What happens when parties have entered into two related contracts, but one has a broad arbitration provision, and the other has a narrow one? Judge Stein addresses that knotty issue in Mat Movies & Television Productions GMBH & Co. v. RHI Entertainment Distribution, LLC, 2010 WL 4323269 (S.D.N.Y.). Although Judge Stein acknowledges the strong federal policy favoring arbitration, he keeps the case in court.
The two contracts in question are a movie distribution agreement with a broad “any dispute” arbitration clause, and a subsequent settlement agreement with a limited arbitration clause. The settlement agreement settled a payment dispute arising from the distribution agreement. Plaintiff Mat sued when defendant RHI failed to make payments due under the settlement agreement, and RHI moved to dismiss the suit or stay it in favor of arbitration.
Judge Stein acknowledges that there is plenty of authority for the proposition that “where a claim alleging breach of one contract requires construction of another contract with an arbitration clause…that claim may be governed by the other contract’s arbitration clause.” But he distinguishes the situation before him because “the underlying claim related to whether or not RHI owes MAT money pursuant to the Settlement Agreement, and if so, how much. Construction of the Distribution Agreement is not required to resolve the parties’ dispute, and their rights or obligations under the Distribution Agreement are not implicated.”
Thus, Judge Stein applies the narrow arbitration clause of the settlement agreement and keeps the case, notwithstanding the existence of a broad arbitration clause in the distribution agreement.