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Justices uphold finding that tort claims not subject to arbitration
A court should decide whether a dispute between U.S. Steel and an Iron Range mining company is arbitrable, the Minnesota Supreme Court decided June 30 in a unanimous opinion.
In Glacier Park Iron Ore Properties v. United States Steel, the Supreme Court affirmed the St. Louis County District Court and the state Court of Appeals, which ruled that the dispute was not subject to arbitration. It rejected the claim that an arbitrator should decide arbitrability.
“For the question of arbitrability to be subject to arbitration, the parties must express that agreement in clear language. No such language appears here,” said the court in an opinion written by Chief Justice Lorie Gildea.
Breach of fiduciary duty alleged
The case involves the mineral rights in Iron Range properties leased by U.S. Steel. Glacier Park alleges that U.S. Steel wrongly procured the lease through a breach of fiduciary duty by the trust that held the property until it was terminated in 2015 and its assets were conveyed to Glacier Park.
It also argues that U.S. Steel aided and abetted the trust’s breach of duty and seeks rescission of the lease.
Glacier Park first served an arbitration demand, which was followed by a District Court lawsuit. The District Court said that arbitrability was a judicial decision, and that the lease did not require arbitration of Glacier Park’s claim. The Court of Appeals affirmed.
Not reasonably debatable
The U.S. Supreme Court has adopted a clear and unmistakable evidence standard to determine whether the parties agreed to arbitrate arbitrability, Gildea noted. In the absence of such evidence, courts should not assume that the parties agreed.
It rejected Glacier Park’s argument that state law should apply and the court should apply the state’s reasonably debatable standard set forth in 1972 in Atcas v. Credit Clearing Corp. That standard said that if the intention of the parties is reasonably debatable as to the scope of the arbitration clause, arbitrability should be determined by the arbitrator.
With the two standards in direct conflict, the court applied the federal caselaw standard.
Clear and unmistakable
The court next observed that Paragraph (A) of the lease’s arbitration provision articulates disputes that are subject to arbitration: conformance of mining practices, royalty payment determinations, any fact relative to the observance and fulfillment of the terms and obligations of the contract, and any other matter specifically stated.
It does not state that arbitrability of the claim itself is subject to arbitration.
“We agree with the Court of Appeals that this silence does not satisfy the clear and unmistakable standard,” Gildea wrote.
It rejected Glacier Park’s argument that the ‘’observance and fulfillment” language would include arbitrability. Under that argument, all disputes would be covered by that clause.
“To the contrary, the fact that the parties listed out four specific categories of arbitrable issues confirms that the parties did not intend the broad agreement that Glacier Park advances,” Gildea continued.
No presumption of arbitrability
The court then turned to the District Court’s conclusion that the tort claims asserted by Glacier Park were not arbitrable, and affirmed.
It rejected the argument that contract validity claims are presumptively arbitrable under the Minnesota arbitration law, because it decided the case under federal law. It also relied on the “well-settled principle” that a party cannot be required to arbitrate claims that it has not agreed, by contract, to arbitrate.
In contrast, the lease limits issues for arbitration to those specifically stated, the court said.
The court also said that the contract’s reference to arbitration of “observance” and “fulfillment” of the contract did not encompass a claim about the formation of the contract. Since a claim about contract formation, such as a breach of fiduciary duty, is not one of the types of arbitrable disputes identified in the lease, the claim is not subject to arbitration.