American Italian Pasta Company v. The Austin Company

914 F.2d 1103, 1990 WL 135556

• Court: Court of Appeals for the Eighth Circuit
• Decided: October 26, 1990
• Docket: 89-2751
• Status: Published

Opinions

WOLLMAN, Circuit Judge.

The Austin Company appeals from the district court’s order denying its motion to compel arbitration. We reverse.

I.

American Italian Pasta Company (American Pasta) entered into a contract with Austin under which Austin agreed to design and build a pasta factory. Article 16 of the contract provides:

In the event of any dispute or disagreement arising under this contract, it is mutually agreed, that upon written notice of either to the other party, both Owner and Austin will use their best efforts to settle such disputes or disagreement in a manner that is fair and equitable to both parties before either party can exercise the right of any legal action. If both parties agree that a dispute or disagreement is of such nature that it cannot be settled as provided for above, then such dispute or disagreement may be submitted to arbitration in accordance with the Rules of The American Arbitration Association in which event, the decision of the arbitrators shall be final and binding upon the parties.

A dispute arose between the parties, and settlement negotiations were unsuccessful. Austin notified the American Arbitration Association to proceed with arbitration. American Pasta filed an application for stay of arbitration in state court. Austin removed the case to federal court. The district court concluded that the contract between the parties permits, but does not compel, participation in arbitration.¹

II.

The Federal Arbitration Act, 9 U.S.C. § 1 et seq., which the parties agree governs this contract, expresses Congress’ “declaration of a liberal policy favoring arbitration agreements.” Moses H. Cone Memorial Hosp. v. Mercury Constr., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983); I.S. Joseph Co., Inc. v. Michigan Sugar Co., 803 F.2d 396, 399 (8th Cir.1986). Notwithstanding this liberal policy in favor of arbitration agreements, the Arbitration Act does not require parties to arbitrate when they have not agreed to do so. Volt Info. Sciences v. Board of Trustees, 489 U.S. 468, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989); Recold, S.A. De C. V. v. Monfort of Colorado, Inc., 893 F.2d 195, 197 (8th Cir.1990). Our task, then, is to determine whether the language the parties used in Article 16 reflects the parties’ intention to consent to mandatory arbitration. I.S. Joseph Co., Inc., 803 F.2d at 399.

The Fifth Circuit found arbitration mandatory under a contract that stated: “If the Union and the Company fail to agree, the dispute may be submitted to the arbitration and the decision of the arbitrator shall be final.” Deaton Truck Line, Inc. v. Local Union 612, 314 F.2d 418, 421 (5th Cir.1962). The court held that “may” should be construed to give either party the option to require arbitration. Id. at 422.

In Bonnot v. Congress of Indep. Unions Local # 14, 331 F.2d 355 (8th Cir.1964), we construed a contract that provided: “In the event the two parties do not agree after the steps outlined ... above, then either party may request arbitration and follow the following procedure.” Id. at 356. We adopted the interpretation in Deaton and held that the purpose of “may” was to give an aggrieved party the choice between arbitration or the abandonment of its claim. Id. at 359.

We construe a contract to give effect to all of its provisions and to avoid rendering any provisions meaningless. Johnson Controls, Inc. v. City of Cedar Rapids, 713 F.2d 370, 374 (8th Cir.1983). When viewed in the light of this rule of construction and the holdings in Deaton and Bon-not, we conclude that the structure and language of the contract reflect that Austin and American Pasta intended arbitration to be mandatory. The phrase “[i]f both parties agree” in the second paragraph of Article 16 refers to the inability of the parties to reach a settlement rather than to the submission of the dispute to arbitration. There would be no reason for the arbitration language in Article 16 if the parties intended it to be permissive, for the parties could voluntarily have agreed to submit a dispute to arbitration in the absence of such a provision.

The judgment is reversed, and the case is remanded with directions to enter judgment compelling arbitration.

1 . American Pasta’s amended complaint alleged that no enforceable contract exists between the parties. The district court expressly declined to determine this issue, limiting its ruling to a determination that Article 16 provides for only permissive arbitration. Accordingly, our references to the “contract” should be read in the light of the district court’s limited holding.