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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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1

The Honorable Clyde H. Hamilton, United States Circuit Judge for the Fourth

Circuit, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2314

___________

Asia Pacific Industrial Corp., *

a British Virgin Islands corporation; *

Ashok S. Kothari, a resident of Hong *

Kong, individually, *

*

Plaintiffs/Appellees, * Appeal from the United States

* District Court for the

v. * District of Minnesota.

*

Rainforest Café, Inc., a Minnesota *

corporation, *

*

Defendant/Appellant. *

___________

Submitted: May 14, 2004

Filed: August 23, 2004

___________

Before WOLLMAN, HAMILTON,1

 and BYE, Circuit Judges.

___________

BYE, Circuit Judge.

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The Honorable James M. Rosenbaum, United States District Judge for the

District of Minnesota.

3

The Federal Arbitration Act (FAA) prohibits interlocutory appeals, including

appeals from orders compelling arbitration. 9 U.S.C. § 16(b). The FAA, however,

permits an appeal from an order confirming an arbitration award, Id. § 16(a)(1)(D),

and from a final decision with respect to an arbitration that is subject to the FAA. Id.

§ 16(a)(3). We review Rainforest's appeal as a challenge to the order of confirmation.

2

Rainforest Café, Inc. challenges the district court's2

 orders compelling and

confirming arbitration in a contract dispute between Rainforest and Ashok S. Kothari

and his investment company Asia Pacific Industrial Corporation.3

 We affirm. 

I

In 1997, Rainforest Chairman Lyle Berman contacted Ashok Kothari and asked

him to find a suitable franchisee to open Rainforest restaurants in Asia. Through Mr.

Kothari's efforts, Rainforest contracted with James Robertson, who eventually opened

successful Rainforest restaurants in Asia through Jungle Investments, Ltd., an affiliate

of Rainforest. After Rainforest granted Mr. Kothari stock in Jungle, he claimed Mr.

Berman had agreed to pay $1,000,000 as a fee for finding the franchisee. Rainforest

responded no such agreement existed and the stock grant was sufficient compensation

anyway for Mr. Kothari’s services. 

After the parties exchanged several written communications aimed at bringing

the dispute to arbitration, Mr. Kothari and Asia Pacific brought an action for breach

of oral contract in federal court. Pursuant to the Federal Arbitration Act (FAA), 9

U.S.C. §§ 1-16 (2000), the plaintiffs then moved to stay the federal court proceedings

and compel arbitration. The district court granted the motion, and after the arbitrator

awarded Mr. Kothari $200,000, the district court confirmed the award. 

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On appeal, Rainforest argues the district court erred in concluding the parties

entered into an arbitration agreement through their written communications. We hold

the parties entered into a binding agreement to arbitrate. 

II

Because the district court had to look no further than the correspondence

between the parties to determine they had entered into a contract, we will review the

district court's determination de novo. See Litton Microwave Cooking Prods. v.

Leviton Mfg., 15 F.3d 790, 794-95 (8th Cir. 1994) (giving plenary review to question

whether contract was formed through an exchange of forms between the parties);

Rockwood Mfg. Corp. v. AMP, Inc., 806 F.2d 142, 144-46 (7th Cir. 1996) (giving

plenary review to determination of contract formation under state law in diversity

action); Hunt v. IBM Mid Am. Employees Fed. Credit Union, 384 N.W.2d 853, 856

(Minn. 1986) (stating, under Minnesota law, “[t]he resolution of whether the language

used rises to the level of a contract is for the court” and “[w]here the intent of the

parties is totally ascertainable from the writing, construction is for the court”).

We apply ordinary state-law contract principles to decide whether parties have

agreed to arbitrate a particular matter, giving healthy regard for the federal policy

favoring arbitration. Aggrow Oils v. Nat'l Union Fire Ins. Co. of Pittsburgh, 242 F.3d

777, 780 (8th Cir. 2001). The parties agree Minnesota state law governs this diversity

case. See Erie R.R. v. Tompkins, 304 U.S. 64, 71-80 (1938). 

