1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-28-1999

Bel Ray Co Inc v. Chemrite(Pty) LTD

Precedential or Non-Precedential:

Docket 98-6297

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Recommended Citation

"Bel Ray Co Inc v. Chemrite(Pty) LTD" (1999). 1999 Decisions. Paper 170.

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Filed June 28, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

NO. 98-6297 

BEL-RAY COMPANY, INC. 

v. 

CHEMRITE (PTY) LTD.; LUBRITENE (PTY) LTD.; 

IVOR H. KAHN; CESARE CARBONARE; IAN ROBERTSON; 

PIERRE VAN DER RIET 

 Lubritene (Pty) Ltd.; Ivor H. Kahn; Cesare Carbonare; 

 Ian Robertson; Pierre Van Der Riet, 

 Appellants 

On Appeal From the United States District Court 

For the District of New Jersey 

(D.C. Civil Action No. 98-cv-00424) 

District Judge: Honorable Katherine S. Hayden 

Argued March 1, 1999 

BEFORE: STAPLETON, RENDELL and ALDISERT, 

Circuit Judges 

(Opinion Filed June 28, 1999) 

 Sanford D. Brown (Argued) 

 Cerrato, Dawes, Collins, Saker 

 & Brown 

 509 Stillwells Corner Road 

 P.O. Box 6009 

 Freehold, NJ 07728 

 Attorney for Appellees 
 Louis R. Moffa, Jr. (Argued) 

 Edward J. McBride, Jr. 

 Schnader, Harrison, Segal & Lewis 

 220 Lake Drive East - Suite 200 

 Cherry Hill, NJ 08002-1165 

 Attorney for Appellants 

OPINION OF THE COURT 

STAPLETON, Circuit Judge: 

Lubritene Ltd. ("Lubritene") and four of its directors and 

officers appeal the District Court's order compelling them to 

arbitrate claims brought against them by Bel-Ray 

Company, Inc. ("Bel-Ray"). Lubritene claims the District 

Court erroneously concluded that it was bound under its 

predecessor's arbitration agreement. The directors and 

officers contend that the District Court erred because it 

lacked personal jurisdiction over them, and because they 

are not bound by their corporate principal's agreement to 

arbitrate. We agree that Lubritene is bound to arbitrate this 

dispute and that the District Court had personal 

jurisdiction over the directors and officers. We conclude, 

however, that the directors and officers are not bound to 

arbitrate Bel-Ray's claims against them. Accordingly, we 

will affirm in part and reverse in part. 

I. 

Bel-Ray is a New Jersey corporation engaged in the 

business of manufacturing specialty lubricants for the 

international mining, industrial and consumer markets. 

Bel-Ray has developed special formulas and blending

technology for its products and maintains them in the 

highest confidentiality. Between 1983 and 1996, Bel-Ray 

entered into a series of agreements with Chemrite (Pty.) 

Ltd., a South African corporation, for the blending and 

distribution of Bel-Ray products in South Africa. Ivor H. 

Kahn, Cesare Carbonare, Ian Robertson, and Pierre Van 

Der Riet (the "Individual Appellants") were officers or 

directors, as well as shareholders, of Chemrite. 

 2 
In January of 1996, the parties entered into the most 

recent set of these agreements (the "Trade Agreements") by 

executing a (i) Distributor Sales Agreement, (ii) Blending 

Manufacturing License Agreement, and (iii) License 

Agreement to Trade Name. The Trade Agreements allowed 

Chemrite to market and sell Bel-Ray products, and to 

produce and market products under Bel-Ray's trade name 

in South Africa. Each agreement contains two clauses 

relevant to this appeal. First, each agreement required 

arbitration of "any and all disputes relating to th[e] 

agreement or its breach" in Wall Township, New Jersey. 

(A38; A60; A86) Arbitration was to proceed under the 

American Arbitration Association rules and New Jersey 

substantive law. Second, the agreements specifically require 

Bel-Ray's written consent to any assignment of Chemrite's 

interests under the Trade Agreements. 

On August 20, 1996, Chemrite sent Bel-Ray a fax 

indicating that it had changed its name to "Lubritene (Pty) 

Ltd." The change became more than nominal on October 

10, 1996, when Chemrite sold its lubricant business, 

expressly including its rights under the Trade Agreements 

to Lubritene, a newly formed business entity, and Chemrite 

entered liquidation. Lubritene continued Chemrite's

lubricant business at the same location with the same 

employees and management, and the Individual Appellants 

became Lubritene shareholders, directors and officers. 

