Atlantic Textiles v. Avondale Inc.

505 F.3d 274, 64 U.C.C. Rep. Serv. 2d (West) 214, 2007 U.S. App. LEXIS 23979
CourtCourt of Appeals for the Fourth Circuit
DecidedOctober 12, 2007
DocketNos. 05-2392, 05-2393
StatusPublished
Cited by3 cases

This text of 505 F.3d 274 (Atlantic Textiles v. Avondale Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantic Textiles v. Avondale Inc., 505 F.3d 274, 64 U.C.C. Rep. Serv. 2d (West) 214, 2007 U.S. App. LEXIS 23979 (4th Cir. 2007).

Opinions

Vacated and remanded by published opinion. Judge TRAXLER wrote the opinion for the court, in which Chief Judge WILLIAMS concurred as to Part II and in which Judge JOHNSTON concurred as to Parts 1,11(A), and 11(B)(1). Chief Judge WILLIAMS wrote an opinion dissenting from Part I of the opinion of the court. Judge JOHNSTON wrote an opinion dissenting from Parts 11(B)(2) and 11(B)(3) of the opinion of the court.

OPINION

TRAXLER, Circuit Judge:

Purchasers of cotton and poly-cotton yarn commenced a class action against various North Carolina manufacturers of the yarns, alleging that the manufacturers had engaged in a price-fixing conspiracy in violation of the Sherman Act. The manufacturers moved to dismiss the suit as to certain plaintiffs, arguing that those plaintiffs were bound by arbitration clauses that were broad enough to encompass the antitrust claims. The district court denied the motion. The court concluded that some of the contracts at issue did not include arbitration clauses. As to those contracts that did include binding arbitration clauses, the district court concluded that those clauses could not be enforced because they prevented the plaintiffs from effectively vindicating their statutory antitrust claims. Thus, the end result of the district court’s ruling was that no plaintiff was required to submit its antitrust claims to arbitration.

The manufacturers appeal. We conclude that all contracts at issue in this appeal include a binding arbitration provision. We also conclude that the plaintiffs have failed to establish that the terms of the arbitration provisions prevent them from effectively vindicating their statutory rights. We therefore vacate the decision [278]*278of the district court and remand for further proceedings.

I.

We turn first to the question of whether the contracts at issue include binding arbitration clauses. This case involves antitrust claims asserted against Avondale Inc., and Avondale Mills, Inc. (together, “Avondale”) and Frontier Spinning Mills, Inc.,1 by a putative class of those who purchased yarn from these manufacturers between January 1, 1999, and February 11, 2004. The district court concluded that all of the Avondale contracts at issue included binding arbitration provisions, and that some of the Frontier contracts also included binding arbitration agreements. However, the district court concluded that the Frontier contracts with plaintiffs Atlantic Textiles, South Carolina Tees, and Armen Company did not include binding arbitration clauses.

Starting in 2000 and 2001, the purchasers involved in the Frontier transactions arranged purchases over the phone, discussing quantity and price. Frontier then sent written contracts (which refer to themselves as “sales contracts” and “confirmations”) that confirmed the terms discussed and included additional terms, including an arbitration clause. The contracts provided that they were subject to “The Yarn Rules of 1989,” J.A. 79, and stated that “[ejxcept to the extent a future transaction is governed by a signed contract between the parties, the terms and conditions hereof, including, without limitation, the arbitration provision, shall govern all further transactions.” J.A. 80. The contracts were signed by Frontier, but the record contains no copy of the contracts signed by the purchasers. The contracts at issue, however, state that acceptance of the product constitutes acceptance of the contract terms.

New contracts were not sent with each shipment of yarn, because orders often contemplated multiple separate shipments, but Frontier did send invoices to the purchasers with each shipment. The invoices are not signed by either party. They do not include an arbitration provision, nor do they explicitly incorporate the terms of the sales contracts. