Court Opinion

ID: 62078
Source: CourtListenerOpinion
Date Created: 2010-04-26 04:23:27+00
Date Added: 2024-06-11T14:57:51.192034
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                   Fifth Circuit

                                                                            FILED
                                                                            June 2, 2008

                                       No. 07-40277                   Charles R. Fulbruge III
                                                                              Clerk

RETRACTABLE TECHNOLOGIES INCORPORATED

                                                  Plaintiff - Appellee
v.

ABBOTT LABORATORIES INC

                                                  Defendant - Appellant

                   Appeal from the United States District Court
                         for the Eastern District of Texas
                                   5:05-CV-157

Before JOLLY, BARKSDALE, and BENAVIDES, Circuit Judges.
PER CURIAM:*
       After reviewing the briefs, hearing arguments, further study of the briefs
and the record, we AFFIRM the judgment of the district court that, under the
contract between the parties in this case, arbitration of the dispute at issue is
not mandatory.        Although the district court held that the contract was
ambiguous and admitted parol evidence to reach its ultimate conclusion, we hold
that the contract unambiguously makes arbitration permissive rather than
mandatory. Accordingly, the judgment of the district court is AFFIRMED.

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
                                  No. 07-40277

      Our affirmance is based on a matter of straightforward contract
interpretation. The contract at issue requires that any dispute between the
parties “shall” first be presented to the presidents of the respective parties, or
their designees. If the parties fail to resolve the dispute on this level, the
contract provides that the dispute “may” be resolved by arbitration “in the
manner described” by an attached document, Exhibit 12.2. This reference in the
contract to arbitration and to the an attached exhibit relates to the dispute itself
and gives no right to any party to demand or “initiate” arbitration. Instead, the
contractual provision referencing the exhibit allows arbitration only by mutual
agreement, that is, it takes both parties to agree to arbitration. By the use of the
word “may,” the parties preserved other options to resolve disputes, including
litigation. When, however, the parties mutually agree to arbitration, as is
permitted by the contract and its use of the word “may,” Exhibit 12.2 becomes
applicable. Nothing in Exhibit 12.2 changes the permissive language of the
contract provision. Exhibit 12.2 is only denominated “Alternative Dispute
Resolution”; it is not denominated an “Agreement to Arbitrate” nor does it
contain any suggestion, by word or words, that indicates that arbitration is
mandatory absent mutual agreement. Exhibit 12.2 basically provides a lengthy
list of arbitration procedures and the rights of the parties along with a prefatory
statement that either party, after preliminary discussions have failed, “may”
initiate arbitration. Thus, Exhibit 12.2 vests an individual right in each party
to initiate the process, once mutually agreed to.
      Given the structure outlined above, it is evident that the contract does not
mandate the parties to resolve their disputes by arbitration; there is no
agreement reflected anywhere in the contract to submit disputes to binding
arbitration. The section of the contract itself discussing dispute resolution
clearly indicates that arbitration is only a permissive manner to resolve disputes
because the parties “may” rather than “shall” have their disputes resolved by

                                         2
                                   No. 07-40277

this procedure. And Exhibit 12.2 is a subordinate section that only outlines the
procedural requirements of arbitration once the parties mutually agree to
arbitrate the dispute. The statement in Exhibit 12.2 that either party may
initiate arbitration refers to the right of each party, when, by mutual agreement,
the procedures are invoked.
      To the extent that one may attempt to argue that the respective
arbitration provisions create an ambiguity, our interpretation of the contractual
intent is fortified by extrinsic evidence clearly indicating that the parties’ intent
behind the wording was to make arbitration non-mandatory.
      Accordingly, the judgment of the district court is AFFIRMED.

                                         3
                                   No. 07-40277

RHESA HAWKINS BARKSDALE, Circuit Judge, dissenting:
      Consistent with the structure outlined by the esteemed majority, it is
evident the contract mandates the parties to resolve their disputes by
arbitration. Accordingly, I must respectfully dissent.
      As correctly summarized by my BROTHERS, the contractual provision
states:   any dispute “shall” be presented to the other party for amicable
resolution; but, if the parties cannot resolve the dispute, then it “may be resolved
by [arbitration] in the manner described in Exhibit 12.2”. (Emphasis added.)
Exhibit 12.2, entitled “Alternative Dispute Resolution”, provides: if a dispute
cannot be resolved by the parties, then “either party may initiate an [arbitration]
proceeding as provided herein”. (Emphasis added.) The balance of the exhibit
is the arbitration procedure.
      In sum, the contract requires the parties to attempt to resolve a dispute
amicably; if they cannot, either party “may” initiate arbitration. “May” is
defined by Black’s Law Dictionary as “1. To be permitted to”, “2. To be a
possibility”, and “3. Loosely, is required to; shall; must . . . . In dozens of cases,
courts have held may to be synonymous with shall or must”. Black’s Law
Dictionary (8th ed. 2004). Therefore, both parties unambiguously gave their
permission for the other to initiate arbitration if that party so desires; only if
neither party desires arbitration can litigation take place. See, e.g., Deaton
Truck Line, Inc. v. Local Union 612, 314 F.2d 418, 421-22 (5th Cir. 1962)
(holding contract using “may” clearly gave either party the right to compel
arbitration).
      And, even if the clause is ambiguous and extrinsic evidence should be
considered, the extrinsic evidence does not clearly indicate both parties’ intent
was to require mutual consent for arbitration of a dispute. This is reflected by
Plaintiff’s general counsel’s drafting, but not proposing, “may with mutual
consent” language.