Lubritene and Bel-Ray continued to conduct business in 

the same manner under the Trade Agreements. In 

November of 1996, Lubritene sent Bel-Ray a package of 

documents that included the October 10th sale of assets 

documents and thereby informed Bel-Ray that Lubritene 

was a new and separate company. 

In the Spring of 1997, the parties engaged in a series of 

negotiations. These negotiations were initially motivated by 

Bel-Ray's interest in acquiring a stake in Lubritene. When 

it became clear that such an acquisition was not in the 

cards, the negotiations turned to focus upon modifying the 

Trade Agreements to add additional industrial products and 

to extend their terms to six years. During negotiating 

sessions in South Africa, Lubritene representatives queried 

Bel-Ray representative Linda Kiefer as to whether Bel-Ray 

 3 
believed there was a legally binding agreement between 

Lubritene and Bel-Ray. According to Keifer: 

 [she] explained to them that, not being an attorney, 

 [she] could not comment on the legal enforceability of 

 the [Trade Agreements], but told them that Bel-Ray's 

 attorneys had advised [her] that technically and legally 

 we do have an agreement. Moreover, [she] pointed out 

 that both Bel-Ray and Lubritene had continued to 

 conduct business in the same manner without 

 interruption, since the agreements were signed . . . 

 [and] that [she] understood from Bel-Ray's attorneys 

 that as long as we both continued to do business 

 according to the terms of the existing agreements while 

 we discussed a possible new relationship, Bel-Ray had 

 an implied agreement with Lubritene on the same 

 terms as the existing agreements with Chemrite. 

(A285). Six Lubritene affiants, however, contend that Keifer 

stated that "technically and legally there is no agreement 

between Lubritene and Bel-Ray" because any assignment of 

the Chemrite agreement required Bel-Ray's written consent, 

which had not yet been granted. 

Soon after these negotiations, a former Lubritene director 

brought internal corporate documents to Bel-Ray's 

attention. Among these documents were the minutes of a 

Lubritene board meeting held in anticipation of the Spring 

1997 negotiations "to resolve the legal stance Lubritene 

(Pty) Ltd must take in respect of the Bel-Ray Company Inc[.] 

agreement." (A127) Lubritene's counsel advised the board at 

the meeting that: 

 while admittedly the [Trade Agreements were]

 entered into between Chemrite Southern Africa (Pty) 

 Ltd[.,] and Bel-Ray Company Inc.[,] after the 

 deregistration/liquidation of Chemrite Southern Africa 

 (Pty) Ltd[.], Bel-Ray still continued to deal commercially 

 with Lubritene (Pty) Ltd and therefore, Bel-Ray's 

 conduct has basically assumed that the assigned 

 agreements were in fact assigned to Lubritene (Pty) 

 Ltd.[.] However, the agreements state that the transfer 

 of the agreements must be approved in writing by Bel- 

 Ray. 

 4 
Id. The board then resolved to (i) liquidate Chemrite; (ii) 

"continue to trade with Bel-Ray Company Inc as is and not 

[to] suggest any changes to the current agreement when 

Linda Kiefer and Bernie Meeks visit South Africa in April"; 

(iii) create another new company and transfer all of 

Lubritene's business other than Bel-Ray to that company 

so that Lubritene "will have no assets" and"[i]f Bel-Ray 

decides to take legal action against Lubritene (Pty) Ltd, 

there will be nothing left in the company and hence Bel-Ray 

will not recover any damages"; and (iv) when Bel-Ray seeks 

to renew the Trade Agreements to inform them that the 

Trade Agreements were with Chemrite, "which does not 

exist anymore and that the agreements are no longer valid." 

Id. The minutes end by instructing that "[i]t is vital that we 

do not alert Bel-Ray to our plans and hence we must be 

very cautious and circumspect when we ALL meet with

them in April." Id. (emphasis in original). 

Bel-Ray alleges that these minutes and the other 

documents brought to them by the former Lubritene 

director reveal that Lubritene, and the Individual 

Appellants as its officers and directors, conspired to 

misappropriate Bel-Ray's technology and other proprietary 

information and intentionally defrauded Bel-Ray by leading 

it to believe that Lubritene would abide by the Trade 

Agreements. Additionally, they allege that Lubritene 

marketed Bel-Ray products falsely under Lubritene's trade 

name, and conversely marketed inferior Lubritene products 

under Bel-Ray's trade name thereby damaging Bel-Ray's 

business reputation. 

