Invista S.À.R.L. v. Rhodia, S.A. , 625 F.3d 75 ( 2010 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 09-2514
INVISTA S.À.R.L.; INVISTA TECHNOLOGIES, S.À.R.L.;
INVISTA NORTH AMERICA S.À.R.L.
v.
RHODIA, SA,
Appellant
Appeal from the United States District Court
for the District of Delaware
(Civ. No. 1-08-cv-00941)
District Judge: Hon. Robert B. Kugler
Argued: April 13, 2010
Before: McKEE, Chief Judge, HARDIMAN, Circuit Judge,
and
RUFE, District Judge *
*
The Hon. Cynthia M. Rufe, United States District
Judge for the Eastern District of Pennsylvania, sitting by
designation.
1
(Opinion filed: October 25, 2010)
JONATHAN L. GREENBLATT, ESQ. (Argued)
NEIL KOSLOWE, ESQ.
CHRISTOPHER RYAN, ESQ.
SEAN ARTHURS, ESQ.
SHEARMAN & STERLING LLP
801 Pennsylvania Avenue, N.W. , Suite 900
Washington, D.C. 20004
Attorneys for Appellant
KATHLEEN M. SULLIVAN, ESQ. (Argued)
MICHAEL B. CARLINSKY, ESQ.
DANIEL L. BROCKETT, ESQ.
SANFORD I. WEISBURST, ESQ.
QUINN EMMANUEL URQUHART OLIVER & HEDGES,
LLP
51 Madison Avenue, 22nd Floor
New York, New York 10010
JACK B. BLUMENFELD, ESQ.
RODGER D. SMITH II, ESQ.
MORRIS, NICHOLS, ARSHT & TUNNEL LLP
1201 North Market Street, 18th Floor
P.O. Box 1347
Wilmington, Delaware 19899
Attorneys for Appellees
OPINION
McKEE, Chief Judge.
2
Rhodia, SA, appeals the district court’s denial of the
motion it filed pursuant to Section 3 of the Federal Arbitration
Act, 9 U.S.C. § 3, (“FAA”), in which Rhodia asked the district
court to dismiss or stay an action filed against Rhodia by Invista
S.à.r.l., Invista Technologies, S.à.r.l. and Invista North America
S.à.r.l. (“INVISTA”).1 For the reasons set forth below, we will
dismiss Rhodia’s appeal because Rhodia’s attempt to resolve the
underlying dispute through arbitration under the § 3 of the FAA
is now moot.
I. THE UNDERLYING DISPUTE
In the late 1960's, E. I. DuPont de Nemours (“DuPont”)
developed the “Gen I technology,” for manufacturing
adiponitrile (“ADN”). ADN is a critical intermediate chemical
used in manufacturing nylon. The actual Gen I technology
(hereinafter, sometimes referred to as “The Trade Secrets”) is
contained in various documents including flowsheets, process
simulation models, and proprietary design and engineering
manuals. According to INVISTA, these documents contain
countless items of proprietary technical information concerning
designing, constructing, and safely and efficiently operating an
ADN plant. The information was developed from mathematical
modeling and laboratory experiments, as well as the
accumulated technical knowledge of many years of operational
experience. According to INVISTA, today, over 40 years after
its invention, the Gen I technologies and other butadiene-based
1
Rhodia, SA is a holding company and parent of all the
other Rhodia companies and entities involved in this appeal.
3
ADN technologies offer the promise of hundreds of millions of
dollars in annual revenue in the global merchant market for
ADN and nylon 6, 6.
Ultimately, the parties decided to enter an arrangement
whereby DuPont’s French affiliate, E.I. DuPont de Nemours
France S.A.S. (“DuPont France”), entered into a joint venture
with Société des Usines Chimiques Rhône-Poulenc (“SUCRP”),
which is a subsidiary of Rhône-Poulenc S.A. (“Rhône-
Poulenc”). The joint venture was called, “Butachimie.” The
arrangement involved SUCRP designing, building and
operating a plant to manufacture ADN using the Gen I
technology.
The Butachimie joint venture is governed by the Joint
Venture Agreement (“JVA”) and a number of ancillary
agreements. However, the JVA is the umbrella agreement that
spells out the duties and obligations of the parties. Article 9 of
th e JV A, cap tio ned : “N ON DIS CLOSURE OF
TECHNOLOGY,” provides that, absent certain specified
exceptions:
Neither party will disclose to third parties or use,
except as otherwise agreed upon, for fifteen (15)
years from date of disclosure, confidential
information with respect to the production of
ADN or ADN hydrogenation disclosed to it by
4
the other party or by SNC,3 . . .
