Masco Corporation v. Zurich American Insurance Company

*The Honorable Robert Holmes Bell, Chief United States District
Judge for the W estern D istrict of M ichigan, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0287P (6th Cir.)
File Name: 04a0287p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
MASCO CORPORATION,
Plaintiff-Appellee,
v.
ZURICH AMERICAN
INSURANCE COMPANY,
Defendant-Appellant,
NEAR NORTH INSURANCE
AGENCY, INC., et al.,
Defendants.
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No. 03-3071
Appeal from the United States District Court
for the Northern District of Ohio at Akron.
No. 02-00988—James S. Gallas, Magistrate Judge.
Argued: April 27, 2004
Decided and Filed: August 31, 2004
Before: MARTIN and ROGERS, Circuit Judges; BELL,
Chief District Judge.*
2 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
_________________
COUNSEL
ARGUED: Joseph A. Hinkhouse, LORD, BISSELL &
BROOK, Chicago, Illinois, for Appellant. Marc A. Sanchez,
FRANTZ WARD, Cleveland, Ohio, for Appellee.
ON BRIEF: Damon N. Vocke, LORD, BISSELL &
BROOK, Chicago, Illinois, Hugh D. Berkson, HERMANN,
CAHN & SCHNEIDER, Cleveland, Ohio, for Appellant.
Marc A. Sanchez, FRANTZ WARD, Cleveland, Ohio, for
Appellee.
ROGERS, J., delivered the opinion of the court, in which
BELL, D. J., joined. MARTIN, J. (pp. 12-18), delivered a
separate dissenting opinion.
_________________
OPINION
_________________
ROGERS, Circuit Judge. The district court in this case
refused to give effect to a broad arbitration clause in an
insurance policy, where the underlying dispute between the
parties revolved around policy coverage that neither party
intended, but that was imposed on the contract by law as
determined by subsequent Ohio Supreme Court opinions.
Because the dispute nonetheless falls within the ambit of the
arbitration agreement, we reverse.
Zurich American Insurance Company (“Zurich”), through
its agent, Near North Insurance Agency, Inc. (“Near North”),
sold to Masco Corporation (“Masco”) two commercial
automobile insurance policies, one effective June 30, 1997, to
June 30, 1998, and a second, renewal policy, effective June
30, 1998, to June 30, 1999. The two policies included a
deductible agreement, consisting of a basic agreement and a

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
3
1The Ohio Supreme Co urt has since drastically reduced the scope of
Scott-Pontzer cove rage. See Westfield Ins. Co. v. Galatis, 797 N.E.2d
1256 (O hio 2003).
set of specifications. As part of the deductible agreement,
Zurich agreed to pay and handle the claims made under the
policies, and Masco agreed to pay Zurich a $500,000
deductible for claims made under the policies. The deductible
agreement included an arbitration clause reading, “Any
dispute arising out of the interpretation, performance or
alleged breach of this agreement, shall be submitted to
arbitration . . . .”
In negotiating the purchase of automobile insurance, Masco
specifically instructed Near North that it wished to purchase
policies that contained no uninsured/underinsured-motorist
(“UM/UIM”) coverage. Near North and Zurich provided
Masco with forms that all parties thought rejected UM/UIM
coverage. At the time the polices were purchased and the
deductible agreement was entered into, both parties to this
appeal thought that their contract did not include UM/UIM
coverage.
Later events, however, rendered the parties’ rejection of
UM/UIM coverage ineffective. The Ohio Supreme Court in
Scott-Pontzer v. Liberty Mutual Fire Insurance Co., 710
N.E.2d 1116 (Ohio 1999), and Linko v. Indemnity Insurance
Co. of North America, 739 N.E.2d 338 (Ohio 2000),
interpreted § 3937.18 of the Ohio Revised Code to extend
UM/UIM coverage to almost all corporations buying
automobile insurance unless they expressly rejected the
coverage in a very precise way. Both Zurich and Masco agree
that the manner in which they rejected possible UM/UIM
coverage, although arguably valid at the time of contracting,
did not satisfy the Linko requirements. It is thus
uncontroverted that a new burden of coverage arose flowing
from Zurich to Masco and those affiliated with Masco.1
4 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
Zurich has paid a pair of UM/UIM claims made against the
policies. On March 11, 1999, Natalie Ruska, the daughter of
an employee of a Masco subsidiary, was killed in an
automobile accident. Ms. Ruska’s estate sued Zurich in an
Ohio state court claiming entitlement to Scott-Pontzer
benefits. Zurich settled the suit, paying Ms. Ruska’s estate
approximately $700,000. Zurich then demanded payment of
the $500,000 deductible from Masco.
