Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc.

• Decision Date: 30 December 1993
• Docket Number: No. 91-9153,91-9153
• Citation: 10 F.3d 753
• Parties: SUNKIST SOFT DRINKS, INC., Plaintiff, Del Monte Corporation, Nabisco Brands, Inc., Plaintiffs-Appellees, v. SUNKIST GROWERS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 753

10 F.3d 753

SUNKIST SOFT DRINKS, INC., Plaintiff Del Monte Corporation, Nabisco Brands, Inc., Plaintiffs-Appellees, v. SUNKIST GROWERS, INC., Defendant-Appellant.

No. 91-9153.

United States Court of Appeals Eleventh Circuit.

Dec. 30, 1993.

Emmet J. Bondurant, II, Edward Bryan Krugman, Bondurant Mixson & Elmore, Atlanta, GA, Deseriee A. Kennedy, Robert G. Badal, Wayne M. Smith, Jill F. Cooper, Pepper Hamilton & Scheetz, Martin J. Trupiano, Les J. Weinstein, Graham & James, Los Angeles, CA, for defendant-appellant.

David R. Aufdenspring, Powell Goldstein Frazer & Murphy, P.C., Atlanta, GA, Virginia S. Taylor, Kilpatrick & Cody, Atlanta, GA, George L. Little, Jr., Rodrick J. Enns, J. David Mayberry, Petree Stockton & Robinson, Winston Salem, NC, for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before ANDERSON, Circuit Judge and MORGAN and JOHNSON, Senior Circuit Judges.

MORGAN, Senior Circuit Judge:

The appellant appeals the district court's order granting the appellees' motion to compel arbitration pursuant to the Federal Arbitration Act and the denial of appellant's subsequent motion to vacate the arbitration award. We must decide whether a nonsignatory to a contract may invoke an arbitration provision contained therein, and if so, whether appellees' party-appointed arbitrator acted improperly. We AFFIRM the district court's judgment.

BACKGROUND

The defendant-appellant, Sunkist Growers, Inc. (hereinafter "Sunkist") is the exclusive owner and licensor of the "Sunkist" trademark. General Cinema Corporation ("GCC") obtained the contractual right from Sunkist to market and sell an orange soda under the "Sunkist" brand name. To produce and market this soft drink, GCC created a wholly owned subsidiary known as Sunkist Soft Drinks ("SSD"). Subsequently, Sunkist and SSD entered into a license agreement which provided a detailed framework for the marketing and sale of "Sunkist" soft drinks. The license agreement included the following arbitration clause:

Except for any claim with respect to the ownership rights in Licensed Trademarks, any controversy or claim arising out of or relating to this Agreement or the breach thereof, including those regarding termination or failure to renew this Agreement, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrators may be entered in any Court having jurisdiction thereof. The Arbitration Tribunal shall be comprised of two party-designated arbitrators, one selected by Sunkist and one selected by SSD, and a third neutral arbitrator selected by the parties in accordance with the Rules of the American Arbitration Association. (emphasis added).

In November 1984, Del Monte Corporation ("Del Monte") acquired the stock of SSD from GCC. After acquiring the stock, Del Monte absorbed SSD into its own beverage products division, known as Del Monte Franchised Beverage Products. By placing the "Sunkist" brand under a single administration with its own soft drink brands, Del Monte effectively stripped SSD of its employees and management and any other separate operating status.

On July 18, 1986, Del Monte and its wholly owned subsidiary, SSD, filed a declaratory relief action against Sunkist in the District Court for the Northern District of Georgia seeking a declaration that the controversy relating to SSD's performance under the license agreement was subject to arbitration. Shortly after the original complaint was filed, SSD was sold to a third party, Cadbury Schweppes, Inc., a fact that was reflected in Del Monte's amended complaint, which also added Nabisco Brands, Inc., Del Monte's sister company, as a party plaintiff.

On February 2, 1987, Sunkist filed a separate complaint against Del Monte and SSD in the District Court for the Central District of California. Sunkist asserted ten claims against Del Monte and SSD, some sounding in tort and some in contract, arising out of Del Monte's alleged interference with the Sunkist-SSD license agreement.

On March 12, 1987, the district court approved SSD's dismissal of its claims against Sunkist in the Georgia action, and Sunkist voluntarily dismissed SSD from the California action. On November 20, 1987, Sunkist filed counterclaims against Del Monte in the Georgia action alleging essentially the same ten claims that were then pending in the California action, plus an eleventh claim for abuse of process. Sometime thereafter, the California action was transferred to the Northern District of Georgia and became a companion to this case.

