Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions


Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.

  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Lexington Marketing Group v. Goldbelt Eagle, LLC (05/04/2007) sp-6122

Lexington Marketing Group v. Goldbelt Eagle, LLC (05/04/2007) sp-6122, 157 P3d 470

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

LEXINGTON MARKETING )
GROUP, INC., ) Supreme Court No. S- 12171
)
Appellant, ) Superior Court No.
) 1JU-05-00446 CI
v. )
) O P I N I O N
GOLDBELT EAGLE, LLC, )
) No. 6122 - May 4, 2007
Appellee. )
)

          Appeal  from the Superior Court of the  State
          of  Alaska, First Judicial District,  Juneau,
          Patricia A. Collins, Judge.

          Appearances:  William F. Cummings and Douglas
          K.  Mertz,  Juneau, for Appellant.   Eric  A.
          Kueffner,  Faulkner Banfield,  P.C.,  Juneau,
          for Appellee.

          Before:   Fabe,   Chief  Justice,   Matthews,
          Bryner,  and Carpeneti, Justices.  [Eastaugh,
          Justice, not participating.]

          FABE, Chief Justice.

I.   INTRODUCTION
          Goldbelt Corporation is a majority shareholder of  both
Goldbelt Eagle, LLC and CP Leasing, Inc.  Goldbelt Eagle  entered
into  a  contract for marketing services with Lexington Marketing
Group (Lexington), a Virginia corporation wholly owned by Lisbeth
Gnugnoli.  The agreement contained an arbitration clause.  In May
2005  Lexington  filed a complaint in superior court,  requesting
that  the  court  compel arbitration of a  dispute  over  whether
Goldbelt  Eagle  owed it compensation for a  referral  under  the
marketing contract.  The superior court granted summary  judgment
to Goldbelt Eagle, ruling that Lexingtons agreement with Goldbelt
Eagle became unenforceable on public policy grounds when Gnugnoli
became  an  employee of CP Leasing.  Lexington appeals,  claiming
the  superior  court erred under federal and state  law  when  it
adjudicated the validity of the underlying contract.  We conclude
that  federal  and  state arbitration law  prohibit  courts  from
adjudicating  the  validity  of  the  underlying  contract   when
determining   arbitrability.   We  hold  that   the   arbitration
agreement covers Lexingtons claim, and we reverse the decision of
the superior court.
 II. FACTS AND PROCEEDINGS
          Goldbelt is a corporation formed pursuant to the Alaska
Native Claims Settlement Act.  Goldbelt is a majority shareholder
in  several business entities, including Goldbelt Eagle, LLC  and
CP  Leasing, Inc.  Goldbelt Eagle and CP Leasing are eligible  to
receive  preferences  in government contracts  under  the  United
States Small Business Administrations Section 8(a) program, which
is  designed  to  assist  eligible small  disadvantaged  business
concerns  [to]  compete in the American economy through  business
development.1
          In  August 2001 Lisbeth Gnugnoli incorporated Lexington
Marketing   Group,  Inc.  (Lexington),  a  Virginia   corporation
licensed  to do business in Alaska and wholly owned by  Gnugnoli.
Lexington  provides marketing services to assist corporations  in
obtaining  government contracts.  On August 27,  2001,  Lexington
entered  into  an agreement with CP Leasing to provide  marketing
services related to Section 8(a) contracts.
          Goldbelt  formed Goldbelt Eagle in December 2001  as  a
vehicle  for  Section 8(a) contracts.  In October  2002  Goldbelt
Eagle  entered  into  an agreement with Lexington  for  marketing
services.   The agreement provided that Goldbelt Eagle would  pay
Lexington  a  commission of twenty percent of gross profits  from
business opportunities registered by Lexington.
          In  October  2003  Gary Droubay,  the  Chief  Operating
Officer  of Goldbelt, Inc., offered Gnugnoli employment  with  CP
Leasing.  Her job was to identify opportunities for CP Leasing to
obtain  Section  8(a) contracts.  The parties  agreed  that  when
Gnugnoli became an employee of CP Leasing, she would no longer be
paid commissions on the Lexington contract with CP Leasing.   The
parties dispute whether this agreement also terminated Lexingtons
contract with Goldbelt Eagle.
          In  the  spring of 2004 Gnugnoli learned of a  contract
opportunity to provide training for Army personnel.  She met with
representatives  of a Virginia corporation willing  and  able  to
subcontract  the work for a Section 8(a) entity such as  Goldbelt
Eagle  or  CP  Leasing.   Gnugnoli referred  the  opportunity  to
Goldbelt  Eagle.  In an evidentiary hearing before  the  superior
court,  Gnugnoli claimed she referred the opportunity to Goldbelt
Eagle  because the contract called for personnel services,  which
she  claimed  CP  Leasing was not equipped to provide.   Gnugnoli
then  requested  a commission for the referral.   Goldbelt  Eagle
refused payment on the ground that the agreement between Goldbelt
Eagle  and  Lexington was void as of October 2003, when  Gnugnoli
          became an employee of CP Leasing.
          In  May  2005  Lexington filed a complaint in  superior
