Axiall Canada v. MECS ( 2023 )

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.
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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
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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
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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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