On April 7, 1999, Linda Collins was injured in an
automobile accident. At the time of the accident, Ms. Collins
was a passenger in a vehicle being driven by her daughter,
Rachael Collins, an employee of a Masco subsidiary. Collins
sued Zurich demanding Scott-Pontzer benefits. At oral
argument, Zurich admitted that it paid Ms. Collins at least
$140,000 in Scott-Pontzer benefits. Masco believes that
Zurich will demand payment of a deductible for the Collins
claim.
Wishing to clarify its legal position, Masco filed a
complaint in the Ohio Court of Common Pleas against Zurich
and Near North seeking a declaration that: (a) it owed no
obligation to pay deductibles for UM/UIM claims brought
against Zurich, (b) if it is required to pay Zurich a deductible
then Near North should indemnify it, and (c) that the
deductible contained in the liability portion of the policies
does not apply to UM/UIM coverage imposed by operation of
law. Zurich removed the case to the federal district court, and
moved to stay and compel arbitration based on the arbitration
clause in the deductible agreement. The district court denied
the motion to stay, holding that the “the underlying disputes
in the complaint are beyond the scope” of the deductible
agreement because “Masco could never have agreed to pay a
deductible for coverage that would arise by operation of law
years later as a result of a deficiency in the policy or waiver
drafted by Zurich.” Masco Corp. v. Zurich Am. Ins. Co., No.
4:02 CV 0988, slip op. at 5 (N.D. Ohio Dec. 5, 2002). Zurich

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
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timely appealed. The question of arbitrability is the sole issue
on appeal.
The Federal Arbitration Act (the “FAA”) manifests “a
liberal federal policy favoring arbitration agreements.” Moses
H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24 (1983). “To enforce this dictate, [the FAA] provides for
a stay of proceedings when an issue is referable to arbitration
and for orders compelling arbitration when one party has
failed or refused to comply with an arbitration agreement.”
Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir.
2003) (citing 9 U.S.C. §§ 3 & 4 ). This court reviews de novo
a district court’s decision whether to compel arbitration
pursuant to the FAA. Burden v. Check Into Cash of
Kentucky, LLC, 267 F.3d 483, 487 (6th Cir. 2001).
Case law amply supports arbitrability of Masco’s claims
against Zurich in this case. “Before compelling an unwilling
party to arbitrate, the court must engage in a limited review to
determine whether the dispute is arbitrable; meaning that a
valid agreement to arbitrate exists between the parties and that
the specific dispute falls within the substantive scope of that
agreement.” Javitch, 315 F.3d at 624. “[A]s a matter of
federal law, any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration.” Moses H.
Cone, 460 U.S. at 24-25 (1983). “[T]here is a general
presumption of arbitrability, and any doubts are to be resolved
in favor of arbitration ‘unless it may be said with positive
assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.’” Highlands
Wellmont Health Network, Inc. v. John Deere Health Plan,
Inc., 350 F.3d 568, 576-77 (6th Cir. 2003) (quoting AT & T
Techs., Inc. v. Communications Workers of Am., 475 U.S.
643, 650 (1986)). Where, as here, the arbitration clause is
broad, “only an express provision excluding a specific
dispute, or ‘the most forceful evidence of a purpose to
exclude the claim from arbitration,’ will remove the dispute
from consideration by the arbitrators.” Id. at 577 (quoting AT
6 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
& T Techs., 475 U.S. at 650). Of course, “[w]hile ambiguities
in the language of the agreement should be resolved in favor
of arbitration, we do not override the clear intent of the
parties, or reach a result inconsistent with the plain text of the
contract, simply because the policy favoring arbitration is
implicated.” EEOC v. Waffle House, Inc., 534 U.S. 279, 294
(2002) (internal citations omitted).
