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Broad Arbitration Agreement Not Enough

In a recent opinion, the Massachusetts Appeals Court held that a broad arbitration agreement did not apply retroactively to the parties’ prior course of dealing.  The case arose out of claims against an accounting firm.  The accounting firm had been performing work for a college under a series of engagement letters, none of which provided for arbitration.  In 2005, the accounting firm changed its engagement letter to include a broad arbitration clause.  When the college sued the accounting firm for malpractice arising out of its work under the prior engagement letters, the accounting firm sought to compel arbitration.  The Superior Court concluded that the claims were not subject to arbitration, and the Appeals Court agreed.  Although the Appeals Court acknowledged that it was “linguistically possible” for the 2005 arbitration agreement to cover pre-2005 claims, the Court did not believe that interpretation was reasonable.  According to the Appeals Court, “the only reasonable interpretation” of the “forward-looking” agreement was that arbitration would apply to services performed after the 2005 agreement was executed.  If the accounting firm wanted disputes arising out of past conduct to be subject to arbitration, it would have been easy to make that clear in the arbitration agreement.  The case is Merrimack College v. KPMG, LLP, 15-P-122.