NELSON, Circuit Judge:
Defendant-appellant Ssangyong Construction Co. (Ssangyong) appeals the district court's interlocutory order staying the action and sending to arbitration certain issues raised in a complaint filed by plaintiff-appellee Mediterranean Enterprises, Inc. (MEI). Ssangyong contends that the district court improperly interpreted the scope of the arbitration clause in a contract between the parties. We affirm the district court's order.
FACTUAL AND PROCEDURAL BACKGROUND
MEI, a California corporation, provides engineering services for modular housing projects in developing countries. In May, 1978, MEI was invited by the Saudi Arabian Royal Commission to bid on certain construction projects in Saudi Arabia. In connection with this invitation, MEI contacted Ssangyong, a Korean contractor.
Subsequently, MEI and Ssangyong entered into an Agency Agreement dated October 21, 1978, with Trac Enterprises, providing that Trac would serve as the agent of the joint venture in Saudi Arabia.
The contemplated MEI—Ssangyong joint venture was never actually formed. In its complaint, MEI alleges that Ssangyong used the Agreement merely to gain access to the Saudi projects, and wrongfully commenced the projects in association with Trac (named as a defendant below) rather than with MEI. Ssangyong claims that no breach occurred, and that its non-performance of the Agreement was due to its inability to obtain certain Korean government approvals required by paragraph 20 of the Agreement.
On November 5, 1980, MEI commenced this action in district court. The complaint contains six counts against Ssangyong: breach of contract and breach of fiduciary duty (counts 1, 2 and 4), inducing and conspiracy to induce breach of contract [the Trac Agency Agreement] (count 7), quantum meruit (count 8), and conversion (count 9).
On November 9, 1981, the district court rejected MEI's contention that Ssangyong had fraudulently inserted the words "arising hereunder or" in the arbitration clause, and ordered Ssangyong to prepare findings of fact and conclusions of law on all of the issues relating to its motion to stay the proceedings pending arbitration. Ssangyong submitted its proposed findings and conclusions, which the court signed shortly thereafter. On December 1, 1981, the court held a hearing on the scope of the arbitration clause and took the matter under submission.
On July 19, 1982, the court entered its order amending one earlier conclusion of law, stating:
The order also provides that "the action is stayed pending receipt by this court of the results of the arbitration between [MEI] and [Ssangyong]." It is from this order that Ssangyong appeals.
This court has jurisdiction over the district court's order. As a general rule, the "grant or denial of a stay of an action pending arbitration ... is not a `final decision' appealable under 28 U.S.C. § 1291." Danford v. Schwabacher, 488 F.2d 454, 455 (9th Cir.1973). However, under 28 U.S.C. § 1292(a)(1) (1976), this court has jurisdiction over appeals from "[i]nterlocutory orders of the district courts ... granting, continuing, modifying, refusing, or dissolving injunctions, or refusing to dissolve or
An appeal from a stay order lies if two conditions are met:
Danford, 488 F.2d at 455, quoted in Brannon, 508 F.2d at 118. Both prongs of the test are satisfied here. See Wren v. Sletten Construction Co., 654 F.2d 529, 532-33 (9th Cir.1981).
The second prong is satisfied because reliance upon an arbitration agreement to avoid immediate litigation is an equitable defense. See, e.g., Schanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 452, 55 S.Ct. 313, 314-15, 79 L.Ed. 583, 586-87 (1935); Wren, 654 F.2d at 533; Danford, 488 F.2d at 456.
To determine whether the first prong of the test is satisfied, we must examine MEI's complaint to determine whether it would have been considered legal or equitable prior to the merger of the two forms of action. See Brannon, 508 F.2d at 118-19; Danford, 488 F.2d at 456. When the complaint is arguably a combination of legal and equitable claims, this circuit has applied a "dominant purpose" test, which provides that when the complaint is "wholly or basically and predominantly an action at law," it is considered legal for the purpose of satisfying the test's first prong. Alexander v. Pacific Maritime Ass'n, 332 F.2d 266, 267 (9th Cir.) (dictum), cert. denied, 379 U.S. 882, 85 S.Ct. 144, 13 L.Ed.2d 88 (1964), quoted in Brannon, 508 F.2d at 119.
