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An arbitration agreement stating that parties “may” submit a dispute to arbitration mandates arbitration once one of the parties indicates a desire to arbitrate a dispute, a federal court in Utah held.
In Zars, Inc. v. LTS Lohmann Therapy Systems Corp., No. 2:05-CV-198 TC, 2006 WL 2992719 (D. Utah Oct. 18, 2006), Zars and LTS entered into a Memorandum of Understanding (MOU) regarding the development, manufacture and sale of a self-adhesive pain reliever patch.
The MOU contained an arbitration agreement, and after a dispute arose, LTS sought a court order compelling arbitration. Zars argued that it should not be compelled to arbitrate because the arbitration agreement stated that either party may submit a dispute to arbitration. This language, Zars argued, indicated that the arbitration agreement was not mandatory.
However, the Court disagreed and held that a plain language reading of the agreement indicated that once one of the parties invoked the arbitration clause, both parties were required to arbitrate the dispute. The word “may” does not make an arbitration agreement permissive and does not allow a veto of the other party’s decision to arbitrate.
The Court also noted that decisions from other districts supported its conclusion. See, e.g., Block 175 Corp. v. Fairmont Hotel Mgmt. Co., 648 F.Supp. 450 (D. Colo. 1986); Held v. Nat’l R.R. Passenger Corp., 101 F.R.D. 420 (D. D.C. 1984). Therefore, the Court granted LTS’s request to compel arbitration of the dispute.
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