Simula, Inc. v. Autoliv, Inc.
1999 WL 253191, 175 F.3d 716 (1999)
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Rule of Law:
An arbitration clause covering all disputes "arising in connection with" an agreement is to be interpreted broadly, encompassing all disputes that have a significant relationship to the contract or that have their origin or genesis in the contract, including statutory and tort claims.
Facts:
- In 1992, Simula, Inc. invented an automotive side impact airbag system called the Inflatable Tubular Structure (ITS).
- Automaker BMW instructed Simula to work through Autoliv, a pre-approved supplier, to integrate the ITS into BMW vehicles.
- In 1993, Simula and Autoliv signed nondisclosure agreements, after which Simula provided Autoliv with confidential, proprietary, and trade secret information about the ITS.
- Simula alleges that Autoliv then used this information to begin developing its own competing "inflatable curtain" product.
- Simula further alleges that Autoliv began disparaging the ITS and presenting inaccurate test data to other automotive manufacturers, including Mercedes Benz and Ford.
- In January 1995, unaware of Autoliv's competing product development, Simula and Autoliv entered into a series of related agreements (the "1995 Agreement") which established their business relationship, granted Autoliv exclusive marketing rights for the ITS, and included a broad arbitration clause.
- The 1995 Agreement contained a merger clause superseding all prior written or oral agreements between the parties.
Procedural Posture:
- Simula, Inc. filed a lawsuit against Autoliv, Inc. in federal district court.
- The complaint alleged violations of the Sherman Act, Lanham Act, and Arizona Trade Secrets Act, as well as claims for misappropriation of trade secrets, breach of nondisclosure agreements, and defamation.
- Autoliv filed a motion to compel arbitration under the Federal Arbitration Act and to dismiss the complaint.
- The district court granted Autoliv's motion to compel arbitration and dismissed Simula's complaint.
- Simula (appellant) appealed the district court's decision to the United States Court of Appeals for the Ninth Circuit.
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Issue:
Does a broad arbitration clause requiring arbitration for 'all disputes arising in connection with this Agreement' encompass tort and statutory claims, including antitrust, trade secret misappropriation, and defamation, that are factually related to the parties' contractual relationship?
Opinions:
Majority - Tashima, Circuit Judge
Yes. A broad arbitration clause requiring arbitration for 'all disputes arising in connection with this Agreement' encompasses related tort and statutory claims. The Federal Arbitration Act establishes a strong federal policy in favor of arbitration, particularly in international commerce, requiring that any doubts concerning the scope of arbitrable issues be resolved in favor of arbitration. The phrase "arising in connection with" is to be interpreted expansively, reaching every dispute between the parties that has a significant relationship to the contract or has its origin or genesis in the contract. Simula's claims for antitrust violations, Lanham Act violations, trade secret misappropriation, and defamation all 'touch matters' covered by the 1995 Agreement, as they relate to Autoliv's performance and conduct under that agreement. Resolution of these claims will necessarily require an interpretation of the 1995 Agreement, making them subject to the arbitration clause.
Analysis:
This decision significantly reinforces the expansive reach of broad arbitration clauses under the Federal Arbitration Act. By holding that the phrase "arising in connection with" captures nearly all disputes factually linked to a contract, including statutory and tort claims, the court makes it very difficult for parties to litigate such claims in court if a broad clause exists. The ruling solidifies the precedent that even claims involving important public policy, such as antitrust, are arbitrable, especially in an international context. This case serves as a strong precedent for compelling arbitration and narrowly construing exceptions to arbitrability, impacting how businesses draft contracts and approach dispute resolution.
