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1001APR21 q q:35

UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF NEW HAMPSHIRE

MACTEC Engineering & Consulting, Inc.

v. Civil No. 06 - cv-445-JD

Gradient Corporation

O R D E R

The claims in this case arise from the parties' interactions

in connection with the remediation of groundwater contamination

at a "Superfund Site" in Milford, New Hampshire. MACTEC

Engineering & Consulting, Inc., moves to compel Gradient

Corporation to join an ongoing arbitration proceeding, involving

MACTEC, Hitchiner Manufacturing Co., Inc., and Thomas & Betts.'

Gradient opposes MACTEC's motion.

Standard of Review

The Federal Arbitration Act provides that when a party is

"aggrieved by the alleged failure, neglect, or refusal of another

to arbitrate under a written agreement for arbitration," that

party may petition a federal district court for an order

compelling arbitration. 9 U.S.C. § 4. Neither the FAA nor the

1MACTEC has filed an amended complaint in which it adds

GradCo, LLC, as a defendant, doing business as Gradient

Corporation.

Case 1:06-cv-00445-JD Document 22 Filed 04/27/07 Page 1 of 13
First Circuit provides a standard for assessing a moving party's

factual showing to support a motion to compel.2 Other courts,

including a district court within the First Circuit, have used

the summary judgment standard of review. See Boulet v. Bangor

Sec., Inc., , 324 F. Supp. 2d 120, 123 (D. Me. 2004); see also S.

& G Elec., Inc. v. Normant Sec. Group, Inc. , 2007 WL 210517 at *2

(E.D. Pa. Jan 24, 2007). The parties have both submitted and

relied on documents beyond the complaint. Under these

circumstances, the court will apply the summary judgment

standard.'

2In contrast, "'abstract questions as to whether particular

disputes do (or do not) come within the four corners of an

expressly limited arbitration provision are legal in nature," and

are considered on their merits alone. Interaen N.V. v. Grina ,

344 F.3d 134, 141 (1st Cir. 2003) (quoting Paul Revere Variable

Annuity Ins. Co. v. Kirschhofer , 226 F.3d 15, 18-19 (1st Cir.

2000)).

3In a footnote, MACTEC requested an opportunity to

supplement its motion "should the Court deem it appropriate."

Pl. Mem. at 1, n.2. MACTEC states in its reply memorandum that

"[g]iven the uncertainty about the state of the evidentiary

record before the court MACTEC asks that this court either (1)

decide the case on the basis of the pleadings and exhibits before

it, including [an affidavit aimed at Gradient's objection to the

authenticity of some previously submitted documents], or (2)

schedule a hearing to develop the evidentiary record and decide

any disputes as promptly as possible . . . . MACTEC prefers the

former option, but if the Court cannot decide any issue of fact

on the record before it, MACTEC should have the opportunity to

respond." Reply at 2-3.

MACTEC has had more than sufficient opportunity to present

its arguments and evidence in support of its motion to compel

2

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Summary judgment is appropriate when "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law." Fed. R. Civ. P.

56(c). The party seeking summary judgment must first demonstrate

the absence of a genuine issue of material fact in the record.

See Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). A party

opposing a properly supported motion for summary judgment must

present competent evidence of record that shows a genuine issue

for trial. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242,

256 (1986). All reasonable inferences and all credibility issues

are resolved in favor of the nonmoving party. See id. at 255.

arbitration. No supplementation or further opportunity to

respond would be appropriate in this case.

3

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Background

MACTEC entered an agreement with Hitchiner Manufacturing

Co., Inc., and Thomas & Betts Corporation ("the Settling

Parties") in 1994 to provide technical consulting services for a

remediation system at the Savage Well Superfund Site in Milford,

New Hampshire.4 The agreement includes an arbitration clause.

Gradient was not a party to and never signed the agreement

between MACTEC and the Settling Parties.5

From 1994 until 2001, MACTEC was the project coordinator and

supervising contractor. In early 2001, the Settling Parties

contacted Gradient about providing services at the Savage Well

site. After Gradient had begun work on the project, they

formalized their agreement in a letter dated July 9, 2001, that

was signed by representatives of Gradient and the Settling

Parties. The agreement provided that Gradient was retained, "on

a time and materials basis," to assist "in understanding

technical issues and developing technical approaches related to

the requirements imposed upon [the Settling Parties] by the

Environmental Protection Agency and the New Hampshire Department

4The parties's use of the term "Settling Parties" apparently

is based on a consent decree between the Environmental Protection

Agency and Hitciner and Betts, pertaining to that site.

5MACTEC is the successor to Environmental Science &

Engineering, Inc., that contracted with the Settling Parties.

4

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of Environmental Services, pursuant to a federal Consent Decree

pertaining to the so-called Savage Well Superfund Site." Shifrin

Aff. Ex. A. An attachment to the letter, referenced in the

letter, provided additional terms, including a provision that

Gradient would operate as an independent contractor.

