2004 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-1-2004

Bouriez v. Carnegie Mellon Univ

Precedential or Non-Precedential: Precedential

Docket No. 03-1709P

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Recommended Citation

"Bouriez v. Carnegie Mellon Univ" (2004). 2004 Decisions. Paper 897.

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PRECEDENTIAL

___________

UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

No. 03-1709

___________

CHRISTIAN BOURIEZ; 

MONTANELLE BEHEER B.V.,

 Appellants,

vs.

CARNEGIE MELLON UNIVERSITY

___________

APPEAL FROM THE UNITED

STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF

PENNSYLVANIA

(D.C. No. 02-cv-02104)

District Judge: 

The Honorable Arthur J. Schwab

___________

ARGUED 

JANUARY 27, 2004

BEFORE: 

NYGAARD and FUENTES, 

Circuit Judges, and 

O’NEILL,* District Judge.

(Filed: March 1, 2004)

___________

James A. Vollins, Esq. (Argued)

Squire, Sanders & Dempsey

127 Public Square

4900 Key Tower

Cleveland, OH 44114-1304

Counsel for Appellants

George E. Yokitis, Esq. (Argued)

DeForest, Koscelnik & Yokitis

436 Seventh Avenue

3000 Koppers Building

Pittsburgh, PA 15219

Counsel for Appellee

___________

OPINION OF THE COURT

___________

NYGAARD, Circuit Judge.

Christian Bouriez and Montanelle

Beheer B.V. (collectively referred to as

“Bouriez”) appeal the District Court’s

order compelling arbitration and

dismissing their case. We will reverse

and remand.

* Honorable Thomas N. O’Neill,

Jr., Senior District Judge for the United

(continued...)

(...continued)

States District Court for the Eastern

District of Pennsylvania, sitting by

designation.
2

I.

In 1996, Carnegie Mellon

University entered into an agreement (the

“1996 Agreement”) with Zeta Projects

Limited. Under the terms of this

Agreement, Zeta Projects would fund

certain of Carnegie Mellon’s research

projects. In 1997, Governors Refining

Technologies assumed Zeta Projects’

position in the 1996 Agreement. 

Governors Refining was a partially

owned subsidiary of Governors

Technologies Corp. 

In 1999, Carnegie Mellon

approached Bouriez about investing in a

research project (“the Project”) that was

being conducted under the 1996

Agreement.1 According to Bouriez,

Carnegie Mellon represented to him that

they had Proof-of-Concept on the

technology at issue. Bouriez agreed to

support the Project and did so by

investing in, and thereby becoming a

shareholder of, Governors Technologies. 

Governors Technologies then took the

$5,000,000 that Bouriez invested and

used it to fund the Project. 

By the end of 2000, Carnegie

Mellon was in need of additional funds

for the Project. Carnegie Mellon again

approached Bouriez and he agreed to

assist Carnegie Mellon in finding

additional investors. Before finding

those investors, the Project underwent an

audit and, according to Bouriez, that

audit revealed that Carnegie Mellon

never had Proof-of-Concept for the

Project. As a result of this discovery,

Bouriez did not try to find additional

investors for the Project and sued

Carnegie Mellon. Bouriez claims that

Carnegie Mellon made

misrepresentations to him about the

status of the Project in order to convince

him to purchase shares in Governors

Technologies and, thereby fund the

Project. 

Carnegie Mellon filed a

 motion seeking to compel Bouriez to

arbitrate his claims and to have his

federal action dismissed. Carnegie

Mellon based this motion on the

arbitration clause contained in the 1996

Agreement. The clause requires that,

“Any dispute or claim arising out of or

relating to the Agreement will be settled

by arbitration in Pittsburgh,

Pennsylvania.” App. 24. Neither

Bouriez nor Governors Technologies

signed this Agreement.

The District Court granted

Carnegie Mellon’s motion after finding

that Bouriez “as agent[] of [Governors

Technologies], [is] bound by [his]

1. The 1996 Agreement does not

specifically lay out research projects, but

contemplates that proposals will be

submitted pursuant to the terms of that

Agreement. The project that Governors

Refining was involved in was submitted

under this procedure and involved the

upgrading of crude petroleum using

microwave-enhanced catalytic cracking. 
3

principal’s [Governors Technologies]

agreement to arbitrate” and “[Bouriez]

embraced the Agreement and directly

benefitted therefrom and thus [is]

equitable [sic] estopped from avoiding its

arbitration clause.” App. at 6.

II.

We have jurisdiction over this

appeal under 28 U.S.C. § 1291.2 We

exercise plenary review over the District

Court’s order compelling arbitration. 

Pritzker v. Merrill Lynch, Pierce, Fenner

& Smith, Inc., 7 F.3d 1110, 1113 (3d

Cir. 1993).

The right to a jury trial is a

fundamental right that is expressly

protected by the Seventh Amendment to

the United States Constitution. Molthan

v. Temple Univ. of Com. Sys. of Higher

Educ., 778 F.2d 955, 963 (3d Cir. 1985). 

