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Innospec Ltd. v. Ethyl Corporation

United States District Court, E.D. Virginia, Richmond Division

October 27, 2014

INNOSPEC LTD., Plaintiff,
v.
ETHYL CORPORATION, Defendant.

MEMORANDUM OPINION

JOHN A. GIBNEY, Jr., District Judge.

This matter comes before the Court on the defendant's Motion to Compel Arbitration. (Dk. No. 20.) In this action, Innospec seeks a declaratory judgment stating that it has the right to terminate its requirements contract with Ethyl Corporation because of changed, previously unforeseeable economic conditions. Ethyl now asks the Court to compel the matter to arbitration and either stay proceedings or dismiss the claim outright. Although Ethyl urges the Court to determine the arbitrability of Innospec's claim, the arbitration provision in the parties' contract clearly and unmistakably commits questions of arbitrability to the arbitrator. The Court therefore GRANTS the motion and DISMISSES the claim without prejudice.

I. Material Facts

Innospec, a fuel additive manufacturer, entered a contract in 1998 to supply Ethyl tetraethyl lead ("TEL"), a lead-based fuel additive, and amended the agreement in 2007 to tie the price of TEL to the United Kingdom retail price index. With the global appetite for leaded motor fuel substantially weakened, however, Innospec asks the Court for a declaratory judgment that it possesses the right to terminate its contract with Ethyl. In response, Ethyl asks the Court to compel arbitration pursuant to an arbitration provision in their contract.

The arbitration provision reads as follows:

DISPUTES

Any dispute between the parties with respect to this Agreement which the parties are unable to resolve through mutual consultations and negotiations within thirty (30) days following notification by one party to the other in writing of the existence of such a dispute, may be submitted by either party for arbitration in London in accordance with the Rules of the London Court of International Arbitration by one arbitrator to be appointed by agreement between the parties. If the parties fail to agree upon an arbitrator, the arbitrator shall be appointed by the President for the time being of the Institution of Chemical Engineers. Either party shall be entitled to make such submission at any time following the last day of such thirty (30) day period by written notice to the other party, but no submission may be made later than eighteen (18) months following the date of the written notification by one party to the other of the existence of the dispute. The parties hereby exclude any right to appeal pursuant to Section 69 of the Arbitration Act 1996. Any arbitral award shall be binding on the parties and judgment upon the award may be entered in any court having jurisdiction. The law of England shall govern this Agreement.

(Compl., Ex. 1, Att. A, at ¶ 14.)

II. Standard of Review

Under the Federal Arbitration Act ("FAA"), a party may move for an order staying proceedings and compelling the opposing party to pursue its claims through arbitration. See 9 U.S.C. §§ 3-4. "The FAA reflects a fundamental principle that arbitration is a matter of contract, " and, as such, "requires courts to enforce [arbitration agreements] according to their terms." Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772, 2776 (2010) (internal citations omitted).

Federal courts have a "healthy regard for the federal policy favoring arbitration." Levin v. Alms & Assocs., Inc., 634 F.3d 260, 266 (4th Cir. 2011) (citing Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). "This federal policy is based on the FAA, which establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Id. (citations omitted).

Courts follow a two-step approach to determine whether arbitration is required in a particular dispute. See Peabody Holding v. United Mine Workers of Am., Int'l Union, 665 F.3d 96, 101 (4th Cir. 2012). First, the court must "determine who decides whether a particular dispute is arbitrable: the arbitrator or the court." Id. If the court answers that question in favor of itself, then the court moves to the second step to determine "whether the dispute is, in fact, arbitrable." Id. While step two adheres to the general federal presumption in favor of arbitration, step one reverses that presumption. "Courts should not assume that the parties agreed to arbitrate arbitrability." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); see also Carson v. Giant Food, Inc., 175 F.3d 325, 329 (4th Cir. 1999) (explaining that the presumption in favor of arbitration "does not apply to the issue of which claims are arbitrable").

To overcome the reverse presumption, an arbitration agreement must meet the "clear and unmistakable" standard announced in AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986): "[u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator." Id. "The clear and unmistakable' standard is exacting, and the presence of an expansive arbitration clause, without more, will not suffice." Peabody Holding, 665 F.3d at 102. Clauses that contain general provisions requiring arbitration for disagreements "relating to" or "arising out of a contract do not meet the standard. Id. ...


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