## Facts

- Personal Security & Safety Systems Inc. (PSSI) developed a personal security product and sought investment and development support.
- Motorola Inc. pursued an investment relationship to obtain access to PSSI’s technology.
- On December 17, 1997, the parties executed multiple related agreements, including:
  - a Stock Purchase Agreement (SPA) for staged financing up to $12 million;
  - a Product Development Agreement (PDA) governing joint product development; and
  - a Shareholders’ Agreement.
- The SPA included a Texas governing-law clause and an exclusive Texas forum-selection clause for any suit “brought hereunder,” but contained no arbitration provision.
- The PDA included a broad arbitration clause covering disputes “arising out of or related to” the PDA.
- By 1999, PSSI completed development of its system; Motorola allegedly refused to disburse funds required under the SPA.
- PSSI sued, alleging breach of the SPA and fraudulent misrepresentations made during negotiations leading to the SPA.

## Issues

1. Whether Motorola could compel arbitration of PSSI’s breach and fraud claims, pleaded under the SPA, based on the PDA’s arbitration clause.
2. Whether the SPA’s exclusive Texas forum-selection clause for suits “brought hereunder” precluded arbitration of SPA disputes.

## Decision

- The Fifth Circuit affirmed the denial of Motorola’s motion to compel arbitration and stay the case.
- The court held that PSSI’s claims, as pleaded, arose from alleged obligations and representations tied to the SPA investment arrangement, not from duties under the PDA.
- The court concluded the parties did not clearly agree to arbitrate disputes arising under the SPA, and the PDA arbitration clause did not extend to SPA-based claims.
- The court read the SPA’s forum-selection clause as allocating SPA disputes to Texas courts, while the PDA’s arbitration clause governed PDA disputes; the provisions were not irreconcilable.

## Legal Principles

- Arbitration under the Federal Arbitration Act is a matter of contract; a party may be compelled to arbitrate only disputes the party agreed to arbitrate.
- A broad “arising out of or related to” arbitration clause is limited to disputes connected to the contract containing that clause, absent clear incorporation or agreement extending it to other contracts.
- When multiple contemporaneous agreements allocate different dispute-resolution mechanisms, courts examine the text and structure to determine the parties’ intent as to which disputes fall within arbitration.
- The federal policy favoring arbitration does not permit compelling arbitration of claims governed by a separate agreement that omits arbitration and instead selects an exclusive judicial forum.

## Conclusion

The court held that Motorola could not use the PDA’s arbitration clause to compel arbitration of PSSI’s SPA-based breach and fraud claims, because the transaction documents allocated SPA disputes to litigation in Texas courts and did not show a clear agreement to arbitrate disputes arising under the SPA.


Personal Sec. & Safety Sys., Inc. v. Motorola, Inc., 297 F.3d 388 (5th Cir. 2002)