The new arrangement was communicated to MACTEC in a

memorandum, dated June 12, 2001, from the Settling Parties'

attorneys. In that memorandum, MACTEC was informed that Gradient

would take the lead role and that MACTEC would serve as the field

engineer on the project. The memorandum also directed MACTEC to

take direction from Gradient but to submit its invoices as it had

previously done. The Settling Parties notified the EPA that

Gradient had become the Project Coordinator and that MACTEC would

act as the Supervising General Contractor and provided assurances

that the new parties would "work cohesively."

The remediation system began to operate in October of 2004

but then failed and was shut down by the Settling Parties in

December of 2004. The Settling Parties discharged MACTEC and

hired a new firm to take its place. The disputes between MACTEC

and the Settling Parties have been in arbitration since early

2006. Gradient refuses to participate in the arbitration

proceeding.

5

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Discussion

To compel a recalcitrant party to arbitrate, the movant

"must show that a valid agreement to arbitrate exists, that the

movant is entitled to invoke the arbitration clause, that the

other party is bound by that clause, and that the claim asserted

comes within the clause's scope." Intercen N.V. v. Grina , 344

F.3d 134, 142 (lst Cir. 2003). MACTEC asserts that Gradient

should be compelled to arbitrate MACTEC's claims against it in

the arbitration proceeding with the Settling Parties.6 Gradient

objects on the ground that no arbitration agreement exists

between it and MACTEC and the arbitration agreement between

MACTEC and the Settling Parties is not binding on Gradient.

MACTEC acknowledges that no arbitration agreement exists between

it and Gradient but argues that the arbitration clause in its

agreement with the Settling Parties is binding on Gradient based

on theories that Gradient was the agent of the Settling Parties,

that MACTEC's claims against Gradient are inextricably entwined

with the claims in the arbitration proceeding, and that Gradient

is estopped from avoiding arbitration.

6MACTEC filed a complaint against Gradient in which it

sought an arbitration order and brought claims for

indemnification, contribution, negligent misrepresentation,

"innocent misrepresentation," and negligence, and sought a

declaratory judgment.

6

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A. Agency

"An agent is subject to the same contractual provisions,

including arbitration contracts, to which the principal is

bound." Nitro Distrib., Inc. v. Alticor, Inc. , 453 F.3d 995, 999

(8th Cir. 2006). "But the requirements for such vicarious

responsibility are exacting: not only must an agency arrangement

exist so that one party acts on behalf of the other and within

the usual agency principles, but the arrangement must be relevant

to the legal obligation in dispute." InterGen , 344 F.3d at 147-

48 (internal quotation marks omitted). Under New Hampshire law,

which MACTEC offers as the governing standard, "[t]he necessary

factual elements to establish agency involve: (1) authorization

from the principal that the agent shall act for him or her; (2)

the agent's consent to so act; and (3) the understanding that the

principal is to exert some control of the agent's actions."7

Boynton v. Fiaueroa , 913 A.2d 697, 707 (N.H. 2006).

MACTEC bears the burden to prove that Gradient was the

Settling Parties' agent in order to impose the arbitration

obligation on Gradient. When the moving party bears the burden

7In contrast, because uniform federal standards are

appropriate in deciding questions under chapter two of the FAA,

federal common law governs. InterGen , 344 F.3d at 143.

Nevertheless, a choice of law is not necessary here as "federal

common law incorporates general principles of contract and agency

law." Id. at 144.

7

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of proof, summary judgment will not be granted unless, based on

the record taken in the light most favorable to the nonmoving

party, no reasonable jury could find for the nonmoving party.

See E.E.O.C. v. Union Independiente de la Autoridad de Acueductos

y Alcantarillados de P.R. , 279 F.3d 49, 55 (1st Cir. 2002);

Winnacunnet v. Nat'l Union , 84 F.3d 32, 35 (1st Cir. 1996).

MACTEC has not met that burden.

In support of its agency theory, MACTEC states that "the

Settling Parties selected Gradient to act as their express agent

and representative in dealing with MACTEC." Pl. Mem. at 15.

Following that conclusion, MACTEC makes several statements that

are unsupported by citations to the record and, as a result, are

not considered. MACTEC cites parts of the June 12, 2001,

memorandum to MACTEC from the Settling Parties and a part of

Gradient's proposal to the Settling Parties. The cited passages,

however, state that Gradient would direct MACTEC in the project

and explain Gradient's responsibilities, but suggest nothing

about authorization to act as an agent.

The cited statements do not show that the Settling Parties

"expressly" designated Gradient to act as their agent. To the

contrary, the agreement between Gradient and the Settling Parties

includes a provision that expressly designates Gradient as an

independent contractor. Although circumstances might prove that

8

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an agency relationship existed despite the independent contractor

provision, MACTEC ignored that provision and has not shown that

Gradient was the Settling Parties' agent. Therefore, the agency

argument fails.

