ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEES:
DUANE HARTMAN HAROLD ABRAHAMSON
PATRICK LYP JOHN P. REED
Valparaiso, Indiana Hammond, Indiana
COURT OF APPEALS OF INDIANA
DANNY MISLENKOV and SHORELAND )
METALS, INC., )
vs. ) No. 45A04-0004-CV-137
ACCURATE METAL DETINNING, INC., )
and NEIL B. BERG, )
APPEAL FROM THE LAKE CIRCUIT COURT
The Honorable Lorenzo Arredondo, Special Judge
Cause No. 45C01-9811-CT-2753
January 23, 2001
OPINION - FOR PUBLICATION
SHARPNACK, Chief Judge
This case comes to us on interlocutory appeal. Danny Mislenkov and Shoreland
Metals, Inc. (Shoreland) appeal the trial courts denial of their motion to dismiss
the complaint of Accurate Metal Detinning, Inc. and Neil B. Berg (collectively, Accurate
Metal). Mislenkov and Shoreland raise one issue, which we restate as whether
the trial court erred when it denied their motion to dismiss. We
The relevant facts follow. Mislenkov is the developer and owner of a
patented process for removing tin from tin-coated metals. Accurate Metal engages in
the business of removing tin from copper, a process known as detinning.
Prior to June 1997, Mislenkov had worked for Accurate Metal for approximately eighteen
months. On or about June 1, 1997, the employment relationship between Mislenkov
and Accurate Metal was terminated. On June 13, 1997, Mislenkov and Berg,
who was acting as president of Accurate Metal, signed an employment agreement.
The agreement contained an arbitration clause that provided, in relevant part, that [a]ny
controversy or claim arising out of or relating to this Agreement shall be
settled by arbitration . . . . Record, p. 31. It
is unclear whether Mislenkov actually worked for Accurate Metal under the June 13,
1997, employment agreement.
Accurate Metal subsequently filed suit against Mislenkov and Shoreland, asserting that while Mislenkov
had been employed at Accurate Metal, and prior to termination of his employment
on or about June 1, 1997, he devoted a substantial portion of his
time and efforts . . . to purloining [Accurate Metals] technology and customers,
and to the establishment . . . of his own separate and distinct
competing business, . . . [namely] Shoreland Metals, Inc. Record, pp. 10-11.
Mislenkov and Shoreland responded by filing a motion to dismiss pursuant to
Ind. Trial Rule 12(B)(1), asserting that the trial court lacked subject matter jurisdiction
over Accurate Metals claims because Mislenkov and Accurate Metal had agreed in the
June 13, 1997, agreement to submit all employment-related claims to arbitration. The
trial court denied Mislenkov and Shorelands motion to dismiss, holding that the actions
complained of do not fall within the purview of the arbitration clause.
Record, p. 64. The trial court subsequently certified its ruling on the
arbitration issue for interlocutory appeal.
When ruling on a motion to dismiss for lack of subject matter jurisdiction,
the trial court may weigh evidence and resolve factual disputes. Walters v.
Modern Aluminum, 699 N.E.2d 671, 673 (Ind. Ct. App. 1998), trans. denied.
The trial court may also consider the pleadings, affidavits, and any other evidence
submitted. Id. Generally, the burden of proving that the court does
not have jurisdiction rests with the opponent of jurisdiction. Id. On
appeal, we accept as true the facts as set forth in the complaint.
Group Dekko Serv. LLC v. Miller, 717 N.E.2d 967, 968 (Ind. Ct.
App. 1999), rehg denied.
Here, Mislenkov and Shoreland assert that the trial court lacked subject matter jurisdiction
over Accurate Metals claims because the alleged harm occurred while Mislenkov was working
for Accurate Metal, and because Accurate Metal had agreed to submit all claims
arising out of Mislenkovs employment to arbitration.
A party seeking to compel arbitration must satisfy a two-pronged burden of proof.
First, the party must demonstrate the existence of an enforceable agreement to
arbitrate the dispute. Wilson Fertilizer & Grain, Inc. v. ADM Milling Co.,
654 N.E.2d 848, 849 (Ind. Ct. App. 1995), trans. denied. Second, the
party must prove that the disputed matter is the type of claim that
the parties agreed to arbitrate. Id. Once the court is satisfied
that the parties contracted to submit their dispute to arbitration, the court is
required by statute to compel arbitration. See Ind. Code § 34-57-2-3(a); Homes
By Pate, Inc. v. DeHaan, 713 N.E.2d 303, 306 (Ind. Ct. App. 1999).
When determining whether the parties have agreed to arbitrate a dispute, we
apply ordinary contract principles governed by state law. St. John Sanitary Dist.
v. Town of Schererville, 621 N.E.2d 1160, 1162 (Ind. Ct. App. 1993).
In addition, [w]hen construing arbitration agreements, every doubt is to be resolved in
favor of arbitration, and the parties are bound to arbitrate all matters, not
explicitly excluded, that reasonably fit within the language used. Id. (quoting Ziegler
v. Whale Sec. Co., 786 F. Supp. 739, 741. (N.D. Ind. 1992)).
However, parties are only bound to arbitrate those issues that by clear language
they have agreed to arbitrate; arbitration agreements will not be extended by construction
or implication. International Bhd. of Elec. Workers, Local 1400 v. Citizens Gas
& Coke Util., 428 N.E.2d 1320, 1325 (Ind. Ct. App. 1981) (quoting Board
of Educ. v. Champaign Educ. Assn, 15 Ill.App.3d 335, 340, 304 N.E.2d 138,
142 (Ill. App. Ct. 1973)).
