U.S. Nutraceuticals, LLC v. Cyanotech Corporation, 2014 U.S. App. LEXIS 20872

Background

Valensa and Cyanotech entered two contracts (2007 and 2010) governing sale of Haematococcus pluvialis and extraction of astaxanthin.
Both contracts contain confidentiality provisions restricting disclosure of confidential information.
The 2010 contract adds a carve-out allowing litigation for breaches of the confidentiality provision; arbitration remains for other disputes under AAA rules.
Valensa sued Cyanotech in federal court for tortious interference with its Mercóla relationship and for breach of the 2010 confidentiality agreement.
Cyanotech moved to compel arbitration; the district court denied arbitration, interpreting the 2010 carve-out to exclude arbitration for Valensa’s claims.
The court later faced whether arbitration should be compelled and under which contract, with the lead opinion remanding to arbitration under the 2010 contract to resolve which agreement governs.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Which contract governs arbitrability for this dispute	Valensa argues the 2010 carve-out governs, limiting arbitrability.	Cyanotech argues the 2007 contract governs arbitrability.	Arbitrability should be decided by arbitration under the controlling contract; the 2010 contract controls and the arbitrator will determine which contract governs.
Whether AAA Rules govern arbitrability under the 2010 agreement	AAA Rules apply to all disputes referenced in the contracts.	The carve-out excludes disputes relating to breach of confidentiality from AAA Rules.	Arbitrability is not clearly and unmistakably delegated to the arbitrator under the 2010 contract; arbitration of arbitrability is not compelled.
Does the carve-out for confidentiality breaches preclude arbitration of the tortious interference claim	The tortious interference claim relates to confidentiality breach and is carved out.	Undetermined disputes could still be arbitrable if they relate to breaches of the 2010 agreement.	The carve-out is broad enough to cover claims that relate to breach of confidentiality, including tortious interference based on confidential information.
Was the district court correct to address arbitrability rather than submit it to arbitration	Arbitrability should be determined by the arbitrator if the parties clearly agreed to AAA Rules.	Arbitrability was not clearly and unmistakably delegated to the arbitrator under the controlling agreement.	District court properly decided arbitrability; not clearly and unmistakably delegated to arbitration.

Key Cases Cited

Terminix Int'l Co. v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327 (11th Cir. 2005) (incorporation of AAA rules commits arbitrability to the arbitrator when clearly intended)
AT&T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643 (1986) (arbitrability generally judicial unless parties clearly provide otherwise; arbitrator decides questions of arbitrability when contract incorporates AAA rules)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (court must determine if parties clearly and unmistakably delegated arbitrability to arbitrator)
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitration is a matter of contract; questions decided by courts unless agreement clearly provides otherwise)
Princess Cruise Lines, Ltd. v. Diehl, 657 F.3d 1204 (11th Cir. 2011) (look to complaint true thrust to determine arbitrability; estoppel considerations)
Dasher v. RBC Bank (USA), 745 F.3d 1111 (11th Cir. 2014) (AT&T presumption in arbitrability not applied when determining controlling agreement)
Ivax Corp. v. B. Braun Am., Inc., 286 F.3d 1309 (11th Cir. 2002) (look to factual allegations to determine whether claims arise under an arbitration agreement)
Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th Cir. 1998) (focus on factual allegations to determine arbitrability)
Gregory v. Electro-Mech. Corp., 83 F.3d 382 (11th Cir. 1996) (addressing arbitration scope based on factual allegations)