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SELAS FLUID PROCESSING CORPORATION v. ULTRA-CAST

United States District Court, E.D. Pennsylvania


July 19, 2004.

SELAS FLUID PROCESSING CORPORATION
v.
ULTRA-CAST, INC.

The opinion of the court was delivered by: THOMAS O'NEILL, Senior District Judge

MEMORANDUM

I. INTRODUCTION

Plaintiff, Selas Fluid Processing Corporation, filed a motion to compel arbitration seeking to submit claims for damages against defendant, Ultra-Cast, Inc., to the American Arbitration Association in Philadelphia, Pennsylvania. With the consent of the parties, I denied plaintiff's motion without prejudice and ordered it to be treated as a complaint. Presently before me are plaintiff's motion for summary judgment with respect to plaintiff's motion to compel arbitration, defendant's response thereto, defendant's cross-motion for summary judgment and plaintiff's response thereto. For the reasons stated below, I will grant plaintiff's motion for summary judgment and deny defendant's cross-motion for summary judgment.

  II. BACKGROUND

  Plaintiff Selas Fluid Processing Corporation (SFPC) is a Delaware corporation having administrative, sales and engineering offices in Blue Bell, Pennsylvania, and a test facility and spare parts warehouse in Conshohocken, Pennsylvania. Plaintiff designs, engineers, fabricates and installs various types of combustion-related process plant equipment for chemical, petrochemical, refining and other industries. In 2002, plaintiff entered into a contract with Praxair hydrogen plant facilities in Port Arthur, Texas, to design, engineer and fabricate a steam methane reformer. Also in 2002, plaintiff entered into two contracts with Atofina styrene monomer plant in Carville, Louisiana: one to design, engineer, fabricate and deliver a steam superheater and another to revamp an existing superheater.

  In connection with these contracts, plaintiff required substantial quantities of reformer tube and outlet manifold assemblies, outlet header pipe material, and other cast material. To satisfy these requirements, plaintiff retained as a subcontractor defendant Ultra-Cast, Inc., a Michigan corporation with its principal place of business in that state. Defendant manufactures heat and corrosion resistant cast tubing, radiant tube assemblies, fittings, and various petrochemical and heat treating related castings.

  On October 14, 2002, plaintiff issued Purchase Order 02F-5102-03684 to defendant, under which defendant agreed to procure materials and manufacture various products to be delivered to the Praxair facilities in Texas, in connection with plaintiff's Praxair contract. On November 14, 2002, Jeffrey Spillman, defendant's President and Chief Executive Officer, signed the acknowledgment copy of Purchase Order 02F-5102-03684.

  On December 20, 2002, plaintiff issued Purchase Order 02RF-6037-03800 and Purchase Order 02F-5103-03799 to defendant, under which defendant agreed to procure materials and manufacture various products to be delivered to the Atofina facilities in Louisiana, in connection with plaintiff's Atofina contracts. On January 28, 2003, Mark Hallstrom, defendant's Vice President of Sales, signed the acknowledgment copies of Purchase Orders 02RF-6037-03800 and 02F-5103-03799. Defendant commenced performance under the three Purchase Orders. Each acknowledgment copy to the three Purchase Orders included the following language above the signature line:

Acknowledgment: By execution below, commencement of performance, or any other actions by Seller acknowledging this Purchase Order, Seller hereby accepts and agrees that the contract of sale of products/services is expressly limited to the terms specifically set forth, or incorporated by reference, in this Purchase Order, to the exclusion of additional or different terms in documentation provided by Seller. A signed acknowledgment copy must be returned to Purchaser within (5) days after receipt of this Purchase Order.
  Paragraph 21 of plaintiff's standard terms and conditions of purchase, contained in the Purchase Orders, provides, in relevant part:

 

21. Governing Law and Dispute Resolution. All claims, disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof, shall be decided by binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, to be held in Philadelphia, Pennsylvania, U.S.A. Notice of the demand for arbitration shall be filed in writing with the other party or parties to this Contract and with the American Arbitration Association. In no event shall the arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. . . . The Contract shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Supplier consents to the venue and personal jurisdiction of Pennsylvania federal or state courts exclusively to adjudicate disputes arising out of this contract or to enforce the provisions of this arbitration clause.
  Defendant allegedly breached its commitments to plaintiff under Purchase Order 02F-5102-03684. On July 15, plaintiff issued a letter to defendant entitled "Notice of Breach of Contract," which was intended by plaintiff to constitute formal notification of defendant's breach. The issue of payment and delivery of the remaining materials and work associated with Purchase Order 02F-5102-03684 was then allegedly resolved through a teleconference between plaintiff's attorney, Emerson Rhodes, and Spillman, which was summarized in a fax dated July 31, 2003. The July 31 fax contains no reference to the arbitration provision of Purchase Order 02F-5102-03684. On August 25, 2003, plaintiff sent an email to defendant confirming that plaintiff had received the material certifications for the materials and work received under Purchase Order 02F-5102-03684. Plaintiff's August 25 email stated that plaintiff "reserves all rights associated with the order, the cancellation, and/or any payments made" to defendant. In response to plaintiff's August 25 email, defendant sent an email dated August 26, 2003, stating that defendant "reserves all rights in connection with this matter and nothing contained herein or omitted herefrom is or shall constitute a waiver of any of these rights, remedies, claims, or positions."

