EI DuPont de Nemours v. Rhone Poulenc Fiber , 269 F.3d 187 ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
10-16-2001
EI DuPont de Nemours v. Rhone Poulenc Fiber
Precedential or Non-Precedential:
Docket 00-3550
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"EI DuPont de Nemours v. Rhone Poulenc Fiber" (2001). 2001 Decisions. Paper 241.
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Filed October 15, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-3550
E.I. DUPONT DE NEMOURS AND COMPANY, a Delaware
corporation
v.
RHONE POULENC FIBER AND RESIN INTERMEDIATES,
S.A.S., aka Rhone-Poulenc Fibres et Polymeres S.A.;
RHODIA, a French corporation; RHODIA FIBER AND
RESIN INTERMEDIATES, S.A.S., formerly named Rhone
Poulenc Fiber and Resin Intermediates, S.A.S.; RHODIA,
SA, f/k/a Rhone Poulenc Fibres Et Polymeres S.A.
Rhodia Fiber and Resin Intermediates, SAS and
Rhodia SA,
Appellants
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
D.C. Civil No. 99-cv-00874
District Judge: The Honorable Roderick R. McKelvie
Argued: September 5, 2001
Before: SCIRICA, ALITO, and BARRY, Circuit Jud ges
(Opinion Filed: October 15, 2001)
John A. Parkins, Jr., Esq. (Argued)
Robert W. Whetzel, Esq.
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
Attorneys for Appellants
P. Clarkson Collins, Jr., Esq.
(Argued)
Morris, James, Hitchens & Williams
222 Delaware Avenue
P.O. Box 2306
Wilmington, DE 19899
Attorneys for Appellee
OPINION OF THE COURT
BARRY, Circuit Judge:
In 1996, after years of negotiation, a Joint Venture
Agreement ("the Agreement") was entered into between
DuPont China ("DPC"), Rhone Poulenc Fiber and Resin
Intermediates ("Rhodia Fiber"), and Liaoyang Petro-
Chemical Fiber Company ("LYPFC"), a Chinese entity. DPC
and Rhodia Fiber are subsidiaries of E.I. DuPont de
Nemours and Company ("DuPont") and Rhodia, SA
("Rhodia"),1 respectively. The object of the 50-year joint
venture was to create Sanlong Nylon Company Limited
("Sanlong") to research, manufacture, and sell certain
fibers. The joint venture ultimately failed and DuPont, the
parent of DPC, brought suit against Rhodia Fiber and its
parent, Rhodia, to recover, DuPont says, not for breach of
the Agreement, to which it was not a party, but rather for
breach of an oral agreement and fraudulent
misrepresentations which occurred much later in time and
as a result of which it was damaged. Rhodia Fiber and
Rhodia moved to dismiss the complaint on various grounds
and to compel arbitration. The District Court denied that
_________________________________________________________________
1. Formerly known as Rhone Poulenc, Fibres Et Polymeres S.A.
2
motion in all respects, and an appeal was taken from the
denial of the motion to compel arbitration and the denial of
the motion to dismiss for lack of personal jurisdiction. We
will affirm as to the former and dismiss the appeal as to the
latter.
I. The Joint Venture Agreement
While DuPont does not purport to have sued on the
Agreement itself, there is no dispute that the Agreement
was at the heart of the proceedings before the District
Court and is at the heart of this appeal. We begin,
therefore, with the relevant provisions of the Agreement and
the background of how this litigation came to be.
Each party to the Agreement -- DPC, Rhodia Fiber and
LYPFC -- was to contribute significant capital to the joint
venture in relation to its interest in the venture. In P 7.02,
the parties agreed that:
(a) The Company [Sanlong] will be responsible for
obtaining financing that is beyond or in addition to the
Company's registered capital by borrowing funds from
sources inside China or outside China. Upon the
unanimous affirmative vote of every director of the
Board, each Party shall provide guaranties[sic] for
such additional financing, in proportion to the Party's
contribution to registered capital. A Party may
guarantee the Company's local currency or foreign
currency borrowings, provided that the aggregate
amount of all guaranties [sic] provided, by each Party
is in proportion to that Party's contribution to
registered capital. If any Party's guaranty is not
acceptable to the Lender, that Party shall, subject to
any necessary approval of the relevant authorities,
arrange a guaranty from a financial institution or other
company acceptable to the lender.
(B) Upon the unanimous affirmative vote of every
director of the Board in support of the Company
obtaining additional financing by way of borrowing
from the Parties, each Party shall directly or indirectly
provide loans for additional financing, in proportion to
the Party's contribution to registered capital. The terms
3
and duration of such loans shall be equitable among
the Parties and agreed upon by the Board.
P 7.02 (emphasis added). Nothing in this paragraph
obligated either parent company -- DuPont or Rhodia -- to
provide any guarantees or loans; rather, guarantees and/or
loans were obligations of the subsidiaries.
Even though the parent companies were not parties to
the Agreement, it was stated in the Agreement that they
would "assist the Company in the balancing of foreign
exchange during the Company's initial years of operation by
exporting 14,000 tons and 6,000 tons per year of nylon 6,6
polymer flake respectively in accordance to the DuPont
Polymer Flake Export Sales Agreement and RP Polymer
Flake Export Sales Agreement respectively." P 10.01(b).
Also, to ensure the success of the Company, the Agreement
provided that the parties "and their Affiliates will not take
action detrimental to the interest or well-being of the
Company." P 10.03(a).2 In conjunction with the Agreement,
DuPont (the parent) entered into three related agreements
with the joint venture company: a supply agreement, a
license contract and an export sales agreement. Rhodia (the
parent) also entered into a similar series of related
agreements.
_________________________________________________________________
2. The Agreement defined "Affiliate," "Affiliates" or "Affiliated Company"
as
"any corporation, partnership, association, or other entity or
organization which controls, or is controlled by, or is under
common
control with, that Party. The term "control" as used with respect
to
any Party, means the ownership, directly or indirectly of 50% or
more of the voting stock of such corporation or the possession,
directly or indirectly, of the power to direct or cause the
direction of
the management and policies of such corporation, partnership,
association or other entity or organization, or to receive,
directly or
indirectly, 50% or more of the profits of such corporation,
partnership, association or other entity or organization (whether
through the ownership or voting stock, by contracts or otherwise).
