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CAPROC Manager4/18/2005
ity of Defendants' purported removal of CAPROC Manager is subject to arbitration. The arbitration provision in Nash was relatively narrow and related specifically to resolving disputes regarding the Closing Balance Sheet. The arbitration clause in this case is broad. In addition, unlike the situation in Nash, the "factual questions" CAPROC contends exist here as to whether the parties intended the arbitration provision to apply to removal are inextricably intertwined with its underlying claim on the merits. CAPROC's position rests on the premise that the LLC Agreement does not provide for any removal of the Managing Shareholder. To evaluate that premise for purposes of determining arbitrability, the Court necessarily would have to address factual and legal questions that involve contract interpretation and go squarely to the merits of the parties' dispute. Both the Delaware courts and the United States Supreme Court have made clear that when a contract includes a broad arbitration clause, as the LLC Agreement does, the role of the court in determining arbitrability is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator ... The courts, therefore, have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.
Moreover, the court in United Engineers also noted that "if an entire contract is submitted to arbitration, the submission includes all issues of law or fact, including the interpretation of the terms of the contract."
Therefore, the Court concludes that CAPROC's claim for a determination of whether CAPROC Manager remains the Managing Shareholder does arise under the LLC Agreement and that the claim is subject to arbitration on its face. Furthermore, CAPROC does not seriously challenge the adequacy of arbitration as a remedy at law.
2. Does the LLC Agreement exhibit a purpose to exclude removal from arbitration?
Because CAPROC's claim regarding removal of CAPROC Manager arises under the LLC Agreement, arbitration is an available remedy unless there is either an "express provision" excluding it or "the most forceful evidence of a purpose to exclude."
Regarding the latter exception, courts must be wary of becoming entangled in the construction of the substantive provisions of the agreement, because any attempt to infer a purpose to exclude an issue from arbitration may encompass the merits of that issue.
The LLC Agreement does not contain any provision expressly excluding any issue from arbitration. CAPROC argues, however, that the parties intended to exclude removal because they intended CAPROC Manager to be the permanent Managing Shareholder.
According to CAPROC, a number of aspects of the LLC Agreement, collectively, exhibit strong evidence of a purpose to exclude from arbitration. First, the LLC Agreement specifically names CAPROC Manager as the Managing Shareholder of CAPROC and does not contain a removal provision. Second, the lack of a removal provision is especially important, according to CAPROC, because the Delaware Act (1) expressly provides that "a manager shall cease to be a manager as provided in a limited liability company agreement" and (2) contains no default removal provision. Third, CAPROC emphasizes that it is structured such that CAPROC Manager is essentially a pass-through entity, with all of its shares owned by CAPROC's shareholders in the same proportions they own CAPROC
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