ALIMENTS KRISPY KERNELS, INC., Appellant v. NICHOLS FARMS a/k/a Nichols Family Farms a/k/a Nichols Pistachios
No. 16-1975
United States Court of Appeals, Third Circuit.
March 21, 2017
283-293
Submitted Pursuant to Third Circuit L.A.R. 34.1(a), November 18, 2016
The consequences of this particular distortion of government functioning are foreseeable. As the Supreme Court noted in Nassar, “claims of retaliation are being made with ever-increasing frequency” and “lessening the causation standard could ... contribute to the filing of frivolous claims, which would siphon resources from efforts by employer[s], administrative agencies, and courts to combat workplace harassment.” 133 S.Ct. at 2531-32. Allowing claims to go forward on the terms dictated by the Department of Labor is a shift in public policy that should be debated and crafted within the legislative branch rather than being announced by unelected officials in an administrative agency. Yet, based on the judgment of someone inside the Department tasked with enforcing the FMLA, and despite the District Court‘s effort to say what the law is, employers will now face a lower threshold of liability than they would have under the default causation standard. It is worth pondering how we arrived at this point.9 The trajectory is more important than the result in this particular case.
and coherent regulatory scheme“). Regardless, there is no language akin to “motivating factor” indicating that something less than “but for” causation is in order and so the default rule laid out in Gross and Nassar indicates that a mixed-motive instruction is not warranted.
Samuel Feldman, Esq., Orloff Lowenbach Stifelman & Siegel, 101 Eisenhower Parkway, Suite 400, Roseland, NJ 07068, Counsel for Appellee.
Before: AMBRO, SHWARTZ, and FUENTES, Circuit Judges
OPINION
FUENTES, Circuit Judge.
The plaintiff, Aliments Krispy Kernels, brought this suit to enforce an arbitration award it received against the defendant, Nichols Farms, in a contract dispute. The award, based on an alleged breach of contract, was in the sum of $222,100. Claiming that the parties never agreed to arbitrate, Nichols Farms did not attend the arbitration. Aliments filed a petition to confirm the arbitration award and Nichols cross-petitioned to vacate it. The District Court denied Aliments’ petition to confirm and granted Nichols‘s petition to vacate. Because we find that an issue of material fact exists as to whether the parties agreed to arbitrate, we will vacate the District Court‘s judgment and remand for further proceedings.
I. Background
In August 2012, Aliments, a Canadian snack purveyor, contacted its American broker, Sterling Corporation, to purchase thousands of pounds of raw pistachios. Sterling, in turn, contacted Pacific/Atlantic Crop Exchange, another agricultural commodities broker. Learning of Aliments’ interest in purchasing pistachios, Pacific
To confirm the two orders, Sterling issued sales confirmations for the August and September orders and sent copies to Aliments and Pacific. Pacific did not forward the Sterling sales confirmations to Nichols, however, and instead issued its own set of sales confirmations, which were sent to Nichols and Sterling.1 Neither Aliments nor Nichols was aware that two sets of sales confirmations existed. The two sets contained the same terms, including a thirty-day credit term. However, while Sterling‘s sales confirmations contained arbitration clauses, it appears that some but not all of the sales confirmations generated by Pacific contained arbitration clauses.2
Aliments evidently believed that the Sterling sales confirmations, though unsigned by either party, represented a binding contract to purchase pistachios from Nichols, on credit with payment due thirty days from delivery, “as usual.”3 Nichols, on the other hand, thought that the thirty-day credit term was but a placeholder, as were all the terms in the Pacific sales confirmations except for the price and quantity terms. In support, the president of Nichols submitted a declaration explaining that “[w]hen Nichols receives a request from a customer to purchase product on credit, [it] obtain[s] a credit report and then [he, the president of Nichols, is] the one who makes the decision about whether to sell product on credit and on what terms and conditions.”4 The president of Pacific corroborated this practice, and submitted a separate declaration, stating that he had no authority from Nichols “to commit to any credit terms or to bind Nichols to any credit terms.”5 He avers that he created the sales confirmations based on a “template,” changing only the amount and price to reflect this particular transaction, leaving “product description, packaging, addresses, and terms” as-is from a prior transaction.6 “Based on [his] many years in the commodity brokerage business,” the president of Pacific “understood that Nichols, in response to [Aliments‘] offer, had the right to perform a credit check on [Aliments], and require security or advance payment if it thought it to be necessary.”7
After the sales confirmations were created, Nichols requested, and Aliments submitted, a credit application. This credit application was denied due to Aliments’ previous late payments to Nichols, its involvement in a lawsuit with another farmer, and the increased difficulty of collection with any foreign corporation. In short,
Aliments protested that advance payment is a highly irregular request that is inconsistent with Nichols‘s past practices with Aliments and with industry standards. Nonetheless, it continued to attempt to work with Nichols to come to an amiable resolution. However, the parties were ultimately unable to come to an agreement on a payment method. Finally, Aliments bought pistachios from another vendor at a higher price. Seeking to recoup the extra cost, Aliments initiated arbitration proceedings in accordance with the arbitration clauses contained in the Sterling sales confirmations that were unseen and unsigned by Nichols.
