2004 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

3-1-2004 

# B our ie z v . C a r negie M el lon Uni

v

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al
D ocke t N o . 03-1709P

F o l lo w thi s a nd a dd it ion al work s at : h tt p://d i g it alc ommon s .l a w . vi l l a no va . e du/thir dc ir c uit_2004

Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sity S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2004 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sity S choo l of L a

w Di g it al Re posit or y

. F or mor e infor m at ion, p le as e c on t a ct Be n j a min

. C a rl s on@l a

w . vi l l a no va . e du

. Re c omme nde d C it at ion

" Bour iez v . C a r ne g ie M e l lon U

niv " (2004). 2004 D e cisio n s . P ape r 897. h tt p://d i g it alc ommon s .l a

w . vi l l a no va . e du/thir dc ir c uit_2004/897PRECE DENTI AL

___________ UNIT ED STA TES C OURT OF AP PEA LS F OR TH E TH IRD CIR CU IT

No. 03-1709

___________ CH RIS TIA N B OU RIE Z; M ON TA NE LL E B EH EE R B .V.,

Appellants,

vs.
CARNEGIE MELLON U NIVERSITY

___________ APPEAL FROM THE U NITED STATE S DI STRI CT COURT FOR THE WESTE RN DI STRI CT OF PEN NS YL VA NIA (D.C. No. 02-cv- 02104)

Distric t Judg e: The Honorable Arthur

J. Schwab

___________ ARGUED JANU ARY 27, 2004

BE FO RE : NY GA AR D a nd F UE NT ES , Circu it Judges , and O’NEILL, * Distri ct Judge

. (Fil ed: March 1, 2004)

___________ James A. Vollins, Esq. (Argued) Squire, Sanders & Dempsey 127 P ublic Squ are 4900 Key Tower Cleveland, OH 44114-1304 Co unse l for A ppella nts

George E. Yokiti s, Esq. (Argued) De Fore st, Ko scelnik & Y okitis 436 Seventh Avenue 3000 Koppers Buildi ng Pitt sburgh, PA 15219 Counsel for Appell ee

___________ OPINI ON OF THE COURT

___________ NY GA AR D, Circu it Judge

. Ch ristian B ouriez and M ontan elle Beheer B.V. (col lect ively referr ed to as “Bou riez”) appea l the District Cou rt’s order compel ling ar

bitr ation and dismissing their

case. We will reverse and remand.

* Ho nora ble T hom as N . O’N eill, Jr. , Senior

Distri ct Judge for

the Unite d (continued...) (...continued)

States District Co urt for the Ea stern Distri ct of Pennsylvania , si tting by designation.2 I. In 1996, Carnegi e Mellon Universi ty

entere d into an a greement ( the “199 6 A greem ent”) w ith Ze ta Pro jects Lim ited. U nder the term s of th is Agreement, Zet a Project s would fund certa in of Carnegi e Mellon’s r esearch project s. I n 1997, Governors Refining Technologies assumed Z eta Projects’ pos ition in th e 19 96 A gre em ent. Go vern ors R efinin g w as a p artially
own ed subsidiary of G overno rs Te chn olo gies Co rp. In 1999, Carnegi e Mellon approached Bouri ez about i nvesti ng in a
resear ch projec t (“t

he Project”) that

was being conduct ed under the 1996 Ag reem ent. 1 According to Bouri ez, Carnegie Mellon r epresent ed to him t hat they had Proof-of- Concept on the techn olog y at issue. B ouriez agree d to support t he Project

and did so by invest ing in, and there by becomi ng a sha reh old er o f, G ove rno rs T ech nol ogi es. Governors Technologi es then t ook the $5,000,000 t

hat Bourie z invest ed and
use d it to fun d th e Pr ojec t. By the e nd o f 20 00, C arneg ie Mellon was in need of additionalfunds for the Proje ct. Ca rneg ie M ellon a gain appr oach ed B ouriez and h e agre ed to assis t Carnegi e Mellon in finding additi onal inve stors . Before finding those i nvestor s, t

he Project

underwent an audit and, accor ding to Bouri ez, t hat audit revealed t

hat Carnegi e Mellon never had Proof- of-Concept for the Pr oj ec t. A s a re su lt o f th is d isc ov er y, Bouriez di d not tr

y t o find addi tional invest ors for t

he Project

and sued Carnegie Mellon. Bouriez cl aims that Carnegie Mellon made misrepr esentations t o him about t he stat us of the Pr oject

