Cunico Corporation v. Custom Alloy Corporation ( 2019 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 3 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CUNICO CORPORATION, No. 18-55047
Plaintiff-Appellant, D.C. No.
2:14-cv-01234-PA-AJW
v.
CUSTOM ALLOY CORPORATION, MEMORANDUM*
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Percy Anderson, District Judge, Presiding
Argued and Submitted June 14, 2019
Pasadena, California
Before: WARDLAW, BYBEE, and MILLER, Circuit Judges.
Cunico Corporation appeals the district court’s order compelling arbitration
and dismissing Cunico’s complaint. We have jurisdiction under 9 U.S.C.
§ 16(a)(3), and we affirm.
1. Under the Federal Arbitration Act, our role is limited to analyzing
“whether a valid agreement to arbitrate exists” and “whether the agreement
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc.,
207 F.3d 1126, 1130 (9th Cir. 2000); see 9 U.S.C. § 4. We review the district
court’s “legal conclusions regarding the existence of a valid, binding contract” de
novo and its factual findings for clear error. Casa del Caffe Vergnano S.p.A. v.
ItalFlavors, LLC, 816 F.3d 1208, 1211 (9th Cir. 2016).
Here, state law governs whether there is a valid agreement to arbitrate. See
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Both California
and New Jersey have adopted the Uniform Commercial Code, which applies to the
parties’ transaction. See Cal. Com. Code §§ 1101, 2102; N.J. Rev. Stat. §§ 12A:1-
101, 12A:2-102. Like the district court, we therefore find it unnecessary to conduct
a choice-of-law analysis.
The district court did not err in finding that Custom Alloy’s October 9, 2008
quotation was an offer and that Cunico accepted the offer by issuing purchase
order 26860 on January 7, 2009. Cunico emphasizes that the purchase order
contained terms that varied in some respects from those of the quotation. But the
UCC rejects the common law’s “mirror-image” rule for contract formation, under
which “no contract was reached if the terms of the offer and the acceptance
varied.” R.W.L. Enters. v. Oldcastle, Inc., 226 Cal. Rptr. 3d 677, 687 (Ct. App.
2017) (citation omitted); accord Sun Coast Merch. Corp. v. Myron Corp., 922
A.2d 782, 791 (N.J. Super. Ct. App. Div. 2007). Under section 2-207 of the UCC,
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Cunico’s purchase order did not need to be identical to Custom Alloy’s quotation
to constitute an acceptance and to form a contract. And because Custom Alloy’s
quotation expressly incorporated Custom Alloy’s terms and conditions—which, in
turn, contained an arbitration clause—those terms and conditions became part of
the contract. See Cal. Com. Code § 2204(1); N.J. Rev. Stat. § 12A:2-204(1).
Cunico contends that it never received the terms and conditions, but the district
court found that Custom Alloy’s terms and conditions were “readily available” to
Cunico. See Selective Way Ins. Co. v. Glasstech, Inc., 191 F. Supp. 3d 350, 359
(D.N.J. 2016) (finding that terms were “reasonably communicated” when
incorporated by reference in the quotation); Wolschlager v. Fid. Nat’l Title Ins.
Co., 4 Cal. Rptr. 3d 179, 185 (Ct. App. 2003) (concluding that an arbitration clause
incorporated by reference was binding because it was “easily available” to the
plaintiff). If Cunico wished to avoid an obligation to arbitrate, it should have
rejected the arbitration clause when it issued its purchase order. There is no clear
error in the district court’s finding that Cunico acquiesced to the arbitration clause.
2. The arbitration clause is neither procedurally nor substantively
unconscionable. See Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d
669, 690 (Cal. 2000); B & S Ltd., Inc. v. Elephant & Castle Int’l, Inc., 906 A.2d
511, 521-22 (N.J. Super. Ct. Ch. Div. 2006). Procedurally, there is no clear error in
the district court’s finding that Cunico and Custom Alloy are both business entities
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with equal bargaining power that spent months negotiating the terms of their
agreement. There is no evidence that Custom Alloy deployed any unfair business
tactics, or that Cunico was otherwise compelled to accept the arbitration
agreement. Substantively, there is nothing shocking to the conscience when two
business entities agree that a commercial dispute will be arbitrated in New York.
3. Custom Alloy did not waive its right to arbitrate the dispute. “Waiver of a
contractual right to arbitration is not favored.” Fisher v. A.G. Becker Paribas Inc.,
791 F.2d 691, 694 (9th Cir. 1986). Cunico, as the party asserting waiver, “bears a
heavy burden” to show that Custom Alloy knew it had “an existing right to compel
arbitration,” that it acted inconsistently with that right, and that Cunico suffered
prejudice as a result. Id. (citation omitted). Cunico has not carried that burden.
Custom Alloy raised the arbitration agreement at the first opportunity: as an
affirmative defense in its answer to Cunico’s complaint in state court. Custom
Alloy removed the case to federal court the same day that it filed its answer. Any
delay by Custom Alloy in moving to compel arbitration once the case reached
federal court did not prejudice Cunico.
AFFIRMED.
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