Nortek Inc. v. ITT LLC

Background

Nortek Inc. sued ITT LLC on claims for breach of contract, specific performance, and implied common-law indemnification. The dispute concerns agreements governing the Reznor Business, including provisions concerning responsibility for asbestos-related claims arising from products manufactured by ITT or its predecessors before the 1985 closing date.

The 1993 Addendum to the asset purchase agreement contains a dispute-resolution provision. It requires unresolved claims or issues arising under the agreement or Addendum to be referred first to the parties’ general counsels and then, if necessary, to an independent third party. The provision states that the independent third party’s decision will be final and binding, subject to limited review, and refers to the rules of the American Arbitration Association for selecting that third party.

Nortek alleged that it succeeded to the rights of a prior purchaser of the Reznor Business and that ITT had stopped honoring its indemnification obligations. Although Nortek was not a signatory to the original agreements, the court stated that this did not affect the motion because a nonsignatory who seeks benefits flowing directly from a contract containing an arbitration clause may be required to arbitrate.

Motion and Analysis

ITT moved to compel arbitration under the Federal Arbitration Act. The court found that the Addendum’s dispute-resolution provision was a valid arbitration agreement. Nortek conceded that its breach-of-contract and specific-performance claims fell within the provision’s scope.

The remaining question was whether Nortek’s implied-indemnification claim was covered. The court held that the agreement clearly and unmistakably delegated questions about the scope of arbitration to an independent third party. It relied on the provision’s broad coverage of claims or issues arising under the asset purchase agreement or Addendum and its incorporation of the American Arbitration Association’s rules, which authorize an arbitrator to decide questions about the arbitrator’s own authority.

Disposition

The court GRANTS Defendant’s motion to compel arbitration. The parties are directed to comply with the dispute-resolution provision concerning Nortek’s breach-of-contract and specific-performance claims. An independent third party will decide whether Nortek’s implied-indemnification claim is subject to that provision. The action is stayed pending arbitration.

The Clerk was directed to terminate the pending motion and administratively close the case, without prejudice to either party moving by letter to reopen the case within thirty days after the arbitration proceedings conclude. Judge Philip M. Halpern signed the order.