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(f 0  0 0 01 0D 0W 0j 0} 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0! 0" 0# 0<$ 0 <$ 0$%C& 0b' 1e(UhJ|("("(" )",)"N)"p)") B) 0C)*"," -"--"O-"q-"-"-"--0 1e~2 72"2 034 0%4#4U N6 %6M6(6N7 1u7 72w7^ 7w7477 m7\  `&Times New Roman' SUNTERRA CORPORATION, et al Training0Training .   2[+[ 0_level1   , 8.` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level2   X 8.` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level3    8.4` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level4    8.` ` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level5    8. ` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level6    8. ` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level7   4 8. ` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level8   ` 8.` hp x (#823  ..   8.` hp x (#8  2[+[ 0_level9    8.<` hp x (#823  ..   8.` hp x (#8  2[[ 0_levsl1   , 8.` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl2   X 8.` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl3    8.4` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl4    8.` ` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl5    8. ` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl6    8. ` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl7   4 8. ` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl8   ` 8.` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levsl9    8.<` hp x (#823  Ԁ   8.` hp x (#8  2[[ 0_levnl1   , 8.` hp x (#823     8.` hp x (#8  2[[ 0_levnl2   X 8.` hp x (#823     8.` hp x (#8  2[[ 0_levnl3    8.4` hp x (#823     8.` hp x (#8  2[[ 0_levnl4    8.` ` hp x (#823     8.` hp x (#8  2[[ 0_levnl5    8. ` hp x (#823     8.` hp x (#8  2[[ 0_levnl6    8. ` hp x (#823     8.` hp x (#8  2[[ 0_levnl7   4 8. ` hp x (#823     8.` hp x (#8  2[[ 0_levnl8   ` 8.` hp x (#823     8.` hp x (#8  2[[ 0_levnl9    8.<` hp x (#823     8.` hp x (#8  <:Default Para<:Footnote Ref2r+P 0Level 1         8.` ` hp x (#823  ..  8.` hp x (#8    "ц)..      @X@X@  _  XX  XX(2ц$ >:n!..      @X@X@    35;AGMSY_11.11111111111111kIA`2WP TypographicSymbols                                    d($      >:n!..      @X@X@  B.` hp x (#XB  X  XX  1  >  Actually,plaintiffassertsthatthe1998arbitrationagreementwasinducedbyfraud.As  tothe1999arbitrationagreement,itassertsthatitisirrelevanttotheissuebeforetheCourtand,  inanyevent,unenforceableasviolativeofpublicpolicy.D|XX                                          >:n!..      @X@X@  B.` hp x (#XB  X  XX  2  >  TheCourt$X%XXX=XXX$X%srulingthatthe1999arbitrationagreementdoesnotcontrolhererendersit  unnecessarytoaddressplaintiff$X%XXX=XXX$X%scontentionsthatthe1999agreementisotherwiseinvalid.`XX  "ц)..      @X@X@  XXB.` hp x (#XBXX  XX  XX 35;AGMSY_21.a.i.1.a.i.1.a.9 i.     (2$ >:n!..      @X@X@  X  0  #|x(r:n$..      @X@X@HP LaserJet 5M,,,,0(9 Z6Times New Roman Regular@X3#37=CIQYag1.a.i.(1)(a)(i)1)a)Ei)y/ h.<<U >:n!..      @X@X@  _       !8dd8 hB.` hp x (#XBXX_SUNTERRA_ԀCORPORATION,etal.  *  INTHE    hE.` hp x (#X(#E  hE.` hp x (#X(#EPlaintiffs    h   *  CIRCUITCOURT |   hE.` hp x (#X(#E  hE.` hp x (#X(#Ev.   `     h   *  FOR H   hE.` hp x (#X(#E  hE.` hp x (#X(#EERNST&YOUNG_LLP_   h   *  BALTIMORECITY  d   hE.` hp x (#X(#E  hE.` hp x (#X(#EDefendant    h   *  Part20  0   hE.` hp x (#X(#E  hE.` hp x (#X(#E*  CaseNo.:24C02002963    Ѐ[2003_MDBT_Ԁ1]    `  hE.` hp x (#X(#E x   ` * ^   ****************************************************************************** D  3p x (#X(#3Q MEMORANDUMANDOPINION  *z  H.` hp x (#X(#H #  (03E" "  E.` ` hp x (#X(#E  B+` ` hp x (#` X(#B x 2  1  .3   `   CaseSummary x ݌ , Ќ ' X(#` ` X(#'   Plaintiff_Sunterra_ԀCorporation($X%XXX_AXXX$X%Sunterra_$X%XXX@XXX$X%)filedthepresentactioninthisCourton  May30,2002againstdefendants,Ernst&Young_LLP_,_EYT_,Inc.andCapGeminiErnst& x YoungU.S.LLC(collectively$X%XXX_AXXX$X%E_&Y$X%XXX@XXX$X%),allegingfraud(CountI),fraudulentconcealment(Count D II),negligentmisrepresentation(CountIII)andnegligence/professionalmalpractice(CountIV) d inconnectionwiththeperformanceoftheirdutiesasexpertinformationtechnologyconsultants 0 duringtheperiod199899.OnJune27,2002plaintifffiledanamendedcomplaint,adding  allegationsthattheMay20,1998arbitrationagreementwasinducedbyfraud.Plaintiffclaims x!  tohavesufferedmillionsofdollarsindamages. D#" %DefendantE&Yrespondedtotheamendedcomplaintwithamotiontodismissor, %` $ inthealternative,tostaypendingarbitration,demandingthatthemediation/arbitration &,"& provisionsofthewrittencontractsbetweenthepartiesdeprivetheCourtofjurisdictionto (#( determineeventhe_arbitrability_Ԁofplaintiff$X%XXX=XXX$X%sclaims._Sunterra_ԀopposedE&Y$X%XXX=XXX$X%smotionandfiled t*%* % % %  itsownmotionforstayofarbitration,contendingthatthemediation/arbitrationprovisionsofthe  _writtenagreementswereinvalidandunenforceableandthatthisCourt,notthearbitrators,should | maketheinitialdeterminationofwhetherthereareclaimssubjecttoarbitration.Priortothe H hearinginthismatter,plaintifffiledsixaffidavitsinsupportofitsoppositionandmotionforstay  d ofarbitration,settingforthfactualassertionsand/oropinionsbyfactwitnessesandexperts.  0 DefendantinsistedthattheCourtconsiderdispositivethelanguageofthebinding    mediation/arbitrationagreementsenteredintobythepartiesanddismissthiscaseforfailureto x  stateacauseofactionuponwhichreliefcanbegranted. D  AhearingonthemotionswasheldbeforetheCourtonDecember2,2002andthe ` motionswerethenheldsubcuria,pendingthiswrittenmemorandumandopinion.Thereafter, , onDecember17,2002E&Yfiledamotiontosupplementtherecordwithanextensiveaffidavit  ofRichardGibbsVandercook,E&Y$X%XXX=XXX$X%sengagementpartnerfortheinformationtechnology t consultingworkwithSunterra.OnDecember24,2002plaintiffrespondedwithamotionto D excludeand/orstriketheaffidavitasuntimelyandamemoranduminoppositiontoE&Y$X%XXX=XXX$X%s ` motiontosupplementtherecord.DefendantthenfiledanoppositiononJanuary9,2003to 0 plaintiff$X%XXX=XXX$X%smotiontostriketheaffidavitandareplytoplaintiff$X%XXX=XXX$X%soppositiontothemotionto  supplementtherecord. |!  TheCourtwilladdressthesemotionsinthecourseofitsopinion,infra. H#" " "  E.` ` hp x (#X(#E  B+` ` hp x (#` X(#B 2  2  .3   `   TheArbitrabilityofPlaintiff$X%XXX=XXX$X%sClaims ݌ %d $ Ќ ' X(#` ` X(#'   " "  E.` ` hp x (#X(#E  ?( hp x (#` X(#? -2  3  .3     TheAppropriateForumforDeterminationofArbitrability -[ ݌ &4"& Ќ ' X(#  X(#'   XXXXMarylandlawprovidesthat: ($(  ` Awrittenagreementtosubmitanyexisting |*%* controversytoarbitrationoraprovisionin b+&+ awrittencontracttosubmittoarbitrationany  &controversyarisingbetweenthepartiesin  thefutureisvalidandenforceable,andis | irrevocable,exceptupongroundsthatexist b atlaworinequityfortherevocationof H acontract. . ~  ` Md.CodeAnn.[Cts.&Jud.Proc.]$X%XXX'XXX$X%3206.  d  ` Ifapartytoanarbitrationagreementdescribed  2 in$X%XXX'XXX$X%3202refusestoarbitrate,theotherparty    mayfileapetitionwiththecourttoorder   arbitration.    `  ` Iftheopposingpartydeniesexistenceofan b  arbitrationagreement,theCourtshallproceed H  expeditiouslytodetermineiftheagreement .~  exists. d  `  ` Ifthecourtdeterminesthattheagreement 0 exists,itshallorderarbitration.Otherwiseit  shalldenythepetition.   ` Md.CodeAnn.[Cts.&Jud.Proc.]$X%XXX'XXX$X%3207.   FollowingMaryland$X%XXX=XXX$X%sadoptionoftheUniformArbitrationAct,itscourts ` haverecognizedanestablishedpolicyinfavorofthesettlementofdisputesthroughthe 0 arbitrationprocess.BelPreMedicalCtr.,Inc.v.FrederickContractors,21Md.App.307, L aff$X%XXX=XXX$X%d.,274Md.307(1975).Whenanarbitrationagreementexists,orisallegedtoexist,the  courtsaregenerallyenjoinedbythestatutefrominterferingwiththearbitrationprocess.Indeed,   thecourt$X%XXX=XXX$X%sjurisdictionmayproperlybeinvokedinbuttwolimitedcontextstocompel d"! arbitrationortostayit.StaufferConstr.Co.v.BoardofEduc.,54Md.App.658,certdenied, 4$# 297Md.108(1983). &P!% 'TheMarylandArbitrationActprovidesthat,inadjudicatingapetitionfor '#' anorderofarbitrationorastaypendingarbitration,theconsiderationoftheexistenceofan )$) arbitrationagreementisseverable;thescopeofthecourt$X%XXX=XXX$X%sinvolvementthusextendsonlytoa d+&+  &' & '& '  determinationofanarbitrationagreement.Holmesv.CoverallN.Am.,Inc.,336Md.534,546  (1994).Therefore,atthisstageoftheseproceedings,theCourt$X%XXX=XXX$X%sauthorityislimitedtoa | determinationofwhetherthepartieshaveheretoforereachedavalidagreementtoarbitrate L Sunterra$X%XXX=XXX$X%sclaims.  h Astothisthresholdissue,therearetwowrittenagreementsfortheCourt  8 toconsider,thefirstexecutedbyplaintiff$X%XXX=XXX$X%sseniorvicepresident,ChuckFrey,onMay21,1998    andthelatterdatedJanuary1,1999andsignedbyGibbsVandercookforE&YandColin   DrummondonbehalfofSunterra.PlaintiffcontendsthattheMay21,1998agreementisthe P  relevantinstrumentandthatitwasobtainedbyfraud.Defendant(whiledenyingplaintiff$X%XXX=XXX$X%s l allegations)assertsthattheJanuary1,1999agreementisclearlyrelatedtotheearliercontract,is < unrelatedtoSunterra$X%XXX=XXX$X%sfraudclaimsandcontrolsthedeterminationofarbitrability.  