Court Opinion

ID: 620116
Source: CourtListenerOpinion
Date Created: 2012-01-03 17:25:41+00
Date Added: 2024-06-11T17:50:50.980908
License: Public Domain

FILED
                                                             United States Court of Appeals
                                                                     Tenth Circuit

                                                                   January 3, 2012
                     UNITED STATES COURT OF APPEALS
                                                  Elisabeth A. Shumaker
                                                                     Clerk of Court
                            FOR THE TENTH CIRCUIT

    EEC, INC., an Oklahoma corporation,

                Plaintiff-Appellee,

    v.                                                   No. 11-6121
                                                  (D.C. No. 5:10-CV-00873-L)
    BAKER HUGHES OILFIELD                                (W.D. Okla.)
    OPERATIONS, INC., a California
    corporation,

                Defendant-Appellant.

                             ORDER AND JUDGMENT *

Before KELLY, Circuit Judge, PORFILIO, Senior Circuit Judge, and
MATHESON, Circuit Judge.

         Defendant Baker Hughes Inteq, Inc. (Baker) 1 appeals the district court’s

order denying its motion to compel arbitration. We have jurisdiction under

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
     Appellant stated in its Notice of Appeal that its correct name is Baker
Hughes Oilfield Operations, Inc.
9 U.S.C. § 16(a)(1)(C). We reverse and remand for entry of an order to compel

arbitration.

                                I. BACKGROUND

      EEC, Inc. (EEC) and Baker agreed in June 2009 for Baker to provide

drilling equipment for use in EEC’s horizontal oil and natural gas well in Payne

County, Oklahoma. The equipment was lost in the well. EEC filed suit in

Oklahoma state court alleging that Baker’s negligence damaged its well. Baker

removed the case to federal court, invoking diversity jurisdiction, and filed

counterclaims for the value of its equipment. Baker also sought to compel

arbitration.

      Several documents are relevant to the dispute. The AziTrak Offer spelled

out the terms of EEC’s use of Baker’s equipment and included an arbitration

clause. In addition, Baker prepared and EEC signed numerous Delivery Tickets,

each of which contained an arbitration clause that differed somewhat from the

arbitration clause contained in the AziTrak Offer. 2

      The district court found that the arbitration clauses were illusory because

they permitted Baker unilaterally to selectively enforce the terms, including the

scope of arbitration, and that the conflicting language in the AziTrak Offer and

the Delivery Tickets presented an ambiguity. Consequently, the court ruled that

2
      There were numerous Delivery Tickets issued in connection with the
transaction, each of which contained identical provisions.

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the arbitration clauses were unenforceable. The court also denied Baker’s motion

to reconsider. Further, the court enjoined Baker from proceeding with arbitration,

and stayed further district court proceedings pending appeal of its orders.

      Baker appeals both the judgment and the order denying its motion to

reconsider, asserting that the district court erred in holding that the arbitration

clauses were illusory. Baker also claims that the district court erred in

considering both the AziTrak Offer and the Delivery Tickets. EEC responds that

it never accepted the AziTrak Offer, any contracts between the parties are

ambiguous and illusory, and the differences between the arbitration clauses in the

AziTrak Offer and the Delivery Tickets render both unenforceable.

                             II. LEGAL STANDARDS

      The Federal Arbitration Act embodies the national policy favoring

arbitration. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)

(citing 9 U.S.C. §§ 1-16). “Although the [Supreme] Court has . . . long

recognized and enforced a liberal federal policy favoring arbitration

agreements, . . . the question of arbitrability[] is an issue for judicial

determination [u]nless the parties clearly and unmistakably provide otherwise.”

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (citation omitted)

(internal quotation marks omitted). “[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.” Id. (internal quotation marks omitted). “When deciding

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whether the parties agreed to arbitrate a certain matter (including arbitrability),

courts generally . . . should apply ordinary state-law principles that govern the

formation of contracts.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,

944 (1995); accord Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470, 475

(10th Cir. 2006) (“Generally, courts should apply ordinary state-law principles

that govern the formation of contracts to determine whether a party has agreed to

arbitrate a dispute.” (internal quotation marks omitted)). We review de novo the

district court’s order denying a motion to compel arbitration. Cummings v. Fedex

Ground Package Sys., Inc., 404 F.3d 1258, 1261 (10th Cir. 2005).

                                 III. DISCUSSION

      EEC argues that the arbitration agreements are illusory and unenforceable

because (1) it never agreed to the AziTrak Offer except as to price, (2) Baker

reserved to itself the right to alter the contracts at will and in fact attempted to

modify the arbitration agreement, and (3) there are differences between the

arbitration clauses in the AziTrak Offer and the Delivery Tickets. Baker contends

that (1) by “calling out” its equipment, EEC agreed to the terms of the AziTrak

Offer, (2) both the AziTrak Offer and the Delivery Tickets provide for

modification only upon the written consent of both parties, and (3) both

documents require arbitration.

                                          -4-
                         A. EEC Accepted the AziTrak Offer

      EEC does not challenge Baker’s assertions that the cover letter for the

AziTrak Offer states: “your calling out our products/services will constitute your

acceptance of all terms and conditions set forth in this quotation,” Aplt.