Notwithstanding the foregoing for purposes of this Contract,
"Affiliate" "Affiliates" or Affiliated Company" shall not mean
China
Petrochemical Corporation."
P 1.04.
4
Two provisions of the Agreement are of particular
relevance and, thus, particular importance here. First, the
Agreement contained an arbitration clause:
In the event any dispute or claim or difference of any
kind whatsoever arises in connection with the
interpretation or implementation of this Contract (a
"dispute"), including any question regarding its
existence[,] validity or termination, the parties shall
attempt in the first instance to resolve the dispute
through friendly consultations. If the dispute is not
resolved in this manner within sixty (60) days after one
Party has given both the other Parties written notice of
the existence of the dispute, then, the dispute shall be
referred to and finally resolved by arbitration in
Singapore in accordance with the Arbitration Rules of
the Singapore International Arbitration Centre ("SAIC")
for the time being in force. The tribunal shall consist of
three (3) arbitrators. The governing law of this
arbitration shall be the substantive law of the PRC and
the language of arbitration shall be English.
P 25.01 (emphasis added). Second, the Agreement provided
that it was
. . . made for the benefit of LYPFC, [Rhodia Fiber], DCH
and their respective lawful successors and assignees
and is legally binding on them. This Contract may not
be changed orally, but only by a written instrument
signed by LYPFC, [Rhodia Fiber] and DCH and
approved by the Examination and Approval Authority.
P 27.03.
After the joint venture failed, DuPont filed a three count
Complaint against Rhodia Fiber and Rhodia. In the first
count, entitled "Third Party Beneficiary Claims," DuPont
alleged that "DuPont, as the ultimate parent of DCH and as
the party required to provide loan guaranties [sic] on behalf
of its subsidiary DCH, was an intended party beneficiary of
the Joint Venture Contract," and that "Rhodia Fiber
materially breached the Joint Venture Contract by, without
limitation, failing to provide or secure the required loan
guaranties [sic]." A80-81. In the second count, entitled
"Breach of Agreement to Secure and Provide
5
Guaranties/Promissory Estoppel," DuPont alleged that it
was harmed by the breach by Rhodia Fiber and Rhodia of
a January 1998 oral agreement between DuPont and the
two defendants pursuant to which the defendants agreed
to support the joint venture but did not thereafter
provide or secure the requisite loan guarantees. In the
third count, entitled "Fraudulent Inducement/Material
Misrepresentation," DuPont alleged that Rhodia Fiber and
Rhodia made false statements of fact to DuPont with the
intent to induce DuPont's subsidiary DCH "to commit
substantial resources and investments to the business of
the Joint Venture and to induce DuPont to support the
business of the Joint Venture by, inter alia, providing Loan
guaranties on behalf of the Joint Venture." A83.
In response, the defendants moved to compel arbitration
and to dismiss the action for lack of personal jurisdiction,
insufficient service of process, failure to join an
indispensable party, and forum non conveniens. DuPont
then filed a First Amended Complaint significantly altering
its theory of liability. For starters, DuPont dropped the first
count of the Complaint, which alleged a breach of the
Agreement to which it was an intended third party
beneficiary. The first count of the Amended Complaint,
entitled "Breach of Agreement to Secure and Provide
Guaranties/Promissory Estoppel," instead mimicked the
second count of the Complaint, i.e., alleging that at a
meeting on January 22, 1998, Bruno deSoyres on behalf of
Rhodia, the parent, and Rhodia Fiber, the subsidiary,
entered into an oral agreement with DuPont to further
support the joint venture by securing and providing loan
guarantees, and abide by the obligations contemplated by
the Agreement. According to the Amended Complaint,
22. During discussions regarding the EPC Contr acts,
representatives of RP expressed concerns regarding the
Joint Venture which led DuPont representatives to
believe that the RP Group was reluctant to perform
obligations arising from the Joint Venture Agreement.
DCH, as the party to the Joint Venture Contract, and
DuPont as the ultimate parent of DCH and the party
providing the Loan guaranties required to finance the
EPC Contracts, desired to confirm the commitment of
6
the Rhodia Group to the venture before executing of
the EPC contracts and incurring the further financial
liabilities associated therewith.
23. At the request of the Rhodia Group's deSoy res,
representatives of DCH and DuPont convened a
meeting with deSoyres in Wilmington, Delaware, on
January 22, 1998. Kenneth Wall represented DuPont
and Michael Estep represented DCH at this meeting.
deSoyres represented the interests of the Rhodia
Group.
24. During the meeting, DuPont and DCH receive d
assurance that the Rhodia Group would continue to
support the Joint Venture and fully perform all the
obligations contemplated by the Joint Venture Contract
as long as DuPont and DCH did. DCH and DuPont
accepted and relied upon these assurances in
proceeding with the Joint Venture, approving execution
of the EPC Contracts and in agreeing to and ultimately
providing Loan guaranties pursuant to the Joint
Venture Contract.
A455-46.
DuPont alleged that the "Rhodia Group" breached this
oral agreement, and, thus, DuPont named both the parent
and the subsidiary in this count as well as the two
remaining counts. The second count of the Amended
Complaint mimicked the third count of the Complaint, i.e.,
alleging that at the January 1998 meeting the "Rhodia
Group" made false statements regarding its intent to
support the joint venture and induced DuPont by material
misrepresentations to further support the joint venture.
Finally, the third count of the Amended Complaint alleged
"Negligent Misrepresentation" based upon the same
statements underlying the new second count.
As noted above, the District Court denied defendants'
motion to dismiss the complaint and to compel arbitration,
and they appealed. We turn to the issues we are called
upon to decide.
7
A. Should Arbitration Have Been Compelled as to a
Non-Signatory?
