellant to pay them the remaining $9,573.28 due under the agreement. Appellant filed a Notice of Removal to remove the matter to the United States District Court on grounds that appellant had a right of indemnification against Armstrong for any recovery by appellees, thus affecting Armstrong's bankruptcy and giving the federal courts jurisdiction under Section 1452(a), Title 28, U.S.Code. On July 17, 2001, the District Court declined to accept jurisdiction and returned the case to the Scioto County Common Pleas Court.
{¶ 5} Subsequently, appellant filed a motion to stay the proceedings and to compel arbitration of appellees' claim. Appellant's motion was based on a provision in the Settlement Agreement that called for the submission of disputes to binding arbitration. Appellant argued that this provision, as well as the requirements of the Federal Arbitration Act, codified at Section 1 et seq. of Title 9, U.S. Code (FAA), mandated a stay of appellees' motion to enforce the Settlement Agreement and a submission of their claims to arbitration. Appellees argued that nothing should be submitted to arbitration because the Settlement Agreement is unambiguous and required appellant to pay the remainder of the settlement proceeds.
{¶ 6} The trial court filed its decision and judgment entry on August 26, 2002, and found in favor of appellees. Although the Settlement Agreement had a broad arbitration provision subject to enforcement under the FAA, the trial court held that the Settlement Agreement's unambiguous language allowed appellees to enforce the terms of the settlement against the remaining parties to the agreement (i.e. appellant). Thus, the trial court refused to send the matter to arbitration and further ordered appellant to pay the balance of the $2,500 settlement to each appellee.4 This appeal followed.5
{¶ 8} Appellees note in their brief, however, that appellate courts typically apply an abuse of discretion standard when reviewing trial court decisions on motions to stay proceedings and refer a matter to arbitration. See e.g. Carter Steel Fabricating Co. v. DanisBldg. Constr. Co. (1998),
{¶ 9} The case sub judice is distinguishable from the cases that appellees cite because the judgment herein did not simply deny appellant's motion to compel arbitration. Rather, the trial court denied the motion in the larger context of construing and enforcing the Settlement Agreement. This brings us within the ambit of Continental Condominium, supra. We further note that when courts review orders that enforce settlement agreements, the Ohio Supreme Court, as well as other appellate courts, have rejected the application of the abuse of discretion standard. See Continental Condominium, supra at 502; also see NorthHampton Day Care Learning Center, Inc. v. Ohio Dept. of HumanServices (Apr. 4, 1997), Clark App. No. 96-CA-20. Thus, we will review the trial court's August 26, 2002 judgment to determine if the court erred as a matter of law, not whether the court abused its discretion.
{¶ 11} Our analysis begins with paragraph eleven of the Settlement Agreement which states, inter alia, as follows:
"It is agreed that the parties will make good faith efforts to resolveany disputes that may arise while carrying out the terms and conditions of this Agreement. If the parties are unable to resolve a dispute, the issue shall be referred to a mutually agreeable arbitrator for binding resolution." (Emphasis added.)
{¶ 12} The FAA mandates that a written arbitration provision in a contract involving interstate commerce shall be "irrevocable and enforceable." Section 2, Title 9, U.S.Code.7 Moreover, the FAA creates a body of substantive federal law to apply to determine whether parties to an arbitration provision must submit their dispute to binding arbitration. Allied-Bruce Terminix Cos., Inc. v. Dobson (1995),
{¶ 13} Appellant argues that, as a matter of federal law, the FAA requires that any doubt concerning the scope of arbitrable issues must be resolved in favor of arbitration, irrespective of whether the problem is construction of the contract language itself or other matters. See MosesH. Cone Hospital, supra at 24-25; Mastrobuono v. Shearson Lehman Hutton,Inc. (1995),
{¶ 14} In the case at bar, the trial court focused on the latter principle and concluded that the contract is unambiguous and provides for appellees to enforce the entire settlement amount against appellant. We, however, believe that the trial court erred in that determination.
{¶ 15} First, we agree with appellant that the Settlement Agreement's arbitration clause is sufficiently broad to cover this dispute. The question of whether a dispute is arbitrable under an arbitration provision is a legal question for the courts, rather than a question for the arbitrators. ATT Technologies, supra at 649; Intl.Union of Operating Engineers v. Flair Builders, Inc. (1972),
{¶ 16} We note, that arbitration provision in question calls for the parties to "make good faith efforts to resolve any dispute that may arise" while carrying out the Settlement Agreement and, if the parties are unable to resolve such dispute, it will be submitted to binding arbitration. (Emphasis added.) We believe that the key phrase is "any dispute." We have found nothing in the Settlement Agreement to define this phrase, or to elaborate on the scope of the arbitration provision. Thus, we must determine the parties' intent in using that language.
