## F I L E D United States Court of Appeals Tenth Circuit 

### OCT 3 1997 

### PATRICK FISHER Clerk 

### PUBLISH UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

AVEDON ENGINEERING, INC., a Colorado corporation; as assignee of H.B.C., INC., a Colorado corporation, Plaintiff-Appellant,

v. SEATEX, a New York corporation; CONSOLTEX, a New Yorkcorporation; THE BALSONHERCULES GROUP LTD., a Rhode Island corporation and DOES 1-20, whose true names are unknown, inclusive,Defendants-CounterClaimants-Appellees. No. 96-1066

Appeal from the United States District Court for the District of Colorado (D.C. No. 94-B-2561)

John W. Gaddis, of Grant, Bernard, Lyons & Gaddis, Longmont, Colorado, for Plaintiff/Appellant. Mary P. Birk, of Baker & Hostetler (Marjorie N. Slo an, of Baker & Hostetler, with her on the brief), Denver, Colorado, for Defen dants/CounterClaimants/Appellees.-2-

Before SEYMOUR , Chief Judge, BRORBY and KELLY , Circuit Judges.

SEYMOUR , Chief Judge.1 Defendant Seatex is a New York-based division of Ba lson-Hercules, a

Rhode Island corporation. Seatex is a converter of textiles which buys fabric in a “greige,” or unfinished, state and arranges for it to be dyed and finished according to specifications of commercial customers.

2 Plaintiff Avedon Engineering, Inc., is the assignee of H.B.C., Inc., a Colorado corporation engaged in the manufacture of snowboarding apparel under the trade name Twist. In this opinion, both entiti es will be referred to as Twist. -3- In this breach of contract action against Seatex, 1 Twist 2 appeals the district court’s denial of a jury trial on the issue of whet her its contract with Seatex included an agreement to arbitrate, and the distric t court’s stay of litigation pending arbitration. Twist also appeals the grant of summary judgment to Seatex for Twist’s failure to timely arbitrate. Because w e conclude the district court erred by failing to make a choice of law determinat ion before resolving those issues, we reverse and remand for further proceedin gs consistent with this opinion.

I.

Twist was formed in 1992 to design and manufacture clothing and accessories for the snowboard industry. Twist eval uated the suitability of Seatex fabric for use in its clothing line by ordering pro duct samples. At the time of the relevant transactions, Twist’s principal place of b usiness was Colorado and Seatex’s principal place of business was New York. In a series of preliminary3 In relevant part the preprinted form states: “This contract is subject to all

the terms and conditions on this and the reverse si de hereof, including the provisions providing for ARBITRATION and EXCLUSION OF WARRANTIES.” Rec., vol. I at 99.

4 The relevant portions of the clauses state: 10. ARBITRATION: (a) Any controversy arising out of or relating to this contract or any modification or extension ther eof including any claim for damages and/or rescission, shall be settl ed by arbitration before a panel of three arbitrators in the city of New York, (or, if applicable law requires some other place, then such other place) in accordance with the rules then obtaining of the Ame rican Arbitration Association. (b) The parties consent to the jurisdiction of the Superior Court of the State of New York, and of the United States Dis trict Court for the -4- transactions Twist negotiated quantity, price and f abric quality with Goebel Textiles, agent for Seatex, through telephone calls and facsimile transmissions. Twist placed its purchase orders with Goebel by fac simile transmission. For at least three of the preliminary transactions, Seatex responded to the purchase orders by sending a standardized sales con firmation form from New York to Twist in Colorado. Some special conditions of performance were noted in small type at the bottom front of the confirmati on form, among which was a notice regarding arbitration. 3 Two clauses relevant to arbitration appeared in f ull on the back of the form. Clause 10 provided that d isputes arising out of transactions between the parties would be settled b y arbitration, and clause 11 provided that future transactions between the parti es would be controlled by the terms of the sales confirmation form unless superse ded by a signed contract. 4Southern District of New York, for all purposes in connection with

arbitration . . . .

