In China Auto Care, LLC v China Auto Care (Caymans), (S.D.N.Y. May 4, 2012), China Auto Care LLC (CAC), a parent Delaware limited liability corporation, asserted various causes of action in court against its corporate subsidiaries, CAC Caymans and Digisec, when they sold corporate assets without informing CAC of the transaction or distributing pro rata proceeds from the sale. The defendants moved to dismiss the complaint, arguing that the dispute fell within the arbitration clause in the parties' shareholder agreement. That agreement outlined the ownership structure and contained an arbitration clause, stating that "all disputes, claims or controversies arising under this Agreement, including the breach, termination or validity thereof . . . shall be finally settled by arbitration."

The court considered whether the parties agreed to arbitrate and whether CAC's claims fell within the scope of that agreement. The parties conceded that they had agreed to arbitrate claims under the shareholder agreement, but they disagreed over the scope of the clause. The court found that the arbitration clause was broad and that it covered the instant dispute.

The court first explained that the arbitration clause was broad because it expressly covered disputes regarding the validity of the agreement, which includes collateral matters involving more than contract interpretation. Further, the arbitration clause was considered broad because it included "claims" and "controversies", in addition to "disputes." Thus, the court applied a presumption of arbitrability.

The court then concluded that the claims raised in the complaint fell within the broad scope of the arbitration clause because the facts cited by CAC to support its claims "touch[ed] matters" covered by the shareholder agreement". The court noted that CAC implicitly conceded coverage in its complaint by referencing the "rights and obligations of the parties under the shareholder agreement" and asserting Cayman Islands law based on the choice of law from the shareholder agreement. Causes of action related to the shareholder agreement would definitely be covered by the agreement's broad arbitration clause.

This case provides an example of judicial interpretation of the scope and applicability of an arbitration clause. More generally, it illustrates the presumption of arbitrability that underlies the strong federal public policy in favour of arbitration.