Cajun Elec. Power Co-op., Inc., In re

Decision Date09 June 1986
Docket Number85-3366,Nos. 85-3314,s. 85-3314
Citation791 F.2d 353
CourtU.S. Court of Appeals — Fifth Circuit

Reuben L. Hedlund, Deborah C. Paskin, Latham & Watkins, Chicago, Ill., Gene W. Lafitte, John N. Wilson, Bruce V. Schewe, Robert E. Holden, Liskow & Lewis, New Orleans, La., for Riley Stoker Corp., & its sureties.

William P. Wray, Eric S. Kracht, M. J. Bodenhamer, Wray, Robinson & Kracht, Baton Rouge, for Cajun Electric Power Cooperative, Inc.

Appeal from the United States District Court for the Middle District of Louisiana.

Before GOLDBERG, HILL, and JONES, Circuit Judges.

IRVING L. GOLDBERG, Circuit Judge:

This case involves a $76 million contract in which Riley Stoker Corporation agreed to construct two coal-fired steam generators for Cajun Electric Power Cooperative, Inc. The contract contained a provision requiring the parties to submit to arbitration any claims or disputes arising under the contract. Some eight years after the signing of the contract such a dispute did arise, and Riley Stoker sought arbitration. Cajun responded that it had not realized an arbitration clause was contained in the contract and that the arbitration clause was therefore null and void. The district court below, Polozola, J., rejected this argument and ordered arbitration. We affirm.


Cajun Electric Power Cooperative, Inc. ("Cajun") is a Louisiana corporation that generates, sells, and distributes electrical power. In the fall of 1974 Cajun issued bid invitations to Riley Stoker Corporation ("Riley") and other utility boiler manufacturers for the construction of two coal-fired steam generators. Cajun provided bid forms that were to be filled out, returned, and eventually incorporated in a final contract. Bidders were instructed to furnish "other data required in the attached forms" and to have same "executed by a responsible and authorized officer of the company."

This was a "design-and-build" contract. "That is, the Technical Specifications described and defined only the general parameters of the boiler, leaving the specifics of design, fabrication and erection to the expertise of the boiler manufacturers. The Bid Documents called for each bidder to supplement the proposal forms with other technical data to 'explain the bid.' " Appellant's Brief at 6. The "Notice and Instructions to Bidders" section of the contract sets forth the procedures to be followed by bidders in submitting responsive bids. A subsection entitled "Manufacturer's Data Submitted with Bid" states in part that "Proposals shall include prints of the manufacturer's data called for in the Specifications in addition to any other data submitted by the Bidder to explain his bid."

Riley submitted its bid to Cajun under cover letter of January 7, 1975. In making its bid Riley supplied the necessary information on the Cajun contract documents and included a section entitled "Riley Stoker Corp. Proposal No. 53020" as part of the contract; this Proposal contained the disputed arbitration clause. After receiving all the bids, Cajun held negotiation sessions with each of the bidders, as provided for in the "Notice and Instructions of Bidders" section of the contract ("The Owner ... may elect to conduct a round of negotiations with each bidder to resolve any questions related to the substance of his proposal"). 1 Negotiation sessions were held with Riley on February 24 and March 17, 1975.

Cajun awarded the steam generator contract to Riley on April 1, 1975, and issued a formal "letter of intent" on April 10, 1975. Thereafter, representatives of Cajun and Riley met "on numerous occasions," Appellant's Brief at 9, to discuss the contract. On July 17, 1975, Riley submitted a revised version of Proposal 53020, including the original arbitration clause, for inclusion in the contract documents.

Riley signed the final agreement known as Contract G2-2 on August 18, 1975. On September 23, 1975, Cajun's President signed the agreement. That same day Cajun's Board of Directors formally ratified Contract G2-2 by passing the following resolution:

BE IT RESOLVED that the Board of Directors of Cajun Electric Power Cooperative, Inc., in regular session convened, does hereby approve and ratify the awarding to Riley Stoker Corporation of Contract G2-2 for boiler purchase with respect to the Big Cajun No. 2 generating facility, in an original contract amount of $75,949,500, the effectiveness thereof to be conditioned upon approval by the Administrator of the Rural Electrification Administration.

