Missouri Federal Court Finds That Arbitration Agreement Survived Contract Termination

Granting a motion to compel arbitration in a business dispute, a Missouri federal court held that an arbitration agreement survives termination of a contract even when the contract expressly states that all obligations cease save those provisions specifically referenced as surviving termination. 

In Medscript PBM, Inc. v. Procare PBM, Inc., No. 4:08CV0293 AGF, 2008 WL 4941002 (E.D. Mo. Nov 17, 2008), prescription benefits administrator Medscript hired prescriptions benefits consultant Procare. The contract stated that “all obligations specified herein shall cease except any provision specifically referenced as surviving this agreement’s termination.” Additionally, the contract contained an arbitration agreement. 

Medscript terminated the agreement in April 2006. In October 2006, Medscript informed Procare that it owed approximately $100,000 and requested that it cooperate in conducting an audit to ascertain the amount owed. In March 2007, Medscript sued in Missouri state court for breach of contract and unjust enrichment, and sought an equitable audit. Procare removed the case to federal court and moved to compel arbitration, arguing that the contract’s arbitration agreement remained in force based on the general rule that arbitration agreements survive termination of a contract and the strong federal policy favoring arbitration. Medscript responded that the arbitration agreement did not survive termination given that the arbitration agreement was not expressly mentioned as surviving termination in the contract. 

Granting Procare’s motion to compel arbitration, the Court held that the arbitration agreement survived the contract’s termination. Under the United States Supreme Court decision in Litton Financial Printing Division, a Division of Litton Business Systems., Inc. v. NLRB, 501 US. 190, (1991), structural provisions relating to remedies and dispute resolution may survive to enforce duties arising under the contract. Additionally, the Court found that the arbitration agreement’s broad language covering “any controversy or claim arising from or relating to [the contract]” presumably covered disputes arising from the agreement’s termination because “the parties did not intend a pivotal dispute resolution provision to terminate for all purposes upon the expiration of the agreement.” Otherwise, the arbitration agreement would only cover disputes that did not result in the agreement’s termination, which would render meaningless the arbitration agreement’s expansive language. Finally, the Court found that all of Medscript’s claims were subject to arbitration.