court,  requesting  that the court compel  arbitration  under  AS
09.43.020.2   Lexington  invoked an  arbitration  clause  in  its
agreement  with  Goldbelt  Eagle.   That  clause  provides:   All
disputes  or  claims  arising  under  this  Agreement  shall   be
submitted  to  binding arbitration before a single arbitrator  in
Juneau,  Alaska  if demand for arbitration is made  in  a  notice
given by either party.
          Goldbelt  Eagle filed a motion for summary judgment  on
July  6,  2005, arguing that the entire agreement  including  the
arbitration  provision   became  void  when  Gnugnoli  became  an
employee  of  CP  Leasing.  On July 21, 2005, Lexington  filed  a
cross-motion  for  summary judgment, claiming genuine  issues  of
material  fact should prevent Goldbelt Eagle from prevailing  and
requesting that the court refer the matter to an arbitrator.
          The  superior court initially found that there  was  an
apparent  factual  dispute as to whether the  parties  agreed  to
terminate  the Lexington Agreement between Gnugnoli and  Goldbelt
Eagle, which in turn contains the arbitration agreement, when Ms.
Gnugnoli accepted employment with CP Leasing.  The court held  an
evidentiary  hearing on October 24, 2005.  On November  8,  2005,
the  superior  court granted Goldbelt Eagles motion  for  summary
judgment.   The  court found that Goldbelt Eagles agreement  with
Lexington  was  unenforceable  on  public  policy  grounds.    It
reasoned that Gnugnoli could not ethically seek opportunities for
Goldbelt  Eagle  and  be privately remunerated  pursuant  to  the
Lexington Agreement without in turn violating her duty of loyalty
to CP Leasing since both 8(a) firms are capable of bidding on the
same  projects.  The superior court concluded that the  agreement
became impossible to perform without violation of fiduciary  duty
following  Gnugolis  employment with CP Leasing  and  ruled  that
there was no duty to arbitrate claims related to an unenforceable
agreement.
          Lexington  filed  this appeal of  the  superior  courts
ruling.   Lexington claims that the trial court violated  federal
and  state  law  by  refusing to compel arbitration  and  further
contends that the trial court erred in granting summary judgment.
III. DISCUSSION
     A.   Standard of Review
          Whether Lexingtons claim is arbitrable is a question of
law subject to de novo review.3  We adopt the rule of law that is
most  persuasive in light of precedent, reason, and policy.4   We
affirm a grant of summary judgment if there are no genuine issues
of  material fact and if the movant is entitled to judgment as  a
matter  of  law.   When making this determination,  we  draw  all
reasonable inferences in favor of the non-movant.5
     B.   The   Superior   Court  Had  Jurisdiction   To   Decide
          Arbitrability.
          Lexington   first   challenges  the   superior   courts
jurisdiction  to decide the question of arbitrability   in  other
words,  to  decide whether the terms of the agreement called  for
the  dispute to be referred to an arbitrator.  It argues that  in
the  absence  of  allegations of fraud or unconscionability  with
respect  to the arbitration agreement itself, only the arbitrator
can  determine arbitrability.  Goldbelt Eagle responds  that  the
court  properly decided arbitrability.  Because federal and state
arbitration  law  provide  courts  with  jurisdiction  to  decide
arbitrability,  we  agree with Goldbelt Eagle that  the  superior
court had jurisdiction to decide arbitrability.
          A  dispute  is  arbitrable under  federal  law  if  the
agreement  creates  a  duty  for the  parties  to  arbitrate  the
particular  dispute.6   The  United  States  Supreme  Court   has
repeatedly  held  that  courts are the  proper  forum  to  decide
arbitrability  unless the parties agreement  explicitly  provides
that  the issue of arbitrability is for the arbitrator.  In  AT&T
Technologies,  Inc.  v. Communications Workers  of  America,  the
Court held that the question of arbitrability . . . is undeniably
an  issue for judicial determination [u]nless the parties clearly
and unmistakably provide otherwise.7
          Alaska state law mirrors federal law and provides  that
courts  are  the proper forum to determine whether a  dispute  is
arbitrable.  In State of Alaska v. Public Safety Employees  Assn,
we  adopted the federal rule that arbitrability is a question for
the  courts [u]nless the parties clearly and unmistakably provide
otherwise. 8
          Because the arbitration clause in the agreement between
Lexington  and  Goldbelt Eagle is silent on the proper  forum  to
decide arbitrability, it does not clearly and unmistakably  rebut
the  presumption  that  the courts decide whether  a  dispute  is
arbitrable under the terms of the agreement.  The superior  court
thus  correctly  determined that it had  jurisdiction  to  decide
whether the dispute should be referred to an arbitrator.
     C.   The  Superior  Court  Erred  When  It  Adjudicated  the
          Validity of the Underlying Contract.
          