On October 5, 1987, Del Monte filed a motion to compel arbitration on the grounds that Sunkist was contractually obligated to Each party designated an arbitrator and then mutually agreed upon a third, neutral arbitrator pursuant to the license agreement and the Rules of the American Arbitration Association ("AAA"). Del Monte designated Jessie Meyers as its party-appointed arbitrator.

arbitrate its claims under the terms of the license agreement. The district court granted Del Monte's motion to compel arbitration. Sunkist filed an interlocutory appeal from that order which this court dismissed, sua sponte, for lack of jurisdiction following the 1988 amendment of 9 U.S.C. Sec. 16 (formerly Sec. 15, renumbered by amend. 1990).

During the time leading up to the arbitration hearing, Mr. Meyers met with counsel and other representatives of Del Monte to prepare for the hearing. Mr. Meyers met with six individuals identified by Sunkist: Argabright, Mullin, Murray, Watson, Antle, and O'Reilly. Argabright, Mullin, and Murray, were all former Del Monte employees and officers who were responsible for Del Monte's conduct during the relevant time period. Watson and Antle were consultants retained by Del Monte. Mr. O'Reilly was a third party witness interviewed by Del Monte's counsel in Mr. Meyers' presence. After being designated as an arbitrator, Mr. Meyers made a written disclosure to the AAA pursuant to Cannon VII of the AAA's Code of Ethics for Arbitrators in Commercial Disputes. ¹ Prior to the arbitration hearing, Sunkist filed a motion with the AAA requesting that the AAA refrain from confirming Mr. Meyers appointment to the arbitration panel based on his prehearing contact with potential witnesses. The AAA refused to withdraw the appointment, and Sunkist raised the matter with the district court. The district court declined to rule on the merits of the motion, concluding that it was premature and should be decided only after the arbitration award was rendered.

The arbitration panel, in a two-to-one decision with Sunkist's party-designated arbitrator dissenting, entered an award in favor of Del Monte. Sunkist then moved to vacate the award, relying on allegations of misconduct by Mr. Meyers. The district court denied the motion to vacate the award and granted the motion to confirm. This appeal followed.

STANDARD OF REVIEW

We review de novo the district court's order compelling arbitration. McBro Planning & Dev. Co., v. Triangle Elec. Constr. Co., Inc, 741 F.2d 342, 343 (11th Cir.1984). We review the district court's order confirming the arbitration award under the Federal Arbitration Act and denying Sunkist's motion to vacate the same for an abuse of discretion. Schmidt v. Finberg, 942 F.2d 1571, 1573 (11th Cir.1991).

DISCUSSION

I. The Arbitration Clause

Initially, Sunkist asserts that the district court erred in determining, as a matter of law, the arbitrability of its claims against Del Monte. Sunkist argues that a factual issue exists as to whether Sunkist consented to arbitrate with Del Monte, and therefore, it is entitled to a jury trial on this issue pursuant to 9 U.S.C. Sec. 4 (1970). ² Although arbitration is a contractual right that is generally predicated on an express decision to waive the right to trial in a judicial forum, this court has held that the lack of a written arbitration agreement is not an impediment to arbitration. McBro, 741 F.2d at 344. Sunkist concedes that there are certain limited exceptions, such as equitable estoppel, that allow nonsignatories to a contract to compel arbitration. In the instant case, there is no dispute that an arbitration agreement existed between Sunkist and SSD. The only issue before us regarding the arbitration clause is whether Sunkist is equitably estopped from contesting Del Monte's standing to invoke the clause, which is a question of law. There being no issue of material fact, Sunkist is not entitled to a jury trial and the district court was correct in resolving this issue as a matter of law.

Sunkist next contends that the district court improperly invoked the doctrine of equitable estoppel in granting Del Monte's motion to compel arbitration. The district court, following the reasoning of the Seventh Circuit in Hughes Masonry Co. v. Greater Clark County School Bldg. Corp., 659 F.2d 836 (7th Cir.1981), held that Sunkist was equitably estopped from asserting the lack of a written agreement as a defense. Sunkist argues that it did not consent to nor intend to arbitrate any claims with Del Monte. Absent a written agreement to arbitrate with Del Monte itself, Sunkist asserts that the district court erred in compelling arbitration.

In Hughes Masonry, the plaintiff-contractor sought to avoid arbitration because a construction manager involved in the dispute was not a signatory to the construction agreement containing the arbitration provision. The Seventh Circuit noted that, although the plaintiff had characterized its claims against the construction manager as sounding in tort, i.e., intentional and negligent interference with contract, in substance the complaint was based on the manager's alleged breach of the obligations and duties assigned to it in the agreement. Hughes Masonry, 659 F.2d at 838. The Seventh Circuit held that since the plaintiff ultimately must rely on the terms...