Intergen N.V. v. Grina

• Citation: 344 F.3d 134
• Decision Date: 22 September 2003
• Docket Number: No. 03-1056.,03-1056.
• Parties: INTERGEN N.V., Plaintiff, Appellee, v. Eric F. GRINA, Alstom (Switzerland) Limited, and Alstom Power NV, Defendants, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

344 F.3d 134

INTERGEN N.V., Plaintiff, Appellee, v. Eric F. GRINA, Alstom (Switzerland) Limited, and Alstom Power NV, Defendants, Appellants.

No. 03-1056.

United States Court of Appeals, First Circuit.

Submitted July 29, 2003.

Decided September 22, 2003.

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John M. Townsend, Hughes Hubbard & Reed LLP, Barry Y. Weiner, Christopher P. Litterio, and Ruberto, Israel & Weiner, P.C. on brief for appellants.

Evan Slavitt, Bodoff & Slavitt LLP, George Anthony Smith, Thomas Philip Wilson, and Sutherland Asbill & Brennan LLP on brief for appellee.

Before SELYA, Circuit Judge, STAPLETON^* and BALDOCK,^** Senior Circuit Judges.

SELYA, Circuit Judge.

This case invites us to fit a complex set of corporate pegs into a series of unfamiliar holes drilled by international conventions and federal statutes. But the pegs are square, the holes are round, and the fit is inexact. Given the facts of this case, the obvious bar to arbitrability is the abecedarian tenet that a party cannot be forced to arbitrate if it has not agreed to do so. The defendants advance several theories designed to circumvent this tenet. After answering a question of first impression in this circuit as to what legal standard controls in cases brought under chapter 2 of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 201-208, we examine these theories. In the end, we discern no sufficient legal basis for compelling arbitration here. Consequently, we uphold the order entered below.

I. BACKGROUND

We divide our discussion of the relevant background into three segments. Except as otherwise indicated, the facts are not disputed.

A. The Cast of Characters.

Plaintiff-appellee InterGen N.V. is an energy company based in the Netherlands. InterGen finances and develops electric power generation facilities throughout the world. During the summer and fall of 1995, InterGen launched the 750-megawatt Rocksavage power project, located in the United Kingdom. In its preliminary workup, InterGen entertained competitive bids for gas-fired turbines. After consulting with its technical services advisor and corporate cousin Bechtel Power Corporation, InterGen settled on GT26 gas turbines manufactured by defendant-appellant ALSTOM Power N.V. One persuasive attribute of the successful bid, InterGen alleges, was the manufacturer's pledge to vet the GT26 technology at a special testing facility in Birr, Switzerland. Shortly after choosing the GT26 gas turbines for the Rocksavage plant, InterGen decided to go forward with another electronic power generation facility—Coryton, also located in the U.K. — and opted to use the same turbines there.

Both the Rocksavage and Coryton developments were encased in individual Cayman Island corporations, namely, Rocksavage Power Company (RPC) and Coryton Energy Company (CEC). Both corporations were beneficially owned by another Cayman Islands corporation, International Generating Company (a wholly owned subsidiary of InterGen).¹ In exchange for developing the projects, making key design decisions (such as the selection of the turbines), and infusing capital, InterGen received an equity stake in each project.

Bechtel Power also has numerous corporate relatives. The patriarch is Bechtel Group, Inc., and Bechtel Power, Bechtel Limited, and Bechtel Enterprises Energy B.V. (one of InterGen's parent companies) are all part of the family. The specific nature of the ties among the Bechtel entities need not concern us. What does matter is that Bechtel Power had an ongoing relationship as InterGen's technical services advisor during construction and development of the Rocksavage and Coryton projects. Another Bechtel company—Bechtel Limited — entered into a separate contract with RPC to act as the engineering, procurement, and construction (EPC) contractor. Pursuant to that contract, Bechtel Limited negotiated and signed an agreement to purchase turbines and related equipment from an indirectly owned subsidiary of ALSTOM Power, namely, ALSTOM Power Generation (APG).

On June 21, 1996 (some five months after Bechtel Limited and APG executed the Rocksavage purchase order),² RPC and APG entered into a services agreement through which APG would maintain the turbines, and a support agreement in which APG promised to deliver certain technology upgrades and risk protection. CEC and APG entered into a similar support agreement on the same date that Bechtel Limited and APG signed the Coryton purchase order (June 5, 1998). Each of these five contracts — the two purchase orders, the services agreement, and the two support agreements — contained liquidated damages provisions and specified that English law would govern disputes arising thereunder. Each also contained clauses providing for mandatory arbitration.