Here, notwithstanding Masco’s argument to the contrary,
the arbitration clause in the deductible agreement was
patently broad enough to cover the dispute as to whether
Zurich can recover deductibles for the UM/UIM payments
made under the policies. The arbitration clause encompasses
“[a]ny dispute arising out of the interpretation, performance
or alleged breach of [the deductible agreement].” J.A. at 66.
Masco’s claims against Zurich, which pray for a declaration
that Masco has no obligation under the deductible agreement
to pay deductibles for UM/UIM coverage, plainly fall within
these spacious terms. The dispute “arises out of” the parties’
conflicting “interpretation” of Masco’s obligations under the
deductible agreement and Masco’s “alleged breach” of the
deductible agreement by failing to pay deductibles for
UM/UIM coverage.
Masco argues that, because the parties did not contemplate
UM/UIM coverage, they could not possibly have contracted
to submit disputes arising out of this coverage to arbitration.
But, by its plain terms, the arbitration clause embraces any
dispute arising out of the deductible agreement whether or not
the parties anticipated the dispute at the time of contracting.
Our task, of course, is limited to enforcing the parties’
agreement as written, and we have no license to write a
“foreseeability” limitation into the arbitration agreement. As
the Seventh Circuit held in Deputy v. Lehman Bros., Inc., 345
F.3d 494, 513 (7th Cir. 2003), “[w]hether a claim is subject to
arbitration depends on the contractual language, and in this
case the arbitration clause did not limit its scope to reasonably

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
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foreseeable claims.” See also Fazio v. Lehman Bros., Inc.,
340 F.3d 386, 395-96 (6th Cir. 2003).
Masco further argues that (1) the deductible, which applies
to “Masco Policies for Automobile Liability” (J.A. at 75),
does not apply to UM/UIM claims, and (2) Ohio law forbids
the imposition of a deductible on UM/UIM coverage created
by operation of law. These arguments address the substance
of the parties’ dispute, not whether the dispute falls with the
terms of the arbitration clause, and hence the arguments lie
within the province of the arbitrator.
In essence, Masco attempts to recast its challenge to the
underlying contractual liability as a challenge to the
arbitrability of the dispute. While Masco denies that it is
obligated by the deductible agreement to reimburse Zurich for
deductible amounts that Zurich paid as a result of the
imposition of UM/UIM coverage, it has no argument for
making a particular challenge to the arbitration agreement.
Instead, Masco’s challenge is based squarely on the absence
of an underlying contractual obligation. Masco argues that it
never purchased UM/UIM coverage, that the deductibility
obligation accordingly did not apply to such coverage, and
that, in turn, it cannot be compelled to arbitrate a non-existent
obligation to pay UM/UIM deductibles.
Where challenges to an arbitration clause, like those in this
case, are based on disagreement regarding an underlying
contractual dispute, the Supreme Court’s holding in Prima
Paint Corporation v. Flood & Conklin Manufacturing
Company, 388 U.S. 395 (1967), makes clear that arbitration
is required. Under Prima Paint, a general arbitration clause
is enforceable even if it is contained in a contract that is
generally asserted to be voidable, unless the basis for
rescission applies specifically to the arbitration clause.
It is true that a party opposing a motion to stay and compel
arbitration may argue that the arbitration clause is itself
8 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
invalid. “An arbitration agreement may be invalidated for the
same reasons for which any contract may be invalidated,
including forgery, unconscionability, and lack of
consideration.” Fazio, 340 F.3d at 393. In this case, Masco
argues that the arbitration clause fails because it cannot apply
to a contractual provision that Masco did not agree to. But,
by virtue of Ohio law, the extension of UM/UIM coverage
was legally deemed to be an obligation arising from the
contract, and it is an issue of contract interpretation whether
the deductible reimbursement requirement applied to the
UM/UIM obligation. One seeking to challenge an arbitration
clause must make an argument that is specific to the
arbitration clause, however, and that does not simply
challenge the contractual obligation to which the arbitration
clause applies. See Burden, 267 F.3d at 491.
The dissent concludes that Masco’s obligation to reimburse
Zurich for the UM/UIM deductibles arose from a mutual
mistake, and that the arbitration agreement with respect to
that dispute was infected by the same mutual mistake.
