Dorton v. Collins & Aikman Corporation

Decision Date06 January 1972
Docket NumberNo. 71-1129.,71-1129.
Citation453 F.2d 1161
PartiesFrank E. DORTON and J. A. Castle, Partners, d/b/a The Carpet Mart, Plaintiffs-Appellees, v. COLLINS & AIKMAN CORPORATION and Painter Carpet Mills, Inc. Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

Herbert R. Silvers, Greeneville, Tenn., for defendants-appellants; Milligan, Silvers, Coleman & Fletcher, Greeneville, Tenn., on brief.

William W. Hawkins, Kingsport, Tenn., for plaintiffs-appellees; Smoot & Hawkins, Kingsport, Tenn., of counsel.

Before CELEBREZZE, BROOKS* and MILLER, Circuit Judges.

CELEBREZZE, Circuit Judge.

This is an appeal from the District Court's denial of Defendant-Appellant's motion for a stay pending arbitration, pursuant to Section 3 of the United States Arbitration Act of 1925, 9 U.S.C. § 3. The suit arose after a series of over 55 transactions during 1968, 1969, and 1970 in which Plaintiffs-Appellees hereinafter The Carpet Mart, carpet retailers in Kingsport, Tennessee, purchased carpets from Defendant-Appellant hereinafter Collins & Aikman, incorporated under the laws of the State of Delaware, with its principal place of business in New York, New York, and owner of a carpet manufacturing plant formerly the Painter Carpet Mills, Inc. located in Dalton, Georgia. The Carpet Mart originally brought this action in a Tennessee state trial court, seeking compensatory and punitive damages in the amount of $450,000 from Collins & Aikman for the latter's alleged fraud, deceit, and misrepresentation in the sale of what were supposedly carpets manufactured from 100% Kodel polyester fiber. The Carpet Mart maintains that in May, 1970, in response to a customer complaint, it learned that not all of the carpets were manufactured from 100% Kodel polyester fiber but rather some were composed of a cheaper and inferior carpet fiber. After the cause was removed to the District Court on the basis of diversity of citizenship, Collins & Aikman moved for a stay pending arbitration, asserting that The Carpet Mart was bound to an arbitration agreement which appeared on the reverse side of Collins & Aikman's printed sales acknowledgment forms. Holding that there existed no binding arbitration agreement between the parties, the District Court denied the stay. For the reasons set forth below, we remand the case to the District Court for further findings.

I

We initially note that the denial of a motion to stay pending arbitration, although interlocutory in nature, is appealable to this Court. In Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583 (1935), the Supreme Court held that a motion to stay pending arbitration under 9 U.S.C. § 3 is, in effect, an application for an interlocutory injunction, the denial of which is appealable under Section 9 of the Judicial Code now, as amended, 28 U.S.C. § 1292. See also Hoover Motor Express Co., Inc. v. Teamsters, Chauffeurs, Helpers and Taxicab Drivers, Local No. 327, 217 F. 2d 49, 51 (6th Cir. 1954).

We also find that there is no conflicts of law problem in the present case, the Uniform Commercial Code having been enacted in both Georgia and Tennessee at the time of the disputed transactions. G.C.A. Tit. 109A (eff. April 1, 1963) (without Official Comments); T.C.A. Tit. 47 (eff. June 30, 1964) (with Official Comments).

II

The primary question before us on appeal is whether the District Court, in denying Collins & Aikman's motion for a stay pending arbitration, erred in holding that The Carpet Mart was not bound by the arbitration agreement appearing on the back of Collins & Aikman's acknowledgment forms. In reviewing the District Court's determination, we must look closely at the procedures which were followed in the sales transactions which gave rise to the present dispute over the arbitration agreement.