Despite being notified of the arbitration, Nichols elected not to attend. Aliments was awarded $222,100 in damages against Nichols by the arbitration panel. Sent a copy of this award, Nichols refused to satisfy it. Finally, Aliments filed a petition to confirm the arbitration award in the District of New Jersey. In response, Nichols cross-petitioned to vacate the arbitration award.
After months of discovery, the District Court denied Aliments’ petition and granted Nichols‘s cross-petition to vacate because no genuine issue of material fact existed as to whether the parties failed to enter into “an express unequivocal agreement” to arbitrate.8 We disagree, and for the reasons set forth below we will vacate and remand for further proceedings.9
II. Discussion
On appeal, Aliments argues that the District Court made two legal errors: first, the Court “erred in using a legal standard requiring ‘an express unequivocal agreement’ to arbitrate prior to binding a party to arbitration“;10 and second, it erred in finding, as a matter of law, that the parties did not enter into such an agreement to arbitrate. We will address each of these arguments in turn.
A. Legal Standard
The parties’ dispute regarding the proper legal standard for determining whether the parties have made an agreement to arbitrate is the result of courts’ changing attitude towards the Federal Arbitration Act (“FAA“). In 1980, we held in Par-Knit Mills, Inc. v. Stockbridge Fabrics Co. that “[b]efore a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be an express, unequivocal agreement to that effect.”11 In 1994, we reiterated this standard in Kaplan v. First Options.12 That case was appealed to the Supreme Court; and, in a decision affirming on other grounds, the Court held that, “[w]hen deciding whether the parties agreed to arbitrate a certain matter ..., courts generally ... should apply ordinary state-law principles that
Over a decade later, we reexamined the express and unequivocal standard in Century Indemnity Company v. Certain Underwriters at Lloyd‘s, London.14 We reviewed how we have used the express and unequivocal standard in the past, and acknowledged that the express and unequivocal language has been used, confusingly, to establish two different standards:
On the one hand, we have stated the “express” and “unequivocal” requirement to explain that genuine issues of fact as to whether there is an agreement to arbitrate preclude compelling a party to submit to arbitration; on the other, we have used this language to state a substantive standard that applies to the determination of an arbitration agreement‘s enforceability as a general matter.15
In Century Indemnity, we held that the latter use of express and equivocal as a substantive standard is no longer valid after the Supreme Court‘s decision in First Options of Chicago, Inc. v. Kaplan held that courts should generally look to the relevant state contract law to determine whether a valid agreement to arbitrate exists.16 But we did not strike down the use of the express and unequivocal re-quirement to the extent that it “requires that there not be a genuine issue of material fact as to an arbitration agreement‘s existence before a district court may determine whether the agreement exists as a matter of law.”17 Furthermore, in Century Indemnity, we repeatedly made clear that, despite the express and unequivocal language, “when determining whether there is a valid agreement to arbitrate between the parties ... we apply ordinary state-law principles of contract law,” and no more.18
Here, the District Court clearly used the express and unequivocal standard to explain that it will decide the petition to confirm the arbitration award and motion to vacate as a matter of law only if there is no “genuine issue of fact concerning the formation of the contract.”19 Therefore, to the extent that the District Court meant to impose no more stringent standard on the arbitration agreement than that permissible under state law, it did not err. However, Aliments’ confusion on this matter is understandable, and we recommend that district courts avoid using the “express and unequivocal” language. The legal standard is simply that we apply the relevant state contract law to questions of arbitrability, which may be decided as a matter of law only if there is no genuine issue of material fact when viewing the facts in the
Having established that the District Court, despite unclear language, used the correct standard, we turn next to Aliments’ second question on appeal: whether the District Court correctly determined that the parties did not enter into an agreement to arbitrate as a matter of law.