BothagreementscontainvirtuallyidenticallanguagelimitingE&Y$X%XXX=XXX$X%s  liabilityforSunterra$X%XXX=XXX$X%sclaimsheretotheamountoffeespaidundertherespectiveagreements X andrelatingtomediation/arbitrationasfollows: (x  ` Anycontroversyorclaimarisingoutofor D relatingtothisAgreementortheServices * providedbyE&Ypursuantthereto(including  anysuchmatterinvolvinganyparent,   subsidiary,affiliate,successorininterest,or !  agentofCompanyorofE&Y)shallbe r"! submittedfirsttovoluntarymediation,and X#" ifmediationisnotsuccessful,thento >$# bindingarbitration,inaccordancewiththe $%t $ disputeresolutionproceduressetforthin  &Z!% [the]Exhibitattachedhereto.Judgment &@"& onanyarbitrationawardmaybeentered '&#' inanycourthavingproperjurisdiction. ( $(  `  )$)  (AnnexedtobothagreementsareDisputeResolutionProcedures,setting   forththeprocessforinitiatingmediationand,ifthatisunsuccessfulninetydaysafterwritten | notice,bindingarbitrationpursuanttotheArbitrationRulesforProfessionalAccountingand H RelatedServicesDisputesoftheAAA.Thoseproceduresfurtherstate,inpertinentpart,that:  d  ` Anyissueconcerningtheextenttowhich  0 anydisputeissubjecttoarbitration,or    concerningtheapplicability,interpretation,    orenforceabilityoftheseprocedures,   includinganycontentionthatallorpart x  oftheseproceduresareinvalidor ^  unenforceable,shallbegovernedbythe D  FederalArbitrationActandresolvedby *z  thearbitrators. `  `  Additionally,E&YpointsoutthattheTermsandConditionsofthe , agreementswarrantedthattheserviceswouldbeprovidedwith$X%XXXAXXX$X%dueprofessionalcareand  competence$X%XXX@XXX$X%ԀandthatSunterrawastoprovideE&Ywithwrittennoticeofanydeficienciesinthe x serviceswithin90daysofcompletionandbegivenanopportunitytoreperformtheservicesas H warranted.Thisprovisionappearsinbothagreementsandwouldlimitplaintiff$X%XXX=XXX$X%srecovery,ifthe d serviceswerenotreperformedsatisfactorily,tothefeespaidtoE&Yforthedefectiveservices. 4 Relyingontheaboveprovisions,E&YcontendsthatSunterranever  providedwrittennoticeofdeficienciesinserviceand,instead,executedthesecondcontractin |!  Januaryof1999,containingvirtuallyidenticalprovisionsgoverninglimitedliabilityand H#" arbitration.Moreover,defendantarguesthatthemediation/arbitrationclausesinthese %d $ agreementswerestandardinallE&Yengagementlettersthenutilized,includingoneexecuted &0"& onJune3,1999betweenplaintiffanddefendantrelatingtotaxadvice.E&Yalsopointsoutthat (#( Sunterraenteredintoothersignificantagreementscontainingarbitrationclauses,suchasits x*%* ( ( (  softwarelicensingagreementwithResortComputerCorporationofDecember,1997,which  gaverisetotheneedforE&Y$X%XXX=XXX$X%sconsultingservices,accordingtotheamendedcomplaint. | )Defendant,therefore,urgesthisCourttofindthatplaintiffhasfailedto L allegefactssufficienttodisputethevalidityofthe1998arbitrationagreementandthat,inany  h event,thearbitrationprovisionsofthe1999agreementwouldcontrol,asamerecontinuationof  4 theoriginalE&Yengagement,andrequirethatissuesofarbitrabilitybesubmittedtothe   arbitratorsfordetermination. |  Sunterra,ontheotherhand,believestheCourtshouldmakethe H  determinationofarbitrabilityandfindthatthearbitrationclauseintheMay,1998agreementis d unenforceable.Referringtotheallegationsintheamendedcomplaintandthesixaffidavitsfiled 0 concurrently,plaintiffassertsthatthereiscompellingproofofMr.Vandercook$X%XXX=XXX$X%sbreachof  fiduciarydutyandmisrepresentationinprocurementofthe1998arbitrationagreement.Because | theMarylandArbitrationActpermitsanarbitrationagreementtobeinvalidatedonanygrounds H thatwouldjustifyinvalidationofanyothercontractunderMarylandlaw(Md.CodeAnn.,Cts.& d Jud.Proc.$X%XXX'XXX$X%3202),plaintiffasksthisCourttosetasidetheMay,1998arbitrationagreementfor 0 fraudornegligentmisrepresentationortorescinditonthebasisofconstructivefraud.  Contendingthatthe1999agreementrelatesonlytoclaimsaccruingafterthedateofitsexecution |!  (notallegedhere),SunterrainsiststhatitsarbitrationprovisionsareirrelevanttothisCourt$X%XXX=XXX$X%s H#" determinationoftheexistenceofavalidandenforceablearbitrationagreementbetweenthe %h $ parties. &4"& *ReferringtotheMarylandArbitrationAct,theCourtofAppealshasstated ($( that$X%XXXAXXX$X%[t]hesamepolicyfavoringenforcementofarbitrationagreementsispresentinbothourown |*%*  )* ) *) *  andthefederalacts....WethereforerelyondecisionsinterpretingtheFederalArbitrationAct...