Rasheed Al Rushaid v. National Oilwell Varc
2014 U.S. App. LEXIS 12569
| 5th Cir. | 2014Background
- ARPD (plaintiff) sued multiple National Oilwell Varco entities, including NOV Norway, based on separate purchase-order contracts formed in response to price quotations.
- Some defendants removed the Texas action to federal court invoking an arbitration clause in a NOV LP price quotation; NOV Norway was not served until August 2012.
- NOV Norway’s own price quotation referenced the ORGALIME S2000 general conditions, which include an ICC arbitration clause; NOV Norway moved to compel arbitration after service.
- The district court denied NOV Norway’s motion, ruling (1) the phrase “Terms and conditions are based on the general conditions stated in the enclosed ORGALIME S2000” did not incorporate ORGALIME and (2) NOV Norway waived arbitration because its codefendants had substantially invoked the judicial process to plaintiffs’ prejudice.
- On appeal, the Fifth Circuit held that NOV Norway’s quotation did incorporate ORGALIME (so an arbitration agreement existed) and that the actions of NOV Norway’s codefendants could not be attributed to NOV Norway absent alter-ego/veil-piercing evidence, so NOV Norway did not waive arbitration.
- The Fifth Circuit vacated the denial to compel arbitration as to NOV Norway and remanded for the district court to reconsider whether to stay proceedings as to other parties under equitable estoppel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NOV Norway’s quotation incorporated ORGALIME (and its arbitration clause) | The phrase “based on” is too equivocal to incorporate ORGALIME | “Based on the general conditions” in a commercial quotation incorporates the ORGALIME as the foundational terms | Incorporated: the court held the language and context show ORGALIME was part of the agreement, so arbitration clause applies |
| Whether NOV Norway waived the right to arbitrate by delay and litigation participation | Plaintiffs: defendants’ extensive discovery/motion practice (while NOV Norway was not initially served) prejudiced plaintiffs; those actions attributable to NOV Norway | NOV Norway: it promptly sought arbitration after service and did not participate in pre-service litigation; codefendants’ actions cannot be imputed absent alter-ego evidence | No waiver: NOV Norway did not substantially invoke judicial process and codefendants’ actions cannot be imputed without alter-ego/veil-piercing evidence |
| Whether benefit from codefendants’ litigation or shared counsel imputes waiver to NOV Norway | Plaintiffs: NOV Norway benefitted and shared counsel/ownership, so should be bound | Defendants: benefit/shared counsel/ownership alone do not defeat corporate separateness or establish waiver | Not imputable: mere shared counsel/ownership/benefit insufficient; must show alter ego or abuse of corporate form |
| Whether the district court should stay proceedings as to other parties under equitable estoppel | Plaintiffs: non-signatory defendants cannot be compelled to arbitrate | Defendants: equitable estoppel may require stay of related claims against other parties | Remanded: Fifth Circuit declines to decide; leaves equitable-estoppel/stay decision to district court’s discretion |
Key Cases Cited
- Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061 (5th Cir. 1998) (arbitrability when dispute touches matters covered by an agreement)
- Banc One Acceptance Corp. v. Hill, 367 F.3d 426 (5th Cir. 2004) (federal policy favoring arbitration does not determine existence of an agreement)
- In re Prudential Ins. Co. of Am., 148 S.W.3d 124 (Tex. 2004) (a signed document that plainly refers to another writing can incorporate it)
- Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494 (5th Cir. 1986) (waiver of arbitration requires substantial invocation of judicial process and resulting prejudice)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (U.S. 2009) (apply agency and contract principles to determine when non-signatories may be bound by arbitration agreements)
- Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347 (5th Cir. 2003) (interlocutory review available for denial of motion to compel arbitration)