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Trippe Manufacturing Company v. Niles Audio Corporation

March 18, 2005

TRIPPE MANUFACTURING COMPANY, AN ILLINOIS CORPORATION, APPELLANT
v.
NILES AUDIO CORPORATION, A FLORIDA CORPORATION



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY District Court Judge: Honorable Dennis M. Cavanaugh (D.C. No. 03-cv-01905)

Before: Alito, Mckee, and Smith, Circuit Judges

The opinion of the court was delivered by: Alito, Circuit Judge

PRECEDENTIAL

Argued: January 18, 2005

OPINION OF THE COURT

Trippe Manufacturing Co. ("Trippe") appeals an order denying its motion for summary judgment and granting a motion by Niles Audio Corporation ("Niles") to compel arbitration. Because a duty to arbitrate must be founded upon a contractual obligation, we reverse the order compelling arbitration with regard to claims asserted by Niles that are unrelated to obligations expressly assumed by Trippe through the Asset Purchase Agreement ("APA") that entered into effect on August 29, 2001.

To the extent that Trippe expressly assumed obligations under the APA, however, the order compelling arbitration is affirmed.

I.

Niles manufactures and markets consumer audio equipment. In early 1998, Niles entered into an Exclusive Distributor Agreement ("EDA") with SL Waber, Inc. ("Waber"). Under the terms of the EDA, Waber was to manufacture surge protectors for Niles. Waber was also obligated to perform lifetime service support for the product, to provide a toll-free customer service phone line, and to handle claims under a connected equipment guarantee ("CEG") covering damage to electronic equipment connected to the surge-protector. In addition, Waber covenanted to give Niles quarterly reports on service and warranty claims. Clause 12(f) of the EDA states, in part:

All disputes, claims, and controversies arising under this Agreement, or a breach thereof, shall be resolved by arbitration through the American Arbitration Association in accordance with its rules and regulations.

According to Niles, there were several technical problems with the surge-protector and, after selling several thousand units, Niles cancelled all outstanding orders in early 2001.

Trippe, a manufacturer, entered into the APA with Waber, effective August 29, 2001. Under the terms of the agreement, Trippe acquired several assets associated with Waber's surge protector business, including Waber's rights to the Niles Audio Contract. APA 1.1(h); APA Schedule 1.1(h). In clause 1.3 of the APA, Trippe expressly assumed certain of Waber's liabilities, including:

(d) All liabilities, undertakings and obligations for all product warranty and connected equipment guarantees covering all products sold to customers of the Waber Business, regardless of whether the product was manufactured, assembled or sold prior to, on or after the date of Closing.

(f) All liabilities and obligations of [Waber] arising after [August 21, 2001] under each of the Material Contracts listed on Schedule ...


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