$X%XXX@XXX$X%  forpurposesofinterpretingtheMarylandAct.Holmesv.CoverallN.Am.,Inc.,336Md.534,  541(1994). L TheCourt$X%XXX=XXX$X%sreviewofboththefederalandMarylandauthorities  h interpretingthoseActsrevealscertainsalientprinciples.Thefirstoftheseisthat$X%XXXAXXX$X%[A]rbitration  8 isamatterofcontractandapartycannotberequiredtosubmittoarbitrationanydisputewhich    hehasnotagreedsotosubmit.$X%XXX@XXX$X%ԀHowsamv.DeanWitterReynolds,Inc.,123S.Ct.588,591    (2002)citingSteelworkersv.Warrior&GulfNav.Co.,363U.S.574,582(1960)andFirst T  OptionsofChicago,Inc.v.Kaplan,514U.S.938,94243(1995).Secondly,thesamepolicy  p favoringenforcementofarbitrationagreementsispresentinboththeMarylandandfederalActs. < Holmesv.CoverallN.Am.,Inc.,supra,at541.(CitingMosesH.ConeMemorialHospitalv.  MercuryConst.Corp.,460U.S.1,2425(1983)).Thirdly,$X%XXXAXXX$X%[W]hilearbitrationservesimportant  publicinterests,anagreementtoarbitratelikeanyothercontractisfundamentallyabout T privatechoice.Arbitrationisamatterofcontractandapartycannotberequiredtosubmitto  p arbitrationanydisputewhichhehasnotagreedsotosubmit.Despitethepublicbenefitsof < arbitration,thedeterminationofwhatdisputesarearbitrableisfocusedontheintentofthe  parties....Generally,thepartiesnotthecourtscontrolwhichdisputeswillbearbitrated.$X%XXX@XXX$X%Ԁ !  Carsonv.GiantFood,Inc.,175F.3d325,32829(CA41999)andcasescitedtherein.Thus, T#" althoughacourtisnottoruleonthepotentialmeritsofunderlyingclaims,thequestionof  %p $ arbitrabilityisundeniablyanissueforjudicialdetermination,unlessthepartiesclearlyand &<"& unmistakablyprovideotherwise.AT&TTechnologies,Inc.v.CommunicationWorkersof ($( America,475U.S.643,649(1986). *%* , l<`  +Asindicatedearlier,thelanguagecontainedintheparties$X%XXX=XXX$X%Ԁ1998and1999  agreementsarevirtuallyidentical.Bothcallforarbitrationofalldisputesarisingoutofthe  agreementandbothrequirethatissuesrelatedtothearbitrabilityofclaimsbesubmittedtothe L arbitrators,notthecourts.Intheusualcase,therefore,theCourtwouldapplyprinciplesof  h contractconstructionandthepresumptioninfavorofarbitrationandstaytheseproceedings,  4 requiringthepartiestosubmittheirdisputestoarbitrationpursuanttotheirwrittenagreement.   Butthisisnottheusualcase.Rather,Sunterrahasallegedthatthearbitrationprovisionsinthese |  agreements  hXXX. -  1     acas  areunenforceablebecausetheywereinducedbyfraud. H  Otherimportantprinciplescomeintoplayindeterminingwhowilldecide d thearbitrabilityofclaimswhenthereisanassertionoffraudintheinducementofthecontracts 0 containingthearbitrationclauses.InPrimaPaintCorp.v.Flood&ConklinMfg.Co.,388U.S.  395(1967)theSupremeCourtupheldabroadarbitrationclauseinacommercialcontractand x orderedthattheissueofwhetherthecontracthadbeeninducedbyfraudbesubmittedto D arbitration,ratherthanbedeterminedbyafederalcourt.Wherenoclaimhadbeenadvancedby ` PrimaPaintthatF&Cfraudulentlyinducedittoenterintotheagreementtoarbitrate,thecourt , pointedoutthatunderSecondCircuitlaw,exceptwherethepartiesotherwiseintend,arbitration  clausesare$X%XXXAXXX$X%separable$X%XXX@XXX$X%Ԁfromthecontractsinwhichtheyareembedded,aprincipleadoptedin t!  Maryland.SeeHolmesv.CoverallN.Am.,Inc.,336Md.534,545(1994)(broadarbitration D#" clausewillbeheldtoencompassarbitrationoftheclaimthatthecontractitselfwasinducedby %` $ fraud.)PrimaPaintCorp.v.Flood&ConklinMfg.Co.,supra,388U.S.at402. &,"& +  + +  /Inthesituation,however,whereaplumbingandheatingcontractor  attackednotonlyhissubcontractswiththeprimecontractor,butalsothearbitrationclauses | containedtherein,ashavingbeenprocuredthroughfraud,theSupremeCourtpreviouslyheld H thattheissueoffraudshouldfirstbeadjudicatedbythefederalcourtbeforetherightsofthe  d partiesunderthesubcontractscanbedetermined.Moseleyv.ElectronicandMissileFacilities,  0 Inc.,374U.S.167,17071(1963).    Morerecently,whentheSupremeCourtwascalledupontoreviewa x  decisionoftheThirdCircuitinacasewhereastocktraderandhiswifechallengedanarbitration D  demandfromaclearinghouseseekingtoholdthemresponsibleforadebt,thecourtpointedout ` thatthedeterminationofwhetherthepartiesagreedtoarbitrateacertainmatterisgenerally , determinedbyordinarystatelawprinciplesgoverningtheformationofcontracts.Citingits  decisioninAT&TTechnologies,Inc.v.CommunicationWorkersofAmerica,475U.S.643,649 t (1986)andSteelworkersv.Warrior&GulfNavigationCo.,363U.S.574,583,n.7(1960),the @ SupremeCourtstated:$X%XXXAXXX$X%The[C]ourtsshouldnotassumethatthepartiesagreedtoarbitrate  \ arbitrabilityunlessthereis$X%XXX>XXX$X%clearandunmistakable$X%XXX=XXX$X%Ԁevidencethattheydidso.