JA 199-200.
Article 23 of the JVA contained the arbitration clause
that is at the center of this dispute. That clause provides:
The parties hereto agree that all disputes which
may arise in connection with this Agreement
should be resolved between them and, when this
is not possible, such disputes shall be finally
settled under the Rules of Conciliation and
Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed
in accordance with said Rules, arbitration to be
held at Paris, France. The arbitrators will act as
amiable compositeurs. The decision of the
arbitrators will be final. . .
JA 201. The ancillary agreements governing the joint venture
contained similar arbitration clauses, and most of them also
contained non-disclosure provisions.
According to INVISTA, the arbitration clause in the JVA
applies only to the parties to the JVA, i.e., DuPont France and
SUCRP, and not to either entity’s parent company or affiliates.
3
“SNC” stands for “société en nom collectif” which
means “partnership.”
5
A separate License Agreement served as a technology
transfer agreement. It is between DuPont, the technology
owner, and DuPont France/SUCRP, i.e., Butachimie – the joint
venture. INVISTA contends that DuPont, as the technology
owner, licensed the highly confidential Gen I technology (along
with other technical information) pursuant to the License
Agreement between DuPont and Butachimie.
The License Agreement contains a non-disclosure clause,
which provides:
Except as hereinbefore specifically provided,
neither LICENSEE [i.e., Butachimie] nor any
Sublicensee shall disclose to any party, furnish to
any party any equipment embodying such
information or use said information in any
manufacturing operations outside of France. The
obligations of this paragraph shall continue for
fifteen (15) years from the date of receipt by
LICENSEE of the particular Confidential DU
PONT Technical Information in question.
JA 205. The License Agreement also contains an arbitration
clause at Article XVII, which is very similar to the arbitration
clause contained in Article 23 of the JVA. The decision of the
arbitrators is also to be final under Article XVII of the License
Agreement. JA 208.
According to INVISTA, neither Rhodia, S.A. nor any of
its affiliates is a party to the License Agreement because
DuPont only intended a license for the Butachimie joint
6
venture. Thus, all transfers of technology from DuPont were
intended only for the sole benefit of Butachimie and not for any
Rhodia entity.
In 1975, SUCRP merged with another entity to become
Rhône-Poulenc Industrialization (“RPI”). In 1997, the parent
company, Rhône-Poulenc S.A., transferred its chemical and
specialties business (including RPI) to the Rhodia Group, which
is directed by Rhodia S.A. RPI’s interest in the Butachimie
joint venture was ultimately transferred to a single Rhodia S.A.
subsidiary, Rhodianyl.
In 2002, DuPont decided to sell its Textiles and Interiors
Business (“DTI”) to affiliates of the company now known as
INVISTA. In 2004 those affiliates purchased DTI, including
the Gen I technology and other “know-how” related to the
manufacture of ADN, for approximately $4 billion. INVISTA
contends that in two agreements governing the transaction, the
Purchase and Sale Agreement (“PSA”) and the Patent and
Technical Information Agreement (“PTIA”), DuPont promised
INVISTA, inter alia, that it would not compete with INVISTA
in the manufacture of ADN until April 30, 2011, and that it
would maintain the confidentiality of the Trade Secrets being
transferred to INVISTA. As part of the transaction, KoSa
France Holding S.à.r.l, an INVISTA affiliate, acquired DuPont
France’s interest in Butachimie. INVISTA claims that, as a
result of its purchase of DTI, it now owns the Gen I technology.
On September 19, 2006, INVISTA announced that it had
“begun engineering activities to construct a world-scale nylon
6,6 facility in Asia to support the region’s growing demand for
7
[ADN] . . . and nylon 6,6 polymer.” JA 127. INVISTA also
announced that the new facility would deploy its “proprietary,
next generation of butadiene-based ADN technology to expand
its low-cost, competitively advantaged position in Asia.” Id.
INVISTA notes that less than one week after its
announcement, Rhodia, S.A. announced that it too was
“studying the feasibility of building an [ADN] plant in Asia.”
JA 127. However, according to INVISTA, Rhodia, S.A. has
not acquired a license for any butadiene-based ADN
manufacturing technology comparable to INVISTA’s
proprietary and confidential Gen I technology, and Rhodia, S.A.
could not develop a comparable technology on its own without
a substantial expenditure of resources, time, and money.
