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Delta Stone Products Inc. v. Eurostone Machine USA, Inc.

United States District Court, D. Utah

November 8, 2017



          Ted Stewart District Judge.

         This matter is before the Court on Defendant's Motion to Dismiss or for Summary Judgment. Defendant seeks dismissal of Plaintiff's claims. Alternatively, Defendant seeks to have any claims not dismissed on the merits sent to arbitration. For the reasons to be discussed, the Court denies the Motion and stays the case to allow the claims to be submitted to arbitration in accordance with the arbitration clause of the Sales Contract.

         I. BACKGROUND

         Delta Stone Products, Inc. (“Delta Stone”), a Utah Company, entered into an agreement to supply stone for a time-sensitive project. In order to perform on the agreement, Delta Stone signed a purchase contract (the “Sales Contract”) with EuroStone Machine USA, Inc., (“EuroStone”), a South Carolina company, for the purchase and transport of a stone cutting machine. “As part of that purchase contract, EuroStone acted as Delta Stone's representative and . . . was charged with assisting in the selection [of] the Stone Cutting Machine from among EuroStone's vendors, arranging the import and transport of the Stone Cutting Machine, and purchasing insurance” to cover the import and transport of the machine.[1]

         Delta Stone allegedly notified EuroStone of the time-sensitive nature of the project and the potential loss if the machine was damaged or delivered late. However, when the stone cutting machine arrived in Heber City, Utah, it was significantly damaged and the need for repairs delayed Delta Stone's work on its project. The delay allegedly resulted in lost profits and other damages.

         Delta Stone's Complaint alleges three claims of relief, including Breach of Contract, Breach of Fiduciary Duties, and Negligence. Delta Stone claims that EuroStone breached its obligations by:

(i) failing to put any of its vendors, agents, or freight carriers on notice of the time- and quality-sensitive nature of the delivery; and (ii) by failing to purchase adequate insurance for the transport of the Stone Cutting Machine that would cover consequential damages should the Stone Cutting Machine arrive late or damaged and allow Delta Stone to sue the insurer in Utah.[2]

         However, before making any findings on the merits of Delta Stone's claims, the Court must first consider whether the claims are covered by the arbitration clause in the Sales Contract.


         Under the Federal Arbitration Act:

A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.[3]

         In support of this statute, “[t]he Supreme Court has long recognized and enforced a liberal federal policy favoring arbitration agreements. Therefore, all doubts must be resolved in favor of arbitration.”[4] “However, whether a party agreed to arbitration is a contract issue, meaning arbitration clauses are only valid if the parties intended to arbitrate.”[5] Therefore, the Court must decide any issues that may call “into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce.”[6] To do this, the Court applies state-law principles.[7] And while there is a choice-of-law provision at issue in this dispute, Utah and South Carolina law are substantively the same on the issues before the Court, so the Court will refrain from making a finding on the applicability of the choice-of-law provision in the Sales Contract at this time.


         “In interpreting a contract, the intentions of the parties are controlling.”[8] “If the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law.”[9] However, if the language is ambiguous, “extrinsic evidence must be looked to in order to determine the intentions of the parties.”[10] In making these determinations, “[a] contract is read as a whole document so that one may not create an ambiguity by pointing out a single sentence or clause.”[11]

         In regard to the interpretation of arbitration clauses, “[a] clause which provides for arbitration of all disputes ‘arising out of or relating to' the contract is construed broadly. Courts have held that such broad clauses are capable of an expansive reach, ”[12] and apply to “disputes in which a significant relationship exists between the asserted claims and the contract in which the arbitration clause is contained.”[13] “If the scope of an arbitration clause is debatable or reasonably in doubt, the clause should ...

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