Daisy Mfg. Co., Inc. v. NCR Corp.

• Decision Date: 08 July 1994
• Docket Number: No. 93-3738,93-3738
• Citation: 29 F.3d 389
• Parties: RICO Bus.Disp.Guide 8630 DAISY MANUFACTURING CO., INC., a Delaware Corporation, Plaintiff-Appellee, v. NCR CORPORATION, a Maryland Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 389

29 F.3d 389

RICO Bus.Disp.Guide 8630

DAISY MANUFACTURING CO., INC., a Delaware Corporation Plaintiff-Appellee, v. NCR CORPORATION, a Maryland Corporation, Defendant-Appellant.

No. 93-3738.

United States Court of Appeals Eighth Circuit.

Submitted April 13, 1994.

Decided July 8, 1994.

Robert L. Deitz, Washington, DC, argued (James R. Greene, III, Dayton, OH and Charles L. Schlumberger, Little Rock, AR, on the brief), for appellant.

Laura J. Andress, Fayetteville, AR, argued (Tilden P. Wright III, Fayetteville, AR and Ralph Barbier, Jr., Grosse Point Woods, MI, on the brief), for appellee.

Before LOKEN, Circuit Judge, and JOHN R. GIBSON and FRIEDMAN ^*, Senior Circuit Judges.

FRIEDMAN, Senior Circuit Judge.

This is an appeal from an order of the United States District Court for the Western District of Arkansas ^**, denying a motion to compel arbitration and to stay court proceedings, on the ground that the parties had not entered into an agreement to arbitrate. We reverse and remand.

I.

A. In 1976, the appellant NCR Corporation (NCR) entered into an agreement with Daisy Division Victor Comptometer Corporation governing the "terms and conditions" under which the customer would obtain "equipment, programs, and systems and maintenance services" from NCR. The contract, called a "Universal Agreement," was a detailed printed document that, according to NCR, it "typically signs ... at the onset of a commercial relationship with its customers." The "Universal Agreement" included the following arbitration provision:

Disputes--Any controversy or claim, including any claim of misrepresentation, arising out of or related to this Agreement and/or any contract hereafter entered into between NCR and Customer, or the breach thereof, or the furnishing of any equipment or service by NCR to Customer, shall be settled by arbitration.

In 1980, NCR and Daisy executed a Universal Agreement Amendment, by which the customer agreed to include "NCR's copyright notice and any proprietary notice" on all copies made with NCR's consent of material NCR supplied. The agreement was signed for Daisy Manufacturing Co. by Frank Tarr, Vice-President Finance and Administration.

On November 15, 1983, Daisy Manufacturing Company, Inc., was created and "purchased certain of the assets of the Daisy Division" of Kidde Recreation Products, Inc., which in turn had acquired the Daisy Division from Victor Comptometer Corp. Frank Tarr, who had signed the Universal Agreement Amendment as Vice-President Finance and Administration of Daisy Manufacturing Co., assumed the same position in the new entity.

Daisy Manufacturing Company, Inc., continued the same line of business as Daisy Manufacturing Co., at the same address and with some of the same senior management.

Both before and after October 15, 1983, Daisy placed a number of orders with NCR for computers and computer-related equipment. Both NCR and Daisy used the names "Daisy Manufacturing Co." and "Daisy Manufacturing Co., Inc." interchangeably.

The record contains no evidence that after November 15, 1983, (1) Daisy told NCR (a) that a new entity had supplanted Daisy Manufacturing Co. or (b) that the Daisy Manufacturing Co. with which NCR continued to deal was not the same company with which it had previously dealt for a number of years, or (2) that when NCR continued to show Daisy Manufacturing Co., as the customer, Daisy attempted to correct the alleged improper designation.

In a February 9, 1984 letter to NCR, the Vice-President-Controller of Daisy, confirming his "verbal cancellation of the NCR Consulting Service Order dated November 4, 1983 in the amount of $150,000," stated that "[a]s a result of the company being purchased by new management and the related bank loan requirements, we are not in a position to implement the total package of software and hardware which had been scheduled for 1984 and 1985."

B. In October 1991, Daisy ordered from NCR the computer system that gave rise to this litigation. Mr. James Moody, as Executive Vice-President and Chief Financial Officer, signed the purchase order for "Daisy Manufacturing Co." The purchase order included the following statement:

[ ] Except as indicated below, furnishing of equipment, programs and/or services specified herein shall be pursuant to the terms of the Universal Agreement entered into by NCR and Customer.

[ ] Terms and conditions on reverse side apply.