Accordingly, INVISTA claims that Rhodia, S.A. could proceed
with its announced plans only by misappropriating the Gen I
technology Trade Secrets it learned through the Butachimie
joint venture and/or if DuPont (the originator of the technology
and assignor of it to INVISTA) had unlawfully disclosed the
Trade Secrets to Rhodia, S.A.
II. THE INTERNATIONAL ARBITRATION
On October 3, 2007, Rhodianyl, then the Butachimie
joint venture partner and party to the JVA, and Rhodia
Operations S.A.S., an entity which purportedly provides
services to Butachimie, initiated arbitration, pursuant to Article
23 of the JVA against INVISTA-affiliated entities, INVISTA
S.à.r.l. INVISTA North America S.à.r.l.and KoSa France
Holding S.à.r.l, before an Arbitration Tribunal of the
International Chamber of Commerce or “ICC” (the “Tribunal”).
8
Shortly thereafter, the Rhodia claimants added Rhodia, S.A. as
a named party.4 The Rhodia parties asked the Tribunal for a
declaratory ruling that they (the Rhodia parties) have a right to
use confidential information that was disclosed to the
Butachimie joint venture more than 15 years ago pursuant to
confidentiality provisions contained in Article 9 of the JVA.
The Rhodia parties asked the arbitration Tribunal to
determine their rights under the Joint Venture Agreement and
rule on their right to use approximately 11,600 documents that
Rhodia claims were disclosed to Butachimie more than 15 years
ago. The INVISTA respondents submitted counterclaims
against the Rhodia parties seeking, “[a] permanent injunction
. . . preventing Rhodianyl and, derivatively, any entity in the
Rhodia Group . . . from, anywhere in the world sing,
transferring, or benefitting from the Gen I technology.” JA 410.
The INVISTA parties also argued that the Tribunal
lacked jurisdiction over Rhodia S.A., Rhodia Operations S.A.S.,
Invista S.à.r.l., and Invista North America S.à.r.l., because they
had not signed the JVA.
On July 2, 2009, the Tribunal completed a two-week
evidentiary hearing on the INVISTA parties’ challenges to
jurisdiction as well as the Rhodia parties’ claim that it has the
right to use confidential technical information under Article 9
4
INVISTA contends that Rhodia initiated the
arbitration in an attempt to preempt it from taking legal action
against Rhodia.
9
of the JVA. Thereafter, the Tribunal issued a Partial Award that
included four findings relevant to its jurisdiction as well as the
issue before us:
(1). The Tribunal held that it did not have jurisdiction
over Rhodia S.A.
The Tribunal explained:
The RHODIA S.A. company holds all of the
shares of RHODIANYL. There is no doubt that
RHODIA S.A. has had a direct interest in the
activity of BUTACHIMIE to the extent that the
latter substantially supplies it with ADN.
This finding is not sufficient, however, to infer
the consent of RHODIA S.A. to the arbitration
clause. In fact, documents produced on the record
do not show that RHODIA S.A. was directly
involved in the performance of the Joint Venture
Agreement. . . .
Consequently, the Arbitral Tribunal does not have
jurisdiction with regard to RHODIA S.A.
Partial Award, ¶ 210;
(2) The Tribunal did not have jurisdiction over
Invista North America S.à.r.l.
The Tribunal explained:
10
INVISTA NORTH AMERICA does not appear to
have been involved (directly) in the performance
of the Joint Venture Agreement and in the activity
of BUTACHIMIE. The [Rhodia parties] do not
claim otherwise. They limit themselves to
mentioning that INVISTA NORTH AMERICA is
concerned with the rights and obligations arising
out of the Joint Venture Agreement as well as
with the disputed questions that are the object of
the present proceeding.
In the absence of elements showing that
INVISTA NORTH AMERICA substantially
participated in the performance of the Joint
Venture Agreement, the Arbitral Tribunal
declares that it does not have jurisdiction with
regard to that company.
Partial Award, ¶ 208;
(3) The Tribunal determined that it did have
jurisdiction over Invista S.à.r.l.
The Tribunal explained:
As regards the INVISTA SARL company,
according to various minutes of shareholders
meetings of BUTACHIMIE, representatives of
that company have on numerous occasions since
April 2004 participated in shareholder meetings.
...