          After  determining that it had jurisdiction  to  decide
arbitrability,  the  superior  court  ruled  that  the  marketing
agreement  became  impossible  to  perform  when  Gnugnoli  began
employment  with  CP  Leasing because performance  would  require
Gnugnoli  to  breach  a fiduciary duty to CP Leasing.   Reasoning
that   an   agreement  to  breach  a  fiduciary  duty  would   be
unenforceable on public policy grounds, the court concluded  that
it  would  be  improper to enforce the arbitration clause  of  an
unenforceable agreement and granted summary judgment to  Goldbelt
Eagle.   Lexington argues that the superior court erred  when  it
addressed  the  validity  of  the underlying  contract.   Because
federal  and  state arbitration law do not allow courts  deciding
arbitrability  to  adjudicate  the  validity  of  the  underlying
contract, we agree.9
          1.   Federal  law  does  not permit  a  court  deciding
               arbitrability to adjudicate the enforceability  of
               the underlying contract.
               
          The United States Supreme Court has emphasized that the
Federal  Arbitration Act (FAA) reflects a liberal federal  policy
favoring arbitration agreements and has directed that any  doubts
concerning  the scope of arbitrable issues should be resolved  in
favor of arbitration.10  This policy favoring arbitration, coupled
with  the  statutory language, has led the United States  Supreme
Court   to   interpret  the  FAA  to  forbid  courts  determining
arbitrability  from adjudicating the validity of  the  underlying
contract.
          In  Prima  Paint  Corp. v. Conklin  Manufacturing  Co.,
Prima   Paint  filed  suit  in  federal  district  court  seeking
rescission  on fraudulent inducement grounds of a contract  under
which  Flood  & Conklin agreed to provide consulting  services.11
Flood & Conklin moved to stay the proceedings pending arbitration
on  the  grounds that the consulting contract contained  a  valid
arbitration clause.12  The case required the United States Supreme
Court  to  interpret 9 U.S.C.  2, which states  that  arbitration
provisions  shall  be valid, irrevocable, and  enforceable,  save
upon such grounds as exist at law or in equity for the revocation
of any contract,13 and 9 U.S.C.  4, which the Court noted requires
a court to order arbitration once it is satisfied that the making
of  the agreement for arbitration or the failure to comply  (with
the arbitration agreement) is not in issue.14  The Court concluded
that  in  passing upon [an FAA] application for a stay while  the
parties  arbitrate,  a  federal court may  consider  only  issues
relating  to  the  making and performance  of  the  agreement  to
arbitrate.15   Because Prima Paints fraudulent inducement  claims
related   to   the  entire  contract,  rather  than  merely   the
arbitration  clause itself, the Court concluded that  the  claims
should be adjudicated by arbitrators.16
          In  Southland  Corp. v. Keating,17  the  Supreme  Court
fortified  the Prima Paint holding and clarified that it  applies
equally to state courts considering arbitrability under the  FAA.
The Court emphasized:
          We   discern  only  two  limitations  on  the
          enforceability   of  arbitration   provisions
          governed by the Federal Arbitration Act: they
          must be part of a written contract evidencing
          a  transaction  involving commerce  and  such
          clauses may be revoked upon grounds as  exist
          at law or in equity for the revocation of any
          contract.[18]
          
