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Defamation claims can be arbitrated under a contract containing a broadly-worded arbitration clause, if the alleged defamation arises out of or is related to the performance of the contract, according to a federal district court in Hawaii.
In Metzler Contracting Co. v. Stephens, Civ. No. 07-00261 HG-LEK, 2007 WL 1977732 (D. Haw. July 3, 2007), Metzler Contracting and Stephens entered into a residential construction contract with a broad arbitration clause requiring that any claim arising out of the contract, with a few narrow exceptions, be submitted to binding arbitration.
Metzler Contracting and its owner, John Metzler (Mr. Metzler), sued Stephens for defamation. Stephens moved to compel arbitration, arguing that the defamation claim fell within the broad scope of the contract's arbitration clause.
The Court granted Stephens' motion with respect to the claims by Metzler Contracting. Specifically, the Court held that the defamation claim by Metzler Contracting was subject to the arbitration clause because the claim arose out of and was related to the construction contract. In reaching this holding, the Court observed that the defamation related to Metzler Contracting's competency, quality of work, and financial management in the construction of the Stephens' home, which were the very services provided for in the contract.
The Court acknowledged that some court decisions have found defamation claims outside the scope of an arbitration clause in a service contract, but the Court noted that the defamatory acts in those instances "extended to subject matters outside the scope of the contract," or were subject to a narrow arbitration clause that specifically "limited arbitration to matters involving warranty, contract, negligence or strict liability." In contrast, the arbitration agreement in this case included a provision specifically addressing damage to persons, which was essentially the character of the defamation claim by Metzler Contracting.
Nevertheless, the Court limited its order compelling arbitration to the defamation claim brought by Metzler Contracting, thus permitting litigation of Mr. Metzler's personal claim of defamation against Stephens. The Court declined to compel arbitration of the Mr. Metzler's defamation claim because only Metzler Contracting was party to the contract.
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