Vulcan Chemical Technologies Inc. v. Barker, 052102 FED4, 01-1943

Docket Nº:01-1943
Party Name:Vulcan Chemical Technologies Inc. v. Barker
Case Date:February 27, 2002
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit




No. 01-1943


Argued: February 27, 2002

May 21, 2002

Appeal from the United States District Court for the Western District of Virginia, at Big Stone Gap. Glen M. Williams, Senior District Judge. (CA-01-33-2)

Franklin Murry Tatum, III, Wright, Robinson, Osthimer & Tatum, Richmond, Virginia, for Appellant. Anton Henry Gaede, Jr., Bradley, Arant, Rose & White, L.L.P., Birmingham, Alabama, for Appellees.

Mark S. Yacano, Wright, Robinson, Osthimer & Tatum, Richmond, Virginia; Hartley Thorson Hansen, Kevin Robert Culhane, Hansen, Boyd, Culhane & Watson, Sacramento, California; Stephen McQuiston Hodges, Pennstuart, Abingdon, Virginia, for Appellant. Jeffrey M. Anderson, Bradley, Arant, Rose & White, L.L.P., Birmingham, Alabama; Thomas G. Slater, Jr., Ray V. Hartwell, III, Darryl S. Lew, Geremy Kamens, Hunton & Williams, Richmond, Virginia; William B. Poff, Frank K. Friedman, R. Lucas Hobbs, Woods, Rogers & Hazlegrove, Roanoke, Virginia, for Appellees.

Vacated and remanded by published opinion. Judge Niemeyer wrote the opinion, in which Judge Luttig joined. Judge Herlong wrote an opinion concurring in the result.

Before Niemeyer and Luttig, Circuit Judges, and Henry M. Herlong, Jr., United States District Judge for the District of South Carolina, sitting by designation.

Niemeyer, Circuit Judge

We are presented with the question of whether this action should have proceeded to hearing and judgment in the face of an earlier state court judgment that involved the same parties and issues but was subject to appeal.

When Vulcan Chemical Technologies, Inc., terminated Phillip Barker's chemical-products Distribution Agreement, Barker sued the company and its parent, Vulcan Materials Company, (collectively, "Vulcan") in California state court for breach of contract and related claims. Consistent with the Distribution Agreement, Vulcan filed a motion to compel arbitration under the California Arbitration Act, and the state court granted the motion, staying further proceedings until completion of the arbitration. After the arbitrator ruled in favor of Barker, awarding him $21 million in damages, Vulcan filed this action in the Western District of Virginia to vacate the arbitration award, invoking the Federal Arbitration Act. Shortly thereafter, the California state court entered a judgment granting Barker's motion to confirm the arbitration award and denying Vulcan's motion to vacate it, a judgment that Vulcan appealed. Two months later, however, the district court vacated the very award that had been confirmed by the California court, remanding the issue of damages to the arbitrator "for a determination not inconsistent with this opinion." On appeal, Barker contends that the district court acted without jurisdiction or, alternatively, should have abstained.

We conclude that, because Vulcan filed a motion to arbitrate in California under the California Arbitration Act and a California court has confirmed the arbitration award - albeit in a judgment subject to appeal - the district court should have abstained from hearing and deciding this case. Accordingly, we vacate the district court's judgment and remand with instructions to dismiss this action.


Phillip Barker was one of the founders of Rio Linda Chemical Company, a Sacramento, California corporation which developed sodium chlorite and chlorine dioxide chemicals as biocides for vegetables and water treatment. In 1989, Albright and Wilson Americas, Inc., a Richmond, Virginia subsidiary of Tenneco Corporation, purchased the stock of Rio Linda. At the same time, Rio Linda entered into a consulting agreement with Barker that gave Barker the option, upon payment of a sum equal to 800% of after-tax profits, to become the exclusive distributor of sodium chlorite/chlorine dioxide chemicals in the Far East.

By 1994, Rio Linda's financial condition had deteriorated to the point that the company had a negative net worth. Around that time, Barker exercised his option to purchase the rights to distribute specified products in four countries in the Far East and, pursuant to the pre-established formula, paid the price of $32,888. (If Barker had exercised his option in 1989, he would have been required to pay approximately $5.2 million.) These distribution rights were memorialized in a Distribution Agreement between Rio Linda and Barker dated March 1, 1995.

Under the Distribution Agreement, Rio Linda appointed Barker the exclusive distributor of several Rio Linda chemical products for Japan, South Korea, Taiwan, and China. In section B.1. of the Distribution Agreement, Barker agreed (1) to "use his best efforts" in promoting and selling the products, (2) to "develop fully the market," and (3) to purchase all of his requirements of these chemical products for the specified territory from Rio Linda. The Distribution Agreement was to be governed by the law of Virginia. Finally, the parties agreed to settle any "dispute or claim arising out of or relating to this Agreement" by arbitration. The arbitration clause provided:

The arbitration shall take place in Sacramento, California, [where both Rio Linda and Barker were located] or another mutually acceptable California location and will be final and binding. . . . Judgment upon an award, including any interim award, rendered by the arbitrator may be entered in any Court having jurisdiction over the parties. The arbitrator may determine all questions of law and jurisdiction governing the arbitration, including questions as to whether the dispute is arbitrable. The arbitrator has the right to grant interim or permanent relief, including equitable relief, and shall have the discretion to award costs including reasonable legal fees, interest and costs of arbitration.

In mid-1995, Albright and Wilson sold Rio Linda for $12.9 million to Vulcan Materials Company, a New Jersey corporation headquartered in Alabama. Vulcan Materials changed Rio Linda's name to Vulcan Chemical Technologies ("Vulcan Chem-Tech"), but Vulcan Chem-Tech remained headquartered in Sacramento, California. Barker has alleged that, from the time Vulcan Materials acquired Rio Linda, he detected "a concerted effort to prevent [him] from succeeding in the Asian market." He alleged that Vulcan Materials and Vulcan Chem-Tech "disparag[ed] Barker in the marketplace, ignor[ed] his exclusive rights and fail[ed] to make products available to him to sell." Ultimately, in March 1999, Vulcan Chem-Tech terminated Barker's exclusive distributorship, claiming that Barker had failed to "perform [his] obligations under the [distribution] agreement." Although the letter of termination referred to Barker's duties imposed by section B.1. of the Distribution Agreement (to "use best efforts" in promoting products, to "develop fully the market" for the products, and to purchase 100% of its requirements for the market from Rio Linda), the letter referred to no specific failures to fulfill those duties.

Shortly after receiving Vulcan Chem-Tech's letter of termination, Barker commenced an action against Vulcan Materials and Vulcan Chem-Tech in the Superior Court of California for the County of Sacramento, alleging breach of contract, violation of California's Unfair Practices Act, and related torts. Barker joined Vulcan Materials as a defendant on the allegation that Vulcan Materials was Vulcan ChemTech's alter ego. Relying on the arbitration clause in the Distribution Agreement and on the California Arbitration Act, both Vulcan Materials and Vulcan Chem-Tech moved to compel arbitration. When Barker resisted the motion, arguing in part that Vulcan Materials was not a party to the arbitration agreement, Vulcan Materials agreed to participate...

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