The thrust of this appeal is whether the District Court
erred in its refusal to compel arbitration.3 There is no
dispute that the Agreement contained a valid and
enforceable arbitration clause which required all disputes
arising out of the Agreement between the parties be
submitted to binding arbitration in Singapore. The only
question is whether DuPont, a non-signatory to that
Agreement, is bound by that arbitration clause. Similarly,
there is no dispute that a non-signatory cannot be bound
to arbitrate unless it is bound "under traditional principles
of contract and agency law" to be akin to a signatory of the
underlying agreement. Bel-Ray Co., Inc. v. Chemsite (Pty)
Ltd., 181 F.3d 435, 444 (3d Cir. 1999). Appellants appeal
from the District Court's conclusion that DuPont was not
bound to arbitrate because it was not (a) an intended third
party beneficiary of the Agreement, (b) the disclosed
principal of its agent, DPC, a party to the Agreement, or (c)
equitably estopped from avoiding arbitration. We review the
District Court's conclusions de novo. Pritzker v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1113 (3d
Cir. 1993).
As we recently held:
The FAA establishes a strong federal policy in favor of
compelling arbitration over litigation. The Act provides
that if a party petitions to enforce an arbitration
agreement, "[t]he court shall hear the parties, and
upon being satisfied that the making of the agreement
for arbitration or the failure to comply therewith is not
in issue, the court shall make an order directing the
parties to proceed to arbitration in accordance with the
terms of the agreement." 9 U.S.C. S 4. The presumption
in favor of arbitration carries "special force" when
international commerce is involved, because the United
States is also a signatory to the Convention on the
Recognition and Enforcement of Foreign Arbitral
_________________________________________________________________
3. This Court has jurisdiction to consider the appeal from the denial of
a motion to compel arbitration. Sandvik AB v. Advent Int'l. Corp., 220
F.3d 99, 102-04 (3d Cir. 2000).
8
Awards. The CREFAA commits the courts of signatory
states to refer parties to arbitration when the parties
have agreed to arbitrate disputes. CREFAA is enforced
in the United States under Chapter Two of the FAA.
Sandvik AB v. Advent International Corp., 220 F.3d 99, 104-
05 (3d Cir. 2000) (internal citations omitted). The liberal
policy "favoring arbitration agreements . . . is at bottom a
policy guaranteeing the enforcement of private contractual
arrangements," id., and under the FAA,"a court may only
compel a party to arbitrate where that party has entered
into a written agreement to arbitrate that covers the
dispute. Bel-Ray Co., Inc. v. Chemrite (PTY) Ltd., 181 F.3d
435, 444 (3d Cir. 1999) ("Arbitration is strictly a matter of
contract. If a party has not agreed to arbitrate, the courts
have no authority to mandate that he do so.").
Because arbitration is a creature of contract law, when
asked to enforce an arbitration agreement against a non-
signatory to an arbitration clause, we ask "whether he or
she is bound by that agreement under traditional principles
of contract and agency law." Id. at 444. Each of appellants'
theories for binding DuPont to the arbitration clause, i.e.,
third party beneficiary, agency/principal, and equitable
estoppel, is a recognized principle of contract or agency law
applicable in the arbitration context. See Thompson-CSF,
S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776 (2d
Cir. 1995) (listing ways in which non-signatories have been
bound to arbitration clauses); see also Dayhoff Inc. v. H.J.
Heinz Co., 86 F.3d 1287, 1294-96 (3d Cir. 1996) (non-
signatories could not enforce arbitration clause against
signatory where no exception applied, but successor to
signatory could compel arbitration); Barrowclough v. Kidder,
Peabody & Co., Inc., 752 F.2d 923 (3d Cir. 1985)(compelling
signatory-employee to arbitrate claims against signatory-
employer and non-objecting related non-signatory),
overruled on other grounds by Pritzker v. Merrill Lynch,
Pierce, Fenner & Smith, 7 F.3d 1110 (3d Cir. 1993). We
consider them in turn.
1. Was DuPont a Third Party Beneficiary?
Appellants maintain that DuPont was an intended third
party beneficiary of the Agreement and, thus, DuPont is
9
bound by the arbitration clause. The District Court held
that DuPont was not a third party beneficiary and, even if
it were, because the claims asserted by DuPont do not arise
from any "third party beneficiary" status under the
Agreement, DuPont was not bound to arbitrate its claims as
a third party beneficiary. The District Court was correct.
In a series of cases, courts have allowed non-signatory
third party beneficiaries to compel arbitration against
signatories of arbitration agreements. John Hancock Life
Ins. Co. v. Wilson, 254 F.3d 48, 59-61 (2d Cir. 2001)
(member of NASD which was bound by its membership to
arbitrate disputes, was properly compelled to arbitrate by
third party beneficiary of that agreement); Spear, Leeds &
Kellogg v. Central Life Assurance Co., 85 F.3d 21, 29-30 (2d
Cir. 1996) (same with respect to NYSE rules). In the reverse
situation, we have also bound a non-signatory third party
beneficiary to a forum selection clause in the underlying
contract. Coastal Steel Corp. v. Tilghman Wheelabrator Ltd.,
709 F.2d 190, 202-04 (3d Cir. 1983), overruled on other
grounds by Lauro Lines v. Chasses, 490 U.S. 495 (1989).
Thus, whether seeking to avoid or compel arbitration, a
third party beneficiary has been bound by contract terms
where its claim arises out of the underlying contract to
which it was an intended third party beneficiary.
Appellants rely heavily on Coastal Steel in attempting to
show that DuPont was as an intended third party
beneficiary. In that case, a New Jersey company, Coastal
Steel, entered into a contract with Farmer Norton which
contained an arbitration clause. To fulfill that contract, and
at Coastal's suggestion, Farmer Norton contracted with
Tilghman for the purchase of a blast unit. The contract
between Farmer Norton and Tilghman contained a forum
selection clause which named England as the forum. While
in bankruptcy, Coastal filed suit against, inter alia, Farmer
Norton (also bankrupt), Tilghman, and its American parent
alleging breach arising out of the Farmer Norton-Tilghman
contract. The Bankruptcy Court and District Court denied
Tilghman's motion to dismiss in favor of the forum selection
clause contained in the Farmer Norton-Tilghman contract.
