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RCM Technologies, Inc. v. Brignik Technology

March 19, 2001


The opinion of the court was delivered by: Brotman, District Judge



Plaintiff brought claims of breach of contract, fraud, unjust enrichment, and negligent misrepresentation against Defendants in the Superior Court of New Jersey. After removing the case on the basis of diversity of citizenship, Defendants ask this Court to compel arbitration and stay the legal proceeding. For the reasons stated below, Defendants' motion will be granted.


This dispute arose out of the 1998 sale of Defendant Brignik Technology, Inc. ("BTI"), a computer consulting firm, to Plaintiff RCM Technologies, Inc. (RCM). On September 15, 1998, Defendants Stephen Blatnik and Brigitte O'Brien, BTI's owners, entered into an asset purchase agreement whereby RCM agreed to buy BTI for $6 million. RCM paid $3 million of the purchase price up front. The remaining $3 million was subject to certain post-closing adjustments, based on performance targets set forth in the purchase agreement, and payment was to be deferred to one year after closing.

Two provisions of the purchase agreement are at issue here. First, in paragraph 5.23 of the agreement, BTI represented that its closing net operating income ("CNOI") was not less than $1.1 million. Second, in paragraph 10 of the agreement, the parties agreed to submit to mandatory and binding arbitration any dispute that "arises as to interpretation of this Agreement."

Defendants requested payment of the deferred consideration on October 6, 1999. The next month, RCM responded that it had doubts about whether the CNOI was in fact $1.1 million or greater and that it intended to conduct an audit. RCM also stated that it would withhold the deferred consideration until the matter was resolved. On April 21, 2000, BTI served an arbitration claim on RCM. RCM filed the instant complaint on May 12, 2000.


A. Legal Standard

Section 2 of the Federal Arbitration Act ("FAA") states:

A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such a contract . . ., or the refusal to perform the whole or any part thereof, . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2.

This section is a "congressional declaration of a liberal federal policy favoring arbitration agreements." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983). FAA § 4 enables a litigant to petition a federal district court to force a reluctant party into arbitration, provided the court would otherwise have jurisdiction over the controversy. 9 U.S.C. § 4. Finally, FAA § 3 authorizes the court to stay the legal proceeding once it has compelled arbitration. 9 U.S.C. § 3.

As a matter of contract, no party can be forced to arbitrate a dispute unless that party has entered into an agreement to do so. AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S. Ct. 1415, 1418, 89 L. Ed. 2d 648 (1986). FAA § 4 therefore requires that, before compelling an unwilling party to arbitrate, the court engage in a limited review to ensure that the parties' dispute is arbitrable-i.e., that a valid agreement to arbitrate exists and that the specific dispute falls within the substantive scope of that agreement. Id. at 649, 106 S. Ct. at 1418-19; PaineWebber Inc. v. Hartmann, 921 F.2d 507, 510 (3d Cir. 1990).

In light of the federal policy favoring arbitration agreements, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone, 460 U.S. at 24, 103 S. Ct. at 941. Thus, there is a presumption of arbitrability "in the sense that `[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'" AT&T Technologies, 475 U.S. at 650, 106 S. Ct. at 1419 (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S. Ct. 1347, 1353, L. Ed. 2d 648 (1986)). Nevertheless, ...

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