  In December 2003, defendant delivered to plaintiff the last shipments and material certifications associated with Purchase Orders 02RF-6037-03800 and 02F-5103-03799.

  In December 2003, plaintiff submitted a demand for arbitration under the Construction Industry Arbitration Rules of the American Arbitration Association with venue in Philadelphia, Pennsylvania in accordance with Paragraph 21 of plaintiff's standard terms and conditions set forth in the Purchase Orders at issue. In connection with Purchase Order 02F-5102-03684, plaintiff intends to submit claims for damages arising out of defendant's alleged willful breach of contract and repudiation of its obligations, including breach of express and implied warranties, negligence, deceptive trade practices, lack of good faith, economic duress, misrepresentation, and other such appropriate bases for recovery. In connection with Purchase Orders 02RF-6037-03800 and 02F-5103-03799, plaintiff intends to submit claims for damages arising out of defendant's alleged breach of contract, breach of express and implied warranties, delay in delivery, lack of good faith, deceptive trade practices, and other appropriate bases for recovery. III. STANDARD OF REVIEW

  Under Rule 56(c) of the Federal Rules of Civil Procedure, the moving party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. I must view the facts in the light most favorable to the non-moving party, and the nonmoving party is further entitled to all reasonable inferences drawn from those facts. See Anderson, 477 U.S. at 248. However, the non-moving party must raise "more than a mere scintilla of evidence in its favor" in order to overcome a summary judgment motion, and cannot survive by relying on unsupported assertions, conclusory allegations, or mere suspicions. Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989). The nonmoving party still must establish the existence of each element of its case. See Celotex, 477 U.S. at 323.

  "Where cross-motions for summary judgment are presented, each side essentially contends that there are no issues of material fact from the point of view of that party." Bencivenga v. Western Pa. Teamsters, 763 F.2d 574, 576 n. 2 (3d Cir. 1985). In such cases, each side still must establish that it is entitled to judgment as a matter of law, and therefore, the court must consider the motions separately. Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968). IV. DISCUSSION

  To compel arbitration, I must determine that 1) the parties entered into a valid arbitration agreement, and 2) the specific dispute falls within the scope of that agreement. John Hancock Mutual Life Ins. Co. v. Olick, 151 F.3d 132, 137 (3d Cir. 1998). See also PaineWebber v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990) (holding that district courts need only "engage in a limited review to ensure that the dispute is arbitrable — i.e., that a valid agreement exists between the parties and that the specific dispute falls within the substantive scope of that agreement."). In conducting this review, I must apply "ordinary contract principles, with a healthy regard for the strong federal policy in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). "State law applies to issues concerning the validity, revocability and enforceability of contracts." Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681, 684 (1996), cited in Neurosource, Inc. v. Jefferson Univ. Physicians, No. 00-CV-5401, 2001 U.S. Dist. LEXIS 1811, at *5 (E.D. Pa. Feb. 14, 2001).

  A. The Parties Entered into a Valid Arbitration Agreement

  The parties entered into a valid arbitration agreement, as the Purchase Orders containing the arbitration provisions at issue constitute valid contracts between the parties. Before arbitration can be ordered, there must be an agreement to arbitrate. See AT&T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986), cited in Sandvik AB v. Advent Int'l Corp., 220 F.3d 99, 107-08 (3d Cir. 2000) ("Arbitration is a matter of contract, and no arbitration may be compelled in the absence of an agreement to arbitrate."). Therefore, even though I "may consider only issues relating to the making and performance of the agreement to arbitrate" in my analysis, my inquiry implicates the validity of the underlying Purchase Orders which contain the arbitration provision at issue. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967).

  In this case, the parties created a valid agreement to arbitrate. Defendant argues that it never validly executed the Purchase Orders containing the arbitration provision, as the signed acknowledgment was not returned within the five-day time period specified by plaintiff. This argument fails on three grounds. First, the express time requirement contained in the acknowledgment copies runs from the date of receipt by defendant, and defendant offers no evidence that the dates of receipt for any of the Purchase Orders were five or more days prior to the signature dates. Therefore, although in each case the signed acknowledgment copies were returned to plaintiff approximately one month after they were sent, I cannot determine whether the requirement was met or not. Second, construing the facts in the light most favorable to defendant, even if the five day limit was in fact exceeded in each case, based on the language of the acknowledgment defendant could have accepted and agreed to the contract "[b]y execution below, commencement of performance, or any other actions by [defendant] acknowledging this Purchase Order." Therefore, signing and returning was only one of several potential methods of acceptance. Finally, because this dispute involves a sale of goods, the Uniform Commercial Code applies, and 13 Pa.C.S. § 2207 (adopting UCC § 2-207) recognizes the acceptance of a contract through performance. Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 444 (3d Cir. 2003). The parties expressly adopted the arbitration clause included in the Purchase Orders, no writing or other communication exchanged between the parties contradicts that arbitration clause, and defendant substantially began performance under each of the Purchase Orders at issue. B. The Arbitration Provisions Survive the Expiration or Termination of the Contracts