B. Analysis
As previously stated, the ultimate inquiry of whether the parties agreed to arbitrate is governed by the applicable state law. In this case, the question of which state law should apply is muddled. Aliments is a Canadian company seeking to confirm an arbitration award issued in New Jersey by an arbitration panel that used New York law against Nichols Farms, a California company, for breach of a contract to deliver goods in California that was largely negotiated by a broker based in Georgia and a broker based in California. Before the District Court, Aliments argued for New York law to apply, and Nichols argued for California law to apply. The District Court, however, made no findings about which state law applied. Instead, based solely on general principles of contract law, it granted Nichols‘s petition to vacate the arbitration award due to “a lack of evidence that any agreement or sales confirmation was ever entered,” and because “there is nothing to demonstrate that Nichols Farms intended to arbitrate the matter.”21 We disagree with this terse analysis.
Because we look to applicable state law to determine whether the parties agreed to arbitrate, we begin with a choice-of-law analysis. To determine the applicable state law, we use the forum state‘s choice-of-law rule. The first step in any choice-of-law inquiry under New Jersey law requires the court to determine whether there is an actual conflict between the laws of the potential forums.22 “That is done by examining the substance of the potentially applicable laws to determine whether there is a distinction between them.”23 If there is no actual conflict, “the inquiry is over and, because New Jersey would apply its own law in such a case, a federal court sitting in diversity must do the same.”24 If there is an actual conflict, then the court must determine “which forum has the most significant relationship with the parties and the contract.”25
On appeal, the parties continue to rely on different state laws: Aliments relies on New York law and Nichols relies on New Jersey law.26 Both parties, however, agree that there is no actual conflict between New York law and New Jersey law.27 Consequently, we will apply New Jersey law on contract formation.
Here, neither party has persuaded us that, under New Jersey law, no issues of material fact exist as to whether the parties agreed to arbitrate. We turn to appellant Aliments’ arguments first. Aliments asserts that Nichols “clearly intended to be bound by the [Pacific sales confirmations] and never mentioned any dispute regarding the arbitration clause” contained therein.32 Specifically, Aliments points to evidence in the record suggesting that Nichols acted as though it were under a contractual obligation to sell the pistachios to Aliments. For example, during the negotiations that took place in an effort to resolve their dispute, Nichols suggested that Aliments “void[] the existing purchase orders issued by Pacific Atlantic”33 and sign a new agreement with substantially similar sales terms but requiring pre-payment. Separately, in an internal email from the CEO of Nichols, the sales team was told to “delete the contract obligation.”34
Aliments’ argument fails due to at least two issues of material fact. First, as Nichols points out, there is a factual dispute as to whether the Pacific sales confirmations that were actually emailed to Nichols and Aliments contained arbitration clauses.35 The record contains versions of the Pacific sales confirmations that do include the arbitration clauses,36 and versions that do not.37 Second, the record suggests that even though Nichols may have referred to the sales confirmations as “purchase orders” or “contract obligation[s],”38 that does not necessarily mean that Nichols viewed the Pacific sales confirmations as binding contractual agreements. For example, Nichols‘s Regional Sales Manager stated that it is his understanding that Nichols does not “accept” buyers’ offers to purchase until they pass a credit check.39
At the same time, Nichols‘s arguments asking us to affirm the District Court‘s grant of its petition to vacate the arbitration award also fail. Nichols makes three categories of arguments. First, it relies on the fact that neither party signed any of the sales confirmations and that the rules imposed by the Association of Food Industries, the chosen arbitrator, required “the presence of signatures by both parties.”41 This reliance is misplaced. As reiterated above, under New Jersey state law, bills of sale between two merchants need not be signed in order to be binding as long as certain other conditions are met. The arbitrator‘s own procedural rules, such as requiring both parties’ signatures, are to be decided by the arbitrator, rather than the court, unless otherwise provided for in the contract.42 The lack of signatures clearly did not prevent the arbitrator in this case from concluding that Aliments and Nichols entered into a binding sales contract, and that is not a conclusion that we have been asked to review. Thus, our review is limited to examining whether, within the bounds of New Jersey state law, the parties made an agreement to arbitrate, and under New Jersey law, a lack of a signature in an agreement between two merchants is simply not dispositive.