We reversed, and held that Coastal, a non-signatory to the
Farmer Norton-Tilghman contract, was a third party
10
beneficiary of that contract and, thus, was bound by the
forum selection clause contained therein. Coastal Steel, 709
F.2d at 202-04. We reasoned that carving out an exception
to the enforcement of forum selection clauses against third
party beneficiaries would be "inconsistent with the law of
contracts, which has long recognized that third-party
beneficiary status does not permit the avoidance of
contractual provisions otherwise enforceable." Id. at 203.
By doing business with Farmer Norton knowing that
Farmer Norton would, in turn, contract with Tilghman in
order to fulfill the underlying contract with Coastal, Coastal
was an intended third party beneficiary of the Farmer
Norton-Tilghman contract and could not avoid the forum
selection clause when it sued for breach of that contract.
Id.
Appellants argue that DuPont, "whose employees
negotiated this contract, has admitted that it was obligated
to make a loan guarantee on behalf of DuPont China and
that it was the intended beneficiary of the contract which
allegedly required Rhodia Fiber to provide a similar
guarantee." Appellants' Br. at 40. This argument is flawed
for at least two reasons. First, unlike the clear third party
beneficiary relationship in Coastal, there is no evidence that
DuPont was an intended third party beneficiary under the
Agreement. Under Delaware law, which is the law the
parties discuss, to qualify as a third party beneficiary of a
contract, (a) the contracting parties must have intended
that the third party beneficiary benefit from the contract,
(b) the benefit must have been intended as a gift or in
satisfaction of a pre-existing obligation to that person, and
(c) the intent to benefit the third party must be a material
part of the parties' purpose in entering into the contract.
Guardian Constr. Co. v. Tetra Tech Richardson, Inc. , 583
A.2d 1378, 1386 (1990) ("In order for third-party
beneficiary rights to be created, not only is it necessary that
performance of the contract confer a benefit upon a third
person that was intended, but the conferring of the
beneficial effect on such third-party, whether it be creditor
or donee, should be a material part of the contract's
purpose."). Thus, if it was not the promisee's intention to
confer direct benefits upon a third party, but rather such
third party happens to benefit from the performance of the
11
promise either coincidentally or indirectly, then the third
party will have no enforceable rights under the contract.
Appellants have not offered any evidence that DuPont was
anything more than an incidental third party beneficiary.
The parties to the Agreement were only LYPFC (the
Chinese entity), Rhodia Fiber and DCH; moreover, the
Agreement provided that it was
made for the benefit of LYPFC, [Rhodia Fiber], DCH
and their respective lawful successors and assignees
and is legally binding on them. This Contract may not
be changed orally, but only by a written instrument
signed by LYPFC, [Rhodia Fiber] and DCH and
approved by the Examination and Approval Authority.
A158, P 27.03. The arbitration clause itself anticipated only
three beneficiaries to the Agreement, all of them parties. It
stated that if disputes could not be resolved amicably and
"one Party has given both of the other Parties written notice
of the existence of the dispute, then, the dispute shall be
referred to and finally resolved by arbitration in Singapore
in accordance with the Arbitration Rules of the Singapore
International Arbitration Centre ("SAIC") for the time being
in force." P 25.01 (emphasis added). Although DuPont as
the parent of DPC would certainly benefit from the success
of DPC, DuPont was not an intended third party beneficiary
of the Agreement any more than any parent who expects to
benefit from the success of the business ventures of its
subsidiary.
Appellants argue, however, that DuPont was a third party
beneficiary because (a) DuPont negotiated the Agreement,
(b) DuPont's claims "mirror DuPont China's claims in
arbitration, all of which stem from the Joint Venture
Contract," (c) DuPont was positioned to derive more than
shareholder benefits from the joint venture, and (d) DuPont
claimed in the initial Complaint that it was a third party
beneficiary of the Agreement and that it was required to
guarantee the joint venture company's debt under the
Agreement. We disagree.
First, that DuPont negotiated the Agreement, without
more, has nothing to do with whether it was a third party
beneficiary. Second, appellants err in their contention that
12
DuPont's claims mirror DPC's claims in arbitration. DPC is
arbitrating the breach of the underlying Agreement and
seeking its lost profits and the recoupment of its investment
whereas DuPont is litigating its losses arising out of a 1998
oral agreement that was breached and misrepresentations
made by appellants' representative outside of the Agreement.4
Third, appellants have offered nothing to support their bald
assertion that DuPont was positioned to derive more than
shareholder benefits from the joint venture. While DuPont's
"related agreements" at least potentially would have
benefitted DuPont, they do not render DuPont an intended
third party beneficiary of the Agreement. Fourth, although
it was imprudent of DuPont to have alleged in its initial
Complaint that it was a third party beneficiary of the
Agreement, the question of its status is ultimately for us to
decide under applicable law. Parenthetically, we note that it
was also imprudent for DuPont to allege, as it initially
alleged, that it was required under the Agreement to
guarantee the joint venture's debt. DuPont now states,
correctly, that under the Agreement, DPC was required to
provide a suitable guarantee and that, DuPont, in turn,
chose to provide that guarantee for DPC.
Appellants' third party beneficiary argument fails for yet
another, perhaps more obvious, reason. Appellants point
out that "[t]he Court in Coastal Steel applied the forum
selection clause to all claims that implicated the underlying
contract to which Coastal Steel was third-party beneficiary,
including claims for negligent design, breach of implied
warranty and misrepresentation." Appellants' Br. at 37.
Coastal Steel, its progeny and Delaware law make clear that
a third party beneficiary will only be bound by the terms of
the underlying contract where the claims asserted by that
beneficiary arise from its third party beneficiary status.
Industrial Electronics Corp. v. iPower Distribution Group,
Inc., 215 F.3d 677, 680 (7th Cir. 2000) (third party
beneficiary non-signatory was not compelled to arbitrate
_________________________________________________________________
4. DPC alleged in the arbitration that Rhodia Fiber failed to provide the
required guarantee under Article 7.02 for a proposed loan to Sanlong,
causing the loan not to be made and, thus, causing Sanlong's collapse
and dissolution. At oral argument, we were advised that Rhodia Fiber
lost the arbitration but that damages had not yet been set.
