Bouriez v. Carnegie Mellon University

• Decision Date: 01 March 2004
• Docket Number: No. 03-1709.,03-1709.
• Parties: Christian BOURIEZ; Montanelle Beheer B.V., Appellants, v. CARNEGIE MELLON UNIVERSITY.
• Court: U.S. Court of Appeals — Third Circuit

359 F.3d 292

Christian BOURIEZ; Montanelle Beheer B.V., Appellants, v. CARNEGIE MELLON UNIVERSITY.

No. 03-1709.

United States Court of Appeals, Third Circuit.

Argued January 27, 2004.

Filed March 1, 2004.

James A. Vollins, (Argued), Cleveland, for Appellants.

George E. Yokitis, (Argued), DeForest, Koscelnik & Yokitis, Pittsburgh, for Appellee.

Before NYGAARD and FUENTES, Circuit Judges, and O'NEILL,^* District Judge.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Christian Bouriez and Montanelle Beheer B.V. (collectively referred to as "Bouriez") appeal the District Court's order compelling arbitration and dismissing their case. We will reverse and remand.

I.

In 1996, Carnegie Mellon University entered into an agreement (the "1996 Agreement") with Zeta Projects Limited. Under the terms of this Agreement, Zeta Projects would fund certain of Carnegie Mellon's research projects. In 1997, Governors Refining Technologies assumed Zeta Projects' position in the 1996 Agreement. Governors Refining was a partially owned subsidiary of Governors Technologies Corp.

In 1999, Carnegie Mellon approached Bouriez about investing in a research project ("the Project") that was being conducted under the 1996 Agreement.¹ According to Bouriez, Carnegie Mellon represented to him that they had Proof-of-Concept on the technology at issue. Bouriez agreed to support the Project and did so by investing in, and thereby becoming a shareholder of, Governors Technologies. Governors Technologies then took the $5,000,000 that Bouriez invested and used it to fund the Project.

By the end of 2000, Carnegie Mellon was in need of additional funds for the Project. Carnegie Mellon again approached Bouriez and he agreed to assist Carnegie Mellon in finding additional investors. Before finding those investors, the Project underwent an audit and, according to Bouriez, that audit revealed that Carnegie Mellon never had Proof-of-Concept for the Project. As a result of this discovery, Bouriez did not try to find additional investors for the Project and sued Carnegie Mellon. Bouriez claims that Carnegie Mellon made misrepresentations to him about the status of the Project in order to convince him to purchase shares in Governors Technologies and, thereby fund the Project.

Carnegie Mellon filed a motion seeking to compel Bouriez to arbitrate his claims and to have his federal action dismissed. Carnegie Mellon based this motion on the arbitration clause contained in the 1996 Agreement. The clause requires that, "Any dispute or claim arising out of or relating to the Agreement will be settled by arbitration in Pittsburgh, Pennsylvania." App. 24. Neither Bouriez nor Governors Technologies signed this Agreement.

The District Court granted Carnegie Mellon's motion after finding that Bouriez "as agent[] of [Governors Technologies], [is] bound by [his] principal's [Governors Technologies] agreement to arbitrate" and "[Bouriez] embraced the Agreement and directly benefitted therefrom and thus [is] equitable [sic] estopped from avoiding its arbitration clause." App. at 6.

II.

We have jurisdiction over this appeal under 28 U.S.C. § 1291.² We exercise plenary review over the District Court's order compelling arbitration. Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1113 (3d Cir. 1993).

The right to a jury trial is a fundamental right that is expressly protected by the Seventh Amendment to the United States Constitution. Molthan v. Temple Univ. of Com. Sys. of Higher Educ., 778 F.2d 955, 963 (3d Cir.1985). Although the Federal Arbitration Act "establishes a strong federal policy in favor of compelling arbitration over litigation," this Court has held that it is inappropriate to force a party to arbitrate their disputes unless that party agreed to such arbitration. E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 194 (3d Cir.2001). A party, however, can be compelled to arbitrate under an agreement, even if he or she did not sign that agreement, if common law principles of agency and contract support such an obligation on his or her part. Id. at 194-95.

Generally, the common law theories used to bind a non-signatory to an arbitration clause include third party beneficiary, agency and equitable estoppel. Here, Carnegie Mellon argued, and the District Court accepted, that Bouriez could be compelled to arbitrate under the 1996 Agreement based on the principles of agency and equitable estoppel.

In its agency analysis, the District Court found that Bouriez was an agent of Governors Technologies and, therefore, was bound to arbitrate under the 1996 Agreement. Bouriez raises several factual arguments regarding his status as an agent of Governors Technologies and Governors Technologies' obligation to arbitrate under an agreement assumed, not by Governors Technologies, but by Governors Refining. However, even assuming Bouriez was an agent of Governors Technologies and it was obligated to arbitrate under the 1996 Agreement, this does not mean Bouriez was also obligated to arbitrate his claims. In Bel-Ray Co. v. Chemrite, we held that an agent can only be bound by the agreements of his principal when that principal acted with the agent's actual, implied, or apparent authority. 181 F.3d 435, 445 (3d Cir.1999). There is no evidence that Governors Technologies, Governors Refining, or any other entity was acting with implied, actual or apparent authority for Bouriez when it agreed to the 1996 Agreement. In fact, the record shows that Bouriez did not even become involved in the Project until 1999, approximately two years after Governors Refining assumed the 1996 Agreement. Therefore, the District Court is incorrect in its conclusion that any agency relationship between Bouriez and Governors Technologies obligated him to arbitrate.

A person may also be equitably estopped from challenging an agreement that includes an arbitration clause when that person embraces the agreement and directly benefits from it. E.I. DuPont, 269 F.3d at 199-200. Here, there is simply no evidence in the record to indicate that Bouriez directly benefitted from the 1996 Agreement. At most, the facts show that Bouriez became a minority shareholder in Governors...