In PTA-FLA v ZTE USA, Inc., No. 3:11-cv-510-J-32JRK, (M.D. Fla. Oct. 21, 2011), PTA and ZTE entered into an agreement involving telecommunications products and services that included an arbitration clause. The arbitration clause required the parties to attempt to settle any dispute through senior level negotiations, before arbitration could be initiated.

After a dispute arose between the parties, PTA allegedly requested a meeting with ZTE executives, but ZTE did not comply with the requirements for negotiation. PTA then filed a complaint in court, and ZTE responded with a motion to compel arbitration. PTA opposed the motion, arguing that ZTE failed to satisfy the conditions precedent to arbitration and therefore the parties could not be compelled to arbitrate. PTA further argued that the court must determine whether ZTE complied with the conditions precedent to arbitration. ZTE argued in response that the arbitrators should decide whether the conditions precedent to arbitration were satisfied.

The court explained that under the US Supreme Court's decision in Howsam v Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002), "procedural questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide." The court then found that questions about whether conditions precedent to arbitration have been fulfilled are procedural questions.

The court rejected PTA's argument that because the parties did not fulfill the conditions precedent to arbitration, the arbitration clause was not "activated." The court explained that this argument relied on cases decided before Howsam and which were factually distinguishable. In the cases finding that an arbitration clause was not "activated", the parties had taken no steps to satisfy conditions precedent to arbitration. In this case, however, the parties did take steps to fulfill conditions precedent, but disputed whether they were sufficient.

Since the parties disputed whether the steps they took fulfilled the conditions precedent requirement, the court found that this was a procedural question to be decided by the arbitrators and granted the motion to compel arbitration.

This case illustrates the kind of threshold questions that arise when parties attempt to compel arbitration and the application of the rule that arbitrators decide questions of procedural arbitrability, while courts decide questions of substantive arbitrability.