13
claims because the claims did not arise out of the contract
from which it derived its third party status); Spear, 85 F.3d
at 29-30. None of DuPont's amended claims, however, arise
out of its alleged third party beneficiary status under the
Agreement; rather, DuPont's claims arise from the
misrepresentations allegedly made to it by appellants'
representative. Those misrepresentations, while arguably
related to the underlying Agreement, do not relate to any
"third party beneficiary" status created at the inception of
the Agreement.5
2. Agency
Next, appellants argue that DuPont's intimate
involvement with the Sanlong project renders it liable under
traditional agency principles because DPC acted as
DuPont's disclosed agent and, under principles of agency
law, DuPont is bound by DPC's Agreement. The District
Court correctly rejected this argument, a conclusion
underscored by the fact that appellants have failed to cite
either the relevant factors we should consider in
determining whether DCH acted as DuPont's agent or any
case that would carry the day.
Traditional principles of agency law may bind a non-
signatory to an arbitration agreement. Thomson-CSF, S.A. v.
American Arbitration Assoc., 64 F.3d 773, 776 (2d Cir.
1995). Under Delaware law:
_________________________________________________________________
5. Even if this Court were to find that DuPont is bound by the Agreement
and, thus, by the arbitration clause, DuPont might well argue that its
claims fall outside the scope of that clause. The arbitration clause
applies only to a dispute that "arises in connection with the
interpretation or implementation of this Contract." A156, P 25.01. Even
though the "arising out of " language has been read broadly by courts,
DuPont could argue that its claims in the Amended Complaint arise out
of alleged obligations or misrepresentations made outside of the
Agreement and not arising therefrom. See Industrial Electronics, 215 F.3d
at 680 (third party beneficiary non-signatory was not compelled to
arbitrate claims because the claims did not arise out of the contract from
which it derived its third party status.). Thus, it is not a foregone
conclusion that, were this Court to find DuPont bound by the
Agreement, this case would automatically be sent to arbitration.
14
One corporation whose shares are owned by a second
corporation does not, by that fact alone, become the
agent of the second company. However, one
corporation -- completely independent of a second
corporation -- may assume the role of the second
corporation's agent in the course of one or more
specific transactions. This restricted agency
relationship may develop whether the two separate
corporations are parent and subsidiary or are
completely unrelated outside the limited agency
setting. Under this second theory, total domination or
general alter ego criteria need not be proven.
When one corporation acts as the agent of a
disclosed principal corporation, the latter corporation
may be liable on contracts made by the agent. Liability
may attach to the principal corporation even though it
is not a party named in the agreement.
Unlike the alter ego/piercing the corporate veil
theory, when customary agency is alleged the
proponent must demonstrate a relationship between
the corporation and the cause of action. Not only must
an arrangement exist between the two corporations so
that one acts on behalf of the other and within usual
agency principles, but the arrangement must be
relevant to the plaintiff 's claim of wrongdoing.
Phoenix Canada Oil Co. v. Texaco, Inc., 842 F.2d 1466,
1477 (3d Cir. 1988) (citations omitted). To bind a principal
by its agent's acts, the plaintiff must demonstrate that the
agent was acting on behalf of the principal and that the
cause of action arises out of that relationship. Id.
Appellants rely principally on J.J. Ryan & Sons, Inc. v.
Rhone Poulenc Textiles, S.A., 863 F.2d 315 (4th Cir. 1988)
and Phoenix Canada in support of their agency argument.
In Phoenix Canada, we did not apply agency principles but,
instead, remanded for the District Court to make this fact-
intensive inquiry. Moreover, we noted that the agency
relationship must relate to the cause of action alleged in
the complaint. It is far from clear that this case passes that
test. Appellants' reliance on J.J. Ryan & Sons is also
misplaced. The Fourth Circuit never cited to agency
15
principles and merely permitted a signatory to arbitrate its
claims against a non-signatory parent company where that
parent company was willing to submit to arbitration. J.J.
Ryan & Sons, 863 F.2d at 320-21. The Court noted,
however, held that a court "may" refer claims against a
non-signatory parent to arbitration when the claims against
the parent and the subsidiary are "based on the same facts
and are inherently inseparable." Id. at 320. No such claim
can be made here.
Appellants also invoke Pritzker v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993), but
Pritzker is inapposite. In Pritzker, we bound an agent to the
principal's arbitration agreement. Here, appellants seek to
hold a principal to an agent's agreement and the rationale
of Pritzker does not apply with equal force. In Pritzker, a
trustee of a pension plan sued its broker, Merrill Lynch,
and a related company to recover for violations of ERISA.
Merrill Lynch moved to compel arbitration and the District
Court denied that motion. We reversed, holding that (a) the
trustees were bound to arbitrate their claims against Merrill
Lynch as signatories to a binding arbitration agreement,
and (b) over the trustees' objection, the trustees were
bound to arbitrate the dispute against the individual broker
and the sister company, neither of which signed the
aforementioned agreement. Specifically, with respect to the
broker, we found that where the principal is bound to
arbitration and the complaints arise out of the agent's
conduct on behalf of that principal, the agent is bound by
the principal's agreement to arbitrate disputes. Id. at 1122.
With respect to the sister company, we summarily found
that company bound as an agent and possibly as an alter-
ego of Merrill Lynch. Id.
In the case sub judice, unlike Pritzker , appellants seek to
hold DuPont liable as a principal, not as an agent;
moreover, unlike Pritzker, DuPont could act on its own.
Appellants' attempt to bind DuPont on agency principles
fails.
3. Equitable Estoppel
Finally, appellants argue that DuPont is equitably
estopped from avoiding the arbitration clause in the
16
Agreement. We have never applied an equitable estoppel
theory to bind a non-signatory to an arbitration clause
although there appears to be no reason why, in an
appropriate case, we would refrain from doing so.
