Court Opinion

ID: 996721
Source: CourtListenerOpinion
Date Created: 2013-07-04 00:54:53.621465+00
Date Added: 2024-06-11T11:20:57.450910
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

REAL COLOR DISPLAYS,
INCORPORATED,
Plaintiff-Appellee,

v.
                                                                     No. 97-1212
UNIVERSAL APPLIED TECHNOLOGIES
CORPORATION, d/b/a Automated
News Vending Systems,
Defendant-Appellant.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Malcolm J. Howard, District Judge.
(CA-96-607-5-H)

Argued: September 21, 1998

Decided: October 30, 1998

Before NIEMEYER and MOTZ, Circuit Judges, and
BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Affirmed by unpublished opinion. Judge Niemeyer wrote the opinion,
in which Judge Motz and Senior Judge Butzner joined.

_________________________________________________________________

COUNSEL

ARGUED: Scott Gregory Crowley, CROWLEY & CROWLEY,
Richmond, Virginia, for Appellant. James Anthony Penry, SMITH,
HELMS, MULLISS & MOORE, L.L.P., Raleigh, North Carolina, for
Appellee. ON BRIEF: Stephen D. Kiess, EVERETT, WARREN,
HARPER & SWINDELL, Greenville, South Carolina; Noel C. Crow-
ley, CROWLEY & CROWLEY, Morristown, New Jersey, for Appel-
lant. Tracy Hamrick Davis, Matthew W. Sawchak, SMITH, HELMS,
MULLISS & MOORE, L.L.P., Raleigh, North Carolina, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

This appeal presents us with the questions of whether two mer-
chants, in the context of a commercial transaction, agreed in writing
to submit disputes regarding the transaction to arbitration, and if so,
whether one of the parties, who had notice of, but failed to appear at,
an arbitration hearing was time-barred by the Federal Arbitration Act
(the "FAA" or the "Act"), 9 U.S.C. § 12, when it filed a motion to
vacate the adverse arbitration award more than three months after
receiving the award. The district court denied the challenge to the
arbitration award as untimely and entered judgment confirming the
award. We affirm.

I

Real Color Displays, Inc., a North Carolina corporation, with its
principal place of business in Durham County, North Carolina, manu-
factures and sells light emitting diode ("LED") electronic display
boards. In early December 1994, Universal Applied Technologies
Corporation, a Texas corporation with its principal place of business
in San Antonio, requested pricing information from Real Color for a
custom-made LED display board for installation in newspaper vend-
ing machines manufactured by Universal.

On December 5, 1994, Real Color provided Universal with a three-
page "Offer and Agreement for Sale of Products," designated "Offer

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Number 5011." Offer 5011, which included a December 30, 1994
expiration date, contained price quotations for a"Custom RC880 7 x
80 pixels" LED display board in quantities of 100, 500, 1000, or 3000
boards based on a single order, "F.O.B. Hong Kong." The unit price
quoted for an order of 3000 boards was $126 each. Paragraph 13 of
Offer 5011 made the following provision for arbitration:

         Any controversy or claim (including, without limitation, any
         claim based on negligence, misrepresentation, strict liability
         or other basis) arising out of or relating to this Agreement,
         or its performance or breach, which involves an amount in
         excess of $50,000 (exclusive of interest and costs) shall be
         settled by arbitration in the City of Raleigh, North Carolina,
         in accordance with the rules of the American Arbitration
         Association. The decision in such arbitration shall be final
         and binding and any other award rendered thereon may be
         entered in any court having jurisdiction.

On February 7, 1995, Universal sent a "Purchase Order" to Real
Color, which, by twice referring to "Offer 5011," ordered 3,000 "Cus-
tom RC 880" LED units at $126 per unit, F.O.B. Hong Kong, the
price quoted in Offer 5011. Universal's purchase order directed Real
Color to ship six of the LED boards by February 20, 1995, 500 in
April, and the remainder "to be scheduled on standard shipments."
The purchase order contained no text or conditions other than to
accept Real Color's offer.