Masco’s complaint contains a claim for contract reformation
based on mutual mistake, but the theory was not otherwise
argued by the parties, and normally this court treats an issue
not raised by a party as waived. Rybarczyk v. TRW, Inc., 235
F.3d 975, 984 (6th Cir. 2000). In particular, the parties have
not addressed whether, under the relevant law, a party can
base a mutual mistake claim on a change in the law
subsequent to the formation of the contract, given the
requirement that the mistake exist at the time the contract was
made. The answer appears to be no. See In the Matter of the
Liquidation of the New York Agency and Other Assets of
Bank of Credit & Commerce Int’l, S.A., 683 N.E.2d 756, 764
(N.Y. 1997) (“The doctrine of mutual mistake requires that
the mistake exist at the time the contract is negotiated.”); cf.
Wheelabrator Envtl. Sys., Inc. v. Galante, 136 F. Supp. 2d 21,
33 (D. Conn. 2001) (holding that the defendant could not base
a defense of mutual mistake on a court decision rendered a
year after the contract was formed); Sheet Metal Workers

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
9
Local 137 v. Vic Constr. Corp., 825 F. Supp. 463, 467
(E.D.N.Y. 1993) (stating that a failure to determine or predict
a controlling interpretation of a statute does not constitute a
mistake); Krantz v. Univ. of Kansas, 21 P.3d 561, 567 (Kan.
2001) (“A subsequent change in the law will not justify
rescission of a settlement agreement or contract on the basis
of ‘mistake of the law.’”).
Even assuming that the mutual mistake theory might apply
in this case, the argument still amounts to an attack on the
underlying liability, and only derivatively on the obligation to
arbitrate. Therefore, under Prima Paint, the general
arbitration provision still applies. The existence of a mutual
mistake leads at most to the conclusion that the underlying
contract obligation was voidable, or subject to rescission.
Chastain v. The Robinson-Humphrey Co, Inc., 957 F.2d 851,
855 (11th Cir. 1992); Gould v. Bd. of Educ. of Sewanhaka
Cent. High Sch. Dist., 616 N.E.2d 142, 145 (N.Y. 1993);
Restatement (Second) of Contracts § 152 (1981). In a similar
situation, where the party objecting to arbitration claimed that
the entire contract was fraudulently induced, the Supreme
Court in Prima Paint nonetheless required arbitration where
the fraudulent inducement did not relate specifically to the
arbitration clause. The Court reasoned that a court may
consider only claims concerning the validity of the arbitration
clause itself, as opposed to challenges to the validity of the
contract as a whole, in determining whether a valid agreement
to arbitrate exists. Prima Paint, 388 U.S. at 402-06; see also
Great Earth Cos., Inc. v. Simons, 288 F.3d 878, 889-90 (6th
Cir. 2002). The reasoning clearly extends beyond the
fraudulent inducement context to cases involving other bases
for rescinding a contract in toto. As the First Circuit
reasoned:
Contrary to Beneficial’s assertion, the fact that its
attempt to rescind the entire agreement is based on the
grounds of frustration of purpose rather than on fraud in
the inducement does not change applicability of the
10 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
2This is not like a case where, for instance, a contract is void for lack
of a valid signature. In such cases, courts have indicated that an
arbitration clause contained in the contract would not be binding. See,
e.g., Chastain v. The Robinson-Hump hrey Co., Inc., 957 F.2d 851, 855
(11th Cir. 1992). Such cases involve the asserted total absence of any
expressed intent to arbitrate contractual issues. There is clearly no such
absence in this case, where at most the contract is void able rather than
void ab initio. (We do not mean to suggest that Prim a Paint cannot apply
in at least some cases of contracts that are allegedly void, only that Prima
Paint does apply where the contract is said to be voidable rather than
void.)
severability doctrine. The teaching of Prima Paint is that
a federal court must not remove from the arbitrators
consideration of a substantive challenge to a contract
unless there has been an independent challenge to the
making of the arbitration clause itself. The basis of the
underlying challenge to the contract does not alter the
severability principle. Thus, the Seventh Circuit,
applying Prima Paint to a case similar to the one before
us, held that a party could not avoid arbitration through
rescission of an entire agreement when it had made no
independent challenge to the arbitration clause. See,
Wilson Wear, Inc. v. United Merchants &
Manufacturers, Inc., 713 F.2d 324, 327-28 (7th Cir.
1983).
Unionmutual Stock Life Ins. Co. of Am. v. Beneficial Life Ins.