. . . . (d) The arbitrators shall have no power to alter ormodify any express provision of this contract or to render an award wh ich has the effect of altering or modifying any express provision here of, provided, however, that any application for reformation of th e contract shall be made to the arbitrators and not to any Court and th e arbitrators shall be empowered to determine whether valid grounds forreformation exist. (e) Arbitration proceedings must be instituted with in one year after the claimed breach occurred, and the failure to ins titute arbitration proceedings within such period shall constitute an absolute bar to the institution of any proceedings and a waiver of all claims. Notwithstanding any law to the contrary, the determ ination of whether said one-year period has expired shall be m ade by the Court, and shall not be within the jurisdiction of the arb itrators.

. . . . 11. FUTURE TRANSACTIONS: Except to the extent that a future transaction is governed by a signed contract betwee n two parties, the terms and conditions of this contract including wit hout limitation, the provision for arbitration shall govern all future t ransactions. Rec., vol. I at 100. -5- It is undisputed that the arbitration and future tr ansactions clauses were not negotiated terms of contract. Both were inserted u nilaterally by Seatex in its confirmation forms. Although Twist paid for and re tained the fabric pursuant to its preliminary orders and does not dispute that itreceived the confirmation forms reflecting its preliminary purchases, Twist neithersigned nor returned those forms. After completing its preliminary product evaluation , Twist placed a bulk5 Because the only form proffered by Seatex as eviden ce of the April

transaction, rec., vol. I at 104, reflects the incr eased order for 200 denier oxford flat fabric placed in May, Twist contends there is no evidence form 2155 was timely sent by Seatex as required by section 2-207( 1) of the UCC, id. at 137. Mr. Goebel, Seatex’s agent, confirmed that Twist did no t increase its order until May 12, 1993. Id. at 145. Mr. Goebel further attested that by June 3, 1993, he had not yet received from Seatex an acknowledgment of the April contract. Id.

6 Twist originally filed suit in August 1994 in Calif ornia, then its principal place of business. That suit was dismissed for lac k of jurisdiction. -6- order in April 1993 for specially treated waterproo f fabric for its 1993-94 line of clothing. As it had with each of its preliminary t ransactions, Twist placed this order by facsimile transmission to Seatex’s agent. Twist made one alteration to this purchase order: in May of 1993, it increased t he size of the order by facsimile transmission. Seatex alleges that it confirmed thi s order by sales confirmation form No. 2155. Twist disputes whether it received confirmation form No. 2155, and further argues that, even if the form was sent, it was not timely. 5 Twist did, however, accept delivery in Colorado and pay for th e fabric ordered in April and May of 1993. Twist used the fabric to manufacture its 1993-94 li ne of clothing. By December 1993, Twist began to receive reports that a special urethane coating designed to waterproof the fabric was peeling. Clo thing manufactured from this fabric was returned to Twist as defective. After e fforts to resolve the problem with Seatex proved unavailing, Twist brought this s uit in Colorado state court in 1994, 6 seeking damages for breach of contract, breach of express and implied-7-

warranties, negligence, negligence per se, negligen t misrepresentation, strict products liability and deceptive trade practices. Seatex removed the action to federal court and cont ended the arbitration clause contained in the unsigned sales confirmation forms became part of the April/May 1993 contract by operation of section 2-2 07 of the Uniform Commercial Code (UCC). Seatex accordingly made mot ions to stay litigation and to compel arbitration pursuant to the Federal Arbit ration Act (FAA), 9 U.S.C. §§ 3, 4. Twist responded that section 2-207 prohibits inclusion of the arbitration term because it materially alters the contract. Mo reover, Twist argued that whether there is a material alteration of a contrac t presents a question of fact and requested a jury trial on that issue as provided in 9 U.S.C. § 4. The district court concluded that the future transa ctions clause in the preliminary sales confirmation forms negated any is sue of fact regarding Twist’s receipt of the sales confirmation form No. 2155. T he court then concluded under the facts presented and the prevailing trade usage in the textile industry that arbitration was not a material alteration and was t herefore included in the Twist/Seatex contract. The district court granted a stay of litigation pending arbitration and retired the case from its active do cket. Six months later, Seatex brought a motion to reacti vate the case and a motion for summary judgment on all claims for Twist 's failure to timely arbitrate7Under the Federal Arbitration Act (FAA), Twist coul d not immediately

