When do claims fall within an arbitration clause's scope? Hitorq, LLC v. TCC Veterinary Services, Inc. Explained

The Utah Supreme Court’s recent decision in Hitorq, LLC v. TCC Veterinary Services, Inc. provides important guidance on determining when claims fall within an arbitration clause’s scope. The case arose from a failed business sale between veterinary practice partners and illustrates how courts analyze arbitration agreements.

Background and Facts

Three veterinarians formed an LLC for their veterinary clinic with an operating agreement containing an arbitration clause covering “any Member involved in a dispute regarding the enforcement or interpretation of this Agreement.” Dr. Pasquarello later agreed to sell her membership interests to Dr. Artz through an oral agreement without an arbitration provision. When the sale failed, Dr. Pasquarello was prevented from working and eventually expelled from the practice. She sued for breach of contract, breach of the covenant of good faith and fair dealing, and sought judicial dissolution of the LLC.

Key Legal Issues

The central issue was whether Dr. Pasquarello’s claims fell within the arbitration clause’s scope. She argued her claims concerned only the oral purchase agreement and statutory dissolution remedy, not the operating agreement. The defendants moved to compel arbitration, contending the claims required enforcement or interpretation of the operating agreement.

Court’s Analysis and Holding

The Court applied the plain language of the arbitration clause, defining key terms using their ordinary meanings. “Dispute” means a conflict that has given rise to a lawsuit, “regarding” means “concerning” or “relating to,” “enforcement” means compelling compliance with the agreement, and “interpretation” means ascertaining the agreement’s meaning.

The Court found that Dr. Pasquarello’s breach claims, while based on an oral agreement, necessarily involved disputes about enforcing the operating agreement’s profit distribution and member expulsion provisions. Her dissolution claim, though grounded in statute, relied entirely on alleged violations of the operating agreement to establish the statutory grounds. Because each claim required either enforcement or interpretation of the operating agreement, all fell within the arbitration clause’s scope.

Practice Implications

This decision demonstrates that courts will not allow parties to avoid arbitration by clever pleading. When claims involve multiple agreements or legal theories, arbitration clauses apply if any aspect requires enforcement or interpretation of the agreement containing the clause. Practitioners should carefully analyze whether their clients’ claims touch on provisions of agreements containing arbitration clauses, even when the primary theory involves separate contracts or statutory remedies.