The opinion of the court was delivered by: VUKASIN
J. P. VUKASIN, JR., UNITED STATES DISTRICT JUDGE
Defendants' Petition to Compel Arbitration and Motion to Stay All Proceedings Pending Arbitration were scheduled to be heard on December 13, 1990. After a review of the briefs, this court considered it appropriate to submit the petition and motion on the pleadings pursuant to Local Rule 220-1, and now DENIES both the petition and the motion.
Plaintiff Mesquite Lake Associates ("Mesquite") contracted with defendant Lurgi Corporation
for the construction in Imperial County of an electrical power generation plant fired by manure. The contract was entered into on December 31, 1984, and the plant is now in operation, but the course of the parties' relationship under the contract was not altogether amicable. A panoply of disputes has arisen, essentially focusing on whether the plant meets the terms of the contract, and On May 30, 1990, Mesquite filed a complaint in the Superior Court of Marin County, alleging seven breach of contract and tort causes of action. On September 28, 1990, Lurgi removed the action to this court under 28 U.S.C. §§ 1332 and 1441(b), and on October 3, 1990, Lurgi filed the Petition to Compel Arbitration and Motion to Stay All Proceedings which are the subjects of this Opinion and Order.
Lurgi's Petition and Motion are based on an arbitration clause contained in Article 13 of the contract. Article 13 provides, in relevant part, that "any controversy or dispute between the Parties concerning this Agreement and specifically subject to resolution pursuant to this Article shall be subject to arbitration . . . ." Three other clauses in the contract delineate the areas of dispute which are "specifically subject to resolution" by arbitration under Article 13. Section 22.214.171.124 provides, in relevant part: "The affect [sic] of a Change Order on Contract Price, Scheduled Completion Date or Facility performance shall . . . be resolved pursuant to Article 13." Section 5.3 provides, in relevant part, that "any dispute about any amount invoiced by Contractor . . . shall be treated in accordance with ARTICLE 13 of this Agreement." Finally, amended section 126.96.36.199 provides that when Lurgi attempts to cure alleged "Under-Performance," and a specified "Technical Committee" fails unanimously to approve the proposed curative action, then Lurgi may submit the dispute to arbitration under Article 13.
This court is empowered to make an initial determination whether the disputes at issue in this law suit "arguably fall within the narrow reach" of the contract's arbitration clause. Alascom, Inc. v. ITT North Electric Co., 727 F.2d 1419, 1423 (9th Cir. 1984). Lurgi correctly argues that federal and California law permit an arbitral panel to determine its own jurisdiction, and that disputes which are arguably subject to arbitration should be directed to the arbitral panel for such a determination.
These well settled propositions need not be so expansively read, however, as to suggest that all disputes which involve a contract containing any arbitration clause must be submitted to an arbitrator before a traditional court action may be prosecuted.
The claims asserted by Mesquite in its complaint do not fall within the contract's narrow definition of arbitrable issues. Lurgi's argument, in nuke, is that because the complaint addresses Lurgi's overall performance under the contract, it implicates both Lurgi's "final invoice" and liability for "underperformance," and that therefore the arbitration clause applies. But the assertion by one party that there is an arbitrable dispute does not make one exist. Rosenthal v. Emanuel, Deetjen & Co., 516 F.2d 325, 327 (2d Cir. 1975). The fallacy of Lurgi's argument is that it gives over expansive readings to the three extremely narrow arbitration clause references in the contract. Had the parties intended to subject all disputes about the adequacy of performance under the contract to arbitration, they could, and would, have clearly manifested that intent in Article 13 of the contract.
Lurgi's assertion that this litigation encompasses the compensation owing Lurgi for constructing the plant, and thus falls under the "invoice" category in Article 5, is simply too general. Were this argument to prevail, virtually any dispute under the contract would fall within Article 5. As already indicated, if that were the intent of the parties, then the arbitration clause would by its own terms have been far broader in scope.
Under the "underperformance" rubric, Lurgi argues that Mesquite should be estopped from arguing that the terms of the arbitration reference in Article 16 have not been met, since Mesquite's own actions have made impossible the convening of a "Technical Committee." Be that as it may, the arbitration reference in Article 16 only takes effect upon the conclusion of such a committee's work, so Lurgi cannot rely on Article 16 to place this dispute within Article 13's arbitration clause.
Mesquite concedes that there may be several arbitrable claims falling under the "change order" category of Article 4 of the contract. Whether or not this is the case, those issues are of only limited potential impact on this litigation. The state of the pleadings at this early juncture is not sufficient to enable this court to carve out such issues for reference to an arbitral tribunal. If this situation should change, it appears unlikely that a stay of ...