SW Legal studies in Business

Arbitration Clause in One Part of Agreement Extends to Other Parts of Agreement
Description Appeals court held that when two contracts were signed at the same time as a package, although one did not have an arbitration clause in it, arbitration would be required to resolve all issues related to the contracts.
Topic Alternate Dispute Resolution
Key Words Arbitration; Scope of Agreement
C A S E   S U M M A R Y
Facts PSSI and Motorola made two agreements at the same time: a stock purchase agreement, whereby Motorola agreed to pay $12 million to PSSI for an equity share of the company; and a product development agreement, by which the companies agreed to work together developing a new communication device. PSSI later sued Motorola, contending fraud in the stock purchase agreement. Motorola moved to compel arbitration because the product development agreement had an arbitration clause. The district court held that since the stock purchase agreement did not contain an arbitration agreement, the case could go to trial. Motorola appealed.
Decision

Reversed. The two agreements were a package deal; neither would have been signed without the other. Hence, the dispute over one of the agreements falls within the scope of the entire agreement, so arbitration applies to the dispute. "Where the parties include a broad arbitration provision in an agreement that is 'essential' to the overall transaction, we will presume that they intended the clause to reach all aspects of the transaction-including those aspects governed by other contemporaneously executed agreements that are part of the same transaction."

Citation Personal Security & Safety Systems v. Motorola, 297 F.3d 388 (5th Cir., 2002)

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