Grandis Family Partnership, Ltd. v. Hess Corp.
| Decision Date | 31 October 2008 |
| Docket Number | No. 08-60251-CIV.,08-60251-CIV. |
| Citation | 588 F.Supp.2d 1319 |
| Parties | GRANDIS FAMILY PARTNERSHIP, LTD. d/b/a Advanced Power Technologies, Plaintiff, v. HESS CORPORATION, Defendant. |
| Court | U.S. District Court — Southern District of Florida |
Michael Paul Bennett, Bennett, Aiello, Henry & McGuinness, Miami, FL, for Plaintiff.
Richard Michael Dunn, Sherril May Colombo, Cozen O'Connor, Miami, FL, Christopher Raleigh, Geoffrey D. Ferrer, Cozen O'Connor, New York, NY, for Defendant.
THIS MATTER is before the Court upon Defendant Hess Corporation's Motion To Stay The Litigation And Compel Arbitration, Or, In The Alternative, To Transfer Venue (DE 12). An evidentiary hearing was held before this Court on July 8, 2008, at which the Parties presented evidence in support of and opposition to the instant Motion. The Court has carefully reviewed said Motion and the entire court file and is otherwise fully advised in the premises.
This is a difficult case. It involves several discrete areas of New York contract law coupled with imperfect facts; the combination of which is appropriately found on the pages of cruel contracts exams given by law professors clad in bow ties. Nevertheless, pursuant to this Court's diversity jurisdiction, the following facts were adduced and legal issues raised by the Parties for this Court to resolve.
Defendant Hess Corporation (hereinafter "Hess") and Plaintiff Advanced Power Technologies (hereinafter "APT") began working together in 2003, when Hess contracted with APT for it to service and maintain the lighting at many of Hess's retail gas stations in Florida. Hess was pleased with their business relationship, and in June of 2007, Hess expanded its business with APT by purchasing several orders of lighting ballasts.
In the same year, Hess began accepting bids for a major renovation of its gas stations' outdoor lighting. It planned to replace the existing lighting and ballasts with more energy-efficient models. APT's bid was accepted, and in May of that year, the Parties began negotiating the terms of their agreement. When the Parties' formal agreement was memorialized on July 2, 2007, it consisted of an eleven-page written agreement, complete with eighty pages of appendices, schedules, and forms. However, for certain business reasons, APT began its performance on the project in late June of that year.
The first eleven pages of the Parties' contract was a form prepared by Hess's legal department, which it has used for over a decade. Transcript of Evidentiary Hearing, DE 33, pp. 36, 47 (hereinafter "Transcript"). At the evidentiary hearing, John Garabino, the Hess representative who negotiated the contract with APT, testified that the eleven-page contract was used as a base for the contractual agreement with APT, while the appendices and schedules attached thereto made up the heart of the Parties' agreement. Transcript pp. 46-48. Despite the contract with its appendices and Schedules being seemingly exhaustive in their breadth and detail, it did not contain an arbitration clause or venue provision. Pertinent to the instant Motion, the contract contained a clause listing the documents that were to be incorporated by reference, DE 12, Ex. 1, ¶ 2, an integration clause, id. ¶ 29, and a choice-of-law clause, id. ¶ 32, whereby the Parties agreed that New York law governs any disputes.
After the Parties' agreement was formalized but before the project was completed, the Parties' relationship broke down. APT responded by filing suit in Florida state court, wherein it alleged that Hess was in breach of the contract. Hess timely removed the suit to this Court. See DE 1. With its Answer, it filed a counterclaim for breach of contract and conversion against APT. The factual basis for the counterclaim is immaterial to this Order.
After the case was at issue but before discovery had commenced, Hess filed the instant Motion (DE 12). In it, Hess argues that any disputes arising from the contract must be referred to arbitration, despite the contract's silence concerning the same. In support of this position, Hess cites the terms and conditions referenced in the thirty-two Purchase Orders it sent APT for work performed under the contract. The face of the Purchase Order references the contract's Schedules and forms in several different areas, including each of the individual projects' start and completion dates, as well as forms APT was to complete with the work it performed. See DE 12, Ex. 3. Directly under the Purchase Order's style was the following sentence, in bold:
THE PURCHASE ORDER TERMS AND CONDITIONS AS WELL AS THE SHIPMENT ROUTING POLICY LOCATED AT http://www.hess.com/ PO/HessMR.htm ARE INCORPRATED BY REFERENCE IN THIS PURCHASE ORDER.
