Tire Company Can’t Compel Arbitration in China Under Expired Contract
Yesterday, in Linglong Americas, Inc. v. Horizon Tire, Inc., a unanimous panel of the Sixth Circuit rejected a tire manufacturer’s attempt to compel arbitration of claims in China under a contract that had already expired. The manufacturer and its distributor had a “Collaboration Agreement” with an arbitration clause. The agreement expired in 2011 and was not renewed, but the parties continued to collaborate until, in 2014, a series of events led to the parties suing each other in federal court. The manufacturer sought to compel arbitration of the distributor’s claims pursuant to the arbitration clause in the agreement—which specified China as the forum for any disputes.
In affirming the district court’s denial of the manufacturer’s motion to dismiss, the Sixth Circuit explained that “[a]n arbitration clause survives the expiration of a contract only when the dispute at issue ‘arises under the contract.’” Because the “vast majority” of events underlying the distributor’s claims had occurred after the expiration of the contract and the distributor had “unequivocally and irrevocably” waived any reliance on the agreement as a basis for its claims, the court held that the arbitration clause did not apply to the distributor’s claims.
This case underscores the importance of keeping written agreements current in a business relationship. One should not assume that the conditions in a contract will survive simply because the relationship between the parties continues beyond the contract’s expiration.