Bel-Ray filed this action in the United States District 

Court for the District of New Jersey to compel Lubritene 

and the Individual Appellants to arbitrate their claims 

under the Trade Agreements' arbitration clauses. Bel-Ray 

alleges that Lubritene's actions amount to the business 

torts of (i) unfair competition, (ii) fraud, and (iii) 

misappropriation. Bel-Ray also claims that these same 

actions constitute breaches of the Trade Agreements.1 

_________________________________________________________________ 

1. Additionally, Bel-Ray alleges that Lubritene owes it $64,532.60 for 

products received but not paid for. These products were purchased 

under bills of lading between Bel-Ray and Lubritene that included 

arbitration clauses for disputes regarding amounts owed. The parties do 

not discuss these claims in their briefs to this Court. Nonetheless, it 

would appear that compelling arbitration of these claims was proper. 

 5 
Lubritene and the Individual Appellants, jointly 

represented, filed an answer asserting inter alia lack of 

personal jurisdiction and counterclaims. The counterclaims 

alleged that Bel-Ray had commenced related proceedings in 

South Africa to enjoin Lubritene from continuing to use its 

intellectual property and trade name, and requested the 

District Court to either (i) stay the proceedings, or (ii) enjoin 

Bel-Ray from seeking to compel arbitration because it had 

waived its right to arbitrate by initiating the South African 

litigation. Two months later, the Individual Appellants filed 

a motion on their counterclaims requesting a stay, or 

alternatively, summary judgment enjoining Bel-Ray from 

seeking to compel arbitration. 

The District Court denied the appellants' motion. Months 

later, the Court granted Bel-Ray summary judgment and 

entered an order compelling arbitration on August 10, 

1998. Lubritene and the Individual Appellants appeal this 

order. 

II. 

The District Court had jurisdiction under 9 U.S.C.S 203 

because this action to compel arbitration between 

international parties falls under the Convention on the 

Recognition and Enforcement of Foreign Arbitral Awards. 

See 9 U.S.C. SS 201-208. We have jurisdiction pursuant to 

28 U.S.C. S 1291. We review the District Court's summary 

judgment order compelling arbitration de novo and apply 

the same test that the District Court should have applied. 

Trap Rock Indus., Inc. v. Local 825, Int'l Union of Operating 

Eng'rs, AFL-CIO, 982 F.2d 884, 887 (3d Cir. 1992). 

"[P]ursuant to Fed. R. Civ. P. 56(c), we ask: `(1) is there no 

genuine issue of material fact and (2) is one party entitled 

to judgment as a matter of law?' " Id. (quoting Gray v. York 

Newspapers, Inc., 957 F.2d 1070, 1078 (3d Cir.1992)). 

III. 

We begin with the propriety of the District Court's order 

to the extent it compelled Lubritene to arbitrate Bel-Ray's 

claims. Under the Federal Arbitration Act ("FAA"), a court 

may only compel a party to arbitrate where that party has 

 6 
entered into a written agreement to arbitrate that covers 

the dispute. See 9 U.S.C. SS 2 & 206. The arbitration 

clauses in the Trade Agreements are the only written 

agreements to arbitrate offered in this case. It is

undisputed that these agreements were entered into by 

Chemrite and Bel-Ray, and that Chemrite subsequently 

assigned the agreements to Lubritene. If these assignments 

are effective, then the District Court's order should be 

affirmed. Lubritene, however, contends that the 

assignments are ineffective because Bel-Ray did not

consent to the assignments in writing as the Trade 

Agreements require. They therefore argue that there is no 

written agreement to arbitrate and we must reverse the 

District Court's order. 

Thus, according to Lubritene, this case turns on the 

effect to be given to the Trade Agreements' requirement that 

Bel-Ray consent in writing to any assignment of Chemrite's 

interest. As noted, the Trade Agreements are international 

agreements between United States and South African 

parties. To determine the legal effect of this provision, we 

must first resolve the threshold matter of which 

jurisdiction's contract law we should apply. Ordinarily, this 

would require a conflict of laws analysis to determine which 

state had the weightier interest in having its law apply in 

resolving the relevant issue. Because of a failure of proof 

discussed below, however, we will apply the law of the 

forum. 