$X%XXX@XXX$X%ԀFirstOptionsof , Chicago,Inc.v.Kaplan,514U.S.938,944(1995).BecausetheKaplansdidnotclearlyagreeto  submitthequestionofarbitrabilitytoarbitration,theFirstOptionscourtaffirmedtheCourtof x!  AppealsfindingthatthearbitrabilityoftheKaplan/FirstOptionsdisputewassubjectto D#" independentreviewbythecourts.Id,514U.S.at947.Decisionsintheotherfederalcasesare %` $ inlinewiththeseprinciples.See,e.g.,Myersv.StateFarmIns.Co.,842F.2d705,70708(CA &,"&  31988);Carsonv.GiantFood,Inc.,175F.3d325,32930(CA41999). (#( /  / /  0TheMarylandcasesareinaccordwiththesegeneralprinciplesaswell.In   anactionbyadevelopertovacateanarbitrationawardinfavorofasubcontractor,theMaryland | CourtofAppealsinterpretingtheMarylandUniformArbitrationAct,heldthat$X%XXXAXXX$X%Thefinal H determinationofwhetheravalidcontracttoarbitrateexistedbetweenthepartiesmustbemade  h byacourt,notanarbitrator.$X%XXX@XXX$X%ԀMessersmithv.BarclayTownhouseAssociates,313Md.652,661  4 (1988).FollowingtheSupremeCourt$X%XXX=XXX$X%srationaleinPrimaPaintCorp.v.Flood&ConklinMfg.    Co.,supra,theCourtofAppealsofMarylandlaterreviewedachallengetoafranchise   agreementcontaininganarbitrationclauseandheldthatthearbitrationagreementwasseverable P  fromtherestofthefranchisecontract.Accordingly,intheabsenceofspecificallegationsthat l theagreementtoarbitratehadbeenfraudulentlyinduced,thepartieswererequiredtoarbitrate 8 themeritsoftheunderlyingfranchiseagreement.Holmesv.CoverallN.Am.,Inc.,336Md.534,  54647(1994).InCoveralltheCourtofAppealsstated:$X%XXXAXXX$X%TheCourtmustdeterminethatthere  arenoinfirmitiesintheformationofthearbitrationagreementitself;thatis,thatthereisa P mutualexchangeofpromisestoarbitrate.Onceacourtdeterminesthatthemakingofthe l agreementtoarbitrateisnotindispute,itsinquiryceases,astheagreementtoarbitratehasbeen 8 establishedasavalidandenforceablecontract.$X%XXX@XXX$X%ԀId.,336Md.at544.Evenmorerecently,in  addressingachallengetoanarbitrationprovisioninapropertysettlementagreementbetween !  divorcingparties,theMarylandCourtofSpecialAppealsreiteratedthesepropositionsstating: P#" $X%XXXAXXX$X%when,ashere,thepartiesareindisputeastowhetherthearbitrationprovisionisenforceable, %l $ theresolutionofthatissueisforthecourt.$X%XXX@XXX$X%ԀBlochv.Bloch,115Md.App.368,37475(1997). &<"& 1Thelessontobelearnedfromtheseauthoritiesisfairlysimpleintheory. ( $( Arbitrationagreementsareseverablefromtheothertermsofacontract.Claimsoffraudinthe *%*  0 1  0 10 1  inducementmustgodirectlytothearbitrationprovisionsthemselvesandnotmerelytothe  underlyingcontract.BoththefederalandMarylandActlimitthecourt$X%XXX=XXX$X%sjurisdictiontothe | determinationofwhetherornotavalidandenforceableagreementtoarbitrateexists.Ifso,a L courtisnottodelveintothemeritsofthedispute,butrathertoordersametobedeterminedin  h arbitration.Moreover,wherethesubjectmatterofthedisputeisbetterlefttoqualified  4 arbitratorsaccustomedtodealingwithdisputesinaspecializedsubstantiveareaofthelaw,   courtsarecautionedtolimittheirroletocontractconstructionandadeterminationofwhethera |  validandenforceableagreementexistsandnottoenmeshthemselvesintheparticularsofthe H  underlyingdispute.ThisadmonitionisclearlysetforthbytheSupremeCourtinJustice d Brennan$X%XXX=XXX$X%sconcurringopinioninAT&TTechnologies,Inc.v.CommunicationWorkersof 0 America,supra,475U.S.at65256,wheretheunderlyingdisputerelatedtoagrievance  concerninglayoffsunderthetermsofacollectivebargainingagreementinanactionfiledunder | theLaborManagementRelationsAct.Thesamedeferencetotheexpertiseofthearbitratorsis H evidentinJusticeBreyer$X%XXX=XXX$X%sopinionfortheSupremeCourtinHowsamv.DeanWitterReynolds, d Inc.,supra,123S.Ct.at593,wheretheunderlyingdisputewastobesubmittedtoarbitration 4 beforetheNationalAssociationofSecuritiesDealers.  2Inpractice,however,theroledescribedbythecaselawforthecourtto |!  