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A state court in Delaware held that an arbitration agreement contained in one agreement may not be used to compel arbitration of disputes arising out of a separate agreement between the parties, even though both agreements were signed on the same day, when the dispute arises out of an agreement that does not contain an arbitration clause.
In Hough Associates, Inc. v. Hill, No. Civ. A. 2385-N, 2007 WL 148751 (Del. Ch. Jan. 17, 2007), Hill, an employee of Hough, worked for twenty years as the head of an electrical and instrumental engineering team for Hough's client Dupont.
When Dupont decided to replace Hough with another company, that company offered Hill basically the same job that he had with Hough. Hill not only accepted, but also induced the rest of his team to do the same.
When Hough brought an action against Hill claiming that Hill violated a Non-Competition Agreement between the parties, Hill asked the court to compel arbitration. However, the Court refused to compel arbitration because there was no arbitration agreement in that contract.
To support his motion to compel arbitration, Hill relied on a written agreement to arbitrate in a separate Stock Purchase Agreement, which the parties signed on the same day as the Non-Competition Agreement. However, the Court held that this arbitration agreement did not cover disputes arising out of the Non-Competition Agreement.
Both agreements contained integration clauses, emphasizing their independence. In addition, the Non-Competition Agreement contained a specific remedial section with fee-shifting terms "directly contrary" to those listed in the contract containing the arbitration agreement.
Noting that "no absurdity arises" from deciding that the same parties decided to resolve different kinds of disputes in different ways, the court rejected Hill's request to compel arbitration.
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