Commercial Litigation and Arbitration

Existence of Contract Compelling Arbitration Is for Court to Decide — Party Consistently Opposing Arbitration Does Not Waive Right to Judicial Determination by Seeking Arbitral Resolution of Same Question, Too

From Dedon GmbH and Dedon Inc. v. Janus et Cie, 2011 U.S. App. LEXIS 262 (2d Cir. Jan. 6, 2011):

A. Dispute Involving the Existence of the Contract ***

The Supreme Court recently reiterated that "[a]rbitration is strictly a matter of consent and thus 'is a way to resolve those disputes--but only those disputes--that the parties have agreed to submit to arbitration.'" Granite Rock Co. v. Int'l Bhd. of the Teamsters, U.S. , 130 S. Ct. 2847, 2857, 177 L. Ed. 2d 567***. Accordingly, "courts should order arbitration of a dispute only where the court is satisfied that neither the formation of the parties' arbitration agreement nor . . . its enforceability or applicability to the dispute is in issue." Id. at 2857-58. Where a party contests the issue of contract formation, therefore, "the court must resolve" the issue. Id. at 2858 (internal quotation marks removed).

Granite Rock reconfirms this circuit's well-established precedent that where a party challenges the very existence of the contract containing an arbitration clause, a court cannot compel arbitration without first resolving the issue of the contract's existence. *** "If the making of the agreement to arbitrate is placed in issue--as [the party resisting arbitration] attempts to do by alleging that the contracts in which the arbitration provisions are found never came into existence--the court must set the issue for trial." ***

B. Waiver

Although Janus raises multiple waiver "issues," they can be summarized as a single argument: that Dedon waived its right to object to arbitration--and waived its right to have the arbitrability issue decided by a court--when it made a voluntary request to the ICC to determine "that it is not prima facie satisfied that an arbitration agreement exists."

We agree with the district court that Dedon has not waived its right to object to arbitration of the dispute through its conduct before the ICC. Where a party repeatedly objects to arbitration, "[t]hese objections prevent a finding of waiver." *** Furthermore, to the extent a party participates in an arbitration "in order to resolve the question of arbitrability itself, such participation does not constitute waiver." *** "'[M]erely arguing the arbitrability issue to an arbitrator does not indicate a clear willingness to arbitrate that issue.'" ***

Nor did Dedon's request that the ICC's administrative arm decide that the dispute was non-arbitrable--for lack of an agreement between the parties to arbitrate--constitute a waiver by Dedon of the right to have that question decided by a court. Dedon's submissions to the ICC were replete with statements that Dedon disputed the ICC's jurisdiction; such repeated objections to ICC jurisdiction prevent a finding of waiver***.

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