performincasesliketheonebeforethisCourtrequiressomethinginthenatureofatightrope H#" walk.Sunterra$X%XXX=XXX$X%samendedcomplaintcontainsmorethan40pagesofallegationsoffraudand %d $ concealment,misrepresentationandnegligence,whichwillformthebasisfortheunderlying &4"& disputebetweenplaintiffanddefendant.Inaseriesofparagraphsbeginningat61through68, ($( theamendedcomplaintcontainsspecificallegationsthatthearbitrationagreementintheMay, |*%* 2  2 2  1998contractwasinducedbyfraud.Theseparticularizedallegationschallengethevalidityand  enforceabilityofthearbitrationagreementinthatcontract,anissuethatmustbedeterminedby | thisCourt,despitethedifficultyofdoingsowithoutdecidingtheunderlyingdispute.TheCourt H doesnotbelievethatthesubjectmatterofthisactionbringsintoplaythedeferenceaccorded  d arbitratorstodeterminearbitrabilityunderspecializedstatutoryschemesand,therefore,willnot  0 adoptthatrationaletododgeitsresponsibility,howeverperilousitmayseem.    Sunterrahasallegedafraudulentscheme,whichincludestheprocurement x  ofthemediation/arbitrationagreementinthe1998contract.IntheCourt$X%XXX=XXX$X%sjudgment,the D  allegationsraiseasubstantialandbonafidedisputeastotheexistenceofanagreementbetween d thepartiestoarbitrateplaintiff$X%XXX=XXX$X%sclaims.Theallegationshereassertasubstantialrelationship 0 betweentheallegedfraudandtheagreementtoarbitrate,includingcontentionsthatdefendant$X%XXX=XXX$X%s  purposewastoshielditselffromliabilityforpastmisdealingsandanticipatedlossestobesoon  inflictedwhentheSWORDprojectwasinstalledatitsfirstlocation. L E&Yreliesonaseriesofcaseswhicharesomewhatsupportiveofits h contentionthatthiscaseshouldgotoarbitrationnow.ThosecasesareDoughertyv. 4 Mieczkowski,661F.Supp.267(D.Del.1987),Rosenv.Waldman,1993U.S.Dist.LEXIS  14076(S.D.N.Y.1993)andGartenv.Kurth,265F.3d136(CA22001).Allofthosedecisions |!  enforcedarbitrationagreementsinthefaceofclaimsoffraudulentinducement,withsome H#" similaritiestothepresentaction. %d $ But,asJudgeCalabresipointsoutinhisopinioninGartenv.Kurth, &0"& writingforapaneloftheSecondCircuit: (#(  ` Wehaverecognizedthatsometension x*%* betweenthecasesmayexistandwehave ^+&+ concludedthat$X%XXX>XXX$X%theonlywaytoreconcile  PrimaPaintwithMoseleyistorequire  somesubstantialrelationshipbetween ~ thefraudormisrepresentationandthe d arbitrationclauseinparticular.$X%XXX=XXX$X% J 3Campaniello,117F.3dat667.This 2  $X%XXX>XXX$X%substantialrelationship,$X%XXX=XXX$X%Ԁwehaveheld,  h requiresmorethanamereclaimthat  P the$X%XXX>XXX$X%arbitrationclauseisanelementof  6 theschemetodefraud,$X%XXX=XXX$X%Ԁitmustinclude    $X%XXX>XXX$X%particularizedfactsspecifictothe...    arbitrationclausewhichindicatehow   itwasusedtoeffecttheschemeto   defraud.$X%XXX=XXX$X%ԀId. j   `  IntheCourt$X%XXX=XXX$X%sjudgment,plaintiffhasmetthispleadingburdenandthereby 8  thrustonthisCourtthedutytodecidethethresholdissueofarbitrability. X SunterraalsocontendsthatMaryland$X%XXX=XXX$X%slegislativepreferenceforenforcing $ validarbitrationagreementsmightbeunderminedtotheextentthatthoseprovisionsfirstcallfor  aperiodofmediation.TheCourtagreesthatthereisnorealisticwayforamediatorto p adjudicateanything,muchlessthearbitrabilityofplaintiff$X%XXX=XXX$X%sclaimsinthiscase.Relyingontwo < federaldecisionswhichdeniedmotionstostaylitigationandrequirearbitration,wherethe  \ provisionssetupconditionsprecedenttothearbitrationprocess,Sunterracontendsthat ( arbitrationisa$X%XXXAXXX$X%lastresort$X%XXX@XXX$X%Ԁhereandthatthestatutoryschemeshouldnotevencomeintoplay.   SeeKemironAtlantic,Inc.v.AguakemInternational,Inc.,290F.3d1287(CA112002)and t"! HIMPortland,LLCv.DeVitoBuilders,Inc.,211F.Supp.2d230(D.Me.2002). @$# 4WhiletheCourtisnotpreparedtoreadthesecasesasstandingforthe  &\!% propositionthatacourtshouldnotrequirearbitrationwheremediationisacontractualcondition '(#' precedent,theydolendsupporttoplaintiff$X%XXX=XXX$X%sclaimthatacourtshoulddeterminearbitrability )$) beforerequiringthepartiestoundertakeaprotracteddisputeresolutionprocess.Indeed,the t+&+  34 3 43 4  factualquestionsconcerningsatisfactionofthecontractualconditionsprecedenttoarbitration  mustbeaddressedbythecourt.KemironAtlantic,Inc.v.AguakemInternational,Inc.,supra, | 290F.3dat128990. H / /" "  E.` ` hp x (#X(#E  ?( hp x (#` X(#? 2  2  .3     TheJanuary19,1999AgreementBetweentheParties ݌  d Ќ ' X(#  X(#'   " "    E.` ` hp x (#X(#E   ?( hp x (#` X(#? I2  3  .3        0 5 I݌̌ ' X(#  X(#'   E.