E.I. Dupont de Nemours v. Rhone Poulenc Fiber and Resin

• Citation: 269 F.3d 187
• Decision Date: 05 September 2001
• Docket Number: No. 00-3550,RHONE-POULENC,00-3550
• Parties: (3rd Cir. 2001) E.I. DUPONT DE NEMOURS AND COMPANY, A DELAWARE CORPORATION v. RHONE POULENC FIBER AND RESIN INTERMEDIATES, S.A.S., AKAFIBRES ET POLYMERES S.A.; RHODIA, A FRENCH CORPORATION; RHODIA FIBER AND RESIN INTERMEDIATES, S.A.S., FORMERLY NAMED RHONE POULENC FIBER AND RESIN INTERMEDIATES, S.A.S.; RHODIA, SA, F/K/A RHONE POULENC FIBRES ET POLYMERES S.A. RHODIA FIBER AND RESIN INTERMEDIATES, SAS AND RHODIA SA, APPELLANTS Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

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269 F.3d 187 (3rd Cir. 2001) E.I. DUPONT DE NEMOURS AND COMPANY, A DELAWARE CORPORATION
v.
RHONE POULENC FIBER AND RESIN INTERMEDIATES, S.A.S., AKA RHONE-POULENC FIBRES ET POLYMERES S.A.; RHODIA, A FRENCH CORPORATION; RHODIA FIBER AND RESIN INTERMEDIATES, S.A.S., FORMERLY NAMED RHONE POULENC FIBER AND RESIN INTERMEDIATES, S.A.S.; RHODIA, SA, F/K/A RHONE POULENC FIBRES ET POLYMERES S.A. RHODIA FIBER AND RESIN INTERMEDIATES, SAS AND RHODIA SA, APPELLANTS No. 00-3550 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT Argued: September 5, 2001
October 15, 2001

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE District Judge: The Honorable Roderick R. McKelvie (D.C. Civil No. 99-CV-00874)

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John A. Parkins, Jr., Esq. (Argued), Robert W. Whetzel, Esq., Richards, Layton & Finger, One Rodney Square P.O. Box 551 Wilmington, DE 19899, Attorneys for Appellants

P. Clarkson Collins, Jr., Esq. (Argued), Morris, James, Hitchens & Williams, 222 Delaware Avenue P.O. Box 2306 Wilmington, DE 19899, Attorneys for Appellee

Before: Scirica, Alito, and Barry, Circuit Judges

OPINION OF THE COURT

Barry, Circuit Judge

In 1996, after years of negotiation, a Joint Venture Agreement ("the Agreement") was entered into between DuPont China ("DPC"), Rhone Poulenc Fiber and Resin Intermediates ("Rhodia Fiber"), and Liaoyang Petro-Chemical Fiber Company ("LYPFC"), a Chinese entity. DPC and Rhodia Fiber are subsidiaries of E.I. DuPont

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de Nemours and Company ("DuPont") and Rhodia, SA ("Rhodia"),¹ respectively. The object of the 50-year joint venture was to create Sanlong Nylon Company Limited ("Sanlong") to research, manufacture, and sell certain fibers. The joint venture ultimately failed and DuPont, the parent of DPC, brought suit against Rhodia Fiber and its parent, Rhodia, to recover, DuPont says, not for breach of the Agreement, to which it was not a party, but rather for breach of an oral agreement and fraudulent misrepresentations which occurred much later in time and as a result of which it was damaged. Rhodia Fiber and Rhodia moved to dismiss the complaint on various grounds and to compel arbitration. The District Court denied that motion in all respects, and an appeal was taken from the denial of the motion to compel arbitration and the denial of the motion to dismiss for lack of personal jurisdiction. We will affirm as to the former and dismiss the appeal as to the latter.

I. The Joint Venture Agreement

While DuPont does not purport to have sued on the Agreement itself, there is no dispute that the Agreement was at the heart of the proceedings before the District Court and is at the heart of this appeal. We begin, therefore, with the relevant provisions of the Agreement and the background of how this litigation came to be.

Each party to the Agreement -- DPC, Rhodia Fiber and LYPFC -- was to contribute significant capital to the joint venture in relation to its interest in the venture. In P 7.02, the parties agreed that:

(a) The Company [Sanlong] will be responsible for obtaining financing that is beyond or in addition to the Company's registered capital by borrowing funds from sources inside China or outside China. Upon the unanimous affirmative vote of every director of the Board, each Party shall provide guaranties[sic] for such additional financing, in proportion to the Party's contribution to registered capital. A Party may guarantee the Company's local currency or foreign currency borrowings, provided that the aggregate amount of all guaranties [sic] provided, by each Party is in proportion to that Party's contribution to registered capital. If any Party's guaranty is not acceptable to the Lender, that Party shall, subject to any necessary approval of the relevant authorities, arrange a guaranty from a financial institution or other company acceptable to the lender.