The arbitration clauses in the two purchase orders are identical; in terms, each clause applies to "[a]ny and all controversies, disputes or claims between Buyer and Seller arising out of or in any way relating to this Agreement," and requires that "any dispute or difference arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the rules of the London Court of International Arbitration." The purchase orders define "Buyer" as "the Bechtel entity shown in the Purchase Order Agreement form"; "Seller" as "the Party who has been awarded the Agreement"; and "Agreement" as meaning the purchase order itself. The services and support agreements contain similarly worded arbitration provisions.

B. The Underlying Dispute.

In mid-1998, problems relating to the GT26 turbines started to surface. InterGen alleges that manufacturing and design defects in the turbines caused (and continue to cause) extensive outages that have prevented the Rocksavage facility from operating at full capacity. InterGen further alleges that the turbines commissioned for the Coryton facility (which is not yet in commercial operation) are similarly defective.

Over time, this dissatisfaction led to litigation. On July 20, 2001, InterGen brought suit in a Massachusetts state court. It named as defendants ALSTOM Power, APG (formerly known as ABB Power Generation), ALSTOM Power UK Holdings (an ALSTOM subsidiary that owns APG), and Eric Grina, a Massachusetts resident who allegedly acted as ALSTOM Power's agent for many of the relevant negotiations.³

The complaint alleged in substance that InterGen relied on ALSTOM Power's misrepresentations when choosing turbines for the Rocksavage and Coryton projects; that this selection was contingent upon the manufacturer's assurances that the turbines would be adequately tested before their installation on site; that the manufacturer made other, related representations to InterGen; that the ALSTOM interests neither intended to pre-test the GT26 turbines at Birr nor to fulfill their other representations; that InterGen invested substantial amounts of capital in the two projects in reliance on the manufacturer's knowingly false representations; that the turbines failed miserably; and that InterGen suffered economic losses as a result. The complaint channeled these allegations into six state-law causes of action: intentional deceit, negligent deceit, unfair trade practices, promissory estoppel, tortious interference with advantageous relations, and quantum meruit. The complaint neither sought to recover for breach of contract nor to enforce any contractual right.

C. Travel of the Case.

On October 16, 2001, the defendants removed the action to the federal district court. They posited that the arbitration provisions in the purchase orders and the services and support agreements bound InterGen and that these provisions fell within the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38. Because chapter 2 of the FAA implements the New York Convention, the defendants were able to predicate removal of the action to the federal court on 9 U.S.C. § 205 (allowing removal of any "action or proceeding pending in a State court [that] relates to an arbitration agreement or award falling under the Convention"). On October 26, 2001, the defendants moved to compel arbitration, see id. § 206, and to stay proceedings pending completion of the anticipated arbitration. InterGen opposed these motions, noting that it had neither signed any of the underlying contracts nor agreed to arbitrate the claims asserted in its complaint. For essentially the same reasons, it asked that the case be returned to the state court.

On December 19, 2001, the district court addressed the pending motions at a status conference. Remarking the sparseness of the record, the court adjudged all the pending motions premature and denied them without prejudice. It simultaneously ordered the parties to conduct discovery limited to the questions of arbitrability and personal jurisdiction. The parties complied, and a contentious period of pretrial discovery ensued.

On July 31, 2002, InterGen filed an amended complaint as of right. See Fed.R.Civ.P. 15(a). The amended complaint discarded the quantum meruit claim. More significantly, it revised the roster of parties in such a way that no signatory to any agreement that contained an arbitration clause remained as a party; InterGen was the sole plaintiff and ALSTOM Power, ALSTOM (Switzerland) Limited, and Grina were the sole defendants. For ease in reference, we denominate the three remaining defendants, collectively, as "ALSTOM."

In short order, InterGen renewed its motion to remand the case to the state court and ALSTOM renewed its motion to force arbitration. On October 31, 2002, the district court, ruling ore sponte, denied InterGen's motion to remand. The following week, the court issued a rescript in which it denied ALSTOM's motion. The court rested its ruling on the premise...