On the reverse side, the purchase order form set forth various terms, including the following arbitration clause:

DISPUTES--Any controversy or claim, including any claim of misrepresentation, rising out of or related to this Agreement or the breach thereof, or the furnishing of any equipment or service by NCR to Customer, shall be settled by arbitration.

Daisy did not check either box.

Daisy's complaint states that "[i]mmediately upon the delivery" of the computer software "Daisy began experiencing numerous problems which have greatly compromised the performance and operation of their business."

C. In April 1993, Daisy Manufacturing Co., Inc., filed the present district court diversity action against NCR and another company, which has been dismissed from the suit. The complaint accused NCR of breach of contract (the October 1991 purchase order), fraud, and violation of the Racketeer Influenced and Corrupt Organizations Act [RICO], 18 U.S.C. Sec. 1961 et seq. (1988).

NCR moved, pursuant to Sections 3 and 4 of the Federal Arbitration Act, 9 U.S.C. (1988) and the Arkansas Uniform Arbitration Act, Ark.Code Ann. Secs. 16-108-201 (1987), to compel arbitration and to stay the judicial proceedings. In a 10-page letter opinion, the district court denied the motion because it "cannot say that Daisy is contractually bound to arbitrate the disputes that are the subject of this action." The court held that

NCR has failed to show that Daisy [Manufacturing Co., Inc.] signed, agreed to adopt, affirmatively adopted, or is deemed by operation of law to have adopted the 1976 universal agreement ... The mere fact that Daisy as a newly formed corporation continued a business relationship that had previously existed between NCR and the Daisy Division of a separate corporation is insufficient to subject Daisy to the agreement ... Daisy was incorporated in 1983 and thus became a separate and distinct legal entity. The fact that it may have had the same or some of the same officers, directors, or shareholders, or continued business at the same physical location is insufficient to allow the court to disregard the corporate existence.

The court apparently concluded that Daisy's failure to check either box on the purchase order prevented the application of the arbitration provision on the reverse side of that order.

We have jurisdiction under 9 U.S.C. Sec. 16(a)(1)(A) and (a)(1)(B), to review the district court's order refusing to compel arbitration and to stay court proceedings. See Gammaro v. Thorp Consumer Discount Co., 15 F.3d 93, 95 (8th Cir.1994).

II.

As the district court stated, before a party may be compelled to arbitrate under the Federal Arbitration Act, the court must engage in a limited review to ensure that the dispute "is arbitrable--i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement. PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990)." "Ordinary contract principles determine who is bound by such written provisions and of course parties can become contractually bound absent their signatures.... A/S Custodia v. Lessin International, Inc., 503 F.2d 318, 320 (2d Cir.1974), quoting, Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir.1960)." "[A]lthough a party is bound by an arbitral award only where it has agreed to arbitrate, an agreement may be implied from the party's conduct. [In the matter of Keystone Shipping and Texport Oil, 782 F.Supp. 28, 30 (S.D.N.Y.1992) ] (citations omitted)."

The district court held that Daisy Manufacturing Co., Inc. was not bound by the arbitration provisions in the amended Universal Agreement because those documents had been signed not by that entity but by its predecessors, Daisy Division Victor Comptometer Corporation and Daisy Manufacturing Co. The court stated that "[t]he mere fact that Daisy as a newly formed corporation continued a business relationship that had previously existed between NCR and the Daisy Division of a separate corporation is insufficient to subject Daisy to the agreement.... The fact that it may have had the same or some of the same officers, directors, or shareholders, or continued business at the same physical location is insufficient to allow the court to disregard the corporate existence."

The issues, however, were not whether the new corporate entity "continued a business relationship that had previously existed" between its predecessors and NCR or whether the court should "disregard the corporate existence" of Daisy Manufacturing Co., Inc. The issues were (A) whether the course of dealing between the parties after Daisy Manufacturing Co., Inc. was formed in 1983, in which both treated the latter as the same customer as its predecessor Daisy Manufacturing Co., bound Daisy Manufacturing Co., Inc. to the arbitration provision of the amended Universal Agreement that the predecessor had signed, and (B) whether Daisy Manufacturing Co., Inc. was not bound by the arbitration provision in the Universal Agreement or the purchase order agreement because it had not checked either box on the purchase order to indicate which terms and conditions it wanted to govern the computer system purchase order. We hold that the district court erred in both of the grounds upon which it concluded that Daisy Manufacturing Co., Inc. was not bound by the arbitration provision of the Universal Agreement or the purchase order.

A. Daisy Division signed the Universal Agreement in 1976 and Daisy Manufacturing Co. signed the 198...