Federal Rule of Civil Procedure 44.1 controls 

determinations of foreign law in federal court. It provides: 

 A party who intends to raise an issue concerning the 

 law of a foreign country shall give notice by pleadings 

 or other reasonable written notice. The court, in 

 determining foreign law, may consider any relevant 

 material or source, including testimony, whether or not 

 submitted by a party or admissible under the Federal 

 Rules of Evidence. The court's determination shall be 

 treated as a ruling on a question of law. 

Fed. R. Civ. P. 44.1. This rule provides courts with broad 

authority to conduct their own independent research to 

determine foreign law but imposes no duty upon them to do 

 7 
so. See Carey v. Bahama Cruise Lines, 864 F.2d 201, 205 

(1st Cir. 1988)("[Rule] 44.1 empowers a federal court to 

determine foreign law on its own, but does not oblige it to 

do so."); Bartsch v. Metro-Goldwyn-Mayer, Inc., 391 F.2d 

150, 155 n.3 (2d Cir. 1968) (Friendly, J.) (same). 

The parties therefore generally carry both the burden of 

raising the issue that foreign law may apply in an action, 

and the burden of adequately proving foreign law to enable 

the court to apply it in a particular case. See Whirlpool Fin. 

Corp. v. Sevaux, 96 F.3d 216, 221 (7th Cir. 1996)(holding 

that party waived conflicts of law issue because it failed to 

fulfill its obligation under Rule 44.1 "to provide the district 

court with "reasonable notice" of his intention to raise an 

issue of foreign law."); Restatement (Second) Conflict of 

Laws S 136 cmt. f (1971) ("[T]he party who claims that the 

foreign law is different from the local law of the forum has 

the burden of establishing the content of the foreign law."). 

Where parties fail to satisfy either burden the court will 

ordinarily apply the forum's law. See Walter v. Netherlands 

Mead N.V., 514 F.2d 1130, 1137 n.14 (3d Cir. 1975); see 

also Banco de Credito Indus. v. Tesoreria General, 990 F.2d 

827, 837 (5th Cir. 1993)("When the parties have failed to 

conclusively establish foreign law, a court is entitled to look 

to its own forum's law in order to fill any gaps."); Carey, 

864 F.2d at 205 (applying forum's law where parties fail to 

raise issue of foreign law's applicability); Commercial Ins. 

Co. of Newark, N.J. v. Pacific-Peru Constr. Corp., 558 F.2d 

948, 952 (9th Cir. 1977)(applying forum law where parties 

failed to raise issue of foreign law's applicability); 

Restatement (Second) Conflict of Laws S 136 cmt. h (1971) 

("[W]here either no information, or else insufficient 

information, has been obtained about the foreign law, the 

forum will usually decide the case in accordance with its 

own law, except when to do so would not meet the needs of 

the case or would not be in the interests of justice."). 

Lubritene claims that it cannot be bound by Chemrite's 

agreement to arbitrate because, as a matter of contract law, 

the written consent provision prevents it from becoming 

Chemrite's assignee. Lubritene, however, has not raised the 

issue of whether South African contract law applies to its 

claim, nor has it provided any evidence to prove the 

 8 
substance of that law.2 We therefore will apply the law of 

the forum. 

This case was brought in New Jersey. Thus, we now turn 

to consider that state's contract law. The New Jersey 

Supreme Court has not yet addressed the effect of 

contractual provisions limiting or prohibiting assignments. 

Nevertheless, we are not without guidance because the 

Superior Court's Appellate Division recently addressed this 

issue in Garden State Buildings L.P. v. First Fidelity Bank, 

N.A., 702 A.2d 1315 (N.J. Super. Ct. App. Div. 1997). 

There, a partnership had entered a loan agreement with 

Midatlantic Bank for the construction of a new hotel. The 

parties subsequently entered into a modification agreement 

to extend the loan's maturity date, which provided that: "No 

party hereto shall assign this Letter Agreement (or assign 

any right or delegate any obligation contained herein) 

without the prior written consent of the other party hereto 

and any such assignment shall be void." Id. at 1318. 

Midatlantic subsequently assigned the loan to Starwood 

without obtaining the partnership's prior written consent. 

The partnership acknowledged Starwood's rights under the 

loan agreement by making payments to, and eventually 

entering a settlement agreement with, Starwood. 

Nonetheless, the partnership filed suit against Midatlantic 

for damages arising from its breach of the modification 

agreement's assignment clause. It argued that it was not 

required to void the assignment, but could recognize its 

validity while still preserving its right to sue Midatlantic for 

breach of its covenant not to assign without the 

partnership's written consent. 