(B) Upon the unanimous affirmative vote of every director of the Board in support of the Company obtaining additional financing by way of borrowing from the Parties, each Party shall directly or indirectly provide loans for additional financing, in proportion to the Party's contribution to registered capital. The terms and duration of such loans shall be equitable among the Parties and agreed upon by the Board.

P 7.02 (emphasis added). Nothing in this paragraph obligated either parent company -- DuPont or Rhodia -- to provide any guarantees or loans; rather, guarantees and/or loans were obligations of the subsidiaries.

Even though the parent companies were not parties to the Agreement, it was stated in the Agreement that they would "assist the Company in the balancing of foreign exchange during the Company's initial years of operation by exporting 14,000 tons and 6,000 tons per year of nylon 6,6 polymer flake respectively in accordance to the DuPont Polymer Flake Export Sales

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Agreement and RP Polymer Flake Export Sales Agreement respectively." P 10.01(b). Also, to ensure the success of the Company, the Agreement provided that the parties "and their Affiliates will not take action detrimental to the interest or well-being of the Company." P 10.03(a).² In conjunction with the Agreement, DuPont (the parent) entered into three related agreements with the joint venture company: a supply agreement, a license contract and an export sales agreement. Rhodia (the parent) also entered into a similar series of related agreements.

Two provisions of the Agreement are of particular relevance and, thus, particular importance here. First, the Agreement contained an arbitration clause:

In the event any dispute or claim or difference of any kind whatsoever arises in connection with the interpretation or implementation of this Contract (a "dispute"), including any question regarding its existence[,] validity or termination, the parties shall attempt in the first instance to resolve the dispute through friendly consultations. If the dispute is not resolved in this manner within sixty (60) days after one Party has given both the other Parties written notice of the existence of the dispute, then, the dispute shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SAIC") for the time being in force. The tribunal shall consist of three (3) arbitrators. The governing law of this arbitration shall be the substantive law of the PRC and the language of arbitration shall be English.

P 25.01 (emphasis added). Second, the Agreement provided that it was

... made for the benefit of LYPFC, [Rhodia Fiber], DCH and their respective lawful successors and assignees and is legally binding on them. This Contract may not be changed orally, but only by a written instrument signed by LYPFC, [Rhodia Fiber] and DCH and approved by the Examination and Approval Authority.

P 27.03.

After the joint venture failed, DuPont filed a three count Complaint against Rhodia Fiber and Rhodia. In the first count, entitled "Third Party Beneficiary Claims," DuPont alleged that "DuPont, as the ultimate parent of DCH and as the party required to provide loan guaranties [sic] on behalf of its subsidiary DCH, was an intended party beneficiary of the Joint Venture Contract," and that "Rhodia Fiber materially breached the Joint Venture Contract by, without limitation, failing to provide or secure the required loan guaranties [sic]." A80-81. In the second count, entitled "Breach of Agreement to Secure and Provide Guaranties/Promissory Estoppel," DuPont alleged that it was harmed by the breach by Rhodia Fiber

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and Rhodia of a January 1998 oral agreement between DuPont and the two defendants pursuant to which the defendants agreed to support the joint venture but did not thereafter provide or secure the requisite loan guarantees. In the third count, entitled "Fraudulent Inducement/Material Misrepresentation," DuPont alleged that Rhodia Fiber and Rhodia made false statements of fact to DuPont with the intent to induce DuPont's subsidiary DCH "to commit substantial resources and investments to the business of the Joint Venture and to induce DuPont to support the business of the Joint Venture by, inter alia, providing Loan guaranties on behalf of the Joint Venture." A83.

In response, the defendants moved to compel arbitration and to dismiss the action for lack of personal jurisdiction, insufficient service of process, failure to join an indispensable party, and forum non conveniens. DuPont then filed a First Amended Complaint significantly altering its theory of liability. For starters, DuPont dropped the first count of the Complaint, which alleged a breach of the Agreement to which it was an intended third party beneficiary. The first count of the Amended Complaint, entitled "Breach of Agreement to Secure and Provide Guaranties/Promissory Estoppel," instead mimicked the second count of the Complaint, i.e., alleging that at a meeting on January 22, 1998, Bruno deSoyres on behalf of Rhodia, the parent, and Rhodia Fiber, the subsidiary, entered into an oral agreement with DuPont to further support the joint venture by securing and providing loan guarantees, and abide by the obligations contemplated by the Agreement. According to the Amended Complaint,

22. During discussions regarding the EPC Contracts, representatives of RP expressed concerns regarding the Joint Venture which led DuPont representatives to believe that the RP Group was reluctant to perform obligations arising from the Joint Venture Agreement. DCH, as the party to the Joint Venture Contract, and DuPont as the ultimate parent of DCH and the party providing the Loan guaranties required to finance the EPC Contracts, desired to confirm the commitment of the Rhodia Group to the venture before executing of the EPC contracts and incurring the further financial liabilities associated...