  Though the parties disagree as to whether the Purchase Orders at issue have expired, have been terminated through subsequent agreement or are still running through warranty clauses, I do not have to resolve this dispute to order arbitration in this case. Even where contracts have been terminated, "structural provisions relating to remedies and dispute resolution — for example, an arbitration provision — may in some cases survive in order to enforce duties arising under the contract." Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 208 (1991), citing Nolde Bros., Inc. v. Bakery Workers, 430 U.S. 243, 255 (1977).

  The arbitration provision in this case is analogous to that in Chester County School Authority v. Aberthaw Construction Co., 333 A.2d 758, 764 (Pa. 1975), where the Pennsylvania Supreme Court held that because the statute of limitations, not the termination or expiration of the contract, was the agreed upon time limit of the arbitration clause, the arbitration clause remained enforceable after the termination of the contract. The Court explained that

[i]t is clear that the parties, by this section, expressly set forth the perimeters of the obligation to arbitrate and in so doing, did not state that the termination or repudiation of the agreement should be a factor. To the contrary, it set time limits, such as the applicable statute of limitations, which in most instances, would be expected to extend well beyond the termination of the contract.
Id. The Court distinguished cases in which the arbitration clause included a provision specifically requiring a demand for arbitration be made no later than the date of final payment, asserting that such a provision indicated that the parties intended the duty to arbitrate to expire with the termination of the contract. Id., citing Emmaus Municipal Authority v. Eltz, 204 A.2d 926, 927 (Pa. 1964). See also Gavlik Construction Co. v. H.F. Campbell Co., 526 F.2d 777, 786 (3d Cir. 1975) (ordering arbitration of a dispute following the termination of a contract in the absence of a provision requiring a demand for arbitration before the time for final payment); Schneider, Inc. v. Research-Cottrell, Inc., 474 F. Supp. 1179, 1184 (W.D. Pa. 1979) (holding that the absence of a provision requiring that a demand for arbitration be made prior to final payment indicated that the arbitration clause survived termination of the contract).

  Because the arbitration provision included in the Purchase Orders here set the statute of limitations as its time limit, it did not terminate with the termination of the Purchase Orders and thus is applicable to this dispute.

  C. The "Knockout Rule" Does Not Apply

  The arbitration provisions were not "knocked out" of the parties' agreement in this case. In Flender Corporation v. Tippins International, Inc., 830 A.2d 1279, 1287 (Pa. Super. 2003), the Court applied the "knockout rule" where the parties agreed to essential provisions in a sale of goods but each attempted to impose conflicting or different other provisions based on a battle of the forms. Id. In such cases, those other provisions are "knocked out" of the parties' contract. Id. For the "knockout rule" to apply in this case, subsequent communications or agreements between the parties must have had provisions that conflict directly with the arbitration provisions in the Purchase Orders. No such evidence is present in the record, and therefore the "knockout rule" does not apply.

  D. The Claims Raised by Plaintiff Fall within the Scope of the Arbitration Provision

  In this case, plaintiff intends to submit claims to arbitration for damages arising out of defendant's alleged willful breach of contract and repudiation of obligations undertaken in the Purchase Orders, deceptive trade practices, lack of good faith, commercial duress, misrepresentations and other appropriate bases for recovery. Therefore, the claims raised by plaintiff fall within the scope of the arbitration provision contained in the Purchase Orders, which applies to "[a]ll claims, disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof."

  Furthermore, the applicable statute of limitations has not expired in this case, as plaintiff submitted its demand for arbitration in December 2003. Pennsylvania law imposes a four-year statute of limitations for a motion to compel arbitration, which does not begin to run until a demand for arbitration is refused. See PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1066 (3d Cir. 1995).

  V. CONCLUSION

  The dispute between the parties should therefore proceed to arbitration with the American Arbitration Association. I will grant plaintiff's motion for summary judgment and deny defendant's motion for summary judgment.

  An appropriate order follows. ORDER

  AND NOW, this ____ day of July 2004, after consideration of plaintiff's motion for summary judgment, defendant's response thereto, defendant's motion for summary judgment and plaintiff's response thereto, it is ORDERED that plaintiff's motion is GRANTED, and defendant's motion is DENIED. Judgment is entered in favor of plaintiff, Selas Fluid Processing Corporation, and against defendant, Ultra-Cast, Inc. The parties will proceed to arbitration with the American Arbitration Association.

20040719

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