As the Second Circuit recently explained, there are two
theories of equitable estoppel in this context. First, courts
have held non-signatories to an arbitration clause when the
non-signatory knowingly exploits the agreement containing
the arbitration clause despite having never signed the
agreement. Thomson-CSF, S.A. v. American Arbitration
Assoc., 64 F.3d 773, 778 (2d Cir. 1995). Second, courts
have bound a signatory to arbitrate with a non-signatory
"at the nonsignatory's insistence because of`the close
relationship between the entities involved, as well as the
relationship of the alleged wrongs to the nonsignatory's
obligations and duties in the contract . . . and[the fact
that] the claims were intimately founded in and intertwined
with the underlying contract obligations.' " Id. at 779
(quoting Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc.,
10 F.3d 753, 757 (11th Cir. 1993)(quoting McBro Planning
& Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342, 344
(7th Cir. 1984))(internal quotation marks omitted).
Appellants' reliance on the first of these two theories stands
on somewhat stronger ground than their reliance on the
second.
Under the first theory, courts prevent a non-signatory
from embracing a contract, and then turning its back on
the portions of the contract, such as an arbitration clause,
that it finds distasteful. See, e.g., American Bureau of
Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (3d
Cir. 1999) (non-signatory bound by contract under which it
received the direct benefits of lower insurance and the
ability to sail under the French flag); Thomson-CSF, S.A., 64
F.3d at 779 (finding only indirect benefit insufficient to
invoke equitable estoppel against a non-signatory). As the
Fourth Circuit explained, "In the arbitration context, the
doctrine recognizes that a party may be estopped from
asserting that the lack of his signature on a written
contract precludes enforcement of the contract's arbitration
clause when he has consistently maintained that other
provisions of the same contract should be enforced to
17
benefit him. `To allow [a plaintiff] to claim the benefit of the
contract and simultaneously avoid its burdens would both
disregard equity and contravene the purposes underlying
enactment of the Arbitration Act.' " International Paper Co.
v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d
411, 418 (4th Cir. 2000) (internal citation omitted).
Generally, these cases involve non-signatories who,
during the life of the contract, have embraced the contract
despite their non-signatory status but then, during
litigation, attempt to repudiate the arbitration clause in the
contract. See, e.g., Tencara Shipyard, 170 F.3d at 353 (non-
signatory derived benefit from contract and could not avoid
the arbitration clause contained therein).6 Here, there is no
evidence that DuPont embraced the Agreement itself during
the lifetime of the Agreement, or that it received any direct
benefit under the Agreement. Thus, in a strict sense, these
cases do not help appellants.7
What gives us some pause, however, is that a close
examination of the Amended Complaint reveals that, at
bottom, DuPont's claims against the subsidiary, Rhodia
Fiber, arise, at least in part, from the underlying
_________________________________________________________________
6. At least one court has referred to "equitable estoppel" when it
required
a non-signatory to arbitrate based on its conduct during litigation as
opposed to during the lifetime of the commercial contract. International
Paper Co., 206 F.3d at 417-18 (buyer was bound to arbitrate claim
against manufacturer even though it was not a signatory to
manufacturer-distributor contract because the buyer alleged a breach of
that contract). While at first blush this appears helpful to appellants, a
closer examination reveals that the non-signatory in that case also
received a direct benefit under the contract during the lifetime of the
contract.
7. We cannot help but note that many of these cases resemble the third
party beneficiary cases. In Tencara Shipyard, for example, the non-
signatory was the intended third party beneficiary of the contract
containing the arbitration clause. The two theories of liability are,
however, distinct. Under the third party beneficiary theory, a court must
look to the intentions of the parties at the time the contract was
executed. Under the equitable estoppel theory, a court looks to the
parties' conduct after the contract was executed. Thus, the snapshot this
Court examines under equitable estoppel is much later in time than the
snapshot for third party beneficiary analysis.
18
Agreement. Parenthetically, it is difficult to decipher exactly
what DuPont claims each appellant has done giving rise to
liability because in its Amended Complaint DuPont lumps
them together as "the Rhodia Group," just as in the
Complaint, it lumped them together as "RP."
The Amended Complaint does not allege only that
Rhodia, the parent, breached its oral agreement to provide
loan guarantees to its subsidiary. If this were DuPont's only
claim in this case, the Amended Complaint would have
named one, and only one, defendant -- Rhodia. Instead, the
Amended Complaint also named Rhodia Fiber, the
subsidiary, as a defendant because, DuPont alleges, Rhodia
Fiber breached its oral promise to DuPont that it would
continue to abide by its obligations in the Agreement, i.e.,
securing loan guarantees for the joint venture. To the
extent that DuPont presses a claim against Rhodia Fiber for
breaching its oral commitment to perform under the
Agreement, DuPont alleges a claim which can well be
argued (a) embraces the underlying Agreement and (b)
requires proof that Rhodia Fiber ultimately breached the
underlying Agreement. The question, then, is whether
having alleged that it entered into a separate oral
agreement with Rhodia Fiber binding Rhodia Fiber to the
very obligations it undertook in the Agreement, DuPont is
now equitably estopped from avoiding another provision of
the Agreement, i.e., the arbitration clause. This is a close
call.
On the one hand, we must be careful about disregarding
the corporate form and treating a non-signatory like a
signatory. On the other hand, by alleging, albeit by virtue
of a separate oral agreement, that Rhodia Fiber failed to
secure loan guarantees, DuPont's claim against Rhodia
Fiber implicates, at least in part, the very Agreement which
DuPont repudiates to avoid arbitration. It is, however, that
separate oral agreement that saves the day for DuPont
because, wholly apart from whether Rhodia Fiber breached
the Agreement, what is at the core of this case is the
conduct and the statements of appellants' representative in
January of 1998.