appeal the district court’s interlocutory order gra nting a stay of litigation pending arbitration. 9 U.S.C. § 16(b). -8- according to the terms in the arbitration clause. The district court ruled that its earlier legal analysis on inclusion of the arbitrat ion clause applied with equal force to all of the terms within the clause, and th at Twist was bound by conditions in the arbitration clause which required filing of claims within one year of breach with the American Arbitration Association (AAA) in New York. The court concluded that Twist had waived all claims by faili ng to timely make that filing and granted summary judgment to Seatex. Twist now appeals the initial denial of a jury trial and grant of a stay, 7 and the final grant of summary judgment to
Seatex.

II.

“We review a district court's grant or denial of a motion to compel arbitration de novo , applying the same legal standard employed by the district court.” Armijo v. Prudential Ins. Co. of America , 72 F.3d 793, 796 (10th Cir. 1995). We also review de novo a district court’s d ecision to deny a jury trial on the factual question of whether the parties agreed to arbitrate. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd. , 636 F.2d 51, 54 & n.9 (3d Cir. 1980).8 Section 2-207 provides:

(1) A definite and seasonable expression of accepta nce or a written confirmation which is sent within a reasona ble time operates as an acceptance even though it states terms additi onal to or different from those offered or agreed upon, unless acceptanc e is expressly made conditional on assent to the additional or dif ferent terms. (2) The additional terms are to be construed as pro posals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the te rms of the offer; (b) they materially alter it ; or (c) notification of objection to them has already b een given or is given within a reasonable time after notice of them is received. -9- Before granting a stay of litigation pending arbitr ation, a district court must determine that an agreement to arbitrate exists. 9 U.S.C. §§ 3, 4; Hornbeck Offshore (1984) Corp. v. Coastal Carriers Corp. , 981 F.2d 752, 754 (5th Cir. 1993); Genesco, Inc. v. T. Kakiuchi & Co. , 815 F.2d 840, 844 (2d Cir. 1987). The existence of an agreement to arbitrate “is simp ly a matter of contract between the parties; [arbitration] is a way to resolve thos e disputes--but only those disputes--that the parties have agreed to submit to arbitration.” First Options of Chicago, Inc. v. Kaplan , 115 S. Ct. 1920, 1924 (1995). When parties dispu te the making of an agreement to arbitrate, a jury trial o n the existence of the agreement is warranted unless there are no genuine issues of material fact regarding the parties’ agreement. Par-Knit Mills , 636 F.2d at 54 & n.9. Both Twist and Seatex agree that section 2-207 of t he UCC controls the determination of the existence of an agreement to a rbitrate. 8 Section 2-207(3) Conduct by both parties which recognizes the ex istence of a

contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist o f those terms on which the writings of the parties agree, together w ith any supplementary terms incorporated under any other pr ovisions of this Act. U.C.C. § 2-207 (1994) (emphasis added). Both Color ado and New York have adopted section 2-207 in its entirety, C OLO
. REV
. S TAT
. ANN . § 4-2-207 (Bradford Pub. Co. 1992); N.Y. U.C.C. L AW§ 2-207 (McKinney 1997)).

9A merchant is one “who deals in goods of the kind o r otherwise by his occupation holds himself out as having knowledge orskill peculiar to the practices or goods involved in the transaction.” U .C.C. § 2-104 (1994). Twist admits it is an “acknowledged leader in designing, manufacturing and selling apparel in the international snowboard apparel mark et.” Rec., vol. I at 108. Twist is thus a merchant in the apparel industry.