          The  Court  then  concluded  that  the  FAA  created  a
substantive  rule  in both federal and state courts,  foreclosing
state  legislative  attempts to undercut  the  enforceability  of
arbitration agreements.19
          The  United  States  Supreme Court recently  reaffirmed
this  rule in Buckeye Check Cashing, Inc. v. Cardegna, a decision
issued  after the superior courts ruling in the case  now  before
us.20   In Buckeye, John Cardegna brought a class action in state
court  against  Buckeye  Check  Cashing,  alleging  that  Buckeye
charged usurious interest rates in violation of state laws.21  In
response, Buckeye moved to compel arbitration on the ground  that
          the loan agreements contained an arbitration clause providing
that  [a]ny claim, dispute, or controversy . . . arising from  or
relating to this Agreement . . . or the validity, enforceability,
or   scope   of   this  Arbitration  Provision  or   the   entire
Agreement . . . shall be resolved . . . by binding arbitration.22
The  Florida Supreme Court upheld a denial of a motion to  compel
arbitration  on the grounds that (1) the underlying contract  was
illegal,  and  (2)  an arbitration clause in an illegal  contract
could  not  be  enforced.23   The  United  States  Supreme  Court
reversed.
          The   Supreme   Court  rejected  the   Florida   courts
conclusion  that enforceability of the arbitration  clause  could
turn  on  application of state public policy  to  the  underlying
contract24  and  held  that a challenge to the  validity  of  the
contract  as  a  whole, and not specifically to  the  arbitration
clause,  must go to the arbitrator.25  The Court emphasized  that
under  federal law, the arbitration agreement is to be considered
separately  from  the  remainder of the contract  in  determining
arbitrability.26  The Buckeye decision makes it clear that courts
may  consider challenges of illegality to arbitration  agreements
but not to the underlying contracts.27
          Goldbelt  Eagle  attempts  to  distinguish  Buckeye  by
arguing   that  the  arbitration  clause  in  Buckeye  was   more
exhaustive  than  the  clause at issue in  this  case.   Although
Goldbelt  Eagle  is  correct that this arbitration  agreement  is
drafted  differently  from the clause at issue  in  Buckeye,  the
Supreme  Courts  holding  in  Buckeye  was  broad.   It  was  not
predicated on a close reading of the agreement at issue  in  that
case; the Court did not parse the language of the agreement,  nor
did  it  refer back to the language of the clause after initially
quoting   it.   Instead,  the  Court  relied  on  several   broad
principles:  (1) an arbitration provision is severable  from  the
remainder  of  the  contract;  (2) the  issue  of  the  contracts
validity  is considered by the arbitrator in the first  instance;
and  (3) this arbitration law applies in state as well as federal
courts.28   Thus, regardless of whether the arbitration agreement
at  issue  is  identical to the agreement  before  the  Court  in
Buckeye, the Courts holding applies.
          Buckeye  does  not  change the basic rule  that  courts
determining  arbitrability  must  interpret  the  agreement   and
determine  whether  it governs the dispute  at  issue.   However,
where the parties have agreed to submit a dispute to arbitration,
federal  law  does  not  permit  a  court  to  refuse  to  compel
arbitration based on a holding that the entire contract  is  void
for public policy.29
          2.   State  arbitration  law does not  permit  a  court
               deciding    arbitrability   to   adjudicate    the
               enforceability of the underlying contract.
               
          Lexington  also  argues that the superior  court  erred
under  state  law when it declared the underlying contract  void.
We  agree.   Based on both the statutory language and the  policy
behind  Alaskas  Arbitration Act, we hold that state  arbitration
law  aligns  with  federal  law  and  does  not  permit  a  court
          determining arbitrability to consider the validity of the
underlying agreement.
          The  language of the state statute supports our holding
that  state arbitration law does not permit adjudication  on  the
merits of the underlying agreement.  The text of AS 09.43.010(a),
which  mirrors  FAA  2, suggests that a court  may  only  resolve
public  policy  challenges when such claims are directed  at  the
arbitration  clause  itself.  Buckeye30 and  Prima  Paint31  have
interpreted the analogous federal provision to require a court to
enforce  the  arbitration clause unless a party asserts  standard
contract  defenses,  such as fraudulent inducement  or  void  for
public  policy,  against the arbitration clause  itself.   Alaska
Statute 09.43.010(a) provides:
          [A] provision in a written contract to submit
          to   arbitration  a  subsequent   controversy
          between  the  parties is valid,  enforceable,
          and  irrevocable,  except upon  grounds  that
          exist  at law or in equity for the revocation
          of a contract.[32]
          