in order to convinc e him to pu rchase sha res in Go vernors Technologies and, thereby fund the Pro ject. Carnegie Mellon f

iled a
mo tion see king to com pel B ouriez to arbitrate his claim s and to hav e his fede ral action dism issed. C arneg ie Mellon based this moti on on the arbit rati on clause c ontaine d in the 1996 Ag reem ent. T he cla use re quires that, “Any dis pute or cl aim ari sing out of or relating to t

he Agreement willbe settled by ar bitr ation in Pitt sburgh, Pennsylvania. ” App. 24. Neit her Bouriez nor Governor s Technologi es signe d this A greem ent.
The Distri ct Court granted Carnegie Mellon’ s motion after finding that Bou riez “as agen t[] of [G overno rs Technologies], [is] bound by [his] 1. The 1996 Agreement does not specifi call y l ay out

resear ch projec ts, but contemplat es that

proposal s willbe submitt ed pursuant

to the terms of that Agree ment. Th e project that G overno rs Refining was i nvolved in was s ubmitt ed under thi s procedur e and invol ved the upgrading of c rude petroleum using mic row ave -en han ced cata lytic cra ckin g.3

principal’s [Governors Tec hnologies] agreement t o arbit

rate” and “[Bouriez] emb raced the A greem ent an d direc tly benefitted therefrom and thus [is] equita ble [sic ] estop ped f rom avoid ing its arbit rati on clause. ” App. at 6.

II.

We have jurisdictio n ov er this appeal under

28 U.S.C. § 1291. 2 We exerci se plenar

y r eview over the Distr ict Co urt’s ord er co mp ellin g ar bitra tion

. Pritzker v. Merri ll Lynch, Pierce, Fenner & Sm ith , Inc. , 7 F.3d 1110, 1113 (3d Cir. 1993 ). The right to a jury

trialis a fun dam ental rig ht that is e xpre ssly protec ted by the Sev enth A men dm ent to the U nited Sta tes C ons titutio n. Molthan v. Temple Univ. of Com. Sys. of Higher Educ. , 778 F.2 d 95 5, 96 3 (3 d C ir. 19 85)

. Although the Fede ral Arbi tration Act “estab lishes a strong fede ral polic y in favor of compell ing arbi tration over litigation,” this C ourt h as he ld that it is inapp ropria te to fo rce a p arty to arbitra te their disp utes u nless th at party ag reed to
suc h ar bitra tion

. E.I. Dupont de Nemours & Co. v. Rhone PoulencFiber & Resin I

ntermediat

es, S. A.S. , 269 F.3d 18 7, 1 94 (3 d C ir. 2 00 1) . A pa rty, how ever, c an be com pelled to arbitra te und er an a greem ent, ev en if h e or sh e did not si gn that a greement, if common law principles of ag ency and co ntract suppo rt
suc h an obl igati on o n hi s or h er p art. Id. at 19 4-9 5.

Generall y, the common law theorie s used to bind a non -signa tory to an arb itration c lause in clude third pa rty bene ficiary, age ncy and equita ble estoppel . Here, Carnegie Mellon argued, and the Dist

rict Court accept ed, that Bo uriez c ould be co mp elled to arbitrate under the 1996 Agree ment based on the princip les of a genc y and eq uitable estop pel.

In it s agency

analy sis, the Dist

rict Court found that Bouriezwas an agent of Governors Technologi es and, t herefore, was bound to arbi trat e under the 1996 Agreement. Bouri ez rai ses several factualarguments r egarding hi s stat us as an agent of Governor s Technologi es and Go vern ors T echn olog ies’ ob ligation to arbit rate unde r an agree ment assumed, not by Governors Technologi es, but by Governors Refini ng. However, even assuming Bouri ez was an agent of Governors Technologi es and it was obligated to arbitrat e under the 1996 Agreement, t

his does not

mean Bouriez
wa s also obl igate d to arb itrate his c laim s. 2. We note that as its primary form of reli ef, Carnegi e Mellon reques ted that the Dist rict Court compel ar

bitr ation and di sm i ss Bo ur i ez ’ s f

ed er alac t i on
. We express no opinion as t o whether, ha d Carnegie Mellon r equested a stay under Sectio n 3 o f the F edera l Arb itration A ct, 9 U.S.C. § 3, it would have been proper for the Distric t Cou rt to dism iss this acti on, and for us to hear an appeal fr om that dism issal.4

