Merrimack College v. KPMG LLP
88 Mass. App. Ct. 803
| Mass. App. Ct. | 2016Background
- Merrimack College sued KPMG for malpractice based on audits and other services performed during fiscal years 1998–2004.
- From 1998–2004 the parties executed annual engagement letters; none contained an arbitration clause.
- In 2005 the parties executed a new engagement letter that (for the first time) contained a mandatory dispute resolution provision (mediation then binding arbitration) applying to disputes "arising out of or relating to" the engagement letter, the services provided thereunder, or "any other services provided."
- KPMG moved to compel arbitration of Merrimack's pre-2005 claims, arguing the 2005 clause reached earlier services and that arbitrators should decide arbitrability.
- The Superior Court denied KPMG's motion to compel arbitration; the Appeals Court affirmed.
Issues
| Issue | Merrimack's Argument | KPMG's Argument | Held |
|---|---|---|---|
| Whether the 2005 arbitration clause applies retroactively to disputes about services performed before 2005 | The 2005 clause is forward‑looking and does not waive Merrimack's right to sue for pre‑2005 malpractice | The clause's broad phrase "any other services provided" covers earlier services, so pre‑2005 disputes are arbitrable | The clause is reasonably read as forward‑looking; it does not retroactively compel arbitration of pre‑2005 claims |
| Whether the parties agreed clearly and unmistakably to delegate arbitrability to arbitrators | No such clear and unmistakable agreement exists because Merrimack never consented to subject earlier disputes to the 2005 procedures | Appendix II states arbitrators decide issues concerning whether a dispute is subject to arbitration | No clear and unmistakable evidence that parties agreed to delegate arbitrability of prior‑contract disputes to arbitrators; court decides arbitrability |
| Whether a presumption of arbitrability should apply | Presumption inapplicable because the dispute did not arise under the 2005 contract | Argues presumption applies given express arbitration clause in 2005 letter | Presumption of arbitrability applies only to disputes that arise under the agreement containing the clause; here it does not apply |
| Interpretation standard for ambiguous contract language | Contract should be read in context; retroactive effect must be explicit | Linguistically possible to read "any other services provided" to include past services | Court construes clause in context, declines linguistically possible but unreasonable retroactive reading; retroactivity must be expressed clearly |
Key Cases Cited
- Massachusetts Hy. Dept. v. Perini Corp., 444 Mass. 366 (disagreement over arbitration is contractual; arbitration requires party assent)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (clear and unmistakable evidence required to delegate arbitrability to arbitrators)
- Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287 (court must be satisfied parties agreed to arbitrate before ordering arbitration)
- McInnes v. LPL Financial, LLC, 466 Mass. 256 (arbitration provision applied retroactively where agreement expressly covered controversies entered into prior to the date)
- Downer & Co., LLC v. STI Holding, Inc., 76 Mass. App. Ct. 786 (contract words must be read in context; linguistic possibility does not control)
- Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. case where later arbitration clause applied to earlier dispute—distinguished on facts here)
- Combined Energies v. CCI, Inc., 514 F.3d 168 (if parties intended arbitration clause to reach particular disputes it is easy to state that expressly)
Order denying motion to compel arbitration affirmed.