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Conflicting arbitration provisions in six agreements show no meeting of minds

By Lorene D. Park, J.D.

Finding that six agreements applicable to misrepresentation and other claims asserted by the plaintiff contained clear but conflicting arbitration provisions, including as to which rules would govern and how the arbitrator would be selected, demonstrated that the parties did not have a meeting of the minds, the Tenth Circuit affirmed the denial of the defendants’ motion to compel arbitration. Judge Gorsuch dissented, finding the conflicting terms nonessential and stressing that the parties agreed to arbitrate (Ragab v. Howard , November 21, 2016, Kelly, P., Jr.).

Six conflicting arbitration provisions. When the plaintiff entered a business relationship with Ultegra Financial Partners, the parties entered six agreements, including a consulting agreement, employment agreement, nondisclosure agreement and more. All six agreements contained arbitration provisions that conflicted with the other agreements as to: 1) which rules would govern; 2) how the arbitrator would be selected; 3) the notice required to arbitrate; and 4) who would be entitled to attorneys’ fees. For example, the consulting agreement stated that arbitration would proceed under the rules of Colorado’s Uniform Arbitration Act of 1975, but three of the other agreements required application of the AAA Commercial Arbitration Rules. And one agreement permitted the award of costs and attorneys’ fees to the prevailing party but another required each party to pay its own costs and fees.

Motion to compel denied. In 2015, the plaintiff sued Ultegra and related companies for misrepresentation, among other claims, and the district court found that the claims fell within the scope of all six agreements. However, it denied Ultegra’s motion to compel arbitration because it concluded that there was no meeting of the minds as to how the claims would proceed in arbitration. Reviewing de novo, the Tenth Circuit affirmed.

No meeting of minds. Though there is a liberal federal policy favoring arbitration agreements, arbitration clauses are only valid if the parties intended to arbitrate and courts cannot create or enforce contracts where the contract itself does not clearly demonstrate the parties’ intent. While no Colorado court has addressed whether parties can be compelled to arbitrate given conflicting arbitration provisions, the court was persuaded by a factually similar case out of New Jersey, in which the court held the irreconcilable differences across multiple arbitration provisions indicated that the parties did not agree. Basically, there were so many inconsistencies that a reasonable consumer would not understand “what the exact terms and conditions of that arbitration process would be.” Such was the case here, where the conflicting provisions indicated that there was no meeting of the minds.

No merger or conflicts provision. It was significant that none of the agreements had a merger clause or other language suggesting that one agreement would override the others in the event of a conflict. Nor was this a case involving a single but vague arbitration provision like some of the cases on which the defendants relied. To the contrary, this case involved multiple, specific, conflicting arbitration provisions, which indicated no meeting of the minds as to arbitration.

Also rejected was the defendants’ argument that the district court should have had a summary trial to decide whether the parties agreed to arbitrate. In cases like this, where the material facts surrounding an arbitration provision were not disputed, the court could resolve as a matter of law whether the parties actually agreed to arbitrate.

Dissent. In dissent, Judge Gorsuch pointed out that the plaintiff had instructed his attorney to draft three of the agreements at issue and it was very clear that both sides of the commercial deal intended to arbitrate their disputes. While there were conflicting provisions as to how the arbitration was to proceed, such procedural details were nonessential terms and did not change that the parties had agreed to arbitrate. It was significant, in Judge Gorsuch’s opinion, that Colorado courts enforce even arbitration clauses that say no more than that disputes “shall be submitted to binding arbitration” without any discussion of procedural details at all.