In Bel-R ay C o. v. C hem rite , we held t hat an agent can only be bound by the agreements of his pr incipa l when that princip al acted with the ag ent’s a ctual, imp lied, o r ap par ent a uth ority. 181 F.3d 435, 445 (3d Cir . 1999) . There i s no evidence that Governors Technologies, Go vern ors R efinin g, or an y other en tity was acting wit

h impli ed, act

ual or appa rent au thority for B ouriez wh en it agree d to the 199 6 A greem ent. In fact, the rec ord shows that

Bouriez di d not
even beco me in volv ed in th e Pro ject un til 1999, approximately

two year s after Governors Refini ng assumed the 1996 Agree ment. Th erefore, the D istrict Court is i ncorrect

in it s conclus ion that

any agencyrelationship between Bouriez and Go vern ors T echn olog ies ob ligated him to arbit rate. A p erson may also be eq uitably estopped from challenging an agreement that includes an arbit

rati on clause when that pe rson embraces the agre ement and dire ctly be nefits fro m it. E.I. Dupont , 269 F.3d at 199 -200 . Here , there is simp ly no evid ence in the re cord to indicate that Bouriezdirectly benefitted from the 1996 Agreement. At most, t he facts s how that Bourie z became a minority shareholde r in Gov ernors Technologies for the s ole purpos e of funding the Project . There i s no evidence t

hat any benefit the Proj ect woul d pr odu ce wo ul d go to hi m directly
. In this re spec t, this case is near ly identi cal t o Industrial Electroni cs Corp. of Wisconsin v. i

Power Distri bution Group., I nc ., 215 F.3d 6 77 (7th C ir. 200 0).

In Industrial Electroni cs , iPower approached I ndustri al Elect ronics in an atte mpt to convi nce it

to join an asso ciatio n of

oth er co mp anie s. Id. at 678-79. Once est ablis hed, that association would enter into a franchis e agree men t with iP ow er, for iP ow er to prov ide co mp uter so ftw are tha t wo uld allow custo mers to pu rchas e from all
mem bers o f the a ssocia tion in a single ord er. Id. Industrial El ectroni cs decide d to ente r int o the ass ociat ion, whic h was
crea ted a s a lim ited l iabil ity corp ora tion

. Id. at 679. One year l ater, the ass ociat ion entered into the i ntended franchise agr eem ent w ith iP ow er. Id.

Eventually, Industrial El ectroni cs came to beli eve that

iPower misrepr esented c ertain facts and fraudule ntly

induced Indus tri al Ele ctro nics to en ter th e as soc iatio n. Id. It sue d iP ow er. Id. In an attem pt to compel arbi tration, i Power argued that Industrial El ectroni cs was bound by an arbit rati on clause t

hat exi sted i n the franchi se agreement

between iPower and the a sso ciatio n. Id. The Court of Ap peals for the S even th Circ uit corre ctly observed that IndustrialElectronics’ claims were not based on the franchise agree men t, but on iPow er’s state men ts that induced it

to ente r int o the
asso ciatio n. Id. at 680-81. Thus, Industrial El ectroni cs was not expl oiting or dir ectl y benefitting from the agreement t

hat cont ained the arbit

rati on5

clause , and w ould not b e equ itably estopped from avoiding t hat cl ause.
The facts her e are not dist inguis hable and we find Industrial Electronics persu asive. B ouriez is complaini ng that Car

negie Mellon wronglyinduced hi m to enter into a sharehold er agreem ent with G overno rs Technologies . While t

he purpose of t

hat agree men t was that B ouriez could provide m oney to Go vernors Techn ologies that G overno rs Technologies would use to fund Carnegie Mellon, the fact remains t

hat Bo uriez’s claim s dea l with h is sharehol der agree ment, and not the 1996 Agreement. As i n Industrial Electroni cs , “A dispute t

hat ari ses under one agreement may

be litigate d notwiths tanding a

mandatory

arbit rati on clause in a second agre ement, eve n wh ere the two agree men ts are clo sely inter twined. ” Id. at 681. Such is the circumstan ce here. Th e District Cou rt’s contrar y conclusion fai ls t o acknowledge that Bouri ez was one step r emoved from the 1996 Agreement and, theref ore, i s not equita bly estopped from avoiding t he arbit rati on clause c ontaine d in that Ag reem ent.

III.

For th e fore goin g reas ons, w e w ill remand the caus e.

_________________________