Air-Con, Inc. v. Daikin Applied Latin Am., LLC
21f4th168
| 1st Cir. | 2021Background
- Air-Con, a Puerto Rico distributor, signed a written distribution agreement in 2000 with Daikin Industries (parent company) naming Daikin Industries as the counterparty; Daikin Industries did not countersign. The written agreement contained an Osaka, Japan arbitration clause and a strict non‑assignability clause.
- Air-Con also alleges a separate, unwritten exclusive distribution relationship with Daikin Applied (the parent’s Miami‑based wholesaler) formed the same year.
- Around 2015 Air‑Con claims Daikin Applied engaged in price discrimination, abrupt price increases, delivery suspensions/delays, product removals, and reduced technical support, harming Air‑Con’s distribution rights under Puerto Rico Law 75.
- Air‑Con sued in Puerto Rico court; Daikin Applied removed to federal court and moved to compel arbitration based on (a) the written agreement with Daikin Industries and (b) arbitration clauses in numerous signed per‑shipment sales contracts between Air‑Con and Daikin Applied.
- The district court granted the motion to compel arbitration, treating the written agreement as governing the parties’ relationship; the First Circuit reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Daikin Applied may compel arbitration under the written agreement between Air‑Con and Daikin Industries | The written agreement is not a binding contract with Daikin Applied: it wasn’t countersigned and includes a non‑assignability clause barring transfer without written consent | The parties operated pursuant to that written agreement since 2000, so Daikin Applied can invoke its arbitration clause | Reversed: Daikin Applied failed to meet its burden; the agreement names Daikin Industries, no written assignment exists, and corporate separateness stands |
| Standard of review/evidence for FAA §4 motions to compel arbitration | District should apply summary‑judgment style inquiry and may consider evidence beyond the pleadings | Motion could be resolved on the pleadings (motion to dismiss approach) | Held: Courts should generally apply the summary‑judgment standard; Rule 12(b)(6) is available only in exceptional cases where parties forgo evidentiary materials |
| Which party bears the burden of proving arbitrability | Air‑Con argued district misallocated burden to it | Daikin Applied treated complaint allegations as admitting the agreement applied | Held: Burden rests on the party seeking to compel arbitration; district erred in requiring Air‑Con to disprove arbitrability |
| Whether arbitration clauses in individual sales contracts cover Air‑Con’s distribution claims | Sales‑contract arbitration clauses are narrow—apply to disputes arising from a particular sale, not a broad pattern harming distribution rights | Sales contracts’ arbitration clauses cover disputes arising out of or relating to the contract, so they could apply | Held: Air‑Con’s claims concern the overall distribution relationship and pattern of conduct, not discrete sales; individual sales arbitration clauses do not cover these claims |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (federal policy favors enforcement of arbitration agreements)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA §4 contemplates some factual inquiry and summary proceedings)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (arbitration governed by contract terms; courts treat arbitration as a matter of contract)
- Rivera‑Colón v. AT&T Mobility P.R., Inc., 913 F.3d 200 (1st Cir. 2019) (party seeking to compel arbitration bears burden of proving agreement to arbitrate)
- Soto‑Fonalledas v. Ritz‑Carlton San Juan Hotel Spa & Casino, 640 F.3d 471 (1st Cir. 2011) (listing elements a movant must prove to compel arbitration)
- Guidotti v. Legal Helpers Debt Resol., L.L.C., 716 F.3d 764 (3d Cir. 2013) (advocates summary‑judgment standard for resolving §4 arbitrability disputes)