This provision does not provide that the arbitration agreement is
not  enforceable if grounds exist for revocation of the  contract
that  underlies  the agreement.  Instead, it  dictates  that  the
agreement  is not enforceable if grounds . . . exist .  .  .  for
revocation  .  .  . of a contract.33  In other  words,  under  AS
09.43.010,  a  court  may  properly adjudicate  claims  that  the
arbitration clause itself is void, but not claims that the entire
contract is void.
          Alaska  Statute  09.43.020 also indicates  that  courts
deciding  arbitrability should not adjudicate the  enforceability
of the underlying contract.  Subsection (a) indicates that courts
should   address  arbitration  provisions  separately  from   the
underlying contract.  The statute mirrors FAA  4 and states  that
if  the  opposing party denies the existence of the agreement  to
arbitrate, the court shall proceed summarily to the determination
of  the issue and if the agreement is found to exist shall  order
arbitration.34  Similarly, under subsection (b) of  the  statute,
the  court  may  stay  an  arbitration  proceeding  commenced  or
threatened on a showing that there is no agreement to arbitrate.35
Like  FAA   4,  this provision provides for the court  to  decide
issues related to the arbitration agreement itself, but does  not
provide  jurisdiction to decide separate issues relating  to  the
validity  of  the underlying contract.  These provisions  support
the  view that arbitration clauses are severable from the  entire
contract  and  thus  may be properly enforced  even  when  it  is
claimed that the underlying contract is void.
          Strong  public policy rationales support this position.
Like  federal  law, state law strongly favors arbitrability.   We
have  previously recognized the strong public policy in favor  of
arbitration.36  Given this policy, we have indicated that we . . .
allow  ambiguous  contract  terms to be  construed  in  favor  of
arbitrability  where such construction is not obviously  contrary
to  the  parties intent.37  Forbidding courts from examining  the
merits  of  a dispute or the validity of the underlying  contract
          furthers the primary benefit of arbitration  expeditious and
inexpensive  dispute resolution for the parties.38   This  policy
would  be  frustrated  if  parties  could  avoid  arbitration  by
challenging the validity of the underlying agreement.
          Although  the  superior court noted the  states  strong
presumption in favor of arbitrability, it reasoned that it  would
be  illogical to refer the case to an arbitrator simply  so  that
the  arbitrator could decide that he or she lacked the power  (or
jurisdiction) to arbitrate.  However, arbitrability is  a  matter
of contract, and there is no reason to assume that submitting the
validity  of  the  underlying contract to the arbitrator  is  not
appropriate where the parties so intended.39
           The  superior court relied on our decision  in  Willis
Flooring, Inc. v. Howard S. Lease Construction Co. & Associates.40
In  Willis,  we  held  that  an  arbitration  provision  was  not
unenforceable  for  lack of mutuality where arbitration  was  the
sole  option of one party.41  Our holding was premised  upon  the
notion  that  an  arbitration clause does  not  require  separate
consideration so long as the underlying contract is supported  by
consideration   because  the  contract  and  arbitration   clause
constitute  a  unitary,  integrated contract,  not  a  series  of
independent agreements.42  But this notion is consistent with the
Prima  Paint  and Buckeye rule that courts deciding arbitrability
are  not  to adjudicate the validity of the underlying agreement.
As  several  courts have reasoned, interpreting  Prima  Paint  to
require  separate  consideration for an arbitration  clause  runs
contrary  to the strong federal policy in favor of arbitration.43
Our  holding  in Willis is therefore consistent with federal  law
and with our ruling today.
          Alaskas   arbitration  law  closely   follows   federal
arbitration law,44 and federal law has clarified that arbitration
clauses  are severable from the underlying contracts for purposes
of  challenges  to  the  validity of  the  underlying  agreement.
Determinations as to the validity of the underlying contract  are
a  matter  for the arbitrator to decide.  We therefore hold  that
state  arbitration  law, like federal law,  did  not  permit  the
superior   courts  finding  that  the  underlying  contract   was
unenforceable.
          3.   The   dispute   fell  under  the  terms   of   the
