We recently reported on the Sixth Circuit’s pro-arbitration trend in several recent decisions, and an unpublished decision yesterday, Pureworks, Inc. v. Unique Software Solutions, Inc., is no exception. The Sixth Circuit enforced the arbitrability of earn-out covenants in an asset purchase agreement, concluding that because the disputed issues “arguably fall within the scope of the parties arbitration agreement,” arbitration was proper. It also enforced the arbitration award, concluding: “so long as arbitrators arguably construe the contract and not giving them authority, courts may not overturn their decisions, even if the courts are convinced the arbitrators have committed serious error.”
In many respects the case is a fairly routine one, but Judge Stranch took the opportunity in concurrence to “address my concerns regarding the need for clear language in agreements governing the arbitration of business disputes.” While acknowledging that no lawyer can foresee all potential disputes that may arise in the aftermath of a business deal, Judge Stranch suggests that some additional thought should be given at the drafting stage in order to avoid a lot of problems down the road. Such care is particularly necessary in the arbitration context, Judge Stranch concludes, given that “there has been a decided move to mandate the use of arbitration for resolution of business against business disputes.” She continues: “but in this rush to flee the courthouse, it appears that the parties have not always thought through or written their agreements with the clarity necessary to delineate what disputes will be entrusted to what type of arbitrator.” As a result of such imprecission, countless dollars are spent litigating – the exact result that the parties were seeking to avoid.
A further refinement could be offered on Judge Stranch’s observation, and that is that parties who are contemplating litigating such issues should be fully cognizant of the trends in the law of the jurisdiction where they plan to sue. For instance, some of the recent decisions from the Sixth Circuit in the arbitration area seem to be fairly obvious in light of the Court’s existing precedent, but parties are intent on litigating them nonetheless. So perhaps a dose of pragmatism should be added to some additional care in drafting agreements.