Second, Nichols argues that the Pacific sales confirmations “fail to satisfy the merchant‘s exception to the general signature requirement”43 because they are not writings “in confirmation of the contract[s].”44 Specifically, Nichols argues that the Pacific sales confirmations fail because they “bear blank signature lines for the buyer and seller and still require sales confirmation numbers from Nichols Farms.”45 We disagree with Nichols‘s proposition that these deficiencies rendered the Pacific sales confirmations incomplete as a matter of law where the sales confirmations included all the essential terms of a sales contract: price, quantity, delivery, and payment method.46
Third and last, Nichols argues that the merchant‘s exception does not apply be-
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In sum, contrary to the District Court‘s analysis that there is “a lack of evidence that any agreement or sales confirmation was ever entered,” we find that multiple issues of material fact exist, precluding us from entering judgment in favor of either party.53
III. Conclusion
For the foregoing reasons, we will vacate and remand to the District Court for further proceedings.
UNITED STATES of America EX REL. Patrick Gerard CARSON, Plaintiff-Appellant, and United States of America ex rel. Christine A. Ribik, Plaintiff, v. MANOR CARE, INCORPORATED, a/k/a HCR Manor Care, Inc., d/b/a HCR Manor Care; HCR Manor Care; Heartland Employment Services, LLC, Defendants-Appellees, and Manor Care—Fair Oaks of Fairfax VA, LLC, d/b/a ManorCare Health Services—Fair Oaks; Manor Care of Arlington VA, LLC, d/b/a ManorCare Health Services—Arlington; Manor Care of North Hills of Pittsburgh PA, LLC, a/k/a ManorCare Health Services—North Hills; Manor Care of Pottstown, PA, LLC, a/k/a ManorCare Health Services—Pottstown; Manor Care of Pottsville PA, LLC, a/k/a ManorCare Health Services—Pottsville; Manor Care of Sinking Spring PA, LLC, a/k/a ManorCare Health Services—Sinking Spring; Manor Care of Sunbury PA, LLC, a/k/a ManorCare Health Services—Sunbury; Manor Care of West Reading PA, LLC, a/k/a ManorCare Health Services—West Reading North; Manor Care of Whitehall Borough PA, LLC, a/k/a ManorCare Health Services—Whitehall Borough; Manor Care of Williamsport PA (South), LLC, a/k/a ManorCare Health Services—Williamsport South; Manor Care of Yardley PA, LLC, a/k/a ManorCare Health Services—Yardley; Manor Care of Yeadon PA, LLC, a/k/a ManorCare Health Services—Yeadon; Manor Care of York (North) Inc., a/k/a Manor Care—North, a/k/a ManorCare Health Services—York North; Manor Care of York (South) Inc., a/k/a Manor Care—South, a/k/a ManorCare Health Services—York South; Manor Care of Charleston, Inc., a/k/a HCR ManorCare Health Services—Charleston, a/k/a Manor Care, Incorporated; Manor Care of Columbia, Inc., a/k/a HCR Manor Care—Columbia, a/k/a Manor Care, Incorporated; Manor Care of Lexington, Inc., a/k/a Manor Care Nursing and Rehab Center, a/k/a Manor Care, Incorporated; Manor Care of Aberdeen SD, LLC, a/k/a ManorCare Health Services—