` hp x (#X(#ENotwithstandingtheallegationsintheamendedcomplaintthatthe1998 x  agreementtoarbitratewasinducedbyfraud,E&Ytakesthepositionthattheexactsame D  arbitrationprovisionsarecontainedinavalidandenforceable1999agreementbetweenthe ` parties.CitingtheFourthCircuit$X%XXX=XXX$X%sopinioninDrewsDistributing,Inc.v.SiliconGaming,Inc., , 245F.3d347(CA42001),E&YurgestheCourttofindthatthesubjectmatterofthe1999  agreement$X%XXXAXXX$X%relatesto$X%XXX@XXX$X%Ԁthesubjectmatterofthe1998agreement,bringingitwithinthescopeof x thelatter$X%XXX=XXX$X%sarbitrationprovisions.InDrews,thetwodocumentsatissuewerealetteragreement H andasubsequentdistributionagreementinvolvingthepurchaseofvideogamblingmachines. h Thelowerfederalcourtdeterminedthatthecontroversyaroseundertheletteragreementandnot 4 thedistributoragreement.Relyingonthemergerclauseinthelatteragreementwhich  $X%XXXAXXX$X%excepted$X%XXX@XXX$X%Ԁtheletteragreementfromthesubjectmatterofthedistributoragreement,theCourt |!  reasonedthatitwasnotrelatedtothelatteragreementandnotsubjecttoarbitration.Judge L#" DianaMotz,writingforapaneloftheFourthCircuit,interpretedtheagreementsunderthe %h $ FederalArbitrationActandrecitedtheprinciplesenumeratedhereinabovethatthereisa &4"& presumptionofarbitrabilitywherethepartiesagreeinwritingtoarbitratetheirdisputesandthat ($( itisthecourt$X%XXX=XXX$X%sresponsibilitytodeterminewhetheravalidagreementtoarbitrateexists.Despite |*%* 5 5 5  thefactthattheletteragreementcontainednoarbitrationprovision,thefederalCourtofAppeals  heldthatthecontroversy$X%XXXAXXX$X%relatedto$X%XXX@XXX$X%Ԁthedistributoragreementbasedonanexaminationofthe | factualallegationsofthecomplaint.Thus,itcompelledarbitrationofthedisputebetweenthe L parties.Themergerclausewasdeemedtobemerelyawaytoacknowledgethepreexisting  h obligationintheletteragreementandtoavoiditfrombeingsupersededbythedistributor  4 agreement,executedlater.   6WhileitisundisputedthattheservicesperformedbyE&Yunderthe1999 |  agreementwithSunterrarepresentacontinuationoftheprojectforwhichitwasengaged H  initially,thereisadisputeastowhetheritrepresentsmerelythefinalphaseoftheprojector d whetheritmemorializesthetermsunderwhichE&Y$X%XXX=XXX$X%sservicesweretobephasedoutin 0 anticipationofitsterminationfromtheproject.UnlikeDrews,however,thefactualallegations  intheamendedcomplaintheredonotrelatespecificallytotheservicestobeperformedunder | the1999agreement.Theonlyactualreferencetothattimeperiodintheamendedcomplaintis H containedinparagraph78,whichallegesthatSunterra$X%XXX=XXX$X%snewChiefInformationOfficer,Colin d Drummond,tookstepstodiminishE&Y$X%XXX=XXX$X%spositionandbyMay,1999thatheterminatedE&Y 4 altogether.Theremainingfactualallegationsthatpostdatethe1998agreementallrelateto  plaintiff$X%XXX=XXX$X%sclaimsfordamages.Consequently,thisCourtisunabletoholdthatthefactual !  allegationsoftheamendedcomplaintare$X%XXXAXXX$X%relatedto$X%XXX@XXX$X%Ԁthe1999agreementbetweentheparties.  7 -  2     vment   P#" E&YfurtherarguesthatSunterrawaiveditscontentionthatthe1998arbitrationclausewas  %p $ invalidwhenitinsistedonperformanceofthecontractafterlearningoftheallegedfraud, &<"& 6 6 6  continuedtopaymillionsofdollarstoE&Yforsubsequentperformanceandsignedyetanother  agreement,containingsimilararbitrationprovisions.CitingHowsamv.DeanWitterReynolds, | Inc.,supra,123S.Ct.at592,defendantarguesthatthequestionofwaiverisa$X%XXXAXXX$X%gateway H question$X%XXX@XXX$X%Ԁthatdoesnotconstituteachallengetoarbitrabilityandwhichisforanarbitrator,nota  h court,todecide.TheCourtdisagrees.InthisCourt$X%XXX=XXX$X%sjudgment,thoseissuesamounttofactual  8 contentionsastowhetherornotSunterra$X%XXX=XXX$X%sactionsconstitutearatificationofthe1998    agreement,afteritdiscoveredtheallegedfraud.Totheextentthatthosecontentionsarerelevant   totheexistenceofavalidagreementtoarbitratehere,theywillbedecidedbytheCourtinruling T  onthethresholdissueofarbitrability.  p TheCourtdoesnotbelievethattheCourtofAppeals$X%XXX=XXX$X%ԀdecisioninNelleyv. < Mayor&CityCouncilofBaltimore,224Md.1(1960)compelsadifferentresult.Therecordin   thatcaseclearlyestablishedratificationofthearbitrationagreementbyutilizationofthevery  arbitrationprocesslaterchallenged.Asplaintiffpointsout,thecasepredatestheSupreme T CourtandCourtofAppeals$X%XXX=XXX$X%Ԁrulingsthatarbitrationclausesareseverableandisfactuallyand  p procedurallydistinguishablefromthepresentaction. @ / /" "    E.` ` hp x (#X(#E  B+` ` hp x (#` X(#B 2  3  .3   `   ThePendingMotions ݌   Ќ ' X(#` ` X(#'   XXXXFollowingtheDecember2,2002hearingonthemotionstodismissor,inthe !  