## Facts

- American Italian Pasta Company contracted with The Austin Company to design and build a pasta manufacturing facility.
- The contract contained a dispute-resolution clause requiring the parties to use “best efforts” to settle disputes before either could pursue legal action.
- The clause further provided that if the parties agreed a dispute could not be settled, it “may be submitted to arbitration” under AAA rules, and the arbitrators’ decision would be “final and binding.”
- A dispute arose; settlement efforts failed; Austin initiated arbitration with the American Arbitration Association.
- American Pasta sought to stay arbitration in state court; Austin removed the matter to federal court.
- American Pasta amended its pleading to allege, among other things, that no enforceable contract existed; the district court did not decide that issue.

## Issues

1. Whether the contract’s dispute-resolution clause created an enforceable agreement to arbitrate under the Federal Arbitration Act or merely permitted arbitration at the parties’ option.
2. Whether the district court erred by denying Austin’s motion to compel arbitration based on the clause’s use of “may.”

## Decision

- The Eighth Circuit reversed the order denying the motion to compel arbitration and remanded.
- The court held that, read as a whole, the dispute-resolution clause established an enforceable agreement requiring arbitration of disputes that could not be resolved through the contract’s settlement process.
- The court treated the clause’s “final and binding” language, together with the structured settlement-first procedure, as indicating arbitration was the agreed method of dispute resolution once settlement failed.
- The court limited its ruling to interpretation of the arbitration provision and did not resolve the broader allegation that no enforceable contract existed.

## Legal Principles

- The FAA reflects a strong federal policy favoring enforcement of arbitration agreements, but arbitration is required only when the parties have agreed to arbitrate.
- Contract language must be interpreted in context; the word “may” does not necessarily make arbitration purely optional where the clause, taken as a whole, sets out a dispute-resolution process culminating in final and binding arbitration.
- Doubts concerning the scope of arbitrable issues are generally resolved in favor of arbitration when the agreement reasonably supports arbitration.

## Conclusion

The Eighth Circuit held that the contract’s two-step dispute-resolution clause—good-faith settlement efforts followed by “final and binding” arbitration—constituted an enforceable arbitration agreement under the FAA, requiring arbitration despite the clause’s use of the term “may.”


Am. Ital. Pasta Co. v. Austin Co., 914 F.2d 1103 (8th Cir. 1990)