{¶ 17} Paragraph nineteen of the Settlement Agreement states that any dispute concerning the "interpretation or performance" of the agreement shall be resolved in accordance with the laws of South Carolina. Thus, we turn to South Carolina law to define the phrase "any dispute." Although we have found no case law to interpret that particular phrase, the South Carolina Supreme Court has construed the word "any" to mean "all" or "every." See e.g. Watson v. Watson (S.C. 1956),
{¶ 18} Our holding is buttressed by a review of other cases that involve similar language. The United States Supreme Court has indicated that the interpretation of a clause in a collective bargaining agreement is subject to arbitration under a provision that calls for submission of "all grievances" to arbitration. See Nolde Bros. Inc. v. Local No. 358,Bakery Confectionary Worker's Union (1977),
{¶ 19} The Second Circuit Court of Appeals has held on several occasions that a provision that calls for the arbitration of "any controversy or claim" between parties arising out of an agreement is so broad that it justifies a "presumption of arbitrability." See Mehler v.Terminix Intl. Co. L.P. (C.A.2 2000),
{¶ 20} This authority convinces us that the phrase "any dispute," as used in the arbitration clause of the parties' Settlement Agreement, should be accorded a broad interpretation and should be read to include "every" dispute arising thereunder. In light of this interpretation, we conclude that the disagreement over how to proceed with the settlement now that Armstrong has declared bankruptcy falls under that clause and should be arbitrated. Because the parties have agreed that "every" claim or "all" claims are to be arbitrated, it makes no difference that this is a general provision and that a more specific provision exists elsewhere in the agreement.10 By virtue of the language used in the parties' agreement, the parties intended for every dispute to be arbitrated. We are required to give effect to that intent.11
{¶ 21} Our second reason for concluding that the trial court erred by not ordering arbitration of this matter is that, unlike the trial court, we believe that the Settlement Agreement's language is unambiguous. The trial court based its conclusion on paragraph seven of the Settlement Agreement which states, inter alia, as follows:
"Payments to Plaintiff Counsel by the CCR under Paragraph 5 of this Settlement Agreement shall be funded by the CCR member companies in accordance with the terms of the Producer Agreement Concerning Center for Claims Resolution (as amended, effective February 1, 1994) and each CCRmember company shall be liable under this Settlement Agreement only forits individual share of such payments as determined under that ProducerAgreement. In the event that the CCR fails to make any of the payments pursuant to paragraph 6 because any one of the CCR member companies fails to make timely payment of its individual share of such payment when such payment has become due in accordance with all of the terms of the Settlement Agreement (a "Default"), Plaintiff Counsel shall have, with respect to any and all Plaintiffs whose claims have not been paid in full by the CCR under this Agreement as of the date of the Default, the option of either (a) continuing the settlement as to the non-Defaulting CCR member companies; or (b) declaring this Settlement Agreement null and void as against all CCR member companies. * * * If Plaintiff Counselelects to continue the settlement as to the non-defaulting CCR membercompanies, then as to the defaulting CCR member only, any and allplaintiffs whose claims have not been paid in full by the CCR under thisAgreement shall have the option of (a) electing to enforce the DefaultingCCR member company's obligations under this Settlement Agreement or (b)electing to pursue such plaintiffs claims for asbestos-related injuryagainst the Defaulting CCR member company in the tort system[.] " (Emphasis added.)
{¶ 22} The first portion of the paragraph highlighted above provides that "each CCR member company shall be liable . . . only for itsindividual share of such payments as determined" by the Producers Agreement. This suggests that appellant cannot be held liable for anything more than that initially allocated to it by the CCR. However, if we turn to the Producer Agreement referenced in that paragraph, we find the following language:
"In the event that a Participating Producer shall withdraw from membership in the Center pursuant to Section IV of the Agreement or haveits membership terminated pursuant to Paragraph 3 of Section III, thecorresponding shares of the other Participating Producers shall beincreased appropriately to pick up the shares of the withdrawing orterminating Participating Producer. " (Attachment A, § F) (Emphasis added).
The Producer Agreement further provides that, in the event of a producer declaring bankruptcy, as was the case with Armstrong, the producer's membership is terminated. (§ 3, ¶ 2(b)). These two provisions suggest that appellant's share of the settlement proceeds would increase proportionately with Armstrong's bankruptcy. On the other hand, the Agreement also provides that "notwithstanding termination of membership, a Participating Producer shall continue to have and to honor all of the obligations incurred by it hereunder or on its behalf as a member prior to the effective date of its membership termination . . ." (§ 3, ¶ 3). This portion suggests that Armstrong would continue to be liable for its share of the settlement proceeds regardless of its bankruptcy and termination of membership in CCR.12 We believe that these provisions are ambiguous as to the respective rights and liabilities of the parties now that Armstrong has declared bankruptcy.
