## Facts

- Sauer-Getriebe KG, a West German limited partnership, and White Hydraulics, Inc., an Indiana corporation, entered a June 29, 1979 agreement.
- White granted Sauer exclusive rights to sell White-manufactured motors in a territory covering approximately 47 countries (including East and West Germany) but excluding the United States.
- White agreed that upon specified events it would convey to Sauer trade secrets, patent rights, and other rights needed to manufacture the motors and would provide technical know-how necessary for Sauer to market them.
- Sauer agreed to pay royalties on each motor sold and stated an intent to purchase 50,000 motors from White during 1979–1985.
- The agreement included an arbitration clause covering “any and all disputes arising out of and in connection with” the contract.
- In July 1981, White notified Sauer it was negotiating to sell assets, including the manufacturing rights promised to Sauer, to a third party.
- Sauer filed a diversity action seeking preliminary and permanent injunctions to prevent transfer of the manufacturing rights while stating it intended to arbitrate the parties’ disputes.
- White argued Sauer waived arbitration by suing and counterclaimed for declarations that the contract was unenforceable due to vagueness, lack of consideration, unconscionability, inequity, and antitrust illegality.

## Issues

1. Whether a clause requiring arbitration of “any and all disputes arising out of and in connection with” the contract includes disputes asserting the contract is invalid or unenforceable for lack of consideration, unconscionability, vagueness, and related defenses.
2. Whether Sauer waived arbitration by filing suit seeking injunctive relief to preserve the status quo pending arbitration.
3. Whether a federal court may grant preliminary injunctive relief in aid of arbitration while compelling arbitration.

## Decision

- The Seventh Circuit affirmed the district court’s order compelling arbitration and granting preliminary injunctive relief preserving the status quo pending arbitration (subject to minor modifications not affecting the core holdings).
- The court held the broad arbitration clause encompassed disputes over alleged invalidity and enforceability defenses, including lack of consideration, unconscionability, and vagueness.
- The court held Sauer did not waive arbitration by filing suit limited to interim injunctive relief while expressly invoking arbitration.
- The court held preliminary injunctive relief may be used to prevent a party from defeating the arbitral process by transferring or dissipating the disputed contractual rights.

## Legal Principles

- Broad arbitration clauses covering “any and all disputes arising out of and in connection with” a contract are construed to include disputes about the contract’s validity and enforceability, absent clear contractual limitation.
- Under federal arbitration policy, doubts about the scope of arbitrable issues are resolved in favor of arbitration, including in international commercial arrangements.
- A party does not waive arbitration by seeking court-ordered provisional relief that is consistent with arbitration—such as preserving the status quo—when the party continues to demand arbitration and the litigation conduct is not inconsistent with that demand.
- Federal courts may issue preliminary injunctions in aid of arbitration to prevent irreparable harm and to preserve the meaningfulness of the arbitral remedy.

## Conclusion

The Seventh Circuit required the parties to arbitrate under a broadly worded arbitration clause, rejected waiver based on Sauer’s limited suit for interim injunctive relief, and approved judicial injunctions that preserve disputed contractual rights so arbitration can provide effective relief.


Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d 348 (7th Cir. 1983)