Court Opinion

ID: 9401935
Source: CourtListenerOpinion
Date Created: 2023-06-14 18:00:38.75202+00
Date Added: 2024-06-11T17:19:56.275276
License: Public Domain

Case: 21-30105        Document: 00516786653             Page: 1      Date Filed: 06/14/2023

             United States Court of Appeals
                  for the Fifth Circuit                                          United States Court of Appeals
                                                                                          Fifth Circuit
                                     ____________                                       FILED
                                                                                     June 14, 2023
                                       No. 21-30105
                                                                                     Lyle W. Cayce
                                     ____________
                                                                                          Clerk

   Axiall Canada, Incorporated,

                                                                      Plaintiff—Appellee,

                                            versus

   MECS, Incorporated,

                                              Defendant—Appellant.
                     ______________________________

                     Appeal from the United States District Court
                        for the Western District of Louisiana
                              USDC No. 2:20-CV-1535
                     ______________________________

   Before King, Smith, and Elrod, Circuit Judges.
   Per Curiam: *
         Axiall brought breach of contract, breach of warranty, and redhibition
   claims against MECS. MECS appeals the district court’s denial of its motion
   to compel arbitration and moves to expedite the appeal. We AFFIRM the
   judgment of the district court and DENY as moot the motion to expedite the
   appeal.

         _____________________
         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 21-30105             Document: 00516786653              Page: 2   Date Filed: 06/14/2023

                                           No. 21-30105

                                                 I.
          Plaintiff-Appellee Axiall Canada, Inc. (“Axiall”) owns and operates a
   chlor-alkali manufacturing facility in Beauharnois, Quebec, Canada.
   Defendant-Appellant MECS, Inc. (“MECS”) designs, produces, and sells
   equipment used and installed in chlor-alkali manufacturing facilities,
   including mist eliminators or “demisters.”
          This case arises out of a series of demister sales between the parties
   beginning in July 2019. For almost all of these transactions, MECS first
   issued a proposal to Axiall, Axiall next sent a Purchase Order, MECS then
   sent an Order Acknowledgement before shipping the demisters to Axiall,
   and, finally, Axiall accepted the demisters. 1
          Both        of     MECS’s      forms       (i.e.,   the   proposals   and    Order
   Acknowledgements) contained language expressly limiting its acceptance of
   any purchase orders to MECS’s standard terms and conditions of sales.
   Section 13 of these standard terms and conditions contained an arbitration
   clause stating that “[a]ny and all disputes arising out of, relating to or in
   connection with this Purchase Order . . . shall be finally and exclusively
   resolved by binding confidential arbitration.”
          Similarly, Axiall’s forms (i.e., the Purchase Orders) contained
   language that acceptance of its Purchase Orders indicated “irrevocable
   agreement to [Axiall’s] General Terms and Conditions.” Axiall’s General
   Terms and Conditions contained two relevant provisions. First is a no-
   modification provision that a seller
          agrees to be bound to the exact terms specified herein, and that
          this [Purchase Order] constitutes a binding contract between
          _____________________
          1
               In one instance, Axiall told MECS to begin production in accordance with a prior
   proposal.

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         Seller and the entity receiving any Product (“Purchaser”).
         Purchaser . . . hereby objects to and rejects any additional or
         modified terms proposed by Seller on which this sale would be
         rejected and any such proposed terms shall be deemed void.
   Second is a forum selection clause stating that the seller “hereby agrees to
   exclusive and sole jurisdiction and venue in Lake Charles, Louisiana or
   Calvert City, Kentucky, as determined by [Axiall].” Arbitration is not
   mentioned in this provision or elsewhere in Axiall’s forms.
         After sending the Order Acknowledgements to Axiall, MECS shipped
   the demisters, which Axiall accepted.
         In sum, below were the relevant events common to these transactions:
         1. MECS sent Axiall a proposal incorporating an arbitration
             clause and containing express limitations on acceptance;
         2. Axiall sent MECS a Purchase Order incorporating the
             forum selection clause and containing express limitations
             on acceptance;
         3. MECS       sent    Axiall   an     Order   Acknowledgment
             incorporating an arbitration clause and containing express
             limitations on acceptance (like MECS’s proposal);
          4. MECS shipped Axiall the demisters; and
         5. Axiall accepted the demisters from MECS.
         On October 23, 2020, Axiall brought suit against MECS in Louisiana
   state court; in December, the case was removed to the United States District
   Court for the Western District of Louisiana. In its complaint, Axiall alleged
   breach of contract, breach of warranties, and redhibition claims stemming
   from problems with the purchased demisters. MECS then moved to dismiss,
   or alternatively stay, and compel arbitration, arguing that Axiall was bound
   by a contract whose terms included the binding arbitration clauses in