10 Seatex also argues, and the district court agreed, that subsection (3) of section 2-207 provides an alternate basis for holdi ng that the parties have agreed to arbitrate disputes. We disagree. Seatex conten ds the arbitration and future transactions clauses in the preliminary sales confi rmation forms control this dispute. Seatex characterizes those forms as confi rming “previous discussions concerning the terms of the specific sale.” Rec., vol. I at 161. Seatex also states that “[i]t should go without saying that offer-and- acceptance precedes the sending of a contract confirmation.” Id. at 165. In such a situation, 2-207(3) would not apply “for it contemplates contract formation throu gh performance, and here the contract was already formed . . . prior to performa nce.” 1 J AMES J. W HITE & R OBERT S. S UMMERS , UNIFORM C OMMERCIAL C ODE § 1-3, at 25-26 (4th ed. 1995). -10- dictates that additional terms inserted unilaterall y in a confirmation form become part of a contract between merchants 9 unless: an offer is made expressly conditional to its terms, § 2-207(2)(a); the additi onal terms are expressly objected to, § 2-207(2)(c); or the terms cause a material alteration to the contra ct , § 2- 207(2)(b). 10 Twist neither limited acceptance of any of its of fers to their11 Twist suggested in its brief in opposition to Seate x’s motion for summary

judgment that it limited its April 20 order express ly to its terms. However, Twist did not raise this issue in the district court when it argued that arbitration materially altered its contract with Seatex. The d istrict court concluded that Twist did not make its offer expressly limited to i ts terms, and there is no evidence the district court’s determination was err oneous.

12 Terms which“materially alter” a contract include th ose which result in surprise or hardship to the parties. U.C.C. § 2-20 7 cmt. 4 (1994). The official comments to section 2-207 give some examples of ter ms which can cause surprise and hardship, but arbitration is not among them. I d.

13 Because we conclude infrathat the district court erred when it failed to make a choice of law determination, we do not separ ately address whether the future transactions clause independently constitute s a material alteration under section 2-207. That issue should be considered, if necessary, on remand. -11- terms 11 nor expressly objected to the terms in the prelimi nary sales confirmation forms. Thus, unless inclusion of the arbitration c lause caused a material alteration 12 to the contract, arbitration became part of the Tw ist/Seatex preliminary sales contracts, and by operation of th e future transactions clause, 13 became part of the April/May 1993 contract. The first step in evaluating whether the arbitratio n term was included in the Twist/Seatex contract should be a determination of what state’s law controlled the formation of that contract. Coastal Indus., Inc. v . Automatic Steam Prods. Corp. , 654 F.2d 375, 377-78 (5th Cir. 1981). The districtcourt did not perform such an analysis, despite Twist’s assertion that Colorado l aw should be applied. The court was apparently persuaded by Seatex’s argument, rec. , vol. I at 42 n.10, that no choice of law analysis was necessary because both C olorado and New York, the-12-

relevant states, have enacted identical versions o f section 2-207 of the UCC and because any New York decisional law diverging from the general application of the UCC would be preempted by the FAA. It is true that both states have adopted identical versions of section 2-207, and we agree that choice of law analysis is general ly unnecessary if the relevant states have enacted identical controlling statutes. However, because we note at least two issues which we think Colorado and New Yo rk would analyze differently--the materiality of the arbitration cla use and the one-year limitations period required under the arbitration clause--a cho ice of law determination is necessary. Moreover, we conclude the FAA does not preempt the state law issue of whether the parties have agreed to arbitrate the ir contract dispute.

A. Materiality of Arbitration Terms Colorado has not directly addressed whether inclusi on of arbitration as an additional term materially alters a contract, and t hus we presume it would follow a conventional UCC analysis on this issue. Arguabl y, arbitration as an additional term would “‘materially alter’ [a contract] and thu s not survive 2-207(2).” 1
J AMES J. W HITE & R OBERT S. S UMMERS , UNIFORM C OMMERCIAL C ODE § 1-3, at 27 (4th ed. 1995). However, the burden of showing that arbitration is a material alteration is on the party opposing its inclusion b ecause section 2-207 presumes14 Usage of trade could be relevant to the determinati on of material

alteration because it “may define a material altera tion under section 2-207, and thus determine whether a proposed term in a ‘battle of the forms’ will be given effect.” 1 W HITE & S UMMERS , § 3-3, at 119. If Colorado law applies, the distri ct court will have to decide in the first instance how that state would deal with the burden of proof issue on trade usage. Some courts, purporting to apply general UCC law, have concluded the burden of showing that arbitration is nota trade usage is with the party opposing the addition of ar bitration. Cf. Wilson Fertilizer & Grain, Inc. v. ADM Milling Co. , 654 N.E.2d 848, 854 (Ind. Ct. App. 1995) (proponents of arbitration not required to put forw ard evidence of trade usage when party opposing inclusion alleges only its actu al surprise in opposition to inclusion). Other courts have concluded that afterthe party opposing inclusion of an arbitration provision has made a prima facie sho wing of hardship or surprise, the burden shifts to the party urging inclusion to prove trade usage. Cf. Comark Merchandising, Inc. v. Highland Group, Inc. , 932 F.2d 1196, 1202 (7th Cir. 1991) (party urging inclusion should prove trade usage to show surprise was unreasonable). -13- inclusion of additional terms between merchants. C omark Merchandising, Inc. v. Highland Group, Inc. , 932 F.2d 1196, 1201 (7th Cir. 1991). 14 New York does not conform to typical UCC analysis, at least with respect to the burden of proof that arbitration is a materi al alteration when introduced as an additional term. New York presumes that arbitration is material; the presumption effectively carries the initial burden of the party opposing arbitration as a material alteration. New York’s highest courthas stated that “the inclusion of an arbitration agreement materially alters a con tract for the sale of goods, and thus, pursuant to section 2-207 (subd. (2), par. (b )), it will not become a part of such a contract unless both parties explicitly agre e to it.” Marlene Indus. Corp. v. Carnac Textiles, Inc. , 380 N.E.2d 239, 242 (N.Y. 1978). Although the pr oponents15New York has held that trade usage can, in some lim ited circumstances, be

used to supplement express terms of a contract. Se e Schubtex, Inc. v. Allen Snyder, Inc. , 399 N.E.2d 1154, 1156 (N.Y. 1979) (acknowledging possibility that trade usage, with appropriate course of dealing between parties showing express assent, could incorporate an arbitration term into the parties’ agreement); compare Woodcrest Fabrics, Inc. v. B & R Textile Corp. , 464 N.Y.S.2d 359, 360 (N.Y. App. Div. 1983) (Sandler, J.P., concurring) (accepting arbitration as trade usage upon receipt of affidavits of two independent brokers) w ithJones Apparel Group, Inc. v. Petit , 426 N.Y.S.2d 739, 740 (N.Y. App. Div. 1980) (ackn owledging possibility that arbitration could be included in contract abse nt express agreement upon proof of trade usage sufficient to show entire industry i s bound by practice, but deciding that proof was insufficient to carry proponent’s bu rden on trade usage). Seatex argued below that an arbitration clause is n ot a material alteration because arbitration is customarily used in the text ile industry. If New York law applies, we disagree that Seatex’s proof on this po int was sufficient to show that arbitration became part of the Twist/Seatex contrac t as a matter of law. In New York the burden is on the proponent of arbitration to establish that arbitration is not a material alteration. Seatex offered two trade co des as proof of the textile industry’s trade practice of arbitrating disputes. Rec., vol. I at 56, 87. However, “[t]o prove [trade usage], a party must usually cal l on an expert.” 1 WHITE & S UMMERS § 3-3, at 124. A trade code, by itself, is insuff icient to show the required regularity of observance and expectation of use within the industry. Id. at n.50. Seatex also offered the affidavit of one of its vic e presidents, rec., vol. I at 54, and the affidavit of Seatex’s agent, Mr. Goebel, id. at 145. Attestations offered by Seatex employees that arbitration is the trade prac tice are insufficient to prove trade usage. H & W Indus., Inc. v. Occidental Chem . Corp. , 911 F.2d 1118, 1122 (5th Cir. 1990). To establish trade usage, more is required than “‘[ a] vague, unspecific reference . . . to the effect that “in the textile industry arbitration is the usual accepted method of resolving disputes.”’” Diskin v . J.P. Stevens & Co., Inc. , 836 F.2d 47, 51-52 (1st Cir. 1987) (quoting Jones Appar el Group , 426 N.Y.S.2d at 740). Moreover, even if the proof offered by Seate x had been sufficient to show a general textile industry practice of arbitration, aquestion of fact would remain as to whether an apparel merchant like Twist is subject t o the trade usage of the textile industry, whether Twist’s reliance on the advice an d guidance of Goebel defeats the -14- of arbitration as trade usage may in some limited c ircumstances make a sufficient showing to alter this result, 15 application of New York law in the absence of suchapplication of trade usage, or whether the terms of this arbitration clause are consistent with trade usage. -15- a showing presumptively requires the conclusion that arbitration is a material alteration and thus would not become part of the Tw ist/Seatex contract.