To resolve this claim the Appellate Division looked to 

_________________________________________________________________ 

2. The only information regarding South African law that Lubritene has 

provided relates to the distinct issue of successor liability. This 

information relates to Lubritene's claim that, if the District Court 

properly considered successor liability, it should have used South 

African, not New Jersey, law on the issue. Lubritene's primary argument, 

however, is that the District Court need not consider successor liability 

principles because this case can be resolved as a matter of contract law. 

In the course of making this argument, Lubritene does not raise the 

issue of which country's contract law applies. 

 9 
S 322 of the Restatement (Second) of Contracts, which 

provides in relevant part: 

 (2) A contract term prohibiting assignment of rights 

 under the contract, unless a different intention is 

 manifested . . . . 

 (b) gives the obligor a right to damages for breach of 

 the terms forbidding assignment but does not render 

 the assignment ineffective . . . 

Restatement (Second) of Contracts S 322 (1981) (emphasis 

added). The Court, distinguished between an assignment 

provision's effect upon a party's "power" to assign, as 

opposed to its "right" to assign. A party's "power" to assign 

is only limited where the parties clearly manifest a different 

intention. According to the Court: 

 `[t]o reveal the intent necessary to preclude the power 

 to assign, or cause an assignment violative of 

 contractual provisions to be wholly void, such clause 

 must contain express provisions that any assignment 

 shall be void or invalid if not made in a certain 

 specified way.' Otherwise, the assignment is effective, 

 and the obligor has the right to damages. 

Garden State, 702 A.2d at 1321 (quoting University Mews 

Assoc's v. Jeanmarie, 471 N.Y.S.2d 457, 461 (N.Y. Sup. Ct. 

1984)). The Court concluded that the parties had 

sufficiently manifested their intent to limit Midatlantic's 

power to assign the loan because the anti-assignment 

clause clearly provided that assignments without the other 

party's written consent "shall be void." Id. at 1322. 

In adopting S 322, New Jersey joins numerous other 

jurisdictions that follow the general rule that contractual 

provisions limiting or prohibiting assignments operate only 

to limit a parties' right to assign the contract, but not their 

power to do so, unless the parties' manifest an intent to the 

contrary with specificity. See Cedar Point Apartments, Ltd. 

v. Cedar Point Inv. Corp., 693 F.2d 748, 754 & n.4 (8th Cir. 

1982); Pro Cardiago Pronto Socorro Cardiological, S.A. v. 

Trussell, 863 F. Supp. 135, 137 (S.D.N.Y. 1994); Lomas 

Mortgage U.S.A., Inc. v. W.E. O'Neil Constr. Co., 812 F. 

Supp. 841, 843-44 (N.D. Ill. 1993); Allhusen v. Caristo 

 10 
Const. Corp., 103 N.E.2d 891, 893 (N.Y. 1952); Macklowe v. 

42nd St. Dev. Corp., 566 N.Y.S.2d 606, 606-07 (N.Y. Sup. 

Ct. App. Div. 1991); Sullivan v. International Fidelity Ins. 

Co., 465 N.Y.S.2d 235, 237 (N.Y. Sup. Ct. App. Div. 1983); 

University Mews Assoc's v. Jeanmarie, 471 N.Y.S.2d 457, 

461 (N.Y. Sup. Ct. 1984). To meet this standard the

assignment provision must generally state that nonconforming assignments (i) shall be "void" or "invalid," or (ii) 

that the assignee shall acquire no rights or the nonassigning party shall not recognize any such assignment. 

See Garden State, 702 A.2d at 1321 ("clause must contain 

express provisions that any assignment shall be void or 

invalid if not made in a certain specified way"); Cedar Point, 

693 F.2d at 754 n.4 (same); Allhusen, 103 N.E.2d at 893; 

Sullivan, 465 N.Y.S.2d at 238; University Mews, 471

N.Y.S.2d at 461. In the absence of such language, the 

provision limiting or prohibiting assignments will be 

interpreted merely as a covenant not to assign, or to follow 

specific procedures--typically obtaining the non-assigning 

party's prior written consent--before assigning. Breach of 

such a covenant may render the assigning party liable in 

damages to the non-assigning party. The assignment,

however, remains valid and enforceable against both the 

assignor and the assignee. See Garden State, 702 A.2d at 

1321; Cedar Point, 693 F.2d at 754 n.4; Pro Cadiago, 863 

F. Supp. at 137; Lomas, 812 F. Supp. at 844; Allhusen, 103 

N.E.2d at 892; Sullivan, 465 N.Y.S.2d at 237. 