In accordance with Universal's purchase order, Real Color deliv-
ered six custom boards to Universal in February 1995, and Universal
paid for these units in full. Real Color delivered another 500 LED
boards in March 1995. By June 1995, however, Universal still had
failed to pay for the March delivery, despite its ongoing promises to
make the payment, and therefore, Real Color stopped a June shipment
of boards en route. Universal made no further payments to Real
Color. Real Color was able to resell some of the custom-made LED
boards, but it took a loss in selling them.

In February 1996, Real Color invoked the arbitration clause and
submitted its claim for payment and damages against Universal to the
American Arbitration Association ("AAA"). The AAA accordingly

                   3
scheduled an arbitration hearing for May 23, 1996, in Raleigh, North
Carolina. Although Universal acknowledged receiving a copy of the
arbitration demand and the AAA corresponded with both Real Color
and Universal on four separate occasions before the hearing regarding
preparations, a fact that Universal does not deny, Universal failed to
appear at the arbitration hearing on May 23.

The hearing proceeded as scheduled and the AAA-appointed arbi-
trator entered an award in favor of Real Color on June 5, 1996, for
approximately $212,000, mailing a copy of the award to both Real
Color and Universal on June 7, 1996. Universal received its copy of
the award on June 11, 1996.

During the second or third week in June 1996, Real Color received
a curious letter from Universal, dated June 6, 1996, and post-marked
June 13, 1996, expressing Universal's desire to return some defective
LED boards that it had previously received from Real Color. The let-
ter went on to state:

          [We] received correspondence recently from the American
          Arbitration Association. We have never agreed that this
          matter will be resolved in arbitration. We seek resolution
          between our companies and their normal channels.

In July 1996, Real Color commenced this diversity action against
Universal, seeking court confirmation of its arbitration award in
accordance with § 9 of the FAA. On September 18, 1996, more than
three months after receiving the arbitration award, Universal filed a
motion to vacate the award, contending that "there was no agreement
to arbitrate" and that Real Color failed to obtain a court order under
9 U.S.C. § 4 to compel the arbitration. The district court denied Uni-
versal's motion to vacate the award as untimely. The court also ruled
that Universal entered into a binding arbitration agreement with Real
Color and that Real Color was not obligated to obtain a court order
to arbitrate before proceeding to arbitration. From the court's judg-
ment confirming the award in favor of Real Color, this appeal fol-
lowed.

II

Universal contends principally that it did not enter into a binding
agreement to arbitrate because it did not sign Real Color's offer to sell

                     4
LED boards and because Real Color's offer, together with the arbitra-
tion clause, expired by its terms on December 30, 1994. Universal
notes that its subsequent purchase order for the boards, dated Febru-
ary 7, 1995, was the basis for the parties' dealings, and that its pur-
chase order did not have an arbitration clause.

Universal fails, however, to account for the fact that its purchase
order, which it did sign, specifically accepted Real Color's earlier
offer. Universal's purchase order specifically referred to Real Color's
Offer 5011 and agreed to pay the price quoted in Offer 5011 -- 3,000
custom-made LED boards at $126 per unit, F.O.B. Hong Kong. Offer
5011 represented Real Color's offer to enter into a binding agreement,
and Universal's purchase order, by referring explicitly to Offer 5011
and its terms, amounted to an acceptance of that offer. See N.C. Gen.
Stat. §§ 25-2-204, 25-2-206, 25-2-208 (1995). The fact that Universal
accepted Real Color's offer after December 30, 1994, is of no conse-
quence under the facts of this case. Real Color waived compliance
with that condition by actually shipping LED boards to Universal in
accordance with Universal's schedule. See Caver v. Britt, 85 S.E.2d
888 (N.C. 1955) (holding that performance permits an offerer to
waive a condition contained in a prior written offer). Moreover, Uni-
versal's receipt of shipments, without objection, demonstrates further
its assent to be bound by the terms and conditions of Real Color's
offer. See N.C. Gen. Stat. § 25-2-208(1).

