In a case involving an ADR clause, the parties to a contract disagreed as to whe
ID: 395426 • Letter: I
Question
In a case involving an ADR clause, the parties to a contract disagreed as to whether a clause required them to submit a dispute over a trade secret problem to arbitration. The clause required the parties to submit "any controversy or claim arising out of the agreement" to arbitration. Strictly speaking, the trade secret controversy did not arise "out of" the agreement. However, it was clear that the trade secret dispute was related to the agreement. The trail court held that the language of the the ADR clause was too narrow and that because the trade secret dispute did not arise out of the controversy, the parties were not required to send it to arbitration. Should the appellate court overrule the trial court's decision rejecting the requirement that the parties arbitrate the trade secret dispute? Explain your response.Tracer Research Corp. v. National Environmental Services, Co., 42 F.3d 1292 (9th Cir.)
Explanation / Answer
When entering into a contract most contracting parties do not give due importance to the possibility of the occurrence of a serious disagreement a breach of contract during the validity of the contract. It is essential that this fact be given all due consideration within the contract and adequate care be taken in drafting an arbitration clause which serves its purpose and covers every aspect so as to deliver the results as required by both parties involved in the agreement. A dispute resolution clause addresses the event of analysis contract violation either through continuing to meet the contractual obligations while a third party investigation is facilitated or by engaging in Alternative dispute resolution such as mediation arbitration before filing a lawsuit. A dispute resolution agreement needs to consider weather mediation can be utilised or arbitration is required for resolution of the dispute. The language used for drafting should leave no scope for any ambiguity and ensure that the clause covers any and every dispute which arises out of the agreement rather than narrowing the application of the clause to special circumstances specified.
In the case of Tracer Research Corp. versus National environmental services, the ADR clause in the agreement specified that arbitration could be resorted to only if the matter arose out of the agreement. As the use of Tracer's trade Secrets by National for other clients after termination of the agreement. As the matter of trade secrets was not arising out of the agreement but only related to the agreement it could not be brought to arbitration. The appellate court should not overrule the decision of the trial court as a party cannot be forced into arbitration unless it has specifically agreed to do so under law. In the given case precedents exist in the form of prior judgements in various courts. The phrases "relating to", and "arising out of" in the arbitration clause provide significantly different meanings which cannot be overlooked. The absence of the required words "relating to" made all the difference. The district court finally grounded its decision resolve the preliminary injunction on the basis of findings of the arbitration panel. The district court should have first considered whether the findings of the arbitration panel reliable and provided adequate basis for dissolving the injunction. The misappropriation of trade secrets is a tort claim admissible under uniform trade secrets act. The remedies for statutory thought do not effect on tractor remedies whatever maybe the basis. The tort claim is admissible and can be tried in the district court. This misappropriation of trade secrets claim does not in any way related to interpretation of performance of the contract. Strick Corp vs Cravens Homalloy Ltd. The Mediterranean Enterprises case is a major precedent for omission of the relating to clause.