Although the Federal Arbitration Act

“establishes a strong federal policy in

favor of compelling arbitration over

litigation,” this Court has held that it is

inappropriate to force a party to arbitrate

their disputes unless that party agreed to

such arbitration. E.I. Dupont de

Nemours & Co. v. Rhone Poulenc Fiber

& Resin Intermediates, S.A.S., 269 F.3d

187, 194 (3d Cir. 2001). A party,

however, can be compelled to arbitrate

under an agreement, even if he or she did

not sign that agreement, if common law

principles of agency and contract support

such an obligation on his or her part. Id.

at 194-95. 

Generally, the common law

theories used to bind a non-signatory to

an arbitration clause include third party

beneficiary, agency and equitable

estoppel. Here, Carnegie Mellon argued,

and the District Court accepted, that

Bouriez could be compelled to arbitrate

under the 1996 Agreement based on the

principles of agency and equitable

estoppel.

In its agency analysis, the District

Court found that Bouriez was an agent of

Governors Technologies and, therefore,

was bound to arbitrate under the 1996

Agreement. Bouriez raises several

factual arguments regarding his status as

an agent of Governors Technologies and

Governors Technologies’ obligation to

arbitrate under an agreement assumed,

not by Governors Technologies, but by

Governors Refining. However, even

assuming Bouriez was an agent of

Governors Technologies and it was

obligated to arbitrate under the 1996

Agreement, this does not mean Bouriez

was also obligated to arbitrate his claims. 

2. We note that as its primary form

of relief, Carnegie Mellon requested that

the District Court compel arbitration and

dismiss Bouriez’s federal action. We

express no opinion as to whether, had

Carnegie Mellon requested a stay under

Section 3 of the Federal Arbitration Act,

9 U.S.C. § 3, it would have been proper

for the District Court to dismiss this

action, and for us to hear an appeal from

that dismissal.
4

In Bel-Ray Co. v. Chemrite, we held that

an agent can only be bound by the

agreements of his principal when that

principal acted with the agent’s actual,

implied, or apparent authority. 181 F.3d

435, 445 (3d Cir. 1999). There is no

evidence that Governors Technologies,

Governors Refining, or any other entity

was acting with implied, actual or

apparent authority for Bouriez when it

agreed to the 1996 Agreement. In fact,

the record shows that Bouriez did not

even become involved in the Project until

1999, approximately two years after

Governors Refining assumed the 1996

Agreement. Therefore, the District Court

is incorrect in its conclusion that any

agency relationship between Bouriez and

Governors Technologies obligated him to

arbitrate.

A person may also be equitably

estopped from challenging an agreement

that includes an arbitration clause when

that person embraces the agreement and

directly benefits from it. E.I. Dupont,

269 F.3d at 199-200. Here, there is

simply no evidence in the record to

indicate that Bouriez directly benefitted

from the 1996 Agreement. At most, the

facts show that Bouriez became a

minority shareholder in Governors

Technologies for the sole purpose of

funding the Project. There is no

evidence that any benefit the Project

would produce would go to him directly. 

In this respect, this case is nearly

identical to Industrial Electronics Corp.

of Wisconsin v. iPower Distribution

Group., Inc., 215 F.3d 677 (7th Cir.

2000). 

In Industrial Electronics, iPower

approached Industrial Electronics in an

attempt to convince it to join an

association of other companies. Id. at

678-79. Once established, that

association would enter into a franchise

agreement with iPower, for iPower to

provide computer software that would

allow customers to purchase from all

members of the association in a single

order. Id. Industrial Electronics decided

to enter into the association, which was

created as a limited liability corporation. 

Id. at 679. One year later, the association

entered into the intended franchise

agreement with iPower. Id. 

Eventually, Industrial Electronics

came to believe that iPower

misrepresented certain facts and

fraudulently induced Industrial

Electronics to enter the association. Id.

It sued iPower. Id. In an attempt to

compel arbitration, iPower argued that

Industrial Electronics was bound by an

arbitration clause that existed in the

franchise agreement between iPower and

the association. Id. The Court of

Appeals for the Seventh Circuit correctly

observed that Industrial Electronics’

claims were not based on the franchise

agreement, but on iPower’s statements

that induced it to enter into the

association. Id. at 680-81. Thus,

Industrial Electronics was not exploiting

or directly benefitting from the

agreement that contained the arbitration
5

clause, and would not be equitably

estopped from avoiding that clause.

The facts here are not

distinguishable and we find Industrial

Electronics persuasive. Bouriez is

complaining that Carnegie Mellon

wrongly induced him to enter into a

shareholder agreement with Governors

Technologies. While the purpose of that

agreement was that Bouriez could

provide money to Governors

Technologies that Governors

Technologies would use to fund

Carnegie Mellon, the fact remains that

Bouriez’s claims deal with his

shareholder agreement, and not the 1996

Agreement. As in Industrial Electronics,

“A dispute that arises under one

agreement may be litigated

notwithstanding a mandatory arbitration

clause in a second agreement, even

where the two agreements are closely

intertwined.” Id. at 681. Such is the

circumstance here. The District Court’s

contrary conclusion fails to acknowledge

that Bouriez was one step removed from

the 1996 Agreement and, therefore, is not

equitably estopped from avoiding the

arbitration clause contained in that

Agreement.

III.

For the foregoing reasons, we will

remand the cause.

_________________________