Co., 774 F.2d 524, 528-29 (1st Cir. 1985). The reasoning
applies a fortiori to a claim of mutual mistake.2 In the instant
case, Masco’s claims, including its mutual mistake claim, are
entirely unrelated to the arbitration clause. As Masco’s
complaint makes clear, its allegation of mutual mistake
concerns the coverage of the automobile liability policies, not
the arbitration clause itself. Prima Paint accordingly requires
reversal.

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
11
The judgment of the district court is REVERSED and
REMANDED for proceedings consistent with this opinion.
12 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
______________
DISSENT
______________
BOYCE F. MARTIN, JR., Circuit Judge, dissenting. This
is not a simple case. At its core, it asks whether a state-court
decision can trump the clear intent of the parties and bar
access to a declaration of rights in federal court. Because I
believe that Masco and Zurich did not agree to arbitrate this
dispute, I respectfully dissent. When we compel arbitration,
we should actualize the parties' intent. I do not believe that is
what the Court has done.
My principal difference with the Court, and the reason I
cannot join the opinion, is that I believe the arbitration
ag r e e me n t , a s a p p lied to a dispute over
uninsured/underinsured-motorist coverage, is not binding on
the parties due to a mutual mistake. In other words, I believe
the parties did not intend for this dispute to go arbitration.
They did not intend for there to be uninsured/underinsured-
motorist coverage at all.
The law is clear. "Before compelling an unwilling party to
arbitrate, [a] court must engage in a limited review to
determine whether the dispute is arbitrable; meaning that a
valid agreement to arbitrate exists between the parties and the
specific dispute falls within the substantive scope of that
agreement." Bratt Enters., Inc. v. Noble Intern., Ltd., 338
F.3d 609, 612 (6th Cir. 2003). "An arbitration agreement
may be invalidated for the same reasons for which any
contract may be invalidated, including forgery,
unconscionability, and lack of consideration." Fazio v.
Lehman Bros., Inc., 340 F.3d 386, 393 (6th Cir. 2003).
"'[O]rdinarily state-law principles that govern formation of
contracts' will apply to this analysis." Id. at 394 (quoting
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
(1995)). One who challenges an arbitration clause must make

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
13
an argument that is specific to the arbitration clause and does
not challenge the contract as a whole. See Burden v. Check
into Cash of Kentucky, LLC, 267 F.3d 483, 491 (6th Cir.
2001).
There appears to be some dispute as to what state law
governs the validity of the arbitration agreement. Zurich
suggests that New York law applies. Masco is not willing to
concede that New York law applies, but it does not offer a
suggestion of what law applies, or which it would prefer to
apply. The deductibles agreement contains a New York
choice-of-law provision, and the District Court applied New
York law. I need not reach the issue in my reasoning,
however, as there is no conflict between Ohio and New York
state law as to the relevant issue. Both Ohio and New York
recognize that a defense of mutual mistake will generally
support the rescission or reformation of a contract. See
Reilley v. Richards, 69 Ohio St. 3d 352, 352-53, 632 N.E.2d
507, 509 (1994), and Morris v. New York City Employees'
Ret. Sys., 129 F. Supp. 2d 599, 605 (S.D.N.Y. 2001).
Under Ohio law, a "mistake is material when it is a mistake
as to a basic assumption on which the contract was made that
has a material effect on the agreed upon exchange of
promises." R.J. Wildner Contracting Co., Inc. v. Ohio Tpk.,
913 F. Supp. 1031, 1041 (N.D. Ohio 1996). "The mutual
mistake must . . . frustrate the intent of the parties." Ibid.
Similarly, "[u]nder New York law a remedy for mistake is
available only where a mistake of both parties at the time the
contract was made as to a basic assumption on which the
contract was made has a material effect on the agreed
exchange of performance." Emergent Capital Inv. Mgmt.,
LLC v. Stonepath, 165 F. Supp. 2d 615, 624 (S.D.N.Y. 2001)
(internal citations and quotations omitted). The mistake must
speak "to the very nature of the subject sold . . . for example,
where what both parties believed to be barren cow turns out
to be a calf." Ibid.
