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August 15, 2005.


The opinion of the court was delivered by: AMY REYNOLDS HAY, Magistrate Judge



It is respectfully recommended that the motion to dismiss ParaTec's cross-claims (Docket No. 104-1) submitted on behalf of defendants Crompton Corporation and Uniroyal Chemical Company, Inc. be granted as to Counts IV, V, VI and VII and denied in all other respects, and that the motion to compel arbitration (Docket No. 104-2) be denied.


  Plaintiffs commenced this class action suit under Section 1 of the Sherman Act, 15 U.S.C. § 1, alleging that defendants are manufacturers and sellers of NBR, or acrylonitrile-butadiene rubber, and have engaged in a "global combination or conspiracy to suppress and eliminate competition which had the effect of raising, maintaining, or stabilizing the price of NBR sold in the United States and elsewhere."*fn1 Defendant ParaTec Elastomers LLC ("ParaTec") filed cross-claims against defendants Crompton Corporation ("Crompton") and Uniroyal Chemical Company, Inc. ("Uniroyal"), alleging that it is entitled to indemnification from Crompton with respect to plaintiffs' claims and that Crompton and Uniroyal have breached their contractual duties owed to ParaTec.

  According to ParaTec's cross-claims, ParaTec was created in September of 1998 as the result of a joint venture between Uniroyal, which was subsequently subsumed by Crompton,*fn2 and GIRSA S.A. de C.V., a predecessor of defendant DESC S.A. de C.V. ("DESC").*fn3 ParaTec's function was to market certain NBR products produced by a related manufacturing company that was also created by the joint venture.*fn4 ParaTec alleges that the marketing activities for these NBR products had previously been performed by employees of Crompton and that when ParaTec began operations it continued to provide the same services using the same offices and employees that Crompton had used.*fn5 Thus, according to ParaTec, although it was functioning as a new corporate entity, Crompton's employees were still providing the marketing services but were doing so for ParaTec's benefit.*fn6

  This arrangement was apparently governed by two agreements, a Sales Service Agreement and a Corporate Service Agreement, which purportedly allowed Crompton to control and manage ParaTec's marketing services and daily operations which, in turn, allowed it to play a critical role in determining the prices for ParaTec's NBR products.*fn7 The Sales Service Agreement contained a provision in which Crompton agreed to carry out its services in accordance with accepted industry standards and both agreements provided that the parties would be liable to one another for breaches of the agreement brought about by gross negligence or willful misconduct.*fn8

  In December of 2001, Crompton apparently sold its interest in ParaTec to a subsidiary of DESC. According to ParaTec's cross-claims, the transaction was governed by two other agreements: the Share Purchase Agreement, pursuant to which Crompton was to continue to operate ParaTec in an appropriate and legal manner through payment of the selling price, and the Transition Services Agreement, which provided for a transition period even after payment had been made whereby Crompton was to continue to provide certain services for at least one year after receiving payment for its share of ParaTec.*fn9 The Transition Service Agreement also provided that Crompton could be held liable for losses caused by its gross negligence or willful misconduct.*fn10

  A fifth agreement, ParaTec's Limited Liability Company Agreement (the "LLC Agreement"), which was executed in September of 1998, also governed ParaTec's operations and the parties' relationships and respective obligations.*fn11 The LLC Agreement contains an indemnification provision pursuant to which, according to ParaTec, Crompton agreed to indemnify ParaTec for any losses or liabilities it incurs as the result of Crompton's improper conduct, including breaches of representations and covenants in the LLC Agreement and the other agreements referenced above.*fn12

  ParaTec alleges that, because its operations were controlled and conducted by Crompton, any involvement in an unlawful conspiracy as alleged by plaintiffs, is necessarily attributable to Crompton and its employees and that, if Crompton, in fact, operated ParaTec in a manner violative of federal antitrust laws, then Crompton has also breached its obligations, representations and covenants in the Agreements thereby entitling ParaTec to indemnification under the LLC Agreement.*fn13

  ParaTec also claims that, to avoid facing criminal liability for violating the antitrust laws, it subsequently entered into an oral agreement with Crompton whereby it would provide Crompton with records and information which Crompton was to disclose to the appropriate authorities in an effort to obtain immunity for both parties.*fn14 Although Crompton successfully obtained immunity for itself and ParaTec from the United States regulatory authority, Crompton only sought and obtained immunity for itself in the European Union which was not only detrimental to ParaTec but in violation of their agreement.*fn15

  ParaTec filed its cross-claims on June 22, 2004, bringing claims against both Crompton and Uniroyal for contractual indemnification pursuant to the LLC Agreement (Count I); breach of fiduciary duty for failing to operate ParaTec in a lawful manner (Count II); breach of covenant of good faith and fair dealing for refusing to indemnify ParaTec under the LLC Agreement (Count III); and violation of the Connecticut Unfair Trade Practices Act, Gen. Stat. §§ 42-110a, et seq. (Count IV). ParaTec has also brought claims against Crompton alone for breach of contract (Count V), fraud (Count VI), and promissory estoppel (Count VII) which revolve around the alleged oral agreement regarding immunity.

  Crompton has now filed a motion to dismiss ParaTec's cross-claims arguing that ParaTec's first and third claims are properly dismissed as it has no right to indemnification for violations of the Sherman and Clayton Acts and that ParaTec's remaining claims are improper under Rule 13(g) and for want of subject matter jurisdiction. Defendants alternatively ask, in the event that any of ParaTec's claims survive the motion to dismiss, that the Court compel arbitration of those claims pursuant to "the parties' multiple binding arbitration agreements" and the Federal Arbitration Act, 9 U.S.C. § 1, et seq ("FAA").

  Where a motion to compel arbitration has been filed, however, the court may only consider issues relating to the agreement to arbitrate. Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 404 (1967); Great Western Mortg. Corp. v. Peacock, 110 F.3d 222, 228 (3d Cir.), cert. denied, 522 U.S. 915 (1997). If a valid arbitration agreement is found to exist, any issues revolving around the complaint are properly decided by the arbitrator. Id. See AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649-50 (1986); Labib v. Younan, 755 F. Supp. 125, 127 (D.N.J. 1991) ("It is the duty of the court only to determine whether a dispute is arbitrable, and not to consider the merits of the action.") See also Merit Insurance Co. v. Leatherby Insurance Co., 581 F.2d 137, 142 (7th Cir. 1978) ("If the agreement to arbitrate is valid the court has no further power or discretion to address the issues raised in the complaint but must order arbitration.") ...

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