The Federal Arbitration Act represents a source of federal substan-
tive law for the enforcement of arbitration agreements. Whether a
party agrees to arbitrate, however, is an issue for judicial determina-
tion by application of common law principles of contract law. See
Johnson v. Circuit City Stores, 148 F.3d 373, 377 (4th Cir. 1998). But
questions regarding a matter's arbitrability, including disputes regard-
ing contract interpretation and defenses to arbitrability, "must be
addressed with a healthy regard for the federal policy favoring arbitra-
tion." Moses H. Cone Mem'l Hosp. v. Mercury Construction Corp.,
460 U.S. 1, 24 (1983). We agree with the district court in this case
that the writings between the parties, coupled with their subsequent
conduct, established the existence of a contract based on Real Color's
Offer 5011 and Universal's purchase order. This contract included
paragraph 13 in Offer 5011 providing for the arbitration of disputes.

                    5
III

Universal also contends that Real Color violated its rights by not
filing a motion in the district court under 9 U.S.C.§ 4 to compel arbi-
tration before actually proceeding with the arbitration. That section
provides that a "party aggrieved by the alleged failure, neglect, or
refusal of another to arbitrate under a written agreement for arbitra-
tion may petition any United States district court . . . for an order
directing that such arbitration proceed in the manner provided for in
such agreement." 9 U.S.C. § 4 (emphasis added).

In the case before us, there is no indication that Real Color had any
need to use § 4. When it demanded arbitration, the AAA scheduled
a hearing, and Universal made no objection; it never took a position
before the scheduled hearing date that the arbitration was not autho-
rized. Rather, Universal elected simply not to appear at the hearing.
This is not a circumstance under which it can be expected that Real
Color would invoke § 4 to compel arbitration by court order.

More importantly, however, as we have recognized previously, the
language of § 4 is permissive and not mandatory. It provides a
method by which arbitration may be compelled, but this authorization
is not mandated as a condition to enforcement of arbitration. In
Sverdrup Corp. v. WHC Constructors, Inc., 989 F.2d 148 (4th Cir.
1993), we rejected a similar argument, noting that"the use of alternat-
ing and permissive and mandatory language throughout the [Federal
Arbitration Act] indicates that Congress was cognizant of the differ-
ence in the meaning between `may' and `must' and intended that the
term `may' must be construed as permissive." Id. at 151.

Universal provides no compelling justification for construing 9
U.S.C. § 4 to impose an obligation of the parties to seek judicial
approval before pursuing contractual arbitration rights. Indeed, to do
so would reduce the judicially favored efficiency that otherwise exists
in the vast majority of arbitrations.

IV

Finally, Universal contends that the AAA arbitrator violated its due
process rights by failing to notify it of the three-month deadline

                    6
imposed by 9 U.S.C. § 12. Universal asserts, therefore, that § 12 does
not apply in this case.

Section 12 provides that "[n]otice of a motion to vacate, modify or
correct an award must be served upon the adverse party or his attor-
ney within three months after the award is filed or delivered." 9
U.S.C. § 12 (emphasis added). The language in§ 12, unlike what we
observed about § 4, is mandatory. Accordingly, a motion to vacate
filed more than three months after Universal received the award is
time-barred. See Sverdrup, 789 F.2d at 151. Moreover, the three-
month deadline imposed by § 12 applies even though the opposing
party has filed a motion to confirm under 9 U.S.C.§ 9. See Taylor v.
Nelson, 788 F.2d 220, 225 (4th Cir. 1986).

Universal does not dispute that it received notice from the AAA of
the adverse arbitration award on June 11, 1996, and that it failed to
file its motion to vacate within three months. It argues, rather, that the
AAA wrongfully failed to give Universal notice of§ 12's require-
ments. This argument is without merit. The statute puts Universal on
unambiguous notice about the requirement to file its motion within
three months, and there is no additional requirement in the FAA that
an arbitrator provide a copy of the statute to merchants, repeating to
them their rights and obligations under the Act. The failure of the
AAA to provide this information certainly cannot be considered a due
process violation.

The judgment of the district court is

AFFIRMED.

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