The Trade Agreements in this case contain the following 

assignment provisions: (i) the Distributor Sales Agreement 

S 7.06 provides that the "Agreement and the obligations and 

rights under this Agreement will not be assignable by 

[Chemrite] without express prior written consent of Bel-Ray, 

which may be withheld at the sole discretion of Bel-Ray"; 

(ii) the Blending and Manufacturing License Agreement 

S 7.05 provides that the "Agreement and the obligations and 

rights hereunder will not be assignable by [Chemrite] 

without the express prior written consent of BEL-RAY"; and 

(iii) the License Agreement to Trade Name S 6.06 provides 

that the "Agreement, and the obligations and rights under 

this agreement will not be assignable without the express 

written consent of all Parties to this Agreement." (A39, A61, 

A83). None contain terms specifically stating that an 

 11 
assignment without Bel-Ray's written consent would be 

void or invalid. Several courts have considered virtually 

identical clauses and concluded that they did not contain 

the necessary express language to limit the assigning 

party's power to assign. See Lomas, 812 F. Supp. at 844; 

Macklowe, 566 N.Y.S.2d at 606-07; Sullivan, 465 N.Y.S.2d 

at 236-38. 

The Trade Agreements' assignment clauses do not 

contain the requisite clear language to limit Chemrite's 

"power" to assign the Trade Agreements. Chemrite's 

assignment to Lubritene is therefore enforceable, and 

Lubritene is bound to arbitrate claims "relating to" the 

Trade Agreements pursuant to their arbitration clauses. We 

therefore agree with the District Court that Bel-Ray was 

entitled to an order compelling Lubritene to arbitrate. 

IV. 

We now turn to consider whether the District Court 

properly compelled the Individual Appellants to arbitrate. 

The Individual Appellants contend that the District Court 

erred because it lacked personal jurisdiction over them, and 

because they did not individually agree to arbitrate claims 

with Bel-Ray. We examine these claims in turn. 

A. 

The Individual Appellants first argue that the District 

Court lacked personal jurisdiction over them. Bel-Ray 

rejoins that appellants waived personal jurisdiction by 

seeking summary judgment on their counterclaim for 

affirmative injunctive relief against Bel-Ray. We agree. 

"Because the requirement of personal jurisdiction 

represents first of all an individual right, it can, like other 

such rights, be waived." Insurance Corp. of Ir., Ltd., et al. v. 

Compagnie des Bauxites de Guinee, 456 U.S. 694, 703

(1982). Moreover, the "actions of the defendant may

amount to a legal submission to the jurisdiction of the 

court, whether voluntary or not." Id. at 704-705. In 

particular, where a party seeks affirmative relief from a 

court, it normally submits itself to the jurisdiction of the 

 12 
court with respect to the adjudication of claims arising from 

the same subject matter. Adam v. Saenger, 303 U.S. 59 

(1938). 

Because there "exists a strong policy to conserve judicial 

time and resources," we have held that "preliminary

matters such as . . . personal jurisdiction . . . should be 

raised and disposed of before the court considers the merits 

or quasi-merits of a controversy." Wyrough & Loser, Inc. v. 

Pelmore Lab., Inc., 376 F.2d 543, 547 (3d Cir. 1967). 

Accordingly, in Wyrough we held that a defendant who 

participates in the adjudication of the plaintiff's application 

for a preliminary injunction without securing a 

determination of his challenge to the court's personal 

jurisdiction over him submits himself to the jurisdiction of 

the court unless it is not reasonably feasible tofirst secure 

that determination. See id. This is true even where the 

defendant raises his personal jurisdiction defense at the 

earliest point required by the Federal Rules. See id. 

While the Individual Appellants timely raised their

personal jurisdiction defense in their answer as required by 

the Federal Rules, they did far more than resist an

application for a preliminary injunction. They asked the 

District Court for affirmative relief before securing a 

determination on their personal jurisdiction defenses. On 

May 21, 1998, three months after they had entered their 

appearances before the District Court, the Individual 

Appellants filed motions for summary judgment on their 

counterclaim asking the Court to enjoin Bel-Ray from 

seeking arbitration. They thereafter proceeded to litigate 

those motions before securing a personal jurisdiction 

determination. Their affidavits supporting their personal 

jurisdiction defenses were not filed until a little over a 

month after their motion for summary judgment was 

denied. Because the record contains nothing suggesting 

that it would be unfair to conclude that the Individual 

Appellants thereby submitted themselves to the District 

Court's jurisdiction, we so hold. 