In this case, the first prong is satisfied because MEI's complaint is predominantly an action at law. MEI seeks money damages in each of its six counts against Ssangyong, and while count 8, quantum meruit, is an equitable claim, MEI's other counts can be classified as legal. Counts 1, 2, and 7, which allege breach of contract and inducing breach of contract, are actions at law. See Wren, 654 F.2d at 533; Bear v. Hayden, Stone, Inc., 526 F.2d 734, 735 (9th Cir.1975). Count 4, alleging breach of fiduciary duty, has been considered an action at law when, as in this case, money damages are sought. Cf. Austin v. Wilcoxson, 149 Cal. 24, 26-27, 84 P. 417, 418-22 (1906); Ripling v. Superior Court, 112 Cal.App.2d 399, 403-07, 247 P.2d 117, 119 (1952) (actions alleging impropriety by trustees). Count 9, conversion, was also historically classified as a legal action. See, e.g., United States v. Bitter Root Development Co., 200 U.S. 451, 471-72, 26 S.Ct. 318, 324-25, 50 L.Ed. 550, 560-61 (1906); see also 1 T. Street, Federal Equity Practice 26-29 (1909).
II. Interpretation of the Arbitration Clause
A. Standard of review and applicable law
A determination of the arbitrability of a dispute, like the interpretation of any
The district court's order followed Ssangyong's motion to stay brought pursuant to 9 U.S.C. § 4, a section of the Federal Arbitration Act (Act), 9 U.S.C. § 1 et seq. (1976). The district court correctly found that "the written arbitration provision is part of a `contract evidencing a transaction involving commerce' within the meaning of [9 U.S.C. § 2 (1976)]." An action brought under the Act is properly characterized as arising under the body of federal law regulating interstate commerce. See generally Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); Grand Bahama Petroleum Co. v. Asiatic Petroleum Corp., 550 F.2d 1320 (2d Cir.1977). Federal law therefore applies to our determination of the scope of this arbitration agreement.
B. Policy considerations
The parties cite strong policies in support of their respective positions. Ssangyong argues that federal policy favors the enforcement of arbitration agreements, especially in international business transactions, citing Scherk v. Alberto-Culver Co., 417 U.S. 506, 516-17, 94 S.Ct. 2449, 2455-56, 41 L.Ed.2d 270, 279-80 (1974). MEI does not dispute the existence of such a federal policy, but counters by arguing that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit," quoting United Steel Workers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409, 1417 (1960). Both statements are sound, and are not at all unreconcilable. Ultimately, the issue of arbitrability "is to be determined by the contract entered into by the parties." Drake Bakeries, 370 U.S. at 256, 82 S.Ct. at 1348, 8 L.Ed.2d at 476; accord West Coast Telephone Co. v. Local Union No. 77, International Brotherhood of Electrical Workers, 431 F.2d 1219, 1221 (9th Cir.1970). The task before this court remains one of contractual interpretation.
C. Scope of "arising hereunder"
Ssangyong argues that the arbitration clause "was designed to cover `any' disputes between the parties." MEI argues that the phrase "arising hereunder" means "arising under the contract itself" and was not intended to cover "matters or claims independent of the contract or collateral thereto." Neither side points to, and additional research has not uncovered, cases in this circuit which define "arising hereunder" in the context of an arbitration agreement. However, we are persuaded by a line of cases from the Second Circuit that MEI's interpretation is the more reasonable one.
In a recent case, a district court amplified Judge Medina's reasoning. In Michele Amoruso e Figli v. Fisheries Development Corp., 499 F.Supp. 1074, 1080 (S.D.N.Y. 1980), the court discussed the Supreme Court's interpretation of an arbitration clause, noting that "arising out of or relating to this agreement" had been labelled a "broad arbitration clause." Id. (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 398, 87 S.Ct. 1801, 1803, 18 L.Ed.2d 1270, 1274 (1967)). The court went on to say that in the case before it, "the clause is limited to differences or disputes `arising out of this Agreement'; notably, it omits reference to disputes `relating to' the agreements. The omission is significant in the Second Circuit." Michele Amoruso e Figli, 499 F.Supp. at 1080.
The omission should be significant in this circuit as well. The standard clause suggested in the U.S.—Korean Commercial Arbitration Agreement contains the phrase, "out of or in relation to or in connection with this contract, or for the breach thereof." We have no difficulty finding that "arising hereunder" is intended to cover a much narrower scope of disputes, i.e., only those relating to the interpretation and performance of the contract itself.