“Minnesota follows the objective theory of contract formation, under which an

outward manifestation of assent is determinative, rather than a party's subjective

intent.” TNT Props., Ltd. v. Tri-Star Developers LLC, 677 N.W.2d 94, 102 (Minn.

Ct. App. 1994). “The test for whether a contract has been formed is an objective one

to be judged by the words and actions of the parties and not by their subjective mental

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intent.” Am. Fed'n of State, County and Mun. Employees, Council #14 v. City of St.

Paul, 533 N.W. 2d 623, 627 (Minn. Ct. App. 1995).

Viewed objectively, the correspondence between the parties in this case shows

they entered into a contract to arbitrate their dispute in June 2000, when Rainforest's

General Counsel Stephen Cohen wrote to Mr. Kothari: 

Lyle [Berman] asked me to review this file and to respond to your

request for an arbitration. We believe that an arbitration in Minneapolis

would be a workable process for resolving this dispute and as such we

have turned it over to our counsel, William Pentelovitch . . . . Please

provide me with the name and number of your counsel so we can discuss

the ground rules for arbitration. I believe it is in all of our interests to

keep expenses to a minimum. 

(Emphasis added.) Rainforest's subjective intent aside, this letter reflects an offer

which has been received (“request for an arbitration”) and Rainforest's acceptance

(“an arbitration in Minneapolis would be . . . workable”). Moreover, the letter reveals

Mr. Cohen turned over the dispute to outside counsel, William Pentelovitch, to

“discuss the ground rules” for the now-agreed-to arbitration. Subsequent to this

letter, Scott Johnson, Mr. Kothari's attorney, wrote to Mr. Pentelovitch, stating he was

making contact because their clients had "apparently agreed to arbitrate the matter.”

In our mind, any reasonable person reading the June 2000 letter in context would

conclude Rainforest and Mr. Kothari had agreed to arbitration and it only remained

for the lawyers to sort through the details. 

Though a few weeks later Mr. Pentelovitch wrote an ambiguous letter in which

he appeared to be backtracking from this agreement, he sent Mr. Johnson an

Agreement to Arbitrate form on December 4, 2000. The cover letter to the form

stated, “Enclosed herewith please find a proposed form of Agreement to Arbitrate the

above-referenced dispute. I received permission from our client to go forward with

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At oral argument, Mr. Kothari explained Asia Pacific is a holding company

for his properties and stock. 

5

arbitration this afternoon.” (Emphasis added.) Again, a reasonable person would

read this letter as a second acceptance of Mr. Kothari's "request" to arbitrate. 

On December 13, 2000, Mr. Johnson wrote back to Mr. Pentelovitch, stating:

I have had an opportunity to review the agreement to arbitrate which you

forwarded to us and the following changes should be made. First, the

agreement should be between Rainforest Café, Inc. and Asia Pacific

Industrial Corporation. Ashok Kothari should not be a personally

named party to the agreement. In paragraph nine, the categories of

documents should be changed from 10 to 15.

In this instance, too, an objective reading of the letter suggests the parties had already

agreed to arbitrate the dispute and were now merely working out the details in the

Agreement form.

Rainforest argues the December correspondence did not create a contract.

Rainforest claims Mr. Johnson's December 13, 2000 letter was not a valid acceptance

of its offer to arbitrate because the letter changed a material term in the offer by

naming Asia Pacific instead of Mr. Kothari as the arbitrating party. Whatever may

be the significance of this formal distinction in name,4

 we conclude that Rainforest’s

argument is faulty.

The argument, of course, rests on the premise Mr. Cohen’s June 2000 letter was

not an acceptance of Mr. Kothari's offer. Because we have already determined the

letter was indeed a valid acceptance, this premise is invalid and so is the argument it

supports. That is to say, by the time Mr. Kothari suggested the name change in his

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Rainforest apparently rejected the request, for Mr. Kothari himself remained

the named claimant through arbitration. 

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December 13 letter, the parties were already bound by the arbitration agreement and

Mr. Kothari's request was at most a request to modify the contract.5

III

Because a valid agreement to arbitrate was formed in June 2000, the district

court properly compelled the parties to arbitrate their dispute. In turn, the district

court’s order confirming arbitration was also without error. It is affirmed.

______________________________

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