alternative,tostayandtheplaintiff$X%XXX=XXX$X%smotiontostayarbitration,E&Yfiledamotionto T#" supplementtherecordwithadetailedaffidavitofRichardGibbsVandercookandthemotion $%t $ wasopposedbySunterrawithitsownmotiontostriketheaffidavitasuntimely. &@"& Plaintifftakesthepositionthatdefendant$X%XXX=XXX$X%sfailuretosupplementtherecord ( $( earlierwasadeliberatestrategybywhichitshouldnowbeboundandthattheCourtmustaccept *%* theuncontestedfactscontainedinSunterra$X%XXX=XXX$X%saffidavitsunderMd.Rule2311(d)inrulingonthe  motiontodismissorstayanditsownmotiontostayarbitration.   8!m8XXdd8Forpurposesofthemotiontodismiss,ofcourse,theCourtisrequiredtoassume  thetruthofallwellpleadedfacts.Sincethatmotionanditsalternative,tostaythese | proceedings,actuallychallengethejurisdictionoftheCourttoproceedinthefaceofan H arbitrationagreement,theyrequiretheCourttolooktomattersoutsidethepleadingsfor  d adjudication.TheMarylandrulespermittheCourttolookbeyondtheamendedcomplaintand  0 toconsideraspartoftherecordaffidavitsfiledbytherespectivepartiesunderthese    circumstancesandtotreatthepreliminarymotionlikeamotionforsummaryjudgment.Md. x  Rule2322(c). D  Havingdeterminedabovethattheallegationsoftheamendedcomplaintare ` sufficienttorequiretheCourttodecidewhetherthe1998arbitrationagreementwasprocured , throughfraud,theCourtmusttheneitherbaseitsdecisionontherecordnowbeforeitorproceed  toalimitedhearingonthevalidityofthe1998arbitrationagreement.EveniftheCourtwereto t permitE&YtosupplementtherecordatthislatehourwiththeVandercookaffidavit,itisnot @ convincedthatthecriticalrulingitiscalledupontomakecanberenderedproperlyonthebasis  \ ofapaperrecord.Itisanunderstatementtoindicatethatthefactswillbehotlycontestedhere. ( TheCourtbelievesthatquestionsofcredibilitymayplayanimportantroleinreachingan  appropriatedeterminationofthem.Accordingly,theCourtwillconductaschedulingconference p!  withcounselpromptlytoaddressdiscoveryandahearingontheissueoftheenforceabilityof <#" the1998arbitrationagreement.Thependingmotionsarethusrendered MOOT . %X $   E.h` hp x (#X(#EALBERTJ.MATRICCIANI,JR. &$"& Judge ' #'  h  E.` hp x (#hX(#EJanuary30,2003 (#(  h XE.` hp x (#X(#E )$) cc:  ArnoldM.Weiner,Esquire l*%*   PaulF.Strain,Esquire R+&+  X XE.` hp x (#X(#EIrvinB.Nathan,Esquire   X hE.` hp x (#X(#ESUNTERRACORPORATION,etal.  *  INTHE    hE.` hp x (#X(#E  hE.` hp x (#X(#EPlaintiffs    h   *  CIRCUITCOURT b   hE.` hp x (#X(#E  hE.` hp x (#X(#Ev.   `     h   *  FOR . ~   hE.` hp x (#X(#E  hE.` hp x (#X(#EERNST&YOUNGLLP   h   *  BALTIMORECITY  J   hE.` hp x (#X(#E  hE.` hp x (#X(#EDefendant    h   *  Part20      hE.` hp x (#X(#E  hE.` hp x (#X(#E*  CaseNo.:24C02002963    `  hE.` hp x (#X(#E x   ` * ^   ****************************************************************************** D    Ӏ ORDER *z      WithrespecttoallmotionspendingbeforetheCourt,uponconsiderationofthe F  memorandaoflawfiledbytherespectivepartiesinsupportofthosemotionsand/orin  oppositionthereto,aswellastheoralargumentspresentedbycounselbeforetheCourton  December2,2002,andforthereasonsmorefullysetforthintheaccompanyingMemorandum Z andOpinionofthisdate,itisthis30thdayofJanuary,2003,bytheCircuitCourtforBaltimore &v City,Part20, B   ORDERED asfollows:   9 (00#  / /""   ,E.` hp x (#X(#E  P ,  <% hp x (#X(#<>2  1  .3     Defendant$X%XXX=XXX$X%smotiontodismisstheamendedcomplaintor,inthe   alternative,tostaypendingarbitrationis RESERVED .>e݌ Z"! Ќ  $ X(#  X(#$ P  ""   ,E.` hp x (#X(#E  P ,  <% hp x (#X(#<2  2  .3     Plaintiff$X%XXX=XXX$X%smotionforstayofarbitrationis GRANTED inpartand &$v#  RESERVED inpart.݌ %F!% Ќ  $ X(#  X(#$ P  ""   ,E.` hp x (#X(#E  P ,  <% hp x (#X(#<2  3  .3     Defendant$X%XXX=XXX$X%smotiontosupplementtherecordis DENIED asmoot.݌ '#' Ќ  $ X(#  X(#$ P   #  (009 / /" "   E.` ` hp x (#X(#E  ?(` hp x (#` X(#? 2  3  .3     Plaintiff$X%XXX=XXX$X%smotiontostriketheVandercookaffidavitasuntimelyis )$)  DENIED asmoot. ݌ b+&+ Ќ ' X(#`  X(#'   " "  E.` ` hp x (#X(#E  ?(` hp x (#` X(#? 2  4  .3   h     ; ݌̌ ' X(#`  X(#'   E.` hp x (#X(#E H CounselshalladvisetheCourtwithinten(10)daysoftheissuanceofthisOrder  d astotheiravailabilityforaschedulingconference.Theconferencewilladdressthescopeof  0 discoveryandthespecificissuestobeaddressedatthehearingontheexistenceofavalid    arbitrationagreementbetweentheparties.Discoverydeadlinesandahearingshallbescheduled x  atthattime. D   h򀀀 ` ALBERTJ.MATRICCIANI,JR. F Judge , January30,2003   h XE.` hp x (#X(#Ecc:  ArnoldM.Weiner,Esquire   X XE.` hp x (#X(#EPaulF.Strain,Esquire  IrvinB.Nathan,Esquire t  XXX