B. 

Arbitration is strictly a matter of contract. If a party has 

not agreed to arbitrate, the courts have no authority to 

 13 
mandate that he do so. United Steelworkers of Am. v. 

Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). 

The Individual Appellants claim that the District Court 

violated this fundamental principle because they have not 

signed an agreement consenting to submit disputes 

between themselves and Bel-Ray to arbitration. When

asked to enforce an arbitration agreement against a nonsignatory, we ask whether he or she is bound by that 

agreement under traditional principles of contract and 

agency law. Kaplan v. First Options of Chicago, Inc., 19 F.3d 

1503 (3d Cir. 1994); Pritzker v. Merrill, Lynch, Pierce, Fenner 

& Smith, 7 F.3d 1110, 1121 (3d Cir. 1993). 

Bel-Ray insists that the Individual Appellants are bound 

by the arbitration clauses in the Trade Agreements"based 

on their status as [Lubritene's] agents," citing our decision 

in Pritzker. Appellants' Br. at 16. Bel-Ray does not 

explicate, however, what principle of agency law enabled 

Lubritene to contract away the Individual Appellants' right 

to litigate their personal liability on claims brought against 

them. Our reading of Pritzker does not suggest such a 

principle, and our research has uncovered none. 

In Pritzker, the trustees of a pension plan sued the 

brokerage firm which traded on behalf of the plan, the 

broker in the firm that serviced the plan's account, and a 

sister corporation of the brokerage firm that provided the 

plan with investment advice. The arbitration clause that the 

trustees sought to enforce was set forth in the Cash 

Management Agreement between the trustees and the 

brokerage firm; neither the broker nor the sister 

corporation signed the agreement. After a dispute arose 

regarding investment decisions and the trusteesfiled suit, 

the defendants sought to compel arbitration. The trustees 

resisted arbitration and argued that they could not be 

compelled to arbitrate against the broker and the sister 

corporation because they had not entered into an 

arbitration agreement with those parties. We rejected this 

argument. 

In Pritzker, the issue was whether a signatory to an 

arbitration agreement could be compelled to arbitrate 

claims it had against the agents of the other party to the 

agreement. As we made clear at the outset of the opinion, 

 14 
the result turned on a construction of the arbitration clause 

to which the trustees had agreed -- i.e., whether it was 

broad enough in scope to encompass claims against agents 

of the brokerage firm arising out of the relationship 

between the brokerage firm and the trustees. We held that 

by agreeing in the context of the customer's agreement to 

arbitrate "all controversies which may arise between us," 

the trustees had committed themselves to arbitrate claims 

against the firm and its agents arising out of the brokerage 

relationship. We noted that since the brokerage could act 

only through agents and employees, "an arbitration 

agreement would be of little value if it did not extend to 

[them]." Id. at 1122 (quoting Troll v. Paciolla, 748 F. Supp. 

305, 309 (E.D. Pa. 1990). Accordingly, "[i]n keeping with 

the federal policy favoring arbitration," we "extend[ed] the 

scope of the arbitration clauses to agents of the party who 

signed the agreements." Id. at 1122. 

The issue before us, however, is not the construction of 

the arbitration clauses. The relevant issue here is whether 

an employee or agent who did not agree to arbitrate can be 

compelled to arbitrate his personal liability on the basis of 

a commitment made by the corporation he serves. 

The only other cases relied upon by Bel-Ray are our

decision in Isidor Paiewonsky Assoc., Inc. v. Sharp

Properties Inc., 998 F.3d 145 (3d Cir. 1993), and the 

decision of the Court of Appeals for the Ninth Circuit in 

Letizia v. Prudential Bache Securities, 802 F.2d 1185 (9th 

Cir. 1986). Like Pritzker, Letizia was a suit by a client 

against a brokerage firm and the two firm employees who 

handled the account. As in Pritzker, the employees sought 

to compel the client to arbitrate his claims against them 

and the result turned on construction of the arbitration 

clause in the agreement between the client and thefirm. 