With reference to the second theory of equitable estoppel,
appellants rely on a series of cases in which signatories
19
were held to arbitrate related claims against parent
companies who were not signatories to the arbitration
clause. In each of these cases, a signatory was bound to
arbitrate claims brought by a non-signatory because of the
close relationship between the entities involved, as well as
the relationship of the alleged wrongs to the non-signatory's
obligations and duties in the contract and the fact that the
claims were intertwined with the underlying contractual
obligations. Thomson-CSF, S.A., 64 F.3d at 779. In essence,
a non-signatory voluntarily pierces its own veil to arbitrate
claims against a signatory that are derivative of its
corporate-subsidiary's claims against the same signatory.
Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524,
527 (5th Cir. 2000) (non-signatory able to compel signatory
to arbitrate claims related to the contract which contained
an arbitration clause); J.J. Ryan & Sons, 863 F.2d at 320-
21 (discussed above); Sunkist Soft Drinks, Inc. v. Sunkist
Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993)
(compelling signatory to arbitrate claims against non-
signatory that were intertwined with claims arising from
contract governed by arbitration clause); Hughes Masonry
Co., Inc. v. Greater Clark County Sch. Bldg. Corp. , 659 F.2d
836, 840-41 (7th Cir. 1981) (same); McBro Planning and
Dev. Co. v. Triangle Elec. Const. Co., Inc., 741 F.2d 342, 344
(11th Cir. 1984) (non-signatory to contract containing
arbitration clause was bound by signatory to arbitrate
dispute where claims were inextricably intertwined with
duties created in underlying contract and non-signatory
signed a related contract which contained an arbitration
clause).8 Appellants recognize that these cases bind a
signatory not a non-signatory to arbitration, but argue that
this is a distinction without a difference. They are wrong.
_________________________________________________________________
8. See also Dominiun Austin Partners, L.L.C. v. Emerson, 248 F.3d 720,
728 (8th Cir. 2001) (party equitably estopped from arguing that opposing
parties were not bound by arbitration clause where that same party
alleged in other lawsuit that those opposing parties were bound by the
contract containing the arbitration clause.); Long v. Silver, 248 F.3d
309,
320 (4th Cir. 2001) (compelling signatory to arbitration clause to
arbitrate claims against non-signatory shareholders where the signatory
claimed that the non-signatories owed him a duty under the contract
they did not sign).
20
Indeed, the Second Circuit recently rejected the same
"distinction without a difference" argument:
As these cases indicate, the circuits have been willing
to estop a signatory from avoiding arbitration with a
nonsignatory when the issues the nonsignatory is
seeking to resolve in arbitration are intertwined with
the agreement that the estopped party has signed. As
the district court pointed out, however, "[t]he situation
here is inverse: E & S, as signatory, seeks to compel
Thomson, a non-signatory." While E & S suggests that
this is a non-distinction, the nature of arbitration
makes it important. Arbitration is strictly a matter of
contract; if the parties have not agreed to arbitrate, the
courts have no authority to mandate that they do so.
In the line of cases discussed above, the courts held
that the parties were estopped from avoiding
arbitration because they had entered into written
arbitration agreements, albeit with the affiliates of
those parties asserting the arbitration and not the
parties themselves. Thomson, however, cannot be
estopped from denying the existence of an arbitration
clause to which it is a signatory because no such
clause exists. At no point did Thomson indicate a
willingness to arbitrate with E & S. Therefore, the
district court properly determined these estoppel cases
to be inapposite and insufficient justification for
binding Thomson to an agreement that it never signed.
Thomson-CSF, S.A., 64 F.3d at 779 (internal citations
omitted). The distinction between signatories and non-
signatories is important to ensure that short of piercing the
corporate veil, a court does not ignore the corporate form of
a non-signatory based solely on the interrelatedness of the
claims alleged. The District Court recognized that this was
so, holding that the corporate form cannot be discarded
and a non-signatory required to arbitrate unless its
conduct falls within one of the accepted principles of
agency or contract law that permit doing so.
In sum, the thrust of the claims in the Amended
Complaint are far enough removed from the Agreement
such that DuPont should not be equitably estopped from
21
repudiating the arbitration clause contained in the
Agreement.
II. Is the Issue of Personal Jurisdiction Now
Appealable?
DuPont has moved to dismiss appellants' appeal from the
District Court's concededly interlocutory order denying
appellants' motion to dismiss for want of personal
jurisdiction. Appellants ask this Court to exercise its
discretion in favor of review under the doctrine of pendent
appellate jurisdiction. We reject appellants' request.
The doctrine of pendent appellate jurisdiction, in its
broadest formulation, allows an appellate court in its
discretion to exercise jurisdiction over issues that are not
independently appealable but that are intertwined with
issues over which the appellate court properly and
independently exercises its jurisdiction. In re TuTu Wells
Contamination Litigation, 120 F.3d 368, 382 (3d Cir.
1997)(citing 16 Charles Alan Wright, Arthur R. Miller, &
Edward H. Cooper, Federal Practice and ProcedureS 3937
at 684-85 (2d ed. 1996). In Swint v. Chambers County
Commission, the Supreme Court considered the availability
of pendent appellate jurisdiction and explicitly struck down
the Eleventh Circuit's liberal construction of 28 U.S.C.
SS 1291 and 1292 which, the Court said, circumvented the
limits Congress set on appellate jurisdiction of interlocutory
orders -- in other words, those orders listed in 1292(a) and
those certified by a district court under 1292(b). 514 U.S.
35, 45-47 (1995).
Congress thus chose to confer on district courts first
line discretion to allow interlocutory appeals. If courts
of appeals had discretion to append to a Cohen -
authorized appeal from a collateral order further
rulings of a kind neither independently appealable nor
certified by the district court, then the two-tiered
arrangement S 1292(b) mandates would be severely
undermined.
Id. at 47 (internal footnotes omitted). Despite this rather
absolute language, the Court did not foreclose entirely the
availability of pendent appellate jurisdiction:
22
We need not definitively or preemptively settle here
whether or when it may be proper for a court of
appeals, with jurisdiction over one ruling, to review,
conjunctively, related rulings that are not themselves
independently appealable. The parties do not contend
that the District Court's decision to deny the Chambers
County Commission's summary judgment motion was
inextricably intertwined with that court's decision to
deny the individual defendants' qualified immunity
motions, or that review of the former decision was
necessary to ensure meaningful review of the latter.