DE 12, Ex. 2. By viewing the website listed above, APT would see the additional terms and conditions that it was deemed to assent to by filling the Purchase Order. Among the terms and conditions located on the Hess website, one is of particular importance to this Motion: the arbitration clause. It states, in pertinent part, that "all disputes, claims, questions, or differences shall be finally settled by arbitration." DE 12, Ex. 4, ¶ 34.
Hess seeks to refer this case to arbitration and makes four arguments for why the arbitration clause is binding on APT. First, the Hess Purchase Order was formally incorporated by reference into the Parties' contract. Second, the Hess Purchase Order and the contract should be read together as one document, because the Purchase Orders were the vehicles through which the contract was implemented; without them, APT could not perform under the contract. DE 12, p. 11. Third, the Hess Purchase Order and the contract should be read together, because "[s]igned and unsigned writings relating to the same transaction and containing all the essential terms of a contract may be read together to evidence a binding contract." DE 12, p. 12. And fourth, the Hess Purchase Orders stand alone as separate contracts binding APT to arbitrate the claims arising under them. Id. at 12. The Parties stipulate that if the arbitration clause referenced in the Purchase Orders is binding then all of the claims and counterclaims raised in this action would be referred to arbitration.
The thrust of the instant Motion (DE 12) focuses on the first two arguments, with passing reference to the third and fourth; Hess spends little more than a sentence briefing each of the latter two arguments. At the evidentiary hearing, Hess proceeded solely on the argument that the Hess Purchase Orders were incorporated by reference into the contract. DE 33, p 64. In its closing argument, Hess relied on the logic of the second argument to the bolster its first: Hess reasoned that because APT could not perform without the Purchase Orders, they were necessarily incorporated by reference in Schedule C into the contract. Id. pp. 62-63.
Hess did not argue at the hearing that the Hess Purchase Orders were incorporated by reference through implication or that because the two documents were executed contemporaneously, or more accurately, near the same time, they should be read together. Nor did Hess argue that the Purchase Orders were a modification of the contract. In fact, when asked whether the Hess Purchase Orders amended the contract, Hess's attorney responded: DE 33, p. 64.
In response to Hess's four arguments, APT argues that under New York law an agreement to arbitrate must be clear and unambiguous. Aerotech World Trade Ltd. v. Excalibur Sys., Inc., 236 A.D.2d 609, 654 N.Y.S.2d 386, 387 (N.Y.App.Div.1997). Thus, the generic reference to "purchase orders" in Schedule C fails, as a matter of law, to incorporate the terms and conditions of the Hess Purchase Orders into the Parties' contract. It also takes the position that Hess's alternative arguments fail to establish that the arbitration clause on the Hess website should be read into the contract.
As expressed more fully below, the Court finds that the reference to "purchase orders" in Schedule C is insufficient to formally incorporate by reference the Hess Purchase Orders into the contract. Further, the facts adduced at the hearing did not establish that APT's prior dealings with the Hess Purchase Orders containing the arbitration clause were sufficient to impute knowledge of their existence and terms to APT. APT's employees testified that over the years Hess had issued thousands of purchase orders to APT, none of which resembled those at issue here. Only the purchase orders dealing with the ballast purchases contained the website link, and APT's processing clerk and President took no notice of the modified form. Further, there was contradictory testimony concerning whether APT ever received a copy of the Hess Purchase Orders with the website terms and conditions in a meeting held prior to entering into the contract. Thus, knowledge of the Hess Purchase Orders with their terms and conditions cannot be imputed to APT when it was entering into the contract with Hess.
Hess's alternative arguments also fail. Its theory that the Purchase Orders and the contract should be read together because APT could not perform under the contract without them is without a basis in New York law; even if general contract principles supported Hess's argument, the evidence adduced at the hearing does not permit the Court to make a finding that APT could not perform under the contract without Hess issuing its Purchase Orders. The caselaw cited by Hess in support of its position that the Purchase Orders and contract should be read together as relating to the same transaction thereby evidencing a single binding contract is inapposite to this case. The pertinent issue in this litigation...
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...Referencing "club rules" is not tantamount to referencing the Rose Creek Rules and Regulations. See Grandis Family Partnership, Ltd. v. Hess Corp., 588 F.Supp.2d 1319 (S.D. Fla. 2008)(concluding that by failing to reference a purchase order by using a proper noun and a reference generally t......