               arbitration agreement.
          Our  conclusion  that the superior  court  erred  under
federal   and  state  arbitration  laws  when  it  declared   the
underlying  contract  void  does not  end  the  matter.   Because
arbitration  is  a  matter  of  contract,  parties  can  only  be
compelled to arbitrate a matter where they have agreed to do so.45
Thus,  we  are required to decide whether the arbitration  clause
covers  this  dispute.  Goldbelt Eagle argues the superior  court
correctly  concluded  that the dispute did not  arise  under  the
agreement and was therefore not arbitrable under the terms of the
arbitration  clause.  We disagree.  Although  Goldbelt  Eagle  is
correct that arbitration is a matter of contract and a particular
dispute  is  not  arbitrable unless the parties  have  agreed  to
arbitrate  it, we hold that this dispute falls easily within  the
terms of the arbitration clause.
          Although the superior court concluded that the  dispute
did  not  arise under the contract, its ruling was predicated  on
its finding that the contract was void for public policy reasons.
The  superior  court  reasoned that  [s]ince  the  agreement  for
marketing  services  for  commission was unenforceable  following
Gnugnolis  CP  Leasing employ, no claims could  arise  under  the
agreement  thereafter.  (Emphasis added.)   The  court  concluded
that no disputes could arise under a void contract.  As explained
above, this conclusion is precluded under both federal and  state
law, which forbid courts from determining arbitrability based  on
the validity of the underlying contract.
          Lexington  contends  that its claim  arise[s]  directly
under  the  contract  and fall[s] within the  disputes  that  are
subject  to  the arbitration provisions.  Goldbelt  Eagle  argues
that the arbitration clause at issue is narrow and did not extend
to  the  dispute  at  issue.  Goldbelt Eagle  suggests  that  the
agreement  is  narrow  because it extends only  to  all  disputes
arising under and does not include disputes as to the validity of
the  agreement or related to or in connection with the agreement.
But  Goldbelt  Eagle cites no Alaska or federal  cases  declaring
that  clauses that require arbitration of all disputes or  claims
arising  under the agreement must be narrowly read.  And  several
federal   courts   have  declared  that  clauses   referring   to
arbitration  disputes  arising under  or  arising  hereunder  are
broad.46
          Moreover, regardless of whether the clause is narrow or
broad,  as  a  matter of contract interpretation, the arbitration
clause applies to this dispute.  Goldbelt Eagle suggests that the
superior  court properly concluded that the parties are disputing
whether the underlying contract was void.  It reasons that such a
dispute  revolves around a collateral matter.  But  Lexington  is
seeking  payment  of a commission for services it  contends  were
provided under the contract.  Thus, Lexingtons claim for  payment
arises under the contract: it is seeking payment for services  it
argues   were   provided  under  the  terms  of  the   agreement.
Arbitration of such a claim falls squarely within the arbitration
clauses  agreement  to submit [a]ll disputes  or  claims  arising
under this Agreement to arbitration.  (Emphasis added.)  In light
of  our  strong  policy  favoring arbitration  and  our  rule  of
construction  allowing  even  ambiguous  contract  terms  to   be
construed  in  favor of arbitrability,47 this  dispute  would  be
arbitrable  even if the contract term was ambiguous.   Here,  the
contract  term  is not ambiguous, and arbitration  is  consistent
with  the  parties intent to arbitrate claims arising  under  the
agreement.  We therefore hold that Lexingtons claim falls  within
the  scope of the arbitration clause.  Because we hold  that  the
superior  court erred in declining to order arbitration based  on
its  finding  that the underlying contract was void,  we  do  not
address  Lexingtons  argument that the court  erred  in  granting
summary judgment because parol evidence was in conflict.
IV.  CONCLUSION
          In  this  case,  decided before Buckeye,  the  superior
court  declined  to refer the case to arbitration  based  on  its
finding  that  the underlying contract was void as  a  matter  of
          public policy.  Under Buckeye, such determinations are for the
arbitrator  to  make.   We  REVERSE and  REMAND  for  proceedings
consistent with this opinion.
_______________________________
     1    See 13 C.F.R.  124.1 (2006).