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   MECS’s forms. Axiall opposed the motion. The district court denied
   MECS’s motion, holding that under Louisiana law, the parties had not
   agreed to the arbitration clauses. MECS appeals this denial and subsequently
   filed an opposed motion to expedite the appeal.
                                         II.
          “We review a denial of a motion to compel arbitration pursuant to the
   [Federal Arbitration Act] de novo.” Marino v. Dillard’s, Inc., 413 F.3d 530,
   532 (5th Cir. 2005). “Similarly, we review a district court’s interpretation of
   state law de novo.” Id.
          When adjudicating a motion to compel arbitration, we “conduct a
   two-step inquiry. The first step is to determine whether the parties agreed to
   arbitrate the dispute in question.” Webb v. Investacorp, Inc., 89 F.3d 252, 257–
   58 (5th Cir. 1996). “This determination involves two considerations: (1)
   whether there is a valid agreement to arbitrate between the parties; and (2)
   whether the dispute in question falls within the scope of that arbitration
   agreement.” Id. “The second step is to determine ‘whether legal constraints
   external to the parties’ agreement foreclosed the arbitration of those
   claims.’” Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth,
   Inc., 473 U.S. 614, 628 (1985)). We hold that, in each of the transactions at
   issue, there was no valid agreement to arbitrate and that the parties thus did
   not agree to arbitrate this dispute. Accordingly, we need not and do not
   consider any external legal constraints foreclosing arbitration.
                                         III.
          This case presents a classic “battle of the forms.” The parties, having
   exchanged their own forms with different terms, now dispute the nature of
   their relationship and the terms incorporated into any contract that may have
   been formed. Two provisions of the Louisiana Civil Code govern this dispute.
   First, Article 2601 concerns additional terms in an acceptance of an offer to

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   sell movables such as demisters. La. Civ. Code Ann. art. 2601. Second,
   Article 2602 concerns contracts formed by the conduct of the parties. Id. art.
   2602. These two provisions are slightly different from but based on Section
   2-207 of the Uniform Commercial Code (“UCC”). See N. Stephan Kinsella,
   Smashing the Broken Mirror: The Battle of the Forms, UCC 2-207, and
   Louisiana’s Improvements, 53 La. L. Rev. 1555, 1556 (1993).
          In relevant part, Article 2601 states that “[a]n expression of
   acceptance of an offer to sell a movable thing suffices to form a contract of
   sale if there is agreement on the thing and the price . . . unless acceptance is
   made conditional on the offeror’s acceptance of the additional or different
   terms.” La. Civ. Code Ann. art. 2601.
          In its entirety, Article 2602 states that
          [a] contract of sale of movables may be established by conduct
          of both parties that recognizes the existence of that contract
          even though the communications exchanged by them do not
          suffice to form a contract. In such a case the contract consists
          of those terms on which the communications of the parties
          agree, together with any applicable provisions of the suppletive
          law.
   Id. art. 2602.
          Applying these provisions to the present facts, we first consider
   whether the actions of the parties ever formed a contract. If so, we then
   consider whether MECS’s arbitration clauses were included as terms of said
   contract.
                              A. Contract Formation
          Under Louisiana law, a contract is formed through the parties’
   consent as established by offer and acceptance. See La. Civ. Code Ann.
   art. 1927 (1985). Here, neither party disputes that a contractual relationship

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   existed; instead, the parties disagree as to when their contracts were formed.
   At issue is thus which of the relevant forms exchanged between the parties,
   if any, constituted the offer and acceptance necessary for contract formation.
          Axiall argues that MECS’s proposals constituted the offers and
   Axiall’s Purchase Orders the acceptances that formed the relevant contracts
   and that, per Article 2602, these contracts included only the agreed-upon
   terms contained in both MECS’s and Axiall’s forms, i.e., not MECS’s
   arbitration clauses. By contrast, MECS contends that the contracts were
   formed later in the parties’ dealings when Axiall accepted delivery of the
   demisters. According to MECS, its proposals and Axiall’s Purchase Orders
   were not offers and acceptances; rather, MECS’s Order Acknowledgments
   operated as counteroffers to Axiall’s Purchase Orders’ proposed terms.
   Axiall then accepted these counteroffers through performance by accepting
   delivery of the demisters.
          The proposals and Purchase Orders agree on the “thing” and price,
   which would normally suffice to form a contract under Article 2601. See La.
   Civ. Code Ann. art. 2601 (“An expression of acceptance of an offer to
   sell a movable thing suffices to form a contract of sale if there is agreement
   on the thing and the price . . . .”). But reading further, the text of Article 2601
   precludes formation when “acceptance is made conditional on the offeror’s
   acceptance of the additional or different terms.” Id. (emphasis added). That
   is the case here. Offeror MECS’s proposals were followed by Axiall’s
   Purchase Orders, which explicitly conditioned Axiall’s acceptances on
   MECS’s subsequent acceptances of Axiall’s “different” forum selection
   clause. See id. at cmt. f (noting that a term is “different” “when it varies a
   term contained in the offer”). Accordingly, Axiall’s Purchase Orders did not
   constitute acceptances of MECS’s proposals sufficient for formation.

