Opinion ID: 1436064
Heading Depth: 1
Heading Rank: 11

Heading: The Express and Unequivocal Standard

Text: A second issue that we address is the standard applied to determine whether there is an agreement to arbitrate. Century asserts that we have required arbitration agreements to be express and unequivocal before compelling arbitration, this standard has prevailed for decades, Appellant's opening br. at 21, and the purported agreement here is unenforceable because it fails to meet that standard. See Kaplan v. First Options, 19 F.3d 1503, 1512 (3d Cir.1994) (stating the rule that an arbitration agreement must be `express' and `unequivocal') (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir.1980)), aff'd on other grounds, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). [10] In Par-Knit Mills, we considered whether a distributor could compel a manufacturer to arbitrate their dispute over a series of oral sales contracts pursuant to a related, written sales contract's arbitration clause signed by one of the manufacturer's production managers. The manufacturer denied ever agreeing to arbitrate, claiming, instead, that its production manager had signed the contracts intending to confirm the goods' delivery dates but not to obligate the corporation to the written contracts' various terms, including the arbitration clause. Par-Knit Mills, 636 F.2d at 53. The manufacturer supported this claim with an affidavit. Id. We held that the district court erred in compelling arbitration because the manufacturer's unequivocal denial that it had agreed to arbitrate, accompanied by a supporting affidavit, created a genuine issue of fact requiring a jury determination of whether there in fact had been a meeting of the minds resulting in the formation of an agreement to arbitrate. Id. at 54-55. We explained that the genuine issue of fact as to the parties' intent prevented the court from finding, as a matter of law, that the parties had formed an agreement to arbitrate, and therefore also prevented the court from compelling arbitration on that basis: Before a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be an express, unequivocal agreement to that effect. If there is doubt as to whether such an agreement exists, the matter, upon a proper and timely demand, should be submitted to a jury. Only when there is no genuine issue of fact concerning the formation of the agreement should the court decide as a matter of law that the parties did or did not enter into such an agreement. The district court, when considering a motion to compel arbitration which is opposed on the ground that no agreement to arbitrate had been made between the parties, should give to the opposing party the benefit of all reasonable doubts and inferences that may arise. Par-Knit Mills, 636 F.2d at 54 (citations and footnotes omitted). In Par-Knit Mills, there was a genuine issue of fact as to whether the production manager was authorized to execute agreements to arbitrate on behalf of the corporation, and so the court, upon the manufacturer's proper and timely demand, was required to submit the question of the agreement's existence to a jury. Id. at 54-55. As we noted, this is the familiar summary judgment standard, see Fed.R.Civ.P. 56(c), and it applies in cases such as Par-Knit Mills because the district court's order compelling arbitration is in effect a summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate. Par-Knit Mills, 636 F.2d at 54 n. 9; see 9 U.S.C. § 4 (district court should not order arbitration unless it is satisfied that the making of arbitration agreement . . . is not in issue). [11] Following Par-Knit Mills, we have referred to the requirement that an agreement be express and unequivocal before a court may compel a party to arbitrate in the context of emphasizing that a genuine issue of fact regarding the arbitration agreement's existencesuch as where the contract language is ambiguous or where one party claims that it never received the terms of an agreement, that the agreement was forged, or that the agreement was signed by a person lacking authority to execute the contractprevents a district court from summarily compelling arbitration. [12] E.g., Kirleis, 560 F.3d at 159 (citing Par-Knit Mills ); Standard Bent Glass, 333 F.3d at 446 (Arbitration clauses must be clear and unequivocal. Genuine issues of fact will preclude an order to arbitrate.); cf. Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159, 163-64 (3d Cir.2001) (discussing determination of a contract's ambiguity). Our cases, however, seem inconsistent in this respect: we sometimes have regarded Par-Knit Mills' express and unequivocal language as stating a substantive standard required of arbitration agreements to be enforceable, seemingly without regard to the procedural posture of the case. In particular, in First Options, 19 F.3d at 1512, we stated that no party can be compelled to arbitrate unless that party has entered into an agreement to do so, and we relied on Par-Knit Mills in stating that [t]hat agreement must be `express' and `unequivocal.' First Options, 19 F.3d at 1512 (quoting Par-Knit Mills ). Notably, this statement can be read to treat the express and unequivocal standard as a substantive requirement that a purported arbitration agreement must meet before a party may be compelled to submit a dispute to arbitration regardless of whether there is a disputed issue of fact as to the agreement's existence. Some of our cases have relied on this view of Par-Knit Mills ' express and unequivocal language as a substantive requirement to explain how parties may be bound by arbitration agreements, even if they are not signatories to those particular agreements: [t]he identification of the parties bound by the agreement to arbitrate need not be confined to the limited inquiry of identifying the signatories to the arbitration agreement. Rather, the dispositive finding is an `express' and `unequivocal' agreement between parties to arbitrate their disputes. In re Prudential Ins. Co., 133 F.3d 225, 229 (3d Cir.1998) (internal quotation marks partially omitted) (quoting First Options, 19 F.3d at 1512). See also First Liberty Inv. Group v. Nicholsberg, 145 F.3d 647, 650 (3d Cir.1998) (quoting the above from In re Prudential, 133 F.3d at 229); cf. Allstate Settlement Corp. v. Rapid Settlements Ltd., 559 F.3d 164, 170 (3d Cir.2009) (citing Trippe, 401 F.3d at 532) (discussing theories under which arbitration agreement may bind nonsignatory). We therefore have used the express and unequivocal language in two different ways when considering whether there is an agreement to arbitrate. On the one hand, we have stated the express and unequivocal requirement to explain that genuine issues of fact as to whether there is an agreement to arbitrate preclude compelling a party to submit to arbitration; [13] on the other, we have used this language to state a substantive standard that applies to the determination of an arbitration agreement's enforceability as a general matter. Turning to the facts at hand, application of the express and unequivocal standard cannot be in issue in this case because there is no genuine issue of fact concerning the formation of the agreementCentury and Lloyd's instead dispute the legal effect of the uncontested contractual languageand thus if the express and unequivocal requirement can be in issue here it only can be if that standard is a substantive requisite for an enforceable arbitration agreement. See Appellant's opening br. at 15; Appellee's br. at 16. In view of the absence of a dispute of facts, this case involves contract construction and therefore requires a legal determination. We reiterate that there is not a disputed issue of fact here as Century does not make an assertion such as that the retrocessional agreements were forged, the signatory lacked authority to bind Century, or the actual words of the contracts are ambiguous. [14] Thus, it is not surprising that Century does not seek a jury trial to determine the parties' intent with respect to the obligation to arbitrate and does not ask us to remand for that purpose. Inasmuch as this case involves contract construction, i.e., determining the legal effect of the retrocessional agreements' incorporation-by-reference language, we reiterate that the express and unequivocal standard we recognized in Par-Knit Mills is inapposite here to the extent that the standard requires that there not be a genuine issue of material fact as to an arbitration agreement's existence before a district court may determine whether the agreement exists as a matter of law and then, if it does, to compel arbitration based on the agreement. Century nevertheless presses the express and unequivocal language as a substantive standard. Accordingly, Century relies on the rule that we stated in First Options, 19 F.3d at 1512. E.g., Appellant's opening br. at 21 (The written agreement to arbitrate must be `express' and `unequivocal.') (quoting First Options, 19 F.3d at 1512). But there are two problems with this position. First, the Supreme Court implicitly may have rejected the express and unequivocal standard as a substantive rule. Upon reviewing our opinion in First Options, after granting certiorari as to two issues presented in our Court, the Supreme Court affirmed but did so without approving a substantive express and unequivocal standard. Instead, the Supreme Court set forth the following guidelines with regard to determining whether there is an arbitration agreement between the parties: When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally (though with a qualification we discuss below) should apply ordinary state-law principles that govern the formation of contracts. The relevant state law here, for example, would require the court to see whether the parties objectively revealed an intent to submit the arbitrability issue to arbitration. First Options, 514 U.S. at 944, 115 S.Ct. at 1924 (internal citations omitted); cf. First Options, 19 F.3d at 1512 (quoting Par-Knit Mills for the rule that to be valid an arbitration agreement must be `express' and `unequivocal'). The qualification that the Supreme Court mentioned relates to the question of who has the primary power to decide the question of arbitrability, an issue not presented in the dispute between Century and Lloyd's. First Options, 514 U.S. at 944-45, 115 S.Ct. at 1925-26; see id. at 942, 115 S.Ct. at 1923 (distinguishing between disagreements over (1) a dispute's merits, (2) the arbitrability of the dispute, and (3) who should have the primary power to decide the arbitrability of the dispute). But a study of the two opinions suggests that the Supreme Court, far from adopting the substantive requirement that arbitration provisions must be express and unequivocal to be valid, in fact rejected it. See First Options, 514 U.S. at 944, 115 S.Ct. at 1924; Blair, 283 F.3d at 603 (citing First Options, 514 U.S. at 944, 115 S.Ct. at 1924) (A federal court must generally look to the relevant state law on the formation of contracts to determine whether there is a valid agreement to arbitrate under the FAA.); Kirleis, 560 F.3d at 160 (citing First Options, 514 U.S. at 944, 115 S.Ct. at 1924, and Blair, 283 F.3d at 603). And there is a second problem with Century's position. Even if the Supreme Court in First Options did not reject the express and unequivocal standard outright to the extent that it is substantive i.e., the burden of persuasion applied to whether arbitration agreements exist generally, rather than the summary judgment standard applied in the arbitration contextthe applicable statutory language and other Supreme Court precedent preclude us from requiring arbitration agreements to be express and unequivocal in order to be enforced. Section 2 of the FAA declares that written arbitration agreements shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2 (emphasis added). It is therefore not surprising that the Supreme Court has explained that threshold limitations placed specifically and solely on arbitration provisions are antithetical to the goals and policies of the FAA. Doctor's Assocs., 517 U.S. at 687-88, 116 S.Ct. at 1656; see Gay, 511 F.3d at 394. It thus follows that requiring arbitration clauses to meet more exacting standards than those imposed by the applicable state-law principles on contracts generally would offend Congress's purpose in enacting the FAA: to put arbitration provisions upon the same footing as other contracts. Doctor's Assocs., 517 U.S. at 687, 116 S.Ct. at 1656 (citing Scherk, 417 U.S. at 511, 94 S.Ct. at 2453 (internal quotation marks omitted) (stating that FAA's purpose is to revers[e] centuries of judicial hostility to arbitration agreements)); Perry, 482 U.S. at 492 n. 9, 107 S.Ct. at 2527 n. 9; cf. Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 46 (2d Cir. 1993) (holding that FAA preempted state law requiring that there be an express, unequivocal agreement to arbitrate before parties would be compelled to arbitrate disputea higher standard than that which applied to contracts generallybecause [a] court may not, in assessing the rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law). A substantive express and unequivocal standard impermissibly would require more of arbitration agreements than of contracts generally to be enforced whenever the standard differed from the applicable state-law principles of contract law. See Progressive Cas., 991 F.2d at 46. Of course, application of the standard in practice always or almost always would differ from ordinary state-law contract principles, as courts enforce contracts that are something less than express and unequivocal. Indeed, sometimes courts enforce contracts that rather than being express and unequivocal simply are implied in law. [15] In sum, when determining whether there is a valid agreement to arbitrate between the parties, the first part of the two-step inquiry, we apply ordinary state-law principles of contract law. First Options, 514 U.S. at 944, 115 S.Ct. at 1924. Because the FAA requires us to place arbitration agreements on an equal footing with other contracts when determining whether the parties have agreed to arbitrate, we cannot subject a purported arbitration agreement otherwise within the scope of the FAA and satisfying its requirements to a standard more demanding than that which we would apply to other agreements under the applicable state law. To be sure, genuine issues of fact preclude summary judgment when determining whether there is an agreement to arbitrate, just as they do when determining the existence of any other contract. See Fed.R.Civ.P. 56(c). But the FAA and Supreme Court precedent forbid us from placing more stringent requirements on arbitration agreements otherwise satisfying the criteria of the FAA than on other contracts, such as a substantive requirement that an arbitration agreement be express and unequivocal to be enforceable, rather than the standard that applies to contracts generally. [16]