{¶ 23} We are also not persuaded by the trial court's interpretation of paragraph seven as providing appellees a remedy against appellant as a defaulting party. Paragraph seven explicitly defines a "default" as when one "of the CCR member companies fails to make timely payment of its individual share of such payment when such payment has become due." It appears to us, from our review of the record, that the party in default of payment is Armstrong, not appellant. A "declaration" by Joseph Jordan, Chief Financial Officer for CCR, was filed during the course of the proceedings below and sets out the following information:
"7. The Producer Agreement makes each member company responsible for its individual share of each liability payment attributable to each claim handled by the CCR as sole agent for each member, according to the shares established under the terms of the CCR Producer Agreement. The settlement agreements negotiated by the CCR, in turn, make each CCR member liable for its share of the settlement as allocated by the CCR. The CCR and its members interpret the settlement agreements that the CCR negotiates on behalf of its member companies as creating separate, rather than joint, liability among the member companies. Plaintiffs' counsel generally understands that the CCR's member companies pay shares of the settlements according to the CCR's allocation arrangements.
"* * *
"10. The CCR exists solely for the purpose of handling and administering claims on behalf of its members. * * * The CCR acts as a conduit for the payment by its members (and/or their insurers) of claims asserted against them. It receives funds from its members under an obligation to pay those funds to plaintiffs in settlement of claims settled by the CCR acting as agent for its members. Thus, unless its members pay their shares, the CCR is simply unable to pay the settlement amounts due from its members to the plaintiffs.
"* * *
"14. Armstrong World Industries, Inc. ("Armstrong") was a CCR member since the inception of the CCR in 1988. Armstrong was a CCR member when the June 2000 settlement agreement at issue in this case was entered into. On December 6, 2000, Armstrong filed a petition for bankruptcy in Delaware federal court, and has stopped funding its share of settlementagreements that the CCR had negotiated on its behalf. Nonetheless, under the Producer Agreement, Armstrong continues to have the obligations it incurred for settlements negotiated prior to its bankruptcy" (Emphasis added.)
{¶ 24} Likewise, in a letter attached as an exhibit to appellees' motion to enforce the Settlement Agreement, a letter from CCR states that Armstrong had declared bankruptcy and "stopped paying its share of previously negotiated settlements." If the Settlement Agreement defines a "defaulting" party as a producer which does not pay its share of settlement proceeds to CCR, as the aforementioned language in paragraph seven suggests, the only of evidence of a default in this case (considering both the letter and Jordan's declaration) is against Armstrong. Thus, appellees would have recourse against Armstrong pursuant to paragraph seven, but not against appellant.
{¶ 25} We recognize that the both the trial court and appellees have a different interpretation of these provisions. We also believe that a differing interpretation is reasonable in light of the agreement's confusing language. We make no attempt at this juncture to resolve that confusion. This illustrates that an ambiguity exists with these provisions and we must once again turn to the law of South Carolina.
{¶ 26} The primary objective in construing a contract is to ascertain and give effect to the intention of the parties. BarnacleBroadcasting, Inc. v. Baker Broadcasting, Inc. (S.C.App. 2000),
{¶ 27} A contract is ambiguous under South Carolina law when its terms are reasonably susceptible to more than one interpretation. SouthCarolina Dept. of Nat. Res., supra at 302; Penton v. J.F. Cleckley Co. (S.C. 1997),
{¶ 28} To summarize, we reverse the trial court's judgment for two reasons. First, we find that the arbitration provision providing for arbitration of "any dispute" is sufficiently broad to encompass this matter. Second, we conclude that the provisions of the Settlement Agreement and Producer Agreement are sufficiently ambiguous that this matter comes down to determining the parties' intent when entering into these contracts, which we also conclude constitutes an arbitrable dispute under the Settlement Agreement's arbitration clause.
{¶ 29} We also note that nothing in this opinion should be construed as criticism for the manner in which the trial court decided this matter. The August 26, 2002 judgment demonstrates a considered effort to resolve a very complex disagreement arising out of a convoluted contract. We simply come to a different conclusion under a de novo standard of review.
{¶ 30} In any event, for the foregoing reasons, appellant's first assignment of error is well-taken and is hereby sustained.
{¶ 32} Having sustained appellant's first assignment of error, the judgment of the trial court is hereby reversed and the case is remanded to the trial court for an order pursuant to Section 3, Title 9, U.S.Code13 to stay proceedings pending resolution of arbitration.
JUDGMENT REVERSED AND CAUSE REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Scioto County Common Pleas Court to carry this judgment into execution.
A certified copy of this entry shall constitute that mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions.
Harsha, J. Kline, J.: Concur in Judgment Opinion.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.