                      United States Court of Appeals
                        FOR THE EIGHTH CIRCUIT



                               No. 96-4126


Fleet Tire Service of North *Little
Rock,                       *
                            * Appeal from the United
States
          Appellee,         * District Court for the
                            * Eastern     District   of
Arkansas.
         v.                 *
                            *
Oliver Rubber Company,      *


                      Submitted:       May 19, 1997

                                          Filed:     July 15, 1997


Before MURPHY and HEANEY, Circuit Judges, and ROSENBAUM,1
District Judge.


HEANEY, Circuit Judge.

    Oliver Rubber Company (“Oliver”) appeals the district
court’s denial of its motion to stay an action for breach
of contract brought by Fleet Tire Service of North Little
Rock (“Fleet Tire”) pending arbitration under the terms
of the contact. We reverse.



      1
        The Honorable James M. Rosenbaum, United States District Judge for the
District of Minnesota, sitting by designation.
                          I.

    In November 1990, Fleet Tire entered into a contract
(“1990 Agreement”) with Oliver granting Fleet Tire a
nonexclusive right to use Oliver’s “Tuff-Cure System” of
retreading tires.     The 1990 Agreement contains an
arbitration clause that provides:

    Any controversy or claim arising out of or
    relating to this Agreement or any breach of its
    terms shall be settled by arbitration in
    accordance with the rules of the American
    Arbitration Association, and judgment upon the
    award rendered by the arbitrator(s) may be
    entered in any court having jurisdiction
    thereof. The expense of such arbitration shall
    be divided equally between the parties.      The
    arbitration provided for in this Section 10
    shall be the exclusive remedy for any dispute
    between Oliver and [Fleet Tire], as a substitute
    for any and all legal remedies and proceedings
    that would otherwise be available to them.

1990 Agreement, § 10. The 1990 Agreement also contains
a provision that requires any amendment or modification
to be made in writing and signed by both parties. 1990
Agreement, § 9.5.

    In February 1995, a sales representative for Oliver
signed a letter (“1995 Letter”) prepared by Fleet Tire
granting Fleet Tire an exclusive market area for the
Tuff-Cure System within a fifty-mile radius of Little
Rock and Russellville, Arkansas.      Fleet Tire never
countersigned the letter.   Subsequent to Fleet Tire’s
receipt of the 1995 Letter, Oliver entered into a Tuff-



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Cure System license agreement with another company that
included the Little Rock area.

    Fleet Tire filed a complaint alleging that Oliver
violated Fleet Tire’s exclusive-market rights provided by
the 1995 Letter. Oliver moved to stay the proceedings in
district court, asserting that Fleet Tire’s claim was
subject to the 1990 Agreement’s arbitration clause. The
district court denied the motion, holding that Fleet
Tire’s complaint arose under the 1995 Letter and that the
provisions of that letter are




                            3
“collateral” to the 1990 Agreement. Because the district
court misapplied the standard for determining when a
collateral matter is subject to an arbitration clause,
and because the arbitration clause at issue is broad
enough to cover this dispute, we reverse.

                          II.

    While we review the district court’s factual findings
for clear error, our review of the construction of the
arbitration   agreement   is   de   novo.     Nordin   v.
Nutri/System, Inc., 897 F.2d 339, 344 (8th Cir. 1990).
Although a court may not impose arbitration on a party
who has not agreed to be subject to it, Case Int’l Co. v.
T.L. James    & Co., 907 F.2d 65, 66 (8th Cir. 1990),
federal policy favors arbitration. Moses H. Cone Mem’l
Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983)
(questions relating to the scope of arbitrable issues
“should be resolved in favor of arbitration”).

    The district court found that a valid arbitration
agreement between Oliver and Fleet Tire exists based on
the 1990 Agreement but noted that “arbitration of [a]
dispute cannot be compelled merely based upon the
existence of an arbitration clause in the main agreement”
if the controversy is collateral to the agreement. Dist.
Ct. Op. at 6 (citing Wilson v. Subway Sandwiches Shops,
Inc., 823 F. Supp. 194, 199 (S.D.N.Y. 1993)). The court
found that the 1995 Letter could not be a modification or
amendment to the 1990 Agreement in the absence of
signings by both parties and that the 1995 Agreement was
specifically nonexclusive.    Therefore, the court held
that the 1995 Letter granting exclusivity did not arise

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under the 1990 Agreement and is therefore collateral to
that agreement.
    We hold that the court misapplied the rule governing
whether the arbitration clause applies to Fleet Tire’s
claim. While the rule established in Wilson prohibits
the application of an arbitration agreement to collateral
claims, it only does so when the arbitration agreement is
narrow. In Prudential Lines, Inc. v. Exxon Corp., 704
F.2d 59, 63 (2d Cir. 1983), cited in Wilson, the Second
Circuit sets out the two inquiries a court




                            5
must make in determining whether an arbitration clause
applies: (1) whether the clause is broad or narrow; and
(2) if the clause is narrow, whether the dispute involves
an agreement collateral to the agreement containing the
arbitration clause. The district court failed to conduct
the first inquiry under Prudential; that is, the court
did not determine whether the arbitration clause is broad
or narrow.

     We believe that, as a matter of law, the arbitration
clause in the 1990 Agreement is broad.        The clause
provides that arbitration is the exclusive remedy
available to the parties to settle controversies or
claims that not only arise from the 1990 Agreement but
also those “relating to” the contract.        The Second
Circuit considered language nearly identical to the
language here, calling it “the paradigm of a broad
clause.” Collins & Aikman Prods. Co. v. Building Sys.,
Inc., 58 F.3d 16, 20 (2d Cir. 1995).2 Such a provision
constitutes the broadest language the parties could
reasonably use to subject their disputes to that form of
settlement, including collateral disputes that relate to
the agreement containing the clause.

    Having found that the arbitration clause in the 1990
Agreement is broad, we turn to whether Fleet Tire’s claim
relates to the subject of the 1990 Agreement. Where a
broad arbitration clause is in effect, even the question


      2
       The contract in Collins & Aikman provided that “[a]ny claim or controversy
arising out of or relating to this agreement shall be settled by arbitration . . . in
accordance with the Rules then obtaining of the American Arbitration Association.”
Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 18 (2d Cir. 1995).
                                         6
of whether the controversy relates to the agreement
containing the clause is subject to arbitration.      See
Prudential Lines, 704 F.2d at 63. The fact that the 1995
Letter purportedly grants Fleet Tire an exclusive market
for the Oliver retreading process originally conferred in
the 1990 Agreement clearly demonstrates that the present
dispute relates to the 1990 Agreement.
    Neither party challenges the fact that each freely
entered into the agreement that provides arbitration as
the exclusive remedy for disputes relating to the
agreement.




                            7
Neither may now frustrate the purpose of the clause by
making   the  court   the   first  step   in resolving
controversies related to the 1990 Agreement.   Such an
avoidance can now be achieved only by bargaining for a
new agreement that provides other remedies.

                          III.

    Accordingly, we reverse the district court and remand
with instructions to grant Oliver’s motion for a stay
pending arbitration of Fleet Tire’s claim.

    A true copy.

        Attest.

             CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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