App. at 79, or that EEC called out Baker’s equipment. “Oklahoma follows

traditional contract principles in permitting acceptance of an offer by

performance: ‘Performance of the conditions of a proposal, or the acceptance of

the consideration offered with a proposal, is an acceptance of the proposal.’”

Hardin, 465 F.3d at 476 (quoting Okla. Stat. tit. 15, § 70). Accordingly, we

conclude that by calling out Baker’s equipment, EEC accepted the terms of the

AziTrak Offer.

                      B. Arbitration Clauses Are Not Illusory

      The district court determined that the arbitration clauses in the AziTrak

Offer and the Delivery Tickets were illusory because they “contain[ed] different

and often contradictory terms regarding the scope of arbitration and whether the

terms may be amended unilaterally or by agreement,” thus allowing Baker to vary

them at will. Aplt. App. at 161-62. See Dumais v. Am. Golf Corp., 299 F.3d

1216, 1219 (10th Cir. 2002) (holding “that an arbitration agreement allowing one

party the unfettered right to alter the arbitration agreement’s existence or its

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scope is illusory”). 3 Both arbitration clauses, however, contain virtually identical

language providing for a broad scope of arbitration and a limitation on

amendment.

      The AziTrak Offer’s arbitration clause provided:

      ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH
      THIS AGREEMENT . . . SHALL BE RESOLVED BY FINAL AND
      BINDING ARBITRATION, AS THE SOLE AND EXCLUSIVE
      REMEDY OF THE PARTIES TO THE DISPUTE, CONDUCTED IN
      ACCORDANCE WITH THE COMMERCIAL RULES OF
      ARBITRATION OF THE AMERICA[N] ARBITRATION
      ASSOCIATION (THE “RULES”), WHICH ARE DEEMED TO BE
      INCORPORATED BY REFERENCE.

Aplt. App. at 97. In addition, the AziTrak Offer stated that it “may only be

amended by an agreement executed by both parties.” Id.

      Similarly, the Delivery Tickets provided for arbitration as follows:

      Any Dispute arising out of or in connection with this Agreement . . .
      shall be referred to and determined by binding arbitration, as the sole
      and exclusive remedy of the parties as to the Dispute, conducted in
      accordance with American Arbitration Association (“AAA”)

3
       For its argument that the arbitration clauses are illusory, EEC also invokes
a 2003 Customer Agreement prepared by Baker and signed by EEC. The
document states that its purpose is to obtain credit information from the applicant.
It further provides that the applicant agrees to be bound by any of Baker’s terms
and conditions which may appear on any document, regardless of whether EEC
signed it. We reject EEC’s claim that this language bears upon the current
dispute. The subsequent, job-specific 2009 AziTrak Offer and Delivery Tickets
supersede and control over the 2003 Customer Agreement. Cf. DeHart v.
Independent School Dist. No. 1, 259 P.3d 877, 882 (Okla. Civ. App.) (holding
subsequent contract covering the same terms as an earlier contract superseded and
rescinded the earlier contract), cert. denied, (May 19, 2011).

                                         -6-
      arbitration rules for commercial disputes, as in effect on the date
      hereof (the “Rules”), which are deemed to be incorporated by
      reference, and the Federal Arbitration Act (Title 9 of the United
      States Code) . . . .

Id. at 109. As with the AziTrak Offer, the Delivery Tickets included the

provision: “This Agreement . . . may only be amended by an agreement executed

by both parties.” Id.

      In the district court Baker relied on the arbitration clauses in both the

AziTrak Offer and the Delivery Tickets. On appeal, however, Baker relies on the

AziTrak Offer alone to compel arbitration. As such, EEC asserts that this

demonstrates Baker’s attempt to “unilaterally defin[e] . . . and selectively

enforc[e] the terms governing the parties’ relationship.” Aplee. Br. at 15

(emphasis omitted).

      The court is not bound by a party’s characterization of its claims. See

Union Pac. R.R. Co. v. United States ex rel. U.S. Army Corps of Eng’rs, 591 F.3d

1311, 1314 (10th Cir. 2010) (holding court is not bound by party’s

characterization of claim) (collecting cases). Moreover, under Oklahoma law,

“[t]he contract must be construed to carry out the intent of the parties at the time

the contract was made. . . . In the search for the parties intent, several contracts

relating to the same matters, between the same parties, and made as parts of

substantially one transaction, are to be taken together.” High Sierra Energy, L.P.

v. Hull, 241 P.3d 1139, 1143 (Okla. Civ. App. 2010) (citation omitted) (internal

                                          -7-
quotation marks and brackets omitted). Consequently, it is proper to consider

both the AziTrak Offer and the Delivery Tickets.

      Both the Azitrak Offer and the Delivery Tickets provide that any changes

must be agreed to by both parties. Therefore, Baker did not retain the unfettered

right to alter or cancel the arbitration clauses unilaterally. “[U]nder Oklahoma

law[,] an arbitration agreement allowing a defendant company the unilateral right

to modify or terminate the agreement is not illusory so long as reasonable

restrictions are placed on this right.” Hardin, 465 F.3d at 479. The requirement

that both parties agree to any amendment is “sufficient to avoid rendering the

parties’ [a]greement[s] to arbitrate illusory.” Id. at 478.