     2    AS 09.43.020(a) provides:

          On   application  of  a  party   showing   an
          agreement described in AS 09.43.010, and  the
          opposing  partys  refusal to  arbitrate,  the
          court shall order the parties to proceed with
          arbitration, but if the opposing party denies
          the  existence of the agreement to arbitrate,
          the  court  shall  proceed summarily  to  the
          determination  of  the  issue  and   if   the
          agreement  is  found  to  exist  shall  order
          arbitration.
          
     3    Ahtna, Inc. v. Ebasco Constructors, Inc., 894 P.2d 657,
660 (Alaska 1995).

     4    Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).

     5     Alakayak  v. British Columbia Packers, Ltd.,  48  P.3d
432, 447 (Alaska 2002) (internal citations omitted).

     6     AT&T Techs., Inc. v. Commcns Workers of Am., 475  U.S.
643, 649 (1986).

     7    Id.; see also Howsam v. Dean Witter Reynolds, Inc., 537
U.S.  79,  83  (2002)  (The  question whether  the  parties  have
submitted a particular dispute to arbitration, i.e., the question
of arbitrability, is an issue for judicial determination [u]nless
the  parties clearly and unmistakably provide otherwise.  (citing
AT&T  Techs., Inc., 475 U.S. at 649)); First Options of  Chicago,
Inc. v. Kaplan, 514 U.S. 938, 943 (1995) (holding that [i]f . . .
the  parties  did not agree to submit the arbitrability  question
itself to arbitration, then the court should decide that question
. . . independently).

     8    798 P.2d 1281, 1285 (Alaska 1990) (quoting AT&T Techs.,
Inc., 475 U.S. at 649).

     9    The superior court did not make a finding as to whether
the Federal Arbitration Act (FAA) applied to the dispute, but  it
relied  on  both  federal and state authorities in  reaching  its
conclusions.   Because we hold that both federal and  state  laws
require  arbitration, we need not resolve the issue of which  law
binds the parties.

     10    Moses H. Cone Meml Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24-25 (1983).

     11    388 U.S. 395, 398-99 (1967).

     12    Id. at 399.

     13    Id. at 400.

     14    Id. at 403.

     15    Id. at 404.

     16    Id. at 406-07.

     17    465 U.S. 1 (1984).

     18    Id. at 10-11 (internal citation omitted).

     19    Id. at 16.

     20     126 S. Ct. 1204 (2006).  The superior courts decision
in  this case was dated November 8, 2005.  Buckeye was decided on
February 21, 2006.

     21    Id. at 1207.

     22    Id.

     23    Id.

     24    Id. at 1209.

     25    Id. at 1210.

     26    Id. at 1209.

     27     Lexington interprets this severability to  limit  the
courts  inquiry  into  only whether there is  fraud,  duress,  or
unconscionability in the arbitration clause.  But in every  case,
the  court  must  interpret the arbitration clause  to  determine
whether  it  extends to the dispute at issue.  As  part  of  this
determination,  the  court  may only consider  fraud  allegations
relating to the arbitration agreement itself.

     28    Id. at 1209 (extracting general rules from Prima Paint
and Southland Corp.)

     29     It  is  not  the  case that the appellee  is  without
recourse if the underlying contract is void.  Federal law  simply
dictates that such a determination is for the arbitrator  not the
court.   The superior court quoted the Wyoming Supreme Court  and
reasoned that to refer the case to an arbitrator only to have him
determine  that  the  contract by which he is  vested  with  this
authority  is void  was illogical.  See Fox v. Tanner,  101  P.3d
939,  949  (Wyo.  2004).   But the United  States  Supreme  Court
subsequently  addressed this question, deciding in  Buckeye  that
the FAA requires such a referral.

     30    126 S. Ct. at 1209.

     31    388 U.S. at 404.

     32    Compare 9 U.S.C.  2:

          A written provision in any maritime transaction or
          a  contract  evidencing  a  transaction  involving
          commerce  to  settle by arbitration a  controversy
          thereafter   arising  out  of  such  contract   or
          transaction, or the refusal to perform  the  whole
          or any part thereof, or an agreement in writing to
          submit  to  arbitration  an  existing  controversy
          arising  out  of such a contract, transaction,  or
          refusal,   shall   be  valid,   irrevocable,   and
          enforceable, save upon such grounds  as  exist  at
          law  or  in  equity  for  the  revocation  of  any
          contract.
          