In each of the more than 55 transactions, one of the partners in The Carpet Mart, or, on some occasions, Collins & Aikman's visiting salesman, telephoned Collins & Aikman's order department in Dalton, Georgia, and ordered certain quantities of carpets listed in Collins & Aikman's catalogue. There is some dispute as to what, if any, agreements were reached through the telephone calls and through the visits by Collins & Aikman's salesman. After each oral order was placed, the price, if any, quoted by the buyer was checked against Collins & Aikman's price list, and the credit department was consulted to determine if The Carpet Mart had paid for all previous shipments. After it was found that everything was in order, Collins & Aikman's order department typed the information concerning the particular order on one of its printed acknowledgment forms. Each acknowledgment form bore one of three legends: "Acknowledgment," "Customer Acknowledgment," or "Sales Contract." The following provision was printed on the face of the forms bearing the "Acknowledgment" legend:

"The acceptance of your order is subject to all of the terms and conditions on the face and reverse side hereof, including arbitration, all of which are accepted by buyer; it supersedes buyer\'s order form, if any. It shall become a contract either (a) when signed and delivered by buyer to seller and accepted in writing by seller, or (b) at Seller\'s option, when buyer shall have given to seller specification of assortments, delivery dates, shipping instructions, or instructions to bill and hold as to all or any part of the merchandise herein described, or when buyer has received delivery of the whole or any part thereof, or when buyer has otherwise assented to the terms and conditions hereof."

Similarly, on the face of the forms bearing the "Customer Acknowledgment" or "Sales Contract" legends the following provision appeared:

"This order is given subject to all of the terms and conditions on the face and reverse side hereof, including the provisions for arbitration and the exclusion of warranties, all of which are accepted by Buyer, supersede Buyer\'s order form, if any, and constitute the entire contract between Buyer and Seller. This order shall become a contract as to the entire quantity specified either (a) when signed and delivered by Buyer to Seller and accepted in writing by Seller or (b) when Buyer has received and retained this order for ten days without objection, or (c) when Buyer has accepted delivery of any part of the merchandise specified herein or has furnished to Seller specifications or assortments, delivery dates, shipping instructions, or instructions to bill and hold, or when Buyer has otherwise indicated acceptance of the terms hereof."

The small print on the reverse side of the forms provided, among other things, that all claims arising out of the contract would be submitted to arbitration in New York City. Each acknowledgment form was signed by an employee of Collins & Aikman's order department and mailed to The Carpet Mart on the day the telephone order was received or, at the latest, on the following day.1 The carpets were thereafter shipped to The Carpet Mart, with the interval between the mailing of the acknowledgment form and shipment of the carpets varying from a brief interval to a period of several weeks or months. Absent a delay in the mails, however, The Carpet Mart always received the acknowledgment forms prior to receiving the carpets. In all cases The Carpet Mart took delivery of and paid for the carpets without objecting to any terms contained in the acknowledgment form.

In holding that no binding arbitration agreement was created between the parties through the transactions above, the District Court relied on T.C.A. § 47-2-207 UCC § 2-207, which provides:

"(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
"(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
"(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of chapters 1 through 9 of this title."

The District Court found that Subsection 2-207(3) controlled the instant case, quoting the following passage from 1 W. Hawkland, A Transactional Guide to the Uniform Commercial Code § 1.090303, at 19-20 (1964):

"If the seller . . . ships the goods and the buyer accepts them, a contract is formed under subsection (3). The terms of this contract are those on which the purchase order and acknowledgment agree, and the additional terms needed for a contract are to be found throughout the U.C.C.
. . . The U.C.C. does not impose an arbitration term on the parties where their contract is silent on the matter. Hence, a conflict between an arbitration and an no-arbitration clause would result in the no-arbitration clause becoming effective."

Under this authority alone the District Court concluded that the arbitration clause on the back of Collins & Aikman's sales acknowledgment had not become a binding term in the 50-odd transactions with The Carpet Mart.

In reviewing this determination by the District Court, we are aware of the problems which courts have had in interpreting Section 2-207. This section of the UCC has been described as a "murky bit of prose," ...

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