B. One-Year Limitations Period There is another potentially significant difference between Colorado and New York law. The arbitration clause at issue in t his case not only requires arbitration, but also requires it to be instituted within one year. New York has adopted the general UCC provision permitting partie s to contractually agree to alter the limitations period to a minimum of one ye ar. N.Y. U.C.C. L AW§ 2- 725(1) (McKinney 1997). It is thus possible New Yo rk would conclude that unilateral inclusion of such a one-year limitations period as an additional term in an otherwise valid agreement to arbitrate would notconstitute a material alteration; such a reduction in limitations periods might reasonably be expected whenever a party contracts in New York. Cf. Shur-Value Stamps, Inc. v. Phillips Petroleum Co. , 50 F.3d 592, 599 (8th Cir. 1995) (concluding a on e-year limitations period inserted as an additional term i n a confirmation form is deemed by the legislature to be reasonable and customary a nd does not impose surprise and hardship within the meaning of section 2-207 if the limitations period is16 Under the Colorado UCC, an “‘[a]ction’ in the sense of a judicial

proceeding includes recoupment, counterclaim, setof f, suit in equity, and any other proceedings in which rights are determined.” C OLO
. REV
. S TAT
. ANN . § 4- 1-201(1) (Bradford Pub. Co. 1992). -16- permitted by state law). Colorado, on the other hand, has not adopted the ge neral UCC provision permitting parties to contractually reduce their li mitations period. C OLO
. REV
. S TAT
. ANN . § 4-2-725 (Bradford Pub. Co. 1992). In Colorado, the state limitation period for “[a]n action for breach of any contract for sale . . . may not be varied by agreement of the parties.” Id. § 4-2-725(1). Parties in Colorado would not expect that limitations periods would be reduced be low the statutory minimum. Although arbitration is arguably not an “action” 16 to which Colorado’s prohibition against variations in limitations periods applies, id. , the prohibition does not have to be enforceable against arbitration clauses to “s urprise” Twist as a party contracting under Colorado law. If Colorado law ap plies, it is likely the limitations period would be excluded from the Twist/Seatex contract as a material alteration under section 2-207(2)(b).

C. Preemption To obviate the potentially substantial impact of st ate law on the determination of whether the parties agreed to arbi trate, Seatex argues that New-17-