The court concluded that "all of the individual defendants' 

allegedly wrongful acts related to their handling of[the 

client's] securities account" and that the firm had "clearly 

indicated its intentions [in the agreement] to protect its 

employees" from the expense of litigation arising from their 

work activities. Id. at 1188. Accordingly, the client's claims 

against the employees were held to be within the scope of 

the client's commitment to arbitrate, and the employees 

were held to be entitled to enforce that commitment. 

 15 
In the Sharp case, a landlord and "head tenant" of a 

shopping center had entered a master lease containing an 

arbitration clause. The issue we were required to decide 

was whether a subtenant, who had not signed the master 

lease, was bound by an award resulting from arbitration 

between the landlord and the "head tenant." The award 

authorized the landlord to regain possession of the portion 

of the leasehold occupied by the subtenant. We held that 

the subtenant was bound, despite the fact that it was not 

a party to the arbitration agreement. We first looked to 

"basic principles of landlord-tenant law": 

 As a general matter, it is well-established that a 

 subtenant's interest in real property cannot exceed that 

 of the head tenant because the subtenant's interest in 

 the real property is strictly derivative of that of the 

 head tenant. Normally, then, if a head tenant loses its 

 rights to continued possession of the property in 

 question, so does the subtenant . . . 

 Thus, to the extent that common law principles of the 

 rights of subtenants inform our analysis here, [the 

 subtenant] cannot complain when its rights to 

 continued possession of the Bolero Building ended 

 upon an adverse adjudication of the rights of its 

 sublessor, [the head tenant]. 

Sharp, 998 F.2d at 154. 

We then turned to the FAA and determined that none of 

its provisions required a different result. Accordingly, we 

enforced the award against the subtenant. While the

general approach we followed in Sharp is equally applicable 

here, the ruling there provides little help in resolving this 

case. 

We thus conclude that Bel-Ray has tendered no 

authorities supporting its position. Nor has our own 

research revealed supporting authority. On the contrary, 

the authority that does exist suggests to us that the District 

Court erred in compelling the Individual Appellees to 

arbitrate. 

Generally, of course, an agent of a disclosed principal, 

even one who negotiates and signs a contract for her 

 16 
principal, does not become a party to the contract. Kaplan 

v. First Options of Chicago, Inc., 19 F.3d 1503 (3d Cir. 

1994); Restatement (Second) of Agency S 320 (1958).

Moreover, under traditional agency principles, the only 

other way we understand that an agent can be bound by 

the terms of a contract is if she is made a party to the 

contract by her principal acting on her behalf with actual, 

implied, or apparent authority. The record in this case will 

not support a decision for Bel-Ray on any of these theories. 

Thomson-CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 

773 (2d Cir. 1995), catalogues the various theories

recognized by the Court of Appeals for the Second Circuit 

for binding non-signatories to an arbitration clause. After 

noting that each theory is based on "common law principles 

of contract and agency law," the court set forth the 

following list: 

 1) incorporation by reference; 2) assumption; 

 3) agency; 4) veil-piercing/alter ego; and 5) estoppel. 

Thomson, 64 F.3d at 776. 

In Thomson, the District Court compelled a non-signatory 

parent corporation to arbitrate based on an arbitration 

agreement between its subsidiary and one of the 

subsidiary's suppliers. The Court of Appeals reversed. After 

analyzing the record before it under each of the enumerated 

theories, the Court held that the District Court lacked 

authority under common law contract and agency 

principles to compel the parent to arbitrate even though the 

claim against it arose out of the relationship between the 

subsidiary and the supplier. 

Having similarly compared our record with the Thomson 

court's explanation of each of the five enumerated theories, 

we have also concluded that each is inapposite here. As in 

Thomson, the record will not support a piercing of the 

corporate veil and, without disregarding the entity of 

Lubritene, it is not possible to find the direct benefit 

required by the estoppel cases. 

Here, as in Kaplan, traditional principles of contract and 

agency law do not support the conclusion that the parties 

resisting arbitration are bound by an arbitration agreement 

 17 
they did not sign. Accordingly, we hold that the District 

Court erred in compelling the Individual Appellants to 

arbitrate Bel-Ray's claims against them. Bel-Ray may, if it 

so chooses, apply to the District Court for a stay of the 

proceeding on those claims pending its arbitration with 

Lubritene. 

V. 

The order of the District Court compelling arbitration will 

be reversed and the case will be remanded to it with 

instructions to enter an order compelling only Lubritene to 

arbitrate. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 18