Stemcor Usa, Inc. v. Trident Steel Corp.

• Decision Date: 25 October 2006
• Docket Number: No. 06 Civ. 585(JGK).,06 Civ. 585(JGK).
• Citation: 471 F.Supp.2d 362
• Parties: STEMCOR USA, INC., Petitioner, v. TRIDENT STEEL CORPORATION, Respondent.
• Court: U.S. District Court — Southern District of New York

471 F.Supp.2d 362

STEMCOR USA, INC., Petitioner, v. TRIDENT STEEL CORPORATION, Respondent.

No. 06 Civ. 585(JGK).

United States District Court, S.D. New York.

October 25, 2006.

Alex Sauchik, Andrew N. Krinsky, Sauchik Alec, Tarter, Krinsky & Drogin, L.L.P. New York, NY, for plaintiffs.

Daniel J. Kasprzak, Johnson Deluca Kennedy & Kurisky, P.C., Houston, TX, Peter A. Cross, Wendy C. Michael, Jacob, Medinger & Finnegan L LP, New York, NY, for defendant.

OPINION AND ORDER

KOELTL, District Judge.

The petitioner, Stemcor USA, Inc. ("Stemcor"), filed a petition to compel arbitration under Sections 3 and 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 3, 4. Stemcor also moved for a preliminary injunction to stay three third-party actions filed against it by the respondent Trident Steel Corporation ("Trident"), that are pending in the state courts of Texas. The parties agreed at a hearing on March 10, 2006 that the preliminary injunction motion and the underlying petition could be consolidated after supplemental briefing.

The Court today dispenses with both actions by denying Stemcor's petition to compel arbitration.

I.

The disputes at issue in the Texas actions arose out of Stemcor's sale of steel products to Trident between October 2000 and April 2002. During that period, the two companies entered into a series of twelve sales agreements for steel casings, or hollow steel pipe. Pursuant to those sales agreements, Stemcor delivered steel casings to Trident.

The parties do not dispute that their sales agreements constituted valid contracts. Trident initiated each purchase by sending to Stemcor a purchase order including the basic specifications of the steel casings desired. Each of Trident's purchase order forms included the following clause:

1. No terms or conditions, other than those stated herein, and no agreement or understanding in any way modifying the terms and conditions herein stated shall be binding upon purchaser, unless mutually agreed upon in writing.

(Ex. A to Decl. of Wendy C. Michael, Feb. 14, 2006.)

In response to Trident's purchase orders, Stemcor sent two subsequent documents to Trident: an acknowledgement farm, alternately labeled a "Sales Contract" or a "Sale Note," sent prior to delivery of the goods, and a "Sales Invoice," sent following the delivery of goods. Each acknowledgement form included the following paragraph:

This contract is made between the buyer and the seller whereby the buyer agrees to buy and the seller agrees to sell the undermentioned goods subject to the terms and conditions as stipulated hereafter. This contract reflects in its entirety all details as agreed between the parties thereto. Any changes must be in writing and accepted by both parties. Any contract disputes are to be resolved through friendly negotiations. If no settlement can be reached then either party may submit the dispute to arbitration as per the rules of the American Arbitration Association in New York.

(Ex. A to Aff. of Alec Sauchik, Jan. 24, 2006.) Some of the acknowledgement forms also altered other terms contained in Trident's purchase orders, including changes in the length of the payment term and minor variations in the price and the amount of steel casing to be delivered. (Compare Ex. A to Aff. of Gary Boral, Mar. 20, 2006, with Ex. A to Sauchik Aff.)

After sending each acknowledgement form to Trident, Stemcor delivered the requested steel casings to Trident at Houston, Texas. (See Pet. To Compel Arbitration, for Stay and for Injunctive Relief ¶ 6; Demand for Arbitration ¶¶ 6, 11-12, Ex. B to Sauchik Aff.) Trident accepted each delivery of casings, but it failed to pay Stemcor $144,690.74 of the amount due under various invoices. (Pet. To Compel Arbitration ¶¶ 6, 7; see also Exs. C, D, E to Demand for Arbitration, attached as Ex. B to Sauchik Aff.)