11
Despite the fact that the minutes do not mention
in what capacity the representatives of INVISTA
SARL participated in the shareholders meetings,
the involvement of that company in the activity of
BUTACHIMIE, starting with the performance of
the Joint Venture Agreement, cannot be denied. .
..
The consistent presence of its representatives
therefore well demonstrates the intention of
INVISTA SARL to be present at the meetings of
BUTACHIMIE. . . .
Furthermore, the presence of representatives of
the [Rhodia parties] as “observers” in no way
rules out the fact that they had been “present.”
First of all, said representatives were regularly
“admitted to the meeting.” Then, the minutes
establish in a significant way that the
“representatives” of INVISTA had different
responsibilities within BUTACHIMIE.
It is, therefore, necessary to consider that
INVISTA SARL was directly involved in the
performance of the Joint Venture Agreement and
the Arbitral Tribunal does hold that it has
jurisdiction with regard to the latter.
Partial Award, ¶ 209;
(4). The Tribunal did have jurisdiction over Rhodia
12
Operations S.A.S..
The Tribunal opined:
Despite the fact that the minutes do not mention
in what capacity RHODIA POLYAMIDE
INTERMEDIATES S.A.S. and then RHODIA
OPERATIONS S.A. participated in the
shareholders meetings [of Butachime], their
involvement in the activity of BUTACHIMIE
cannot be denied. In fact, it is to be considered
that their participation in all those shareholders
meetings for at least four years demonstrates a
substantial involvement of those companies in the
activity of BUTACHIMIE, which the partners
once again had desired by inviting them to
systematically take part in those meetings.
As stated, given the object of the agreement at
issue, a regular attendance of the meetings of
BUTACHIMIE necessarily implies a participation
in the execution of the Joint Venture Agreement.
Consequently, the Arbitral Tribunal holds that
RHODIA OPERATIONS S.A. participated in the
performance of the Joint Venture Agreement. It
therefore considers that is has jurisdiction with
regard to that company.
Partial Award, ¶ 211.
13
In addressing the merits of the arbitration dispute, the
Tribunal did not give the Rhodia parties any rights to use or
disclose any of the 11,600 documents in question, or any Gen I
technical information in general. However, in the Partial
Award, the Tribunal appeared to hold that Article 9 of the Joint
Venture Agreement governed the use and disclosure not only of
commercial information but also Gen I technical information.
See Partial Award, ¶ 254. It also held that Article 9 of the Joint
Venture Agreement was clear that it imposed a fifteen year limit
of confidentiality on disclosure of information, after which the
parties are free to use confidential information as they see fit.
Id. at ¶ 268. Finally, the Tribunal stated: “What remains to be
looked into is at what time the said 15-year period commences.”
Id. Accordingly, rulings on the Rhodia parties rights to use or
disclose specific documents and information will not occur until
a later date. To that end, another hearing has been set for
October 2010. The Tribunal’s ruling on those issues is not
expected until sometime in 2011.
IV. COURT PROCEEDINGS
Six days after the Rhodia parties initiated the
international arbitration, Invisata S.à.r.l sued Rhodia in state
court in Texas alleging misappropriation of trade secrets, unfair
competition and conversion.5 According to Rhodia, S.A. the
5
INVISTA submits that it filed suit in Texas because
many of the Trade Secrets at issue had been developed by
DuPont and INVISTA in Texas, and DuPont built the first
operating ADN plant in Texas using the Gen I technology, a
14
Trade Secrets at issue in the Texas litigation are the same as
those in the arbitration before the Tribunal. Rhodia, S.A.
removed the case from the Texas court to the District Court for
the Eastern District of Texas pursuant to 9 U.S.C. § 205.
Thereafter, Rhodia moved to dismiss the suit or stay it in favor
of the still ongoing arbitration.
INVISTA claims that it voluntarily dismissed the Texas
district court action and filed a new action, along with Invista
North America S.à.r.l and Invista Technologies S.à.r.l, in the
United States District Court for the Southern District of New
York. That suit was brought against both Rhodia, S.A. and
DuPont.6
The district court in New York granted Rhodia, S.A.’s
motion to dismiss for lack of subject matter jurisdiction.