                  C. The Arbitration Clauses Are Not Ambiguous

      EEC also contends that the Delivery Tickets created an ambiguity

demonstrating Baker’s ability to change the terms unilaterally. EEC contends that

three clauses in the Delivery Tickets, other than the arbitration clause,

demonstrate that Baker could modify any contract terms. 4 These other provisions,

however, pertain to whether the Delivery Tickets superseded the AziTrak Offer,

4
      The Delivery Tickets stated: (1) they superseded “all prior oral or written
agreements,” Aplt. App. at 109; (2) any orders Baker accepted were governed by
the Delivery Tickets’ terms “and any additional terms proposed or agreed to in
writing” by Baker’s authorized agent, id.; and (3) the terms were as stated therein
“and/or [in the] current Contract of Work Agreement,” id. at 108.

                                          -8-
not to whether Baker could unilaterally modify or selectively enforce the parties’

agreement to arbitrate.

      “Oklahoma law commands that where arbitration has been contracted for it

constitutes a substantive and mandatory right.” High Sierra Energy, L.P. v. Hull,

259 P.3d 902, 907 (Okla. Civ. App. 2011) (internal quotation marks omitted).

Oklahoma law directs that ‘[a]rbitration should be compelled unless it may be

said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute.” Thompson v. Bar-S Foods Co.,

174 P.3d 567, 572 (Okla. 2007) (internal quotation marks omitted).

      The arbitration clauses in both the AziTrak Offer and the Delivery Tickets

“unambiguously reflect the parties’ intent that [any dispute arising out of or in

connection with their Agreement is] arbitrable.” Shell Oil Co. v. CO2 Comm.,

Inc., 589 F.3d 1105, 1109 (10th Cir. 2009). Therefore, even if other clauses in

the Delivery Tickets make it unclear whether the Delivery Tickets control over

the AziTrak Offer, we cannot say with positive assurance that the disputes are not

subject to arbitration. Construing the AziTrak Offer and the Delivery Tickets to

carry out the intention of the parties at the time of contracting, we determine that

the arbitration clauses are not ambiguous.

        D. Differences in Arbitration Clauses Are for Arbitrator to Resolve

      Finally, we consider whether the differences in the AziTrak Offer and

Delivery Tickets arbitration clauses render the clauses unenforceable. We

                                         -9-
conclude that they do not because the differences concern matters the parties

would likely expect the arbitrators to decide. The differences in the two clauses

are as follows:

      1.     The AziTrak offer specifically recognizes the attorney-client and

             attorney work-product privileges. The Delivery Tickets do not

             mention those privileges.

      2.     The AziTrak Offer provides that “[t]he Parties shall treat all matters

             relating to the arbitration as confidential,” including the fact of

             arbitration and matters discussed therein. Aplt. App. at 97. The

             Delivery Tickets do not mention confidentiality.

      3.     The AziTrak Offer does not address discovery. The Delivery Tickets

             provide that the arbitration panel shall “limit[] discovery to only that

             which is absolutely necessary to enable the Tribunal to render a fair

             decision which reflects the parties’ intent set forth in this

             Agreement.” Id. at 109.

      4.     The AziTrak Offer does not provide a time limit for resolution. The

             Delivery Tickets state that the decision shall be rendered within 120

             days after the third arbitrator is selected.

      5.     The AziTrak Offer and the Delivery Tickets have different provisions

             for the number of arbitrators and their selection.

                                          -10-
      As discussed above, “a gateway dispute about whether the parties are

bound by a given arbitration clause raises a question of arbitrability for a court to

decide.” Howsam, 537 U.S. at 84 (internal quotation marks omitted). Matters

concerning how the arbitration is to be conducted, on the other hand, are

“procedural questions” which are “presumptively not for the judge, but for an

arbitrator, to decide.” Id. (internal quotation marks omitted). In four of the five

differences identified above, there is no conflict between the AziTrak Offer and

the Delivery Tickets. EEC argues without authority or explanation that the

differences “affect the parties’ substantive rights.” Aplee. Br. at 17. But the

differences concern “the kind of arbitration proceeding” the AziTrak Offer and

the Delivery Tickets allow, and “comes down to a matter of contract

interpretation, which the arbitrator is well qualified to address.” Emp’rs Ins. Co.

of Wausau v. Century Indem. Co., 443 F.3d 573, 578 (7th Cir. 2006).

Accordingly, the differences in the arbitration clauses do not render them

unenforceable.

                                IV. CONCLUSION

      The district court’s judgment denying Baker’s motion to compel arbitration

is REVERSED and the case is REMANDED with directions to order the parties to

pursue arbitration. The district court’s order enjoining Baker from pursuing

                                         -11-
arbitration pending this appeal is DISSOLVED. EEC’s motion to waive oral

argument is GRANTED.

                                                Entered for the Court

                                                John C. Porfilio
                                                Senior Circuit Judge

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