824 N.W.2d 155
Wis. Ct. App.2012Background
- Mortimore, a founder and former chairman/CEO of Merge Technologies, was involved in multiple employment agreements from 1997 through 2004 that all contained arbitration provisions.
- The 2004 contract expressly required written amendments and contained an arbitration clause adopting AAA rules, with no oral modifications permitted.
- In 2005–2006 Merge drafted new contracts for executives; by March 2006, Mortimore’s status and potential new contract were under consideration, but no contract was signed.
- A June 2006 period saw internal investigation into Mortimore’s conduct; Mortimore resigned as interim-CEO on June 30, 2009.
- Mortimore filed suit alleging breach of contract for nonpayment of legal expenses; Merge sought to compel arbitration of Mortimore’s breach claims under the 2004 arbitration clause.
- The circuit court held that a new oral agreement in June 2006 superseded the 2004 contract and eliminated the arbitration clause, and denied Merge’s stay pending arbitration; Merge appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2006 oral agreement superseded the 2004 contract and eliminated arbitration. | Mortimore argues the 2006 oral terms created a new contract without arbitration. | Merge contends the 2004 contract governs and arbitration remains required. | Arbitrability to be decided by arbitrator; issue for arbitration. |
| Whether the 2004 contract’s incorporation of AAA Rules assigns arbitrability to the arbitrator. | Arbitrators determine arbitrability under AAA Rules integrated into the contract. | Court should decide arbitrability since it implicates contract interpretation. | Arbitrator may determine arbitrability; issue should be referred to arbitration. |
Key Cases Cited
- AT&T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643 (U.S. Supreme Court 1986) (arbitrability determined by arbitrator when agreement so provides)
- Cirilli v. Country Ins. & Fin. Servs., 322 Wis. 2d 238 (Wis. Ct. App. 2009) (arbitrability question reserved for arbitral determination; strong presumption in favor of arbitration)
- Fallo v. High-Tech Inst., 559 F.3d 874 (8th Cir. 2009) (arbitration rules can express intent to reserve arbitrability to arbitrator)
- Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366 (Fed. Cir. 2006) (arbitration clauses and policy considerations in arbitration)
- Terminix Int'l Co. v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327 (11th Cir. 2005) (arbitrability and arbitration agreements; arbitration favored)
- Contec Corp. v. Remote Solution Co., 398 F.3d 205 (2d Cir. 2005) (arbitrability decisions often reserved for arbitrators under incorporated rules)
- Apollo Computer, Inc. v. Berg, 886 F.2d 469 (1st Cir. 1989) (arbitrability standards and arbitration clause interpretation)
- United Steelworkers v. American Mfg. Co., 363 U.S. 564 (Supreme Court 1960) (Steelworkers Trilogy foundational statements on arbitration as contract-based)
- United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (Supreme Court 1960) (arbiter of arbitrability in Steelworkers framework)
- United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593 (Supreme Court 1960) (core Steelworkers guidance on arbitration)