Id. at 50-51 (internal citations omitted).
Building on this guarded endorsement of pendent
appellate jurisdiction in certain limited circumstances, we
and other Circuits have recognized "a discretionary, though
`narrow,' doctrine of pendent appellate jurisdiction. But we
have also concluded that the doctrine should be used
`sparingly,' and only where there is a sufficient overlap in
the facts relevant to both the appealable and nonappealable
issues to warrant plenary review. We have also stated that
`pendent appellate jurisdiction over an otherwise
unappealable order is available only to the extent necessary
to ensure meaningful review of an appealable order.' " In re
Montgomery County, 215 F.3d 367, 375-76 (3d Cir. 2000)
(emphasis in original) (citations omitted); see also In re Tutu
Wells, 120 F.3d at 382. Essentially, post-Swint, we have
defined pendent appellate jurisdiction to mirror the
Supreme Court's two examples: inextricably intertwined
orders or review of the non-appealable order where it is
necessary to ensure meaningful review of the appealable
order.
Although we have not addressed whether we should
exercise pendent jurisdiction over an appeal of a motion to
compel arbitration, other Circuits have done so. Where
personal jurisdiction is inextricably intertwined with the
immediately appealable decision on a motion to compel
arbitration or other immediately appealable order, Courts of
Appeals have exercised pendent jurisdiction over a personal
jurisdiction issue, but those Courts have been careful to
explain that the basis of the personal jurisdiction decision
was identical to the basis of the immediately appealable
23
order. PaineWebber Inc. v. Chase Manhattan Private Bank,
260 F.3d 453, 461-62 (5th Cir. 2001) (consent to arbitrate
claim in particular forum was also the basis of exercise of
personal jurisdiction and, thus, the issues were interrelated
and both reviewed on appeal); Dominium Austin Partners,
L.L.C. v. Emerson, 248 F.3d 720, 726-27 (8th Cir. 2001)
(implicitly the same); S & Davis Int'l, Inc. v. The Republic of
Yemen, 218 F.3d 1292, 1297 (11th Cir. 2000) (exercising
pendent jurisdiction over personal jurisdiction issue when
immunity under Foreign Sovereign Immunity Act was
properly before the court and the two issues were
"inextricably intertwined"); Hanil Bank v. PT. Bank Negara
Indonesia, 148 F.3d 127, 130 (2d Cir. 1998) (same).
Where, however, personal jurisdiction is not "interrelated"
or "intertwined" with the merits of the immediately
appealable order, Courts of Appeals exercise restraint and
forego review until the unrelated issue is appealable in its
own right. See, e.g., United States Fidelity and Guaranty Co.
v. Braspetro Oil Services Co., 199 F.3d 94, 97 (2d Cir. 1999)
(exercising pendent appellate jurisdiction over interrelated
personal jurisdiction issue but refusing to review
interlocutory forum issue because it has "little or nothing in
common with" the appealable order); Rein v. Socialist
People's Libyan Arab Jamahiriya, 162 F.3d 748, 759 (2d
Cir. 1998); see also Associated Business Telephone
Systems, Corp. v. Greater Capital Corp., 861 F.2d 793, 796
(3d Cir. 1988) (passing on personal jurisdiction of
defendant company against whom injunction was granted
to ensure that injunction was granted against party over
whom the district court had authority, but refusing to
review personal jurisdiction of individual defendants who
were not affected by injunction). The fact that personal
jurisdiction is or can be case-dispositive does not alter the
analysis for two reasons. First, denials of motions to
dismiss for want of personal jurisdiction are not ordinarily
immediately appealable. Second, as the Second Circuit
explained:
It does not follow, however, that a court cannot decide
issues of subject matter jurisdiction without at the
same time making definitive findings as to personal
jurisdiction. For instance, a court could find subject
24
matter jurisdiction without passing on whether there
had been effective service of process, thus leaving the
personal jurisdiction question open. The current case
presents a different example of the same point. Libya's
challenge to personal jurisdiction is based on due
process and the principle of minimum contacts. We
can readily decide whether the district court had
subject matter jurisdiction over Libya without at all
considering whether it would violate due process to
subject Libya to personal jurisdiction. Because review
of the latter is not necessary for review of the former,
we conclude that the issues of subject matter
jurisdiction and personal jurisdiction are not
inextricably intertwined in this case.
Rein v. Socialist People's Libyan Arab Jamahiriya, 162 F.3d
748, 759 (2d Cir. 1998).
We undoubtedly have jurisdiction over the District
Court's refusal to compel arbitration and, as the previous
section of this opinion indicates, that issue can be
discussed at length and resolved without any reference to
whether there was personal jurisdiction over appellants or
whether the meeting in Delaware attended by their
representative amounted to "minimum contacts." Indeed,
for purposes of reviewing and resolving the arbitration
issue, we were bound to accept as true DuPont's allegation
that a "Rhodia Group" representative made the
representations alleged in the Amended Complaint without
passing on their existence, accuracy or effect. Moreover, the
"interrelatedness" listed by appellants is far wide of the
mark -- they cite to the existence and location of DuPont's
actions, which simply have nothing to do with whether the
District Court properly exercised jurisdiction over them.9
The issue of personal jurisdiction does not have to be
reviewed to exercise meaningful review of the immediately
_________________________________________________________________
9. The cases cited by appellants do not further their argument. Three of
those cases were before the respective Courts of Appeals after final
judgment, and personal jurisdiction was considered first because it was
a threshold issue. The remaining case -- which, in any event, predated
Swint -- involved the grant of an injunction. It is well-settled that when
a court grants an injunction, the underlying personal jurisdiction
decision is immediately reviewable on appeal.
25
appealable arbitration issue, and we will not exercise
pendent appellate jurisdiction to review that issue now.
III. Conclusion
For the foregoing reasons, we will affirm the judgment of
the District Court insofar as it denied appellants' motion to
compel arbitration and will dismiss the appeal from the
denial of appellants' motion to dismiss for lack of personal
jurisdiction.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
26