No. 47869-9-I.The Court of Appeals of Washington, Division One.
Filed: March 11, 2002. UNPUBLISHED OPINION.
Appeal from Superior Court of King County, No. 002266138, Hon Linda Lau, December 26, 2000, Judgment or order under review.
Counsel for Appellant(s), David M. Jacobson, 1420 5th Ave #3400, Seattle, WA 98101.
David R. Goodnight, Dorsey Whitney Llp, 1420 5th Ave Ste 3400, Seattle, WA 98101.
Counsel for Respondent(s), Michael M. Fleming, 1420 5th Ave Ste 4100, Seattle, WA 98101-2338.
Linda B. Clapham, Lane Powell Spears Lubersky, Ste 4100 Pacific 1st Ctr, 1420 5th Ave, Seattle, WA 98101.
ELLINGTON, J.
As part of an asset purchase agreement, Gerry Sportswear Company assumed an obligation on a demand note. The purchase agreement contains a broad arbitration clause and grants to the arbitrator the authority to decide issues of arbitrability, whereas the note, which was renegotiated after the purchase, contains a King County venue clause. It is for the arbitrator to decide whether the claim on the note is within the arbitration clause. We therefore reverse the trial court’s refusal to grant a stay.
FACTS
Between 1995 and 1998, Jeffrey Anderson was an owner and president of Seattle-based Gerry Sportswear Company (Gerry I). Anderson allowed Gerry I to retain some of his earnings in exchange for a demand note dated April 1, 1997 in the amount of $172,909.71 The note was drafted by Chief Financial Officer Jerry Wright for Gerry I, and explicitly provided that “[i]n the event suit is instituted to collect any portion of the principal or interest, at the option of the holder of this note, the venue of any suit shall be King County, Washington.” Clerk’s Papers at 6. On October 5, 1998, Amerex (USA) Inc. purchased 80 percent of Gerry I from Anderson and his investors, leaving Anderson with a 20 percent ownership interest. The company became “Gerry Sportswear Company, LLC” (Gerry II). Pursuant to the asset purchase agreement (APA), Gerry II assumed the obligation on Anderson’s demand note.
The APA contains the following arbitration provision:
SECTION 11.13. Binding Arbitration. Any controversy or claim arising out of or relating to the Asset Purchase Agreement (including any claims relating to the termination of this Asset Purchase Agreement, whether arising under Federal, State or local law) shall be settled by arbitration under the auspices of the American Arbitration Association (AAA) in New York. . . . Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator.
Clerk’s Papers at 14 (emphasis added).
The note was due December 31, 1998. Gerry sought to renegotiate the note to gain an additional year to pay Anderson and Anderson agreed. A new note was executed January 1, 1998, with a new due date and a new interest rate favorable to Gerry II. The King County venue designation remained unchanged. Disputes later arose between the parties, and Anderson invoked the arbitration clause regarding other matters. As to the note, he brought this suit in King County seeking to collect amounts allegedly due Gerry II filed a motion for a stay, seeking an order referring the dispute on the note to arbitration. The trial court denied the motion, and Gerry II appeals.
DISCUSSION
The narrow issue presented here is whether the arbitrability of this dispute is to be determined by the arbitrator or by the court. We review questions of arbitrability de novo. Kamaya Co., Ltd. v. American Property Consultants, Ltd., 91 Wn. App. 703, 713, 959 P.2d 1140 (1998). Four guiding principles have been articulated by the U.S. Supreme Court and adopted by Washington courts for determining arbitrability: (1) the duty to arbitrate arises from the contract; (2) a question of arbitrability is a judicial question unless the parties clearly provide otherwise; (3) a court should not reach the underlying merits of the controversy when determining arbitrability; and, (4) as a matter of policy, courts favor arbitration of disputes. ATT Techs., Inc. v. Communications Workers, 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986); Kamaya, 91 Wn. App. at 713-14. Contractual disputes are generally arbitrable “unless the court can say with positive assurance that no interpretation of the arbitration clause could cover the particular dispute.” Stein v. Geonerco, Inc., 105 Wn. App. 41, 46, 17 P.3d 1266 (2001) (citin Kamaya, 91 Wn. App. at 714).
Arbitrability of a given dispute is a question of law, and ordinarily is decided by the court. Kamaya, 91 Wn. App. at 713-14. But parties may confer that determination upon the arbitrator: ‘[T]he question `who has the primary power to decide arbitrability’ turns upon what the parties agreed about that matter.’ First Options of Chicago, Inc., v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Anderson and Gerry II (hereafter Gerry) agreed that disputes over arbitrability would be determined by the arbitrator.
