Rasheed Al Rushaid v. National Oilwell Varc
2016 U.S. App. LEXIS 2716
| 5th Cir. | 2016Background
- In 2011 ARPD, Rasheed al Rushaid, and Al Rushaid Petroleum Investment Corp. sued several NOV-related defendants alleging contract breaches and a bribery scheme involving corrupted ARPD employees.
- Two separate price quotations contained arbitration clauses: one from NOV Norway (calling for ICC arbitration) and one from NOV LP (no forum specified).
- NOV Norway sought arbitration before the ICC after it was served in 2012; the district court denied that motion and found NOV Norway had waived arbitration. The Fifth Circuit reversed as to NOV Norway in an earlier appeal.
- On remand defendants jointly moved to compel arbitration: NOV LP claimed a contractual right; the other defendants (nonsignatories) relied on equitable estoppel to compel arbitration under either clause.
- The district court rejected equitable-estoppel arguments, found NOV LP contractually entitled to arbitration, but (because NOV LP’s clause named no forum) ordered arbitration in the Southern District of Texas; NOV Norway’s claims were to proceed before the ICC, producing potential fragmentation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Is there appellate jurisdiction over NOV LP’s appeal of the district court’s forum ruling? | Plaintiffs argued interlocutory appeal not proper; contesting defendants sought review of denial of ICC forum. | NOV LP/NOV Norway sought review of denial to compel ICC arbitration and/or pendent/collateral jurisdiction. | No jurisdiction under FAA §16; collateral order/pending appellate doctrines do not apply; appeals by NOV LP and NOV Norway dismissed. |
| 2. Can nonsignatory defendants be compelled to arbitrate under equitable estoppel? | Plaintiffs argued claims arise from tort/ordinary-law duties, not from contracts, so estoppel inapplicable. | Nonsignatories argued equitable estoppel (direct benefit or concerted misconduct) ties claims to contracts. | Court rejects equitable estoppel: Texas recognizes only "direct benefit" estoppel; here plaintiffs’ claims rest on general legal duties and bribery scheme, so estoppel fails. |
| 3. Does the "concerted misconduct" theory bind nonsignatories to arbitration under Texas law? | Plaintiffs relied on Texas precedents restricting concerted-misconduct estoppel. | Defendants urged concerted-misconduct estoppel to reach nonsignatories. | Texas Supreme Court precedent forecloses compelling arbitration based solely on concerted misconduct; court declined to apply it. |
| 4. Is piecemeal litigation impermissible such that the court must avoid splitting claims into arbitration and court proceedings? | Plaintiffs asserted forum split is improper and inefficient. | Defendants argued they sought to avoid fragmentation. | Fragmentation is permissible; private arbitration agreements must be enforced even if result is piecemeal litigation. |
Key Cases Cited
- Al Rushaid v. Nat’l Oilwell Varco, Inc., 757 F.3d 416 (5th Cir. 2014) (prior Fifth Circuit decision addressing NOV Norway arbitration clause)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA promotes rapid enforcement of arbitration agreements)
- In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185 (Tex. 2007) (Texas limits estoppel; rejects compelling arbitration based solely on concerted misconduct)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (analyzing when arbitration may bind nonsignatories under Texas law)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (distinguishing contract-based claims subject to arbitration from tort claims based on general legal obligations)
- Bushley v. Credit Suisse First Boston, 360 F.3d 1149 (9th Cir. 2004) (when multiple arbitration clauses point to different forums, appellate review may be appropriate to avoid frustration of §16)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985) (private arbitration agreements must be enforced even if result is piecemeal litigation)
- Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863 (1994) (collateral order doctrine is narrow and does not override statutory schemes)