B. Inextricably Entwined Claims

MACTEC contends that Gradient is bound by the Settling

Parties' arbitration clause because MACTEC's claims against

Gradient are inextricably entwined with the claims in the

arbitration proceeding. In support of that theory, MACTEC relies

on McBro Planning & Dev't Co. v. Trianale Elec. Constr. Co.,

Inc. , 741 F.2d 342 (11th Cir. 1984). In that case, McBro sought

to compel Triangle to arbitrate claims brought by Triangle based

on arbitration agreements each of them had with a third party,

the hospital. Id. Although no arbitration agreement existed

between McBro and Triangle, Triangle's claims asserted that McBro

breached its duties under its contract with the hospital, which

included an arbitration agreement. Id. at 344. As a result, the

court concluded that Triangle was estopped from avoiding

arbitration. Id.

Importantly, in McBro , Triangle also signed an arbitration

agreement with the hospital. Courts that have considered whether

parties may be compelled to arbitrate based on a related

9

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arbitration agreement have concluded that non-signatories cannot

be so bound. See E.I. DuPont De Nemours v. Rhone Poulenc Fiber &

Resin Intermediates, S.A.S. , 269 F.3d 187, 201-02 (3d Cir. 2001)

(citing McBro and discussing related cases). Because Gradient

did not sign an arbitration agreement with MACTEC or the Settling

Parties, the theory applied in McBro is inapposite here.

C. Estoppel

MACTEC urges that Gradient should be estopped from avoiding

the arbitration agreement between MACTEC and the Settling Parties

because Gradient received benefits under that contract. "[T]he

doctrine of equitable estoppel precludes a party from enjoying

rights and benefits under a contract while at the same time

avoiding its burdens and obligations." InterGen , 344 F.3d at

145. In this context, enjoying the rights and benefits under a

contract means that the party to be estopped has "consistently

maintained that other provisions of the same contract should be

enforced to benefit him." Id. (internal quotation marks

omitted).

To support an estoppel theory, MACTEC relies on an

application of "direct benefit" estoppel in Am. Bur. of Shipping

v. Tencara Shipyard S.P.A. , 170 F.3d 349 (2d Cir. 1999). In

Tencara , a group of investors ("the Owners") contracted with

10

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Tencara Shipyard to build a racing yacht. Id. at 351. That

agreement required that the yacht would be "classed" as approved

by the American Bureau of Shipping ("ABS"). Tencara entered an

agreement with ABS for classification, and that agreement

included an arbitration clause. Id. When the yacht was damaged,

allegedly due to poor design and construction, the Owners'

insurers provided coverage, and the Owners, insurers, and Tencara

sued ABS. Id. ABS then brought suit to compel Tencara, the

Owners, and the insurers to arbitrate the claims, which was

granted as to Tencara only. Id. at 352.

On appeal, the Second Circuit concluded that the Owners were

estopped from denying the contract containing the arbitration

clause because they had received direct benefits from that

contract. Id. at 353. Specifically, the court found that the

Owners had lower insurance rates on the yacht and were allowed to

sail under the French flag because the yacht was "classed"

pursuant to the contract. Id. Further, the Owners bore the

responsibility to register the yacht, and the contract between

Tencara and ABS, which included the arbitration clause, fulfilled

that responsibility for the Owners. Id.

MACTEC asserts that Gradient benefitted from MACTEC's

contract with the Settling Parties because Gradient "relied on

information and cooperation that MACTEC was obligated to provide"

11

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under that agreement. Pl. Mem. at 21. Specifically, MACTEC

asserts that Gradient used MACTEC's engineers "to stamp plans,

perform field engineering work, and other services" and coauthored "numerous critical project documents with MACTEC." Id.

MACTEC contends that those "benefits" are analogous to the

benefits that were the basis for compelling arbitration in

Tencara .

While MACTEC may have been obligated to do the cited

services under its contract with the Settling Parties, a point

that is not well-substantiated here, MACTEC has not demonstrated

that Gradient benefitted from those services. In Tencara , the

Owners directly benefitted from the classification agreement

because, when that agreement was performed, they saved money on

insurance and could sail the yacht under the French flag. Here,

the services MACTEC provided for the remediation project

benefitted the Settling Parties, who contracted for those

services, not Gradient. The mere fact that Gradient and MACTEC

worked together on the remediation project does not show that

MACTEC provided a benefit to Gradient. In the absence of a

direct benefit to Gradient from the agreement between the

Settling Parties and MACTEC, no estoppel arises.

12

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D. Arbitration

"'[A]rbitration is a matter of contract and a party cannot

be required to submit to arbitration any dispute which he has not

agreed so to submit.'" InterGen , 344 F.3d at 142 (quoting AT & T

Techs., Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 648

(1986)). In the absence of a binding agreement to arbitrate, a

party may be compelled to arbitrate only when particular

circumstances would otherwise impose that obligation. See id. at

144-50. MACTEC has not shown that any viable basis exists to

compel Gradient to arbitrate the claims MACTEC has alleged here.

Conclusion

For the foregoing reasons, the plaintiff's motion to compel

arbitration (document no. 3) is denied. In the absence of an

order compelling arbitration, the plaintiff's motion to stay

litigation (document no. 3) is moot.

SO ORDERED.

April,?7 , 2007

cc: Daniel P. Luker, Esquire

Sigmund D. Schutz, Esquire

Paul S. Samson, Esquire

Robert J. Gallo, Esquire

United States District Judge

os4ph A. DiClerico, Jr.

13

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