Aliments Krispy Kernels, Inc. v. Nichols Farms
851 F.3d 283
3rd Cir.2017Background
- Aliments Krispy Kernels (Canadian buyer) ordered pistachios through broker Sterling; Pacific/Atlantic (broker) contacted Nichols Farms (California grower) and Pacific issued sales confirmations to Nichols and Sterling. Sterling had separate confirmations sent to Aliments that contained arbitration clauses; Pacific’s confirmations sometimes included arbitration clauses and sometimes did not.
- Neither side signed the confirmations; Sterling’s confirmations were unseen by Nichols. Pacific used a template and may have left placeholder credit terms; Nichols required credit approval and ultimately denied Aliments’ credit application and demanded prepayment.
- Negotiations over payment failed; Aliments bought replacement product at higher cost and sought arbitration under the arbitration clauses in the Sterling confirmations, proceeding without Nichols (which did not attend).
- An arbitration panel awarded Aliments $222,100; Nichols refused to pay. Aliments petitioned in federal court (D.N.J.) to confirm the award; Nichols cross‑petitioned to vacate, arguing no agreement to arbitrate existed.
- The District Court vacated the award, finding no express, unequivocal agreement to arbitrate. The Third Circuit vacated that judgment and remanded, holding genuine issues of material fact exist about whether the parties agreed to arbitrate and directing further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether courts may apply a heightened "express and unequivocal" standard to find an agreement to arbitrate | Apply ordinary state contract law; the Sterling confirmations (containing arbitration clauses) bind Nichols | District Court required an express, unequivocal agreement before enforcing arbitration | Court: Use relevant state contract law (New Jersey here); avoid "express and unequivocal" phrasing as substantive rule; decide only if no genuine factual dispute exists |
| Whether an arbitration agreement was formed between Aliments and Nichols | Nichols acted as if bound; Pacific confirmations (and Sterling confirmations) show assent and satisfy merchant exception to signature requirement | Nichols never signed; broker lacked authority to bind credit terms; conflicting versions of confirmations and lack of written objection create no binding arbitration agreement as a matter of law | Court: Issues of material fact exist (e.g., which confirmations included arbitration clause; whether Nichols timely objected in writing); cannot decide as matter of law; remand |
| Whether unsigned merchant confirmations satisfy statute of frauds (UCC merchant exception) | Pacific confirmations contain essential terms and are confirmations sufficient under merchant exception | Confirmations incomplete (blank signature lines, reference numbers) and Nichols’ pre‑confirmation objections (credit terms) prevent the exception | Court: Under New Jersey law, material factual disputes (including whether Nichols gave written objection within 10 days) preclude resolution now |
| Whether arbitrator’s procedural rules or absence of signatures preclude court review | Arbitrator allowed award despite no signatures; procedural preconditions are for arbitrator unless contract says otherwise | Association rules required signatures; lack of signatures fatal | Court: Arbiter’s decision to proceed is not reviewed here; signature requirement under arbitrator rules not dispositive of whether contract formed under state law |
Key Cases Cited
- Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir. 1980) (earlier Third Circuit language requiring an "express, unequivocal" arbitration agreement)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (courts should apply ordinary state‑law contract principles to determine whether parties agreed to arbitrate)
- Century Indemnity Co. v. Certain Underwriters at Lloyd’s, 584 F.3d 513 (3d Cir. 2009) (clarifies that "express and unequivocal" cannot be used as a substantive standard post-First Options but may refer to absence of genuine factual dispute)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (procedural questions about arbitration administrative preconditions are presumptively for arbitrators)
- BG Group, PLC v. Republic of Argentina, 134 S. Ct. 1198 (U.S. 2014) (presumption that parties intend arbitrators, not courts, to decide certain procedural preconditions)