14 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
I am convinced that under either Ohio law or New York
law the parties' mutual mistake as to their repudiation of
uninsured/underinsured-motorist coverage was fundamental,
and significantly affected their agreed upon exchange of
promises. When Masco and Zurich agreed to arbitrate "any
dispute" arising out of the deductibles agreement, they knew
what the range of those disputes might be. They knew,
because they had just negotiated the substantive terms of the
contract. They both thought this contract was a barren cow,
with uninsured/underinsured-motorist coverage expressly
rejected, not a calf, with coverage aplenty. It is true that an
Ohio Supreme Court case changed the coverage from a barren
cow to a calf, but that does not change the nature of the
mistake. Nor does it change the time of the mistake. The
parties were mistaken as to a key fact – what was being sold
– at the time they agreed to arbitrate "any dispute." By
submitting this case to arbitration, I believe the Court ignores
a clear mutual mistake and judicially constructs intent to
arbitrate when the facts at the time the parties signed the
contract repudiate that construction.
Arbitration is a creature of consent. Inland Bulk Transfer
v. Cummins Engine Co., 332 F.3d 1007, 1015 (6th Cir. 2002).
Consent, in turn, is a creature of intent. It is the parties' intent
and not ours that dictates whether a dispute should be
arbitrated. See Javitch v. First Union Sec., Inc., 315 F.3d 619,
624 (2003). Here the parties were clear as to their intended
coverage relationship, and derivatively clear, although in an
implied way, as to the limited scope of the arbitration
agreement. That the parties were mutually mistaken about the
scope of their uninsured/underinsured-motorist coverage, or
lack thereof, does not change their original limited intent as
to arbitration. To do so by judicial fiat, it seems, would
frustrate their original purpose.
Relatedly, I don't find persuasive the Court's reading of
Prima Paint Corp. v. Flood & Conklin Manufacturing Co.,
388 U.S. 395 (1967). See also Burden 267 F.3d at 491. The

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
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Prima Paint Court held that an argument that contests the
applicability of an arbitration agreement must be specific to
the arbitration agreement and not be a defense that invalidates
the whole contract. Prima Paint, 388 U.S. at 404. Stretched
to an extreme, the Prima Paint Court's instruction could bar
a lower court from looking at the rest of a contract when
analyzing the validity of an arbitration agreement. I do not
believe that was the intent of the Prima Paint Court –
especially in the context of a mutual-mistake defense. The
reasons for not applying an arbitration agreement must be
specific to the arbitration agreement, it is true, but the parties'
intent, as manifested in the whole agreement, certainly can
inform our understanding of the parties' intent as to the scope
of the arbitration agreement. Here, Masco and Zurich's
specific exclusion of uninsured/underinsured-motorist
coverage from their limited relationship suggests that they did
not intend their arbitration agreement to control claims based
on uninsured/underinsured-motorist coverage, or had at least
not expressly agreed to submit those claims to arbitration. It
is our duty to give some effect to that repudiation.
My analysis is not premised on a question of forseeability.
Instead, it gives effect to the parties' contractual language.
See Deputy v. Lehman Bros. Inc., 345 F.3d 494, 513 (7th Cir.
2003). Put in abstract terms, arbitration agreements speak to
the parties' intent regarding how alleged breaches of duties are
to be resolved. If, at the time they agree to arbitrate alleged
breaches of duty A or B, parties to a contract expressly agree
that there is no duty C, I believe it is a logical construction of
the parties' manifested intent not to arbitrate any later alleged
breach of the expressly repudiated duty C.