York law would be inapplicable in any event because the FAA preempts its application. Seatex Br. at 21. In particular, Sea tex contends the New York rule on arbitration always prohibits inclusion of arbitr ation clauses under section 2- 207 and therefore constitutes treatment of arbitrat ion terms different from that accorded to other contract terms. The application of a rule to prohibit formation of agreements to arbitrate contravenes the FAA. 9 U.S.C. § 2 (Written contracts to arbitrate “shall be valid, irrevocable, and enfo rceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”); see Perry v. Thomas , 482 U.S. 483, 492 n.9 (1987) (“A state-law princi ple that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with th[e] requirement[s] of § 2” of the FA A and is therefore preempted.). However, we conclude as has at least one other circ uit that the FAA does not preempt New York’s interpretation of section 2- 207(2)(b) to determine whether arbitration materially alters a contract. See Supak & Sons Mfr. Co. v. Pervel Indus., Inc. , 593 F.2d 135, 137 (4th Cir. 1979) (rejecting FAA preemption of state law where law of either North Carolina or New York demands conclusion that arbitration term is a material alteration unde r section 2-207(2)(b) which cannot become part of a contract by inclusion in a confirmation form without express assent of the contracting parties); cf. Eassa Properties v. Shearson17 Without addressing FAA preemption, the First Circui t applied New York

UCC law in analyzing parties’ agreement to arbitrat e. See Diskin , 836 F.2d at 50- 52 (arbitration does not become part of contract un der New York law unless expressly assented to, and custom of textile trade to resolve disputes through arbitration cannot substitute for the required spec ific assent to arbitration). Similarly, the Third Circuit accepted the parties’ concession that arbitration was a material term for purposes of section 2-207 analysi s without analyzing FAA preemption. See Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., L td. , 636 F.2d 51, 53 n.6 (3d Cir. 1980). -18- Lehman Bros., Inc. , 851 F.2d 1301, 1304 n.7 (11th Cir. 1988) (FAA doe s not preempt Uniform Partnership Act because “state law governs the question of whether . . . an agreement [to arbitrate] exists in the first instance”). 17 In enacting the FAA, “‘Congress intended to foreclo se state legislative attempts to undercut the enforceability of arbitrat ion agreements.’” Perry , 482 U.S. at 489 (quoting Southland Corp. v. Keating , 465 U.S. 1, 16 (1984)). There is a “clear federal policy of requiring arbitration un less the agreement to arbitrate is not part of a contract evidencing interstate commer ce or is revocable ‘upon such grounds as exist at law or in equity for the revocation of any contract.’” Id. (quoting 9 U.S.C. § 2). But the FAA was not enacted to force parties to arb itrate in the absence of an agreement. Congress’ concern “‘was to enforce p rivate agreements into which parties had entered.’” Id. at 490 (quoting Dean Witter Reynolds Inc. v. Byrd , 470 U.S. 213, 221 (1985)). The existence of an agreeme nt to arbitrate is a threshold matter which must be established before the FAA can be invoked. First Options ,-19-

115 S. Ct. at 1924 (“[A]rbitration is simply a matt er of contract between the parties; it is a way to resolve those disputes--butonly those disputes--that the parties have agreed to submit to arbitration.”). W e look to state law principles of contract formation to tell us whether an agreement to arbitrate has been reached. Perry , 482 U.S. at 492 n.9 (“[S]tate law, whether of leg islative or judicial origin, is applicable if that law arose to govern issues co ncerning the validity, revocability, and enforceability of contracts gener ally.”); Schulze and Burch Biscuit Co. v. Tree Top, Inc. , 831 F.2d 709, 715 (7th Cir. 1987) (applying Illin ois state law to determine whether arbitration as addit ional term is a material alteration); Coastal Indus. , 654 F.2d at 377-78 & n.2 (5th Cir. 1981) (holding whether arbitration clause became part of contract is question of state law). Invoking the FAA, some courts have declined to appl y any specific state’s laws of contract formation, like section 2-207, to arbitration clauses. See Genesco, Inc. v. T. Kakiuchi & Co. , 815 F.2d 840, 845 (2d Cir. 1987) (holding the FAA creates federal substantive law, and statin g “whether [a party] is bound by [an] arbitration clause of [a] sales confirmatio n form[] is determined under federal law, which comprises generally accepted pri nciples of contract law”); Hart Ski Mfg. Co. v. Maschinenfabrik Hennecke , 711 F.2d 845, 846 (8th Cir. 1983) (federal law governs whether parties have agreed to arbitrate). We are not persuaded FAA preemption reaches so broadly.-20-