After it received the steel casings, Trident modified them by threading the ends and in turn re-sold them to a number of companies that operate oil wells. (Pet. to Compel Arbitation ¶ 7.) Three of those oil well operators brought suit against Trident in Texas state courts alleging that the steel casings were defective, resulting in the cases J-W Operating Co. v. Trident Steel Corp., No. 04-10235, in the C-68^th Judicial District Court of Dallas County, Trident Steel Corp. v. Eagle Oil & Gas Co., No.2003-20285-158, in the 158^th Judicial District Court of Denton County, and R.L. Adkins Corp. v. Trident Steel Corp., No.2004-301350211, in the 211^th District Court of Denton County. In each of these three actions, the oil well operators asserted claims against Trident alleging that the steel casings delivered by Trident were defective, and in each case Trident filed a third-party complaint against Stemcor seeking indemnification for any damages it might owe to the oil well operators. (See Petition to Compel Arbitration ¶¶ 8-17.)

The J-W Operating Co. case has settled. (Hr'g Tr. 13:8-13, Mar. 10, 2006.) In Eagle Oil & Gas, Stemcor filed a motion to compel arbitration and to stay proceedings with respect to its involvement in the case in September of 2004. No order has issued to date with respect to that motion. Stemcor has not filed a motion to compel arbitration in the R.L. Adkins case, and that action is still pending.

On December 15, 2005, Stemcor filed a demand for arbitration with the American Arbitration Association ("AAA"), claiming that Trident was bound to arbitrate any disputes arising out of the sales agreements. (Demand for Arbitration ¶¶ 48-53, Ex. B to Sauchik Aff.) Trident's answer to the demand for arbitration, filed with the AAA on January 16, 2006, asserted that the AAA was without jurisdiction to arbitrate the disputes because no valid agreement to arbitrate existed between Stemcor and Trident. (Resp.'s Original Answer ¶¶ 1-2, Ex. C to Sauchik Aff.; see also Resp.'s Mot. to Dismiss for Want of Jurisdiction, Ex. D to Sauchik Aff.) The parties agreed to place the matter before the AAA in abeyance. (Ex. M to Michael Decl.)

Stemcor initiated this action by filing its petition to compel arbitration and for injunctive relief on January 24, 2006.

II.

A.

Federal courts, in ruling on a petition to compel arbitration under the FAA, are to determine "two issues: i) whether a valid agreement or obligation to arbitrate exists, and whether one party to the agreement has failed, neglected, or refused to arbitrate." PaineWebber, Inc. v. Bybyk, 81 F.3d 1193, 1198 (2d Cir.1996). It has long been settled that arbitration is a matter of contract and that, therefore, a party cannot be compelled to submit to arbitration any matter that party has not agreed to arbitrate. E.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Shaw Group, Inc. v. Triplefine Ina Corp., 322 F.3d 115, 120 (2d Cir.2003). Whether a valid agreement exists to submit certain issues to binding arbitration is determined by state law principles governing `the formation of contracts. Shaw Group, 322 F.3d at 120 (citing First Options, 514 U.S. at 944, 115 S.Ct. 1920); see also Bell v. Cendant Corp., 293 F.3d 563, 566 (2d Cir. 2002). In applying those state law principles, however, the FAA requires that arbitration agreements be treated no more harshly than other contractual provisions. See Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 295-96 (2d Cir.1999) ("Thus, we have stated that . . . § 2 of the FAA preempts state law that treats arbitration agreements differently from any other contracts .. ."); Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 46 (2d Cir.1993) (quoting Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987)) ("A state law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with this requirement of § 2.").

B.

In this case, there is no dispute that Stemcor and Trident entered into a series of binding sales contracts, and the parties agree that those contracts are governed by New York law,¹ and in particular by the Uniform Commercial Code ("UCC") as adopted by New York. The parties do not, however, agree on the answer to the central question under the FAA analysis: whether those contracts included an agreement to submit disputes between Stemcor and Trident to arbitration. An arbitration clause appears in the acknowledgement forms Stemcor used to confirm Trident's orders, but not in Trident's purchase orders. Trident contends that its purchase orders constituted offers, and that Stemcor's acknowledgement forms constituted acceptances of those offers. Stemcor argues that its acknowledgement forms were not acceptances of Trident's offers, but were instead counter-offers that Trident accepted by performance when it took delivery of the steel casings.

Under New York law, section 2-207 of the UCC governs the formation of contracts when the terms of the parties' writings are not identical. This provision was adopted to alter the common law rule requiring perfect symmetry between the terms of an offer and an acceptance and to resolve the "battle of the forms" problem in a way that better conforms to modern business practices. See N.Y. U.C.C. § 2-207, cmts. 1-2; Rite Fabrics, Inc. v. Stafford-Higgins Co., 366 F.Supp. 1, 6-7 (S.D.N.Y.1973). Section 2-207 provides:

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. .

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c)...