The Rural Electrification Administration ("REA"), which was lending Cajun the funds for the project, approved the contract on April 27, 1977.

At the beginning the final contract is a "List of Contents," which states, at the very top: "The following lists all the pages which constitute the contract." The "List of Contents" covers seven separate contract documents, each separately paginated: 1) REA Form 200 (Modified): Construction Contract--Generating (Alternate Bid); 2) General Conditions; 3) Special Conditions; 4) Appendix A; 5) Technical Specifications S-3183-2 for Steam Generators; 6) Bidding Schedules; 7) Riley Stoker Corp. Proposal No. 53020-75034, dated December 27, 1974 and revised June 20, 1975. The pages encompassed by each of these contract documents are entered in the List of Contents under the titles of their respective documents.

Page 12 of the first contract document, REA Form 200 (Modified), contains the following provision:

11. Contract is Entire Agreement.

The Contract to be effected by the acceptance of the Proposal shall be deemed to include the entire agreement between the parties thereto, and the Bidder shall not claim any modification thereof resulting from any representation or promise made at any time by any officer, agent or employee of the Owner or by any other person.

Page 4 of the General Conditions document contains a similar provision:

1.5 Contract Documents Embody Entire Agreement.

The Contract Documents embody the entire agreement between Owner and Contractor. Owner and Contractor represent that in entering into this Contract they do not rely upon any previous oral, written or implied representation, endorsement or understanding of any kind.

Any modification of the Contract shall be in writing and executed in the same manner as the Contract. The Contract shall be binding upon and inure only to the benefit of the parties hereto and their legal successors, representatives and assigns.

The pages encompassed by the seventh contract document, Riley Stoker Corp. Proposal No. 53020, are listed both in the general "List of Contents" and in a separate Index at the beginning of the Riley Proposal. A page 29 is included in both listings. In the Index to the Riley Proposal the title "Final Page" appears opposite the number 29. The heading "ARBITRATION" appears at the top of page 29 of the Riley Proposal, followed by:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration, in accordance with the Rules of the American Arbitration Association, and judgement [sic ] upon the award rendered by the arbitrators may be entered in any Court having jurisdiction thereof.

This contract is made in Worcester, Massachusetts

Respectfully submitted,


BY /s/ J.E. Hicinbothem





DATE _________ 19__ BY __________

APPROVED AS OF _________ 19 __


BY ______________________

The remainder of the page is blank, except for the notation "Final Page (29)" at the very bottom.

"[P]age 29 of Riley's 'Proposal Number 53020' contained ... the required signature of an 'authorized officer of the company'.... In accordance with previously-quoted portions of the Bid Documents, Riley's ... Proposal 53020 ... was incorporated into the final version of Contract G2-2. [T]he quoted arbitration clause ... remains on the signature page of Riley's 'Proposal No. 53030', which was bound in toto into the Contract Documents." Appellant's Brief at 8, 10.

Construction on the project began in 1975. On December 30, 1983, Cajun instituted a civil action in the United States District Court for the Middle District of Louisiana, alleging delays and deficiencies in the construction and seeking damages in excess of $200 million. On February 21, 1984, Riley filed a Petition to Compel Arbitration under 9 U.S.C. 1 et seq., the United States Arbitration Act, and a Motion to Dismiss or Stay Proceedings Pending Arbitration. On March 12, 1984, Cajun opposed defendants' petition and motion, alleging in part:

3. The agreement between Plaintiff-Respondent and Riley Stoker Corporation contained no agreement, written or otherwise, to settle by arbitration any disputes arising therefrom.

4. The inclusion, listing or reference to page 29 of the Riley Stoker Corporation proposal 53020-75304 (which purportedly refers to arbitration) was the result of a clerical error and mistake in compilation of documents and an accidental happening at best; the same was not authorized by the parties, is contrary to the intent of the parties, and not indicative of or consistent with the agreement between the parties.

5. Plaintiff-Respondent alleges a lack of mutuality of assent as to the arbitration language contained in the page 29 of the Riley Stoker proposal.

6. The parties to the contract sued upon have manifested no consent to arbitrate their disputes, and the persons compiling the construction documents and the signatories thereto lacked authority and capacity to bind their respective employer-principals to an arbitration agreement.

7. Alternatively, Plaintiff-Respondent alleges that the...

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