A unanimous panel of the Sixth Circuit recently rejected a manufacturer's attempt to compel arbitration under an expired contract in Linglong Americas, Inc. v. Horizon Tire, Inc. The manufacturer and its distributor entered into a collaboration agreement that contained an arbitration clause. The agreement expired and was not renewed, but the manufacturer and its distributor continued to work together and continued to make various representations of continued involvement. Approximately three years after the agreement expired, the parties' relationship deteriorated and resulted in a federal court lawsuit. The manufacturer attempted to compel arbitration and pointed to the arbitration provision in the collaboration agreement.
The Sixth Circuit refused to compel arbitration. The Court explained that an arbitration clause survives the expiration of a contract only when the dispute at issue "arises under the contract." And, a dispute "arises under in the contract" in two situations relevant in the instant matter: (1) when a majority of the relevant events occurred before the contract expired; and (2) when the contractual right at issue survives expiration of the contract. Neither was present in the instant matter. The majority of the relevant events occurred after the agreement expired, and the arbitration provision did not survive expiration of the agreement. Arbitration was not warranted.
Two important lessons should be taken from this case. First, the case highlights the importance of keeping written agreements current — at least if you want to rely on arbitration provisions that are contained in those agreements. Second, the case highlights the reality that provisions that are contained in written agreements will not necessarily survive expiration of the agreement simply because the relationship between the parties continues.
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