01-2993 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc. (57927)

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“Nissan characterizes M’Lady’s argument concerning expiration as a ‘defense to the enforcement’ of the agreement containing the arbitration clause and asserts that where a broadly-worded arbitration clause creates a ‘presumption of arbitrability,’ any doubts concerning whether a particular ‘defense’ falls within the scope of the arbitration agreement should be resolved in favor of arbitration. But Nissan’s position would make the contractual obligation to arbitrate limitless; once two parties entered a fixed-term contract with an arbitration clause any later dispute between the parties would be presumed arbitrable, with all disputes going to the arbitrator under the guise of ‘defenses to enforcement.’ Parties would thus be forced to commit to the arbitrator even questions they never intended to arbitrate. To remedy this potential problem, the Supreme Court held in Litton Financial Printing Division v. NLRB, 501 U.S. 190, 209 (1991), that the presumption of arbitrability does not fully apply in cases where the arbitration agreement is contained in an expired fixed-term contract. Instead, courts handling such cases must determine not only whether the parties entered an agreement to arbitrate some issues, but also whether the particular dispute in question falls within the scope of the arbitration agreement-even if that determination requires contract interpretation typically remitted to the arbitrator. Id. at 209; see also CPR (USA) Inc. v. Spray, 187 F.3d 245, 255 (2d Cir. 1999); Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 781 (10th Cir. 1998).

“Nissan also appears to misunderstand the significance of M’Lady’s point about expiration: a contract that by its own terms expired in 1999 cannot possibly be the basis of the parties’ current dealership arrangement, and thus the termination of the current relationship cannot, at least absent additional evidence, be said to relate in any way to the expired contract. That might be the case if, as Nissan contends, the original contract never expired because Nissan repeatedly ‘waived’ the expiration date. But Nissan offers only letters it sent to M’Lady offering to extend the term and never explains whether or how M’Lady accepted those offers. Moreover, some of the letters to which Nissan points contain not offers to extend the contract term, but offers by Nissan to forbear early termination of the contract based on M’Lady’s purported breaches. Nissan also argues, inconsistently, it seems to us, that the original agreement did expire but the parties’ ‘course of dealing’ shows that they continued to ‘operate under’ an identical agreement. These internal inconsistencies in Nissan’s appellate position suggest that any agreement that might exist cannot be as ‘clear and unmistakable’ as Nissan contends. Another problem is that Nissan points us to no written agreement other than the one that has expired, and agreements to arbitrate must be in writing.”

Vacated and remanded.

Appeal from the United States District Court for the Northern District of Illinois, Guzmán, J., Rovner, J.