(Emphasis added.)

     33     AS  09.43.010(a) (emphasis added); cf.  9  U.S.C.   2
(using  the similar phrase, revocation of any contract) (emphasis
added).

     34    Compare 9 U.S.C.  4:

          The  court shall hear the parties,  and  upon
          being  satisfied  that  the  making  of   the
          agreement  for arbitration or the failure  to
          comply  therewith is not in issue, the  court
          shall make an order directing the parties  to
          proceed to arbitration in accordance with the
          terms of the agreement.
          
(Emphasis added.)

     35    AS 09.43.020(b) (emphasis added).

     36    Univ. of Alaska v. Modern Constr., Inc., 522 P.2d 1132,
1138 (Alaska 1974).

     37    Id.; see also Ahtna, 894 P.2d at 662 n.7 ( An order to
arbitrate the particular grievance should not be denied unless it
may  be  said with positive assurance that the arbitration clause
is  not susceptible to an interpretation that covers the dispute.
Doubts  should be resolved in favor of coverage.  (quoting United
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-
83 (1960))).

     38     See,  e.g.,  Prima  Paint  Corp.,  388  U.S.  at  404
(recognizing  the unmistakably clear congressional  purpose  that
the  arbitration  procedure, when selected by the  parties  to  a
contract,  be speedy and not subject to delay and obstruction  in
the courts).

     39    During oral argument, Goldbelt Eagle suggested that the
superior  courts  ruling that the contract was  void  for  public
policy  could  be binding on the arbitrator even if  we  reverse.
But  because  we  hold  that  the superior  court  did  not  have
jurisdiction  to  rule on the merits of the underlying  contract,
the  ruling  has  no  preclusive effect, and the  courts  vacated
determination  is  not binding.  See 18A Charles  Alan  Wright  &
Arthur  R. Miller & Mary Kay Kane, Federal Practice and Procedure
4432  (2d  ed.  2002) (There is no preclusion as to  the  matters
vacated  or  reversed . . . . [I]f the appellate  court  requires
dismissal  of  the  case for want of jurisdiction  in  the  trial
court,  preclusion cannot be revived by attempting to  show  that
the  trial  led  to  an  otherwise proper  determination  on  the
merits.) (internal citations omitted).

     40    656 P.2d 1184 (Alaska 1983).

     41    Id. at 1184-85.

     42    Id. at 1185.

     43    See, e.g., Glazer v. Lehman Bros., Inc., 394 F.3d 444,
453-54  (6th  Cir.  2005);  see also  Doctors  Assocs.,  Inc.  v.
Distajo, 66 F.3d 438, 452-53 (2d Cir. 1995).

     44     See,  e.g., Ahtna, 894 P.2d at 662 n.7  (citing  with
approval  the  approach  of the United States  Supreme  Court  in
arbitration law).

     45     AT&T Techs., 475 U.S. at 648 (Arbitration is a matter
of  contract  and  a  party  cannot  be  required  to  submit  to
arbitration  any dispute which he has not agreed so  to  submit.)
(internal citations and quotations omitted).

     46    See, e.g., Battaglia v. McKendry, 233 F.3d 720, 723-25
(3rd Cir. 2000) (holding that clause providing for arbitration of
any controversy [that] arises hereunder was sufficiently broad to
encompass  counterclaim that agreement was void since inception);
Gregory v. Electro-Mechanical Corp., 83 F.3d 382 (11th Cir. 1996)
(holding  that  clauses  providing for  arbitration  of  disputes
arising  under  a contract are broad and refusing to  distinguish
between  arising under and arising out of); Building Materials  &
Constr.  Teamsters Local No. 216 v. Granite Rock  Co.,  851  F.2d
1190,  1194  (9th  Cir. 1988) (By providing that  [a]ll  disputes
arising   under   this  agreement  shall  be   resolved   through
arbitration,  the  parties  agreed to submit  all  grievances  to
arbitration,  not  merely  those  which  the  court   will   deem
meritorious. ) (internal citations and quotations omitted).

     47    Modern Constr., 522 P.2d at 1138.

This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com
Case Law
Statutes, Regs & Rules
Constitutions
Miscellaneous


IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights
Soteria-alaska
Choices
AWAIC