D. Arbitrability of claims
In light of our interpretation of the arbitration clause in the Agreement, we must next decide whether the district court properly sent "the issues raised by" counts 1, 2 and 4 to arbitration. This entails examining MEI's complaint to determine the extent to which the counts against Ssangyong refer to disputes or controversies relating to the interpretation and performance of the contract itself.
Counts 1, 2 and 4, alleging breach of the Agreement and breach of the fiduciary duty created by the Agreement, clearly fall within the scope of the arbitration clause and are thus proper subjects for arbitration. However, counts 7, 8 and 9 appear to raise issues that are either primarily or wholly outside the scope of the arbitration clause.
Count 7 alleges that Ssangyong induced and conspired to induce breach of the Trac Agency Agreement, a separate and distinct contract. Ssangyong's alleged conduct appears to relate only peripherally to the MEI-Ssangyong Agreement, and could have been accomplished even if the Agreement did not exist. Count 7 therefore alleges activity and raises issues which are predominantly unrelated to the central conflict over the interpretation and performance of the Agreement.
Count 8 sets forth a claim in quantum meruit, which by its own terms rests on the theory that services were performed and accepted pursuant to an implied contract or "quasi-contract." An action does not lie on an implied contract where there exists between the parties a valid express contract which covers the identical subject matter. Swanson v. Levy, 509 F.2d 859, 861 (9th Cir.1975). Thus, by definition, count 8 does not directly relate to the interpretation
Count 9 alleges that Ssangyong converted to its own use and benefit certain prequalification documents delivered by MEI. The Agreement provides only that each of the parties would bear his own costs at the prequalification stage. MEI's claim that Ssangyong misappropriated these documents appears to raise issues largely distinct from the central conflict over the interpretation and performance of the Agreement itself.
By sending "the issues raised by" counts 1, 2 and 4 to arbitration, the district court authorized the arbitrator, in accordance with the expressed intention of the parties, to decide those issues relating to the interpretation and performance of the Agreement. Counts 1, 2 and 4 appear to be completely arbitrable. By deciding those issues necessary to resolve counts 1, 2 and 4, the arbitrator might well decide issues which bear in some way on the court's ultimate disposition of counts 7, 8 and 9. Nothing in the district court's order, or in this opinion, would bar such a result. The arbitrator's award, if it clearly exceeds the scope of his authority by deciding a matter not within the ambit of the arbitration clause, will not be given effect by the court. See Los Angeles Paper Bag Co. v. Printing Specialities and Paper Products Union, 345 F.2d 757, 760 (9th Cir.1965); Lundgren v. Freeman, 307 F.2d 104, 109-10 (9th Cir.1962). See also Davis v. Chevy Chase Financial Ltd., 667 F.2d 160, 165 (D.C.Cir.1981). After the district court receives the results of the arbitration, it should proceed to adjudicate those issues which fall outside the scope of the arbitration clause.
III. Propriety of the Stay Pending Arbitration
We should overturn a trial court's stay of an action only when we believe the court has abused its discretion. See Filtrol Corp. v. Kelleher, 467 F.2d 242, 244 (9th Cir.1972), cert. denied, 409 U.S. 1110, 93 S.Ct. 914, 34 L.Ed.2d 691 (1973). The trial court possesses the inherent power to control its own docket and calendar. Landis v. North American Co., 299 U.S. 248, 254-55, 57 S.Ct. 163, 165-66, 81 L.Ed. 153, 158-59 (1936); accord Leyva v. Certified Grocers of California, Ltd., 593 F.2d 857, 864 (9th Cir.), cert. denied, 444 U.S. 827, 100 S.Ct. 51, 62 L.Ed.2d 34 (1979). As this circuit recently stated,
Leyva, 593 F.2d at 863-64 (citing Kerotest Manufacturing Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 72 S.Ct. 219, 96 L.Ed. 200 (1952)). We believe that under the circumstances presented in this case, the district court did not abuse its discretion by staying the action pending receipt of the results of arbitration.
We find the district court's order staying the action and sending to arbitration certain issues raised by MEI's complaint proper in all respects.
Accordingly, the order is
The rule has been justifiably criticized as "extremely difficult to apply" in cases where the complaint contains a mixture of legal and equitable claims. C. Wright, Handbook of the Law of Federal Courts § 102, at 515 (3d ed. 1976). This circuit has called the rule "peculiar," and has labelled it "a remnant from the jurisprudential attic." Danford, 488 F.2d at 455-56. Despite its arcane nature, the rule has not yet been discarded by the Supreme Court and remains the law of this circuit.