The Court rejects my view, arguing that my understanding
is a hidden ruling on the merits. I do not think it is. I
concede, as I must, that Masco can, and likely will, assert a
mutual-mistake defense in the substantive dispute. The facts
alleged will be the same, but the legal analysis will be
different. The arbitration analysis looks only at where the
16 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
1The Ma jority distinguishes Chastain v. The Robinson-Humphrey
Co., Inc., 957 F.2d 85 1 (11th Cir. 1992) in a footnote. I, in turn, disagree
in a footno te. In the body o f its opinion, the M ajority argues that: "[t]he
[Prima Paint] Court reasoned that a court may consider only claims
considering the validity of the arbitration clause itself, as opposed to
challenges to the validity of the contract as a whole, in determining
whether a valid agreement exists." Ante at 9. In Chastain , the Eleventh
Circuit reasoned that the Supreme Court's holding in Prima Paint does not
compel the arbitration of "a purported contract which indisp utab ly lacks
the formalities necessary to signal Chastain's ex an te assent to the
agreement as a whole." Id. at 855 . While I believe that Masco's mutual-
mistake argument satisfies the Prima Paint doctrine, it is enough to note
that the Ele venth Circuit believed that an argument, which potentially
could invalidate the contract as a whole, could also defeat an attem pt to
compel arbitration. In essence, the question to ask is whether the
purported invalidating cause can be asserted once or twice. If a party can
only argue that the contract is invalid, then Prim a Paint instructs that the
case should be sent to arbitration. If the argument can be asserted twice
– i.e., (1) the lack of a signature invalidates the arbitration clause, and (2)
the lack of a signature also invalidates the contract as a whole – then
Prima Paint's separability doctrine is satisfied, and a district court is free
parties agreed to resolve a dispute. It is a question of contract
law and contract interpretation. Unlike the Court, I suspect
the resolution of the substantive issue will have very little to
do with Ohio contract law. The parties expressly excluded
uninsured/underinsured-motorist coverage from their
contractual relationship. My hunch is that the parties will be
tossing around arguments regarding: gratuitous payments,
failure to join, implied indemnities, and the like.
Consequently, the trier of the substantive issue will likely
resolve a question of equity and fairness, not a question of
contract law. Thus, I do not think my analysis is a ruling on
the merits. The mutual mistake certainly defeats the claim
that the parties should be compelled to resolve this dispute in
arbitration, but it does not necessarily resolve the merits
question. After reviewing the equities, the trier of the
substantive issue may or may not find in favor of Zurich.
Where to resolve the dispute and how to resolve the dispute
are separate questions.1

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No. 03-3071 Masco Corp. v. Zurich
Am. Ins. Co., et al.
17
to move on to hearing the merits of the ca se. I believe my argum ent is
entirely consistent with this position. As I have explained, the mutual-
mistake defense can be asserted twice.
I admit I am not without some sympathy for Zurich's
argument. The parties agreed that disputes arising out of the
"interpretation, performance or alleged breach" of the
deductibles agreement would be submitted to arbitration. The
Court accepts this contention and believes this is a dispute
about deductibles. I believe that view is too narrow. To
reach the conclusion advanced, the Court has to read the
deductibles agreement and the arbitration clause in a vacuum.
This is actually a dispute about the deductibles agreement as
it relates to uninsured/underinsured-motorist coverage –
coverage that both parties thought at the time they agreed to
arbitrate deductibles disputes had been expressly rejected. At
best, Zurich can argue that the parties probably would have
wanted to submit this type of claim to arbitration, but
"probably" is not enough. Although there is a "liberal federal
policy favoring arbitration agreements," Moses H. Cone
Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24
(1983), and it is "a well established rule that any doubt
regarding arbitrability should be resolved in favor of
arbitration," Fazio, 340 F.3d at 392, "[t]he duty to arbitrate
a dispute derives from the parties' agreement and a party
cannot be required to submit to arbitration any dispute that the
party has not agreed to submit." Bratt Enters., 338 F.3d at
612. Evidence of what they might have done is different than
evidence of what they did. That the arbitration agreement can
be interpreted to cover Zurich's claim is a product of both
parties' mistake, and by submitting this claim to arbitration,
the Court extends the scope of the original agreement to an
extent I do not believe the parties agreed to or intended.
Lastly, I disagree with the Court's alternative holding that
Masco waived the mutual-mistake argument. It is true that
the Court in Rybarczyk v. TRW, Inc., 235 F.3d 975, 984 (6th
18 Masco Corp. v. Zurich
Am. Ins. Co., et al.
No. 03-3071
Cir. 2000), stated that "[f]ailure to raise an issue on appeal
would normally constitute a waiver." But, in the very next
sentence, the Court states: "[h]ere, however, we have a pure
question of law that cries out for resolution – and in such a
situation we are not foreclosed from considering the issue."
Ibid.; see also Hutcherson v. Lauderdale Cty., 326 F.3d 747,
756 (6th Cir. 2003) (holding an appellate court may reach
legal issue not raised by the parties to affirm the lower court).
While I think Masco sufficiently raised the mistake argument
to survive a waiver challenge, even if it hadn't, this is a purely
legal issue that cries out for resolution.
I respectfully dissent.

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