“BROAD” AND “NARROW” ARBITRATION CLAUSES: ARE COURTS BREAKING FREE FROM THE TYRANNY OF LABELS?
Marc J. Goldstein
About 13 years ago I wrote a contribution for an edition of this AAA Handbook reporting upon a recently-decided case in the U.S. Court of Appeals for the Second Circuit that rejected a 40-year old precedent and adopted a modern and expansive approach to the construction of arbitration clauses applicable to deciding whether a particular clause is “broad” or “narrow.” The older precedent from 1961 had viewed the phrase “arising under” as connoting a “narrow” scope of agreement to arbitrate that did not, without more language, extend to disputes related to the contract but not directly about its performance, breach, making, interpretation, or validity. The newer decision from 2002 declined to equate “arising from” with “arising under” as a narrow clause, and considered that the phrase “arising from the transaction involved” connoted sufficient breadth of intent to arbitrate as to make arbitrable a claim of fraudulent inducement of the contract. My contribution circa 2002 also reported that the Second Circuit had called for a multi-step approach to so-called “arbitrability” issues—by which was meant issues concerning the scope of arbitrable disputes under a valid agreement to arbitrate—the first step being to ascertain whether the clause in question should be classified as “broad” or “narrow.” Specifically, the Second Circuit in Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.d3d 218 (2d Cir. 2001) called upon district courts to conduct a “three-party inquiry” into arbitrability beginning with an effort to “classify the particular clause as either broad or narrow,” and with a “presumption of arbitrability” arising if the clause is classified as broad.