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           For similar reasons, Axiall’s Purchase Orders cannot be construed as
   initial offers or counteroffers. MECS’s Order Acknowledgements do not
   constitute acceptances because these forms explicitly condition acceptance
   on an additional arbitration clause, which is absent from Axiall’s forms. See
   id. In short, neither party’s form communications—Axiall’s Purchase
   Orders or MECS’s Order Acknowledgements—were communications that,
   when read in succession, were sufficient to form contracts under Article
   2601.
           But the lack of sufficient written communication does not end our
   search for an enforceable contract. In such a scenario, contracts can be
   established through performance. Per Article 2602, “[a] contract of sale of
   movables may be established by conduct of both parties that recognizes the
   existence of that contract even though the communications exchanged by them do
   not suffice to form a contract.” La. Civ. Code Ann. art. 2602 (emphasis
   added). Here, the relevant conduct by both parties is (1) MECS’s shipping
   the demisters following its sending of the Order Acknowledgement and (2)
   Axiall’s accepting delivery of said demisters. These actions constitute
   conduct by the parties that “recognizes the existence of [a] contract,” i.e.,
   one formed by an agreed-upon quantity of demisters delivered at the agreed-
   upon price, which is sufficient for formation of a contract under Article 2601.
   See id. art. 2601. Thus, applying Article 2602, a contract was established
   through performance.
                                B. Contract Terms
           We next consider whether the arbitration clause was included as a
   term of this contract. When, as here, a contract is established by the conduct
   of the parties, “the contract consists of those terms on which the
   communications of the parties agree, together with any applicable provisions

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   of the suppletive law.” 2 La. Civ. Code Ann. art. 2602. The forms
   exchanged by the parties did not agree on MECS’s proposed arbitration
   clause. MECS included an arbitration provision in the terms incorporated in
   its proposals and Order Acknowledgements, while Axiall’s forum selection
   clause in its Purchase Orders explicitly states that MECS agrees to
   “exclusive and sole jurisdiction and venue in Lake Charles, Louisiana or
   Calvert City, Kentucky, as determined by [Axiall].” Because these
   communications do not evince agreement regarding jurisdiction, neither
   term is a part of the contract subsequently formed by the parties’ conduct.
           MECS’s arguments to the contrary are unavailing. It primarily argues
   that its Order Acknowledgments were counteroffers whose terms Axiall
   accepted by performance (i.e., by accepting delivery of the demisters). 3 But
   this argument misses the import of Article 2602’s language governing which
   terms are part of a contract arising out of performance. Even if Axiall’s
   receiving of the demisters constituted acceptance by performance, Article
   2602 states that “the contract consists of those terms on which the
   communications of the parties agree.” Id. MECS’s arbitration clauses are not
   part of these agreed terms because Axiall objected to “any additional or
   modified terms proposed by [MECS] on which this sale would be rejected.”
           This explicit rejection by Axiall distinguishes this case from Marino v.
   Dillard’s, Inc., where defendant Dillard’s sent the plaintiff Marino a written
   arbitration agreement. 413 F.3d 530, 531 (5th Cir. 2005). Marino signed an

           _____________________
           2
              MECS does not argue for any applicable provisions of suppletive law that would
   give rise to contracts that include its arbitration clauses.
           3
              Because there was no valid agreement to arbitrate, we need not and do not
   consider MECS’s arguments about whether this underlying dispute falls within the scope
   of that agreement or whether any statutes or policies foreclosed the arbitration of the
   specific claims at issue here.

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   acknowledgment stating that continued employment (i.e., conduct) would be
   interpreted as consenting to arbitration. Id. at 531–32. We held that this
   continued employment was sufficient to enforce the arbitration agreement.
   Id. at 533. But the facts here are quite different from Marino’s. Unlike the
   continued employment by the Marino plaintiff constituting acceptance of a
   written arbitration agreement, Axiall’s accepting delivery cannot be
   interpreted as consenting to MECS’s proposed terms because, in its
   Purchase Orders, Axiall had already rejected contractual terms different from
   its own. By contrast, the Marino plaintiff maintained his employment after
   signing an acknowledgment indicating that continued employment would
   constitute consent to the specific proposed terms in the arbitration
   agreement. No such acceptance by Axiall—written or conduct-based—is
   present here. And nothing else in Marino suggests that we can contravene
   Article 2602’s straightforward language that, while performance can
   establish a contract where competing forms do not, said contract will only
   include terms on which the communications of the parties agree. And
   Axiall’s communications do not evince agreement to MECS’s proposed
   arbitration term.
          In sum, there was no agreement between the parties to arbitrate
   because the parties never mutually agreed to MECS’s proposed arbitration
   clauses. The district court thus correctly denied MECS’s motion to compel
   arbitration.
                                       IV.
          For the foregoing reasons, the judgment of the district court is
   AFFIRMED. The pending motion to expedite the appeal is DENIED as
   moot. The mandate shall issue forthwith.

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