INVISTA S.à.r.l v. E.I. duPont de Nemours & Co., 2008 WL
4865208 (S.D.N.Y. Nov. 3, 2008). However, the district court
allowed INVISTA to amend its complaint and thereby drop
Rhodia, S.A. as a defendant so that it could invoke diversity
jurisdiction as to DuPont. Id. at *5. The district court did not
address Rhodia, S.A.’s alternative motion to compel arbitration.
plant that INVISTA operates to this day.
6
INVISTA purportedly did this for reasons of
efficiency and convenience that favored suing DuPont and
Rhodia, SA in a single forum, and because INVISTA’s PSA
and PTIA agreements with DuPont mandate a New York
forum for dispute resolution.
15
Thereafter, INVISTA (Invista S.à.r.l., Invista
Technologies, S.à.r.l. and Invista North America S.à.r.l.) filed
an action against Rhodia, S.A. in the Court of Chancery of the
State of Delaware, alleging various claims under state law
pertaining to misappropriation of trade secrets, interference with
contract and unfair competition. INVISTA’s complaint alleges
that: “[t]his litigation raises separate and distinct issues and
claims from those raised in the arbitration.” Compl. ¶ 9 (JA
39).
Rhodia, SA removed the case from Delaware Chancery
Court to the United States District Court for the District of
Delaware pursuant to 9 U.S.C. § 205, and then filed a motion
asking that court to either dismiss or stay the litigation in favor
of arbitration, pursuant to 9 U.S.C. § 3 or the court’s
discretionary authority to enter a stay.
The district court denied the motion. Invista S.à.r.l v.
Rhodia S.A., 2009 WL 1439407 (D. Del. May 20, 2009). The
court refused a stay based upon its determination that “Invista
may not be bound by the arbitration provision of the JVA.” Id.
at *3. The district court reasoned that INVISTA may not be
bound to the JVA’s arbitration clause because INVISTA was
not a signatory to the JVA or any of the other agreements
containing an arbitration clause. In addition, the court
concluded that equitable doctrines that might otherwise bind a
non-signatory to an agreement did not apply because INVISTA
had neither exploited nor directly benefitted from the JVA.
Accordingly, INVISTA could not be held to the provisions of
the JVA. Id. at *4-5.
16
The district court refused to grant a discretionary stay
because Rhodia, SA had not established the “exceptional
circumstances” required for that relief. Id. at *5. This appeal
followed.
V. APPLICABLE LEGAL PRINCIPLES
“The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.
(“FAA”), creates a body of federal substantive law establishing
and governing the duty to honor agreements to arbitrate
disputes.” Century Indemnity Co. v. Certain Underwriters at
Lloyd’s, London, 584 F.3d 513, 522 (3d Cir. 2009) (citation
omitted). “Congress designed the FAA to overrule the
judiciary’s longstanding reluctance to enforce agreements to
arbitrate and its refusal to put such agreements on the same
footing as other contracts, and in the FAA expressed a strong
federal policy in favor of resolving disputes through
arbitration.” Id. (citations omitted). “In particular, the FAA
provides that as a matter of federal law ‘[a] written provision’
in a maritime or commercial contract showing an agreement to
settle disputes by arbitration ‘shall be valid, irrevocable, and
enforceable, save upon such grounds as exist in law or equity
for the revocation of any contract.’” Id. (quoting 9 U.S.C. § 2).
The FAA’s second chapter, 9 U.S.C. §§ 201-208,
implements the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards, opened for
signature June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38,
reprinted in 9 U.S.C. § 201 (historical and statutory notes)
(“New York Convention”) Id. at 522-23 (citations omitted).
“Pursuant to this chapter, arbitration agreements fall within the
17
New York Convention if they arise from commercial, legal
relationships, such as commercial contracts, except when those
relationships are entirely between United States citizens and
otherwise are domestic in nature.” Id. at 523 (citing 9 U.S.C. §
202). “Actions under the New York Convention are deemed to
arise under the laws and treaties of the United States.” Id.(citing 9 U.S.C. § 203).
“The FAA empowers district courts to compel arbitration
in accordance with agreements and to enforce awards falling
within the New York Convention.” Id. (citing 9 U.S.C. § 206and § 207 respectively). “The domestic FAA applies to actions
brought under the New York Convention to the extent that the
two are not in conflict.” Id. (citations omitted). “The strong
federal policy favoring arbitration applies with special force in
the field of international commerce.” Id. (citation omitted).
“The strong federal policy favoring arbitration, however,
does not lead automatically to the submission of a dispute to
arbitration upon the demand of a party to the dispute.” Id.