Turning to the first prong of the analysis, there is no dispute that
the employment agreement between Mislenkov and Accurate Metal, including the arbitration clause, is
enforceable as to those two parties. Shoreland, however, was not a party
to the employment agreement. Generally, only those who are parties to a
contract or those in privity with a party have the right to enforce
the contract. Indiana Gaming Co. v. Blevins, 724 N.E.2d 274, 277 (Ind.
Ct. App. 2000), trans. denied. Privity has been defined as mutual or
successive relationships to the same right of property, or an identification of interest
of one person with another as to represent the same legal right.
Riehle v. Moore, 601 N.E.2d 365, 371 (Ind. Ct. App. 1992) (quoting Blacks
Law Dictionary 1199 (6th ed. 1990)), trans. denied. The record does not
demonstrate that Shoreland had a mutual or successive relationship with Mislenkov with regard
to property or that their interests are so identical as to represent the
same legal right. Consequently, Shoreland is not a privy of Mislenkov.
See id. Because Shoreland was not a party to the employment agreement
and is not in privity with Mislenkov, Shoreland is not entitled to compel
arbitration of Accurate Metals claims against it by means of the arbitration clause.
See Angell Enter., Inc. v. Abram & Hawkins Excavating Co., 643 N.E.2d
362, 365 (Ind. Ct. App. 1994) (determining that a group of subcontractors could
not use an arbitration clause in a contract between a general contractor and
an owner to compel the owner to submit its claims against the subcontractors
to arbitration because the subcontractors were not parties to the agreement), on rehg.
Consequently, we affirm the trial courts judgment as it applies to Shoreland.
Turning to the second prong of the analysis, we must determine whether Accurate
Metals claims against Mislenkov are the type of claim that the parties agreed
Wilson Fertilizer & Grain, Inc., 654 N.E.2d at 849.
A review of our rules of contract interpretation is necessary. When reviewing
the trial courts interpretation of a contract, we view the contract in the
same manner as the trial court. Exide Corp. v. Millwright Riggers, Inc.,
727 N.E.2d 473, 478 (Ind. Ct. App. 2000), trans. denied. The court
should attempt to determine the intent of the parties at the time the
contract was made by examining the language used to express their rights and
duties. Id. Words used in a contract are to be given
their usual and common meaning unless, from the contract and the subject matter
thereof, it is clear that some other meaning was intended. Id. at
478-479. Words, phrases, sentences, paragraphs, and sections of a contract cannot be
read alone. Id. at 479. The entire contract must be read
together and given meaning, if possible. Id.
In this case, Accurate Metals complaint asserts that, prior to Mislenkovs termination on
or about June 1, 1997, he devoted a substantial portion of his time
and efforts during said employment to . . . purloining [Accurate Metals] technology
and customers, and to the establishment . . . of his own separate
and distinct competing business, [namely] Shoreland Metals, Inc. Record, pp. 10-11. Thus,
Accurate Metal is accusing Mislenkov of stealing its trade secrets throughout the course
of his employment. However, Mislenkov and Accurate Metal did not sign the
employment agreement on which Mislenkov relies until June 13, 1997, which was after
Mislenkov had been terminated. Thus, the crucial question is whether the agreement
governs prior wrongdoing by Mislenkov. The employment agreement provides, in relevant part:
1. RELEASE. Any prior agreements and provisions within the agreements between
[Accurate Metal] and [Mislenkov] are terminated at this date . . . .
Both parties are released from any and all of the responsibilities and
duties under the prior agreements. The Employment Agreement and Release shall be
the sole contract which may be enforced against the parties. . . .
* * * * *
9. ARBITRATION CLAUSE. Any controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in Valparaiso, Indiana in
accordance with the rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrators may be entered in court having jurisdiction thereof.
Record, pp. 30-31.
Thus, the arbitration provision provides that the parties must arbitrate disputes arising out
of or relating to the agreement, not to the parties employment relationship in
general. By its plain language, the agreement invalidates all prior employment contracts
between Accurate Metal and Mislenkov and provides that it is the sole contract
which may be enforced against the parties, but that does not demonstrate that
it applies retroactively. Record, p. 30. We are bound to resolve
doubts in favor of arbitration, but Accurate Metals claims of pre-agreement wrongdoing do
not reasonably fit within the specific language the parties used in the agreement.
Cf. St. John Sanitary Dist., 621 N.E.2d at 1163 (determining that a
sewer companys challenge to a municipalitys rate increase was at the heart of
the parties contract and was subject to arbitration). Consequently, the Accurate Metals
claims against Mislenkov do not fall within the purview of the arbitration clause,
and the judgment of the trial court must be affirmed with regard to
Mislenkov as well.
For the foregoing reasons, we affirm the judgment of the trial court.
Baker, J. and Vaidik, J. concur.
Mislenkov and Shoreland contend that Accurate Metal is challenging the applicability
of the employment agreement to Shoreland for the first time on appeal, and
has therefore waived the issue. We disagree. The issue of whether
the employment agreement applies to Shoreland is determinative of the trial courts subject
matter jurisdiction over Accurate Metals claims against Shoreland, and challenges to subject matter
jurisdiction cannot be waived.
See Schafer v. Sellersburg Town Council, 714 N.E.2d
212, 215 (Ind. Ct. App. 1999), trans. denied. Because subject matter jurisdiction
cannot be waived, we must address the issue even if the parties did
not properly raise it. See id.
It appears from the record that Mislenkov and Accurate Metal had
signed a prior employment agreement that also contained an arbitration clause. However,
that agreement has not been included in the record, and no argument that
it applies has been made, so we cannot consider whether Accurate Metals claims
would be subject to arbitration pursuant to that agreements terms.