Arbitration provision in first computer purchase contract did not cover dispute arising from subsequent upgrade purchase

Law Reporter, Jun 2001

Johnson's, Inc. v. Gers, Inc., 778 So. 2d 740 (La. Ct. App. 2001).

A Louisiana appellate court held that an arbitration provision in a first computer purchase contract did not cover a later dispute arising from documents exchanged between two parties concerning purchase of upgrades.

Here, in 1993, a furniture company entered into a sales and license agreement with a computer company in connection with the purchase of hardware and software. The agreement provided that all disputes would be resolved by arbitration. The furniture company also agreed, in a separate contract, to become a member of the computer company's institute for educational and technical support services. In 1998, the computer company gave a quote document to the furniture company describing an upgrade that would make the existing system Year 2000 compliant. The parties could not agree on a price for the upgrade, and the furniture company eventually purchased another computer system from a different company.

The furniture company sued the computer company for damages. Defendant argued that plaintiffs claim was covered by the arbitration provisions in the 1993 contracts. The trial court found that the upgrade deal in 1998 was a completely new contract, unrelated to the previous ones, and that the quote document contained no provision for arbitration.

Affirming, the appellate court noted that the threshold inquiry of whether the parties have agreed to arbitrate the dispute depends on whether (1) there is a valid agreement to arbitrate between the parties and (2) the dispute is covered by the arbitration agreement. The court found that defendant failed to satisfy these two factors. The 1993 agreement, the court explained, was a sales contract for hardware and licensed software that did not contain a provision regarding the effect of the contract on future hardware purchases. This agreement and the membership contract, the court said, also did not contain language that would define the scope of arbitration so broadly as to include future transactions between the parties. Moreover, the quote documents exchanged in 1998, the court noted, contained an offer and acceptance embodying a separate contract that contained no arbitration provision.

Plaintiff's Counsel

Fred A. Rogers III, William Lake Hearne, and Michael B. Rennix, all of Shreveport, La.