In applying state law, “[a] court may not . . . con strue [an arbitration] agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law.” Perry , 482 U.S. at 492 n.9. However, it is only when “[a] state-law principle . . . takes its meaning precisely from the fact that a contract to arbitrate is at is sue” that the state law will be preempted by the FAA. Id. Section 2-207 is a general principle of state law controlling issues of contract formation. As a gen eral rule, section 2-207 proscribes binding parties to any important non-neg otiated terms of contract. Presumptions against including terms, such as the N ew York rule, are routinely applied to any term considered significant to the c ontracting parties. U.C.C. § 2- 207 cmt. 4 (1994) (warranties of merchantability orfitness are material alterations under 2-207(2)(b)). Section 2-207 does nothing und er its general, or its specific New York application, to restrict enforcement of ag reements to arbitrate to which the parties have expressly assented. Supak , 593 F.2d at 137. Such a general rule of contract law is not an impermissible “state stat ute[] [or] decision[] which limit[s] arbitration agreements with rules not appl icable to other contracts.” Medical Dev. Corp. v. Industrial Molding Corp. , 479 F.2d 345, 348 (10th Cir. 1973). There is a world of difference between a state law rule that requires special preconditions for enforcement of arbitration clause s not required for any other-21-

term of contract (which would be preempted by the F AA), see, e.g. , Doctor’s Assocs., Inc. v. Casarotto , 116 S. Ct. 1652, 1657 (1996) (FAA preempts a Montana state statute prohibiting enforcement of ar bitration agreements which fail to include a special notice provision not requ ired for any other terms of contract.); Perry , 482 U.S. at 490, 492 (holding preempted a Califor nia Labor Code provision permitting an action at law to be ma intained despite existence of parties’ agreement to arbitrate), and a rule of law that prohibits enforcement of any important term of contract without the express agreement of the parties and then concludes that arbitration is among the group of terms considered important enough to require such express assent, Saturn Distr ibution Corp. v. Williams , 905 F.2d 719, 723 (4th Cir. 1990) (state law which proh ibits formation of nonnegotiable agreement compelling arbitration is p reempted by the FAA, whereas section 2-207 as a general rule of contractformation is not). Accordingly, we conclude that state law principles of Colorado or New York can, at a minimum, impact the interpretation o f both the materiality of the arbitration clause itself and also the terms contai ned within that clause. Those varying interpretations are not preempted by the FA A. The district court should have begun its analysis with a choice of law determ ination. Its failure to do so affected all of the court’s subsequent determinatio ns regarding the arbitration term. We therefore reverse and remand for the dist rict court to make the choice18 It would be inappropriate to resolve this choice of law issue by simply applying the choice of law clause Seatex inserted a s an additional term in its sales confirmation form. Rec., vol. I at 100 (clause 9 o f the confirmation form). The choice of law provision may itself constitute a mat erial alteration, particularly if the choice of state law is determinative of whetherother terms become part of the contract. Compare Coastal Indus., Inc. v. Automatic Steam Prods. Corp., 654 F.2d 375, 378-79 (5th Cir. 1981) (applying choice o f law provision inserted as additional term in sales confirmation form when its application is immaterial to analysis of the contract), with Galaxy Int’l, Inc. v. White Stores, Inc. , 88 F.R.D. 311, 320-21 (W.D. Pa. 1980) (under Pennsylvania law , choice of law term added as additional term is a material alteration).

-22- of law determination. E.g. , Rocky Mtn. Helicopters, Inc. v. Bell Helicopter Textron, Inc. , 24 F.3d 125, 127 (10th Cir. 1994). 18

III.

We REVERSE the district court’s stay of litigation and remand this case for a choice of law determination and for further p roceedings consistent with this opinion. Because we reverse the district court’s s tay pending arbitration, we do not reach the questions of whether arbitration beca me part of the Twist/Seatex contract as a matter of law or whether the districtcourt properly granted summary judgment to Seatex for Twist’s failure to timely ar bitrate. We leave those issues to the district court on remand.