The parties agreed to arbitrate all disputes “arising out of or relating to” the APA. Clerk’s Papers at 14. The parties dispute whether a claim on the note arises out of the APA. Anderson contends it does not, because the note is a wholly separate, later agreement, with its own venue provision. He points out that Gerry requested to renegotiate the note several months after the APA was effectuated, that Gerry drafted the new note, and that several material terms of the note were changed. He argues the note’s venue provision is clear and removed the note from the arbitration provision of the APA. Gerry counters by pointing out that while the terms of payment changed, the new note is not a new obligation. Gerry argues the note is subject to the APA arbitration clause because the source of the obligation was the APA, and Gerry’s defenses to the note are the same as its defenses on the matters already in arbitration to wit, fraud and misrepresentation. Gerry contends the venue clause is not fatally inconsistent with the APA because suit may be required to obtain judgment on an arbitration award, in which case the venue clause has effect. Gerry also argues that the venue provision is at most like the choice of law provision in the agreement considered in Kamaya. There, a partnership agreement contained both a clause mandating arbitration of all disputes arising between partners, and a general Japanese choice-of-law provision.
The particular dispute was within the arbitration clause unless Japanese law was invoked to decide arbitrability, in which case it (arguably) was not. The court held that the choice of law provision could be interpreted in two ways: as stating only what substantive law would apply to disputes, or as stating what law would be used to determine arbitrability. The court therefore held it could not be said “with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Kamaya, 91 Wn. App. at 719 (quoting ML Park Place Corp. v. Hedreen, 71 Wn. App. 727, 739, 862 P.2d 602 (1993)). As Anderson points out, however, the Kamaya court interpreted one agreement, not two; Anderson contends that the renegotiated note supercedes the APA to the extent of any conflict between the two.
The parties also dispute intent. Anderson contends he always intended that potential disputes regarding the note would be resolved by suit in King County, not by arbitration. He claims that he would not have agreed to strike the King County venue clause. Gerry II, however, asserts that the venue designation language was left in the renegotiated note by accident and that the parties intended to arbitrate the dispute over payment of the demand note. Statements of unilateral intent are not evidence of mutual intent, however, and are likely of little help in resolving the question presented here. See Syputa v. Druck, 90 Wn. App. 638, 644, 954 P.2d 279 (1998).
In ML Park Place Corp. v. Hedreen, we noted that ‘(a)bsent an express provision excluding a particular type of dispute, “only the most forceful evidence of a purpose to exclude a claim from arbitration can prevail.”ML Parki, 71 Wn. App. at 739 (quoting Local Union 77, IBEW v. P.U.D. 1, 40 Wn. App. 61, 65, 696 P.2d 1264 (1985)). Where the parties have agreed that disputes about arbitrability are for the arbitrator, we could usurp that authority only if the dispute was unquestionably outside the scope of arbitration under the APA. Anderson does not dispute Gerry’s contention that the original demand note fell within the scope of the arbitration clause. That the note was later renegotiated, was drafted by Gerry II, and contains a King County venue clause are facts that weigh heavily, but whether they are sufficient evidence of a purpose to exclude the claims on the note from arbitration under the APA is for the arbitrator to decide. The trial court erred in refusing to stay proceedings long enough for that determination to be made. Gerry requests attorney fees under the APA, which provides for fees to a prevailing party in arbitration. But Gerry is not yet a prevailing party, and fees at this stage are inappropriate.
We do, however, award certain fees to Gerry by way of sanctions Anderson submitted documents to this court that were not part of the record below. He first attached them to a brief submitted to the Court Commissioner in proceedings to determine appealability Gerry moved to strike the brief and the documents. The Commissioner denied the motion to strike on grounds the brief was helpful and the attached documents were irrelevant, but the Commissioner expressly noted the documents were not properly before this court. Anderson again submitted the documents as attachments to his opening brief. Gerry again made a motion to strike, in response to which Anderson contended the documents had become part of the appellate record when the Commissioner declined to strike them. Anderson also filed a motion to supplement the record under RAP 9.11. Both motions were referred to this panel by the Commissioner, along with a court’s motion for sanctions.[1]
We can discern no justification for Anderson’s submissions and no basis for supplementing the record. We therefore deny the motion to supplement, grant the motion to strike, and award sanctions to Gerry, to be determined by the Court Commissioner, in the amount of the attorney fees incurred by Gerry in attempting to protect the record from these submissions and otherwise responding to the documents and arguments based thereon. Gerry is directed to submit an appropriate affidavit for the Commissioner’s consideration.
Reversed and remanded.
COLEMAN and COX, concur.