“Before compelling a party to arbitrate pursuant to the FAA, a
court must determine that (1) there is an agreement to arbitrate
and (2) the dispute at issue falls within the scope of that
agreement.” Id. (citation omitted). “This determination applies
equally in domestic and international arbitration contexts.” Id.
(citation omitted).
“Because an arbitrator’s authority derives solely from the
parties’ agreement to submit their disputes to arbitration, a party
cannot be compelled to submit a dispute to arbitration unless it
has agreed to do so.” Id. at 523-24 (citations omitted).
18
In determining if partes “have agreed to arbitrate, we
apply ordinary state-law principles that govern the formation of
contracts.” Id. at 524 (citation and internal quotation marks
omitted). “These principles must govern contracts generally; a
state law-principle that takes its meaning from the fact that an
agreement to arbitrate is at issue does not comport with section
2 of the FAA and therefore is preempted.” Id. (citations
omitted).
As our abbreviated recitation of the district court’s
holding suggests, non-signatories may be bound to arbitration
agreements under certain very limited circumstances. “[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.” E.I. DuPont de
Nemours and Co. v. Rhone Poulenc Fiber and Resin
Intermediates, S.A.S., 269 F.3d 187, 194 (3d Cir. 2001)
(“DuPont”) (citation omitted). “There are five theories for
binding nonsignatories to arbitration agreements: (1)
incorporation by reference, (2) assumption, (3) agency, (4) veil-
piercing/alter ego, and (5) estoppel.” Trippe Manufacturing Co.
v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005).
Rhodia, SA claims that estoppel and assumption both apply
here and INVISTA should therefore be required to arbitrate
even though it is not a signatory to any agreements containing
an arbitration clause.
Estoppel can bind a non-signatory to an arbitration
clause when that non-signatory has reaped the benefits of a
contract containing an arbitration clause. See Thomson-CSF,
S.A. v. American Arbitration Assoc., 64 F.3d 773, 778 (2d Cir.
19
1995). This prevents a non-signatory from “cherry-picking” the
provisions of a contract that it will benefit from and ignoring
other provisions that don’t benefit it or that it would prefer not
to be governed by (such as an arbitration clause). See, e.g.,
American Bureau of Shipping v. Tencara Shipyard S.P.A., 170
F.3d 349, 353 (2d Cir. 1999).
In addition, non-signatories may assume the obligations
contained in an arbitration clause where there is a sufficiently
close relationship to justify doing so, and the circumstances
warrant that result. See Thomson-CSF, S.A., 64 F.3d at 779.7
In Thomson-CSF, S.A. v. American Arbitration Assoc., 64 F.3d
773 (2d Cir. 1995), the court explained that a non-signatory
may be bound by an arbitration clause “if its subsequent
conduct indicates that it is assuming the obligation to arbitrate.”
See Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105
(2d Cir.) (flight attendants manifested a clear intention to
arbitrate by sending a representative to act on their behalf in
arbitration process), cert. denied, 502 U.S. 910 (1991).
VI. DISCUSSION
Rhodia, SA contends that three INVISTA entities who
are the plaintiffs in this litigation – all of whom are non-
7
When this occurs, 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., 201 F.3d 524, 527 (5th Cir. 2000).
20
signatories to the JVA containing the arbitration clause – can
each be compelled to arbitrate the claims they asserted against
Rhodia S.A. in the district court. Although Rhodia S.A.
correctly notes that non-signatories can be compelled to arbitrate
under the doctrines of equitable estoppel and/or assumption, the
argument overlooks the rather crucial fact that Rhodia did not
sign any agreement to arbitrate the claims either.
Not surprisingly, Rhodia, SA offers no authority for its
contention that a non-signatory to an arbitration agreement can
compel another non-signatory to arbitrate certain claims, and we
have found none. However, we need not attempt to navigate the
uncharted waters churned up by Rhodia’s novel argument
because the Tribunal’s Partial Award renders Rhodia’s appeal
moot.
On January 13, 2010, the Tribunal issued a Partial
Award. It ruled, inter alia, that it lacked jurisdiction over
Rhodia, SA. The Tribunal ruled that Rhodia, SA has a direct
interest in the Butachimie joint venture because Butachimie
“substantially supplies it with ADN.” Partial Award ¶ 210.
However, the Tribunal determined that Rhodia, SA’s interest in
Butachimie “is not sufficient . . . to infer the consent of
RHODIA SA to the arbitration clause.” Id.“[A]n appeal will be dismissed as moot when events
occur during [its] pendency . . . which prevent the appellate
court from granting any effective relief.” Gen. Elect. Co. v.
Cathcart, 980 F.2d 927, 934 (3d Cir. 1992) (citation omitted).
Dismissal is necessary in those circumstances because appellate
courts “do not have jurisdiction to hear a case that cannot affect
21
the rights the appellant wishes to assert.” Salovaara v. Jackson
Nat’l Life Ins. Co., 246 F.3d 289, 296 (3d Cir. 2001).
In Salovaara, we explained that “[i]f events occur after
the filing of a notice of appeal that moot the issues presented,
then there is no remaining justiciable controversy.” Id. In
Salovaara, we were not able to grant the requested relief against
one of the parties because a settlement agreement was reached
after suit was filed. Id. The Partial Award that was entered by
the Tribunal has exactly the same effect here. Rhodia S.A.’s
claim that it is entitled to arbitration has been rejected by the
entity Rhodia S.A. asked the district court to defer to in its
motion to dismiss or stay litigation in favor of arbitration. Thus,
the Tribunal’s holding that it does not have jurisdiction over
Rhodia, SA moots this appeal. Given the Tribunal’s ruling, it is
now clear that the district court could not have enforced the
arbitration clause as Rhodia, SA had urged.
“The purpose of the FAA is to render agreements to
arbitrate fully enforceable.” Mendez v. Puerto Rican
International Companies, Inc., 553 F.3d 709, 711 (3d Cir.
2009). Courts lack power to grant relief under the FAA unless
there is an enforceable contractual right to arbitrate on the part
of the moving party. See Bel-Ray Co. v. Chemrite (Pty) Ltd.,
181 F.3d 435, 444 (3d Cir. 1999). As we have explained,
“[a]rbitration 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,” absent circumstances that would justify applying one
or more of the equitable doctrines we have mentioned. Id.As we have explained above, the threshold inquiry under
22
8
§ § 3 a n d 4 o f t h e F A A
8
Section 3 of the FAA provides as follows:
§3. Stay of proceedings where issue
therein referable to arbitration
If any suit or proceeding be
brought in any of the courts of the
United States upon any issue
referable to arbitration under an
agreement in writing for such
arbitration, the court in which
such suit is pending, upon being
satisfied that the issue involved in
such suit or proceeding is
referable to arbitration under such
an agreement, shall on application
of one of the parties stay the trial
of the action until such arbitration
has been had in accordance with
the terms of the agreement,
providing the applicant for the
stay is not in default in proceeding
with such arbitration.
9 U.S.C. § 4 of the FAA provides:
§ 4. Failure to arbitrate under
agreement; petition to United
23
States court having jurisdiction
for order to compel arbitration;
notice and service thereof; hearing
and determination
A party aggrieved by the alleged
failure, neglect, or refusal of
another to arbitrate under a
written agreement for arbitration
may petition any United States
district court which, save for such
agreement, would have
jurisdiction under Title 28, in a
civil action or in admiralty of the
subject matter of a suit arising out
of the controversy between the
parties, for an order directing that
such arbitration proceed in the
manner provided for in such
agreement. Five days' notice in
writing of such application shall
be served upon the party in
default. Service thereof shall be
made in the manner provided by
the Federal Rules of Civil
Procedure. The court shall hear
the parties, and upon being
satisfied that the making of the
agreement for arbitration or the
24
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. The hearing and
proceedings, under such
agreement, shall be within the
district in which the petition for
an order directing such arbitration
is filed. If the making of the
arbitration agreement or the
failure, neglect, or refusal to
perform the same be in issue, the
court shall proceed summarily to
the trial thereof. If no jury trial be
demanded by the party alleged to
be in default, or if the matter in
dispute is within admiralty
jurisdiction, the court shall hear
and determine such issue. Where
such an issue is raised, the party
alleged to be in default may,
except in cases of admiralty, on or
before the return day of the notice
of application, demand a jury trial
of such issue, and upon such
demand the court shall make an
order referring the issue or issues
25
whether, under traditional contract law principles, an agreement
to arbitrate is enforceable between the parties. See, e.g., Arthur
Andersen LLP v. Carlisle, U.S. , 129 S.Ct. 1896, 1902
(2009) (“If a written arbitration provision is made enforceable
against (or for the benefit of) a third party under state contract
law, [§ 3's] terms are fulfilled.); DuPont, 269 F.3d at 194 (“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 under the underlying agreement.”) (citation
to a jury in the manner provided
by the Federal Rules of Civil
Procedure, or may specially call a
jury for that purpose. If the jury
find that no agreement in writing
for arbitration was made or that
there is no default in proceeding
thereunder, the proceeding shall
be dismissed. If the jury find that
an agreement for arbitration was
made in writing and that there is a
default in proceeding thereunder,
the court shall make an order
summarily directing the parties to
proceed with the arbitration in
accordance with the terms thereof.
9 U.S.C. § 4.
26
and internal quotation marks omitted).
The inquiry is the same for motions under §§ 3 and 4,
viz., the inquiry is whether an enforceable agreement to arbitrate
exists. See, e.g., Zosky v. Boyer, 856 F.2d 554, 556 (3d Cir.
1988). (“[I]t makes no practical difference whether the court
enters an order in an ongoing suit compelling arbitration or
merely stays its own proceedings. In either event, arbitration is
the sine qua non before proceeding.”), abrogated on other
grounds by Green Tree Fin. Corp.-Alabama v. Randolph, 531
U.S. 79 (2000).
The Tribunal’s holding that it has no jurisdiction over
Rhodia, SA means that Rhodia, SA is a stranger to the ICC
Arbitration and, therefore, has no enforceable right of
arbitration. Because Rhodia, SA has no right to arbitration, it
cannot obtain relief under §§ 3 or 4 of the FAA, and its appeal
from the district court’s denial of its motion to dismiss/stay
under § 3 of the FAA must therefore be dismissed as moot,
because a court can not award it the relief it seeks. It simply can
not arbitrate the disputed claims given the Tribunal’s decision.
Moreover, because Rhodia, SA’s appeal from the denial
of its motion to dismiss under § 3 is moot and must be
dismissed, Rhodia, SA’s appeal from the district court’s denial
of its discretionary motion to stay must also be dismissed for
lack of pendent appellate jurisdiction. There is no jurisdiction
for the court’s pendent jurisdiction to attach to.
Section 16(a)(1)(A) of the FAA, 9 U.S.C. § 16(a)(1)(A)
initially gave us jurisdiction over Rhodia’s appeal from the
27
district court’s order denying Rhodia’s motion for a mandatory
stay under § 3 of the FAA. However, “the denial of a stay based
on an exercise of the district court’s discretion, as opposed to
the denial of a mandatory stay based on a failure to meet the
requirements of Section 3, would be a non-final order over
which we would have no jurisdiction.” Mendez v. Puerto Rican
International Companies, Inc., 553 F.3d at 714 n.3.
Nonetheless, a court of appeals can, in certain cases,
exercise pendent appellate jurisdiction over issues not otherwise
appealable. “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.” DuPont, 269 F.3d at 202-03(citations omitted). However, 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.” Id. at 203.
“[T]he exercise of pendent appellate jurisdiction
requires, at the very least, that the orders from which the appeals
are taken be ‘inextricably intertwined.’” Bowers v. National
Collegiate Athletic Ass’n, 346 F.3d 402, 412 (3d Cir. 2003).
Issues are “inextricably intertwined” only when the appealable
issue “cannot be resolved without reference to the otherwise
unappealable issue.” American Society for Testing & Materials
v. Corrpro Companies, Inc., 478 F.3d 557, 580-81 (3d Cir.
2007) (citations omitted). In addition, “pendent appellate
jurisdiction over an otherwise unappealable order is available
28
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).
Thus, even assuming arguendo that we once had pendent
appellate jurisdiction over the district court’s denial of Rhodia,
SA’s motion for a discretionary stay, we no longer have such
jurisdiction. The appeal from the district court’s denial of the
motion for a stay under the § 3 of the FAA is now moot, and
there is no longer any properly appealable order before us.
Therefore, there can be no pendent appellate jurisdiction over
the order denying the motion for a discretionary stay.
Accordingly, the appeal from the order denying the motion for
a discretionary stay must be dismissed for lack of pendent
appellate jurisdiction.
V. CONCLUSION
For all of the above reasons, we will dismiss the Rhodia,
SA’s appeal from the order denying the motion for a stay under
9 U.S.C. § 3 as moot and dismiss Rhodia, SA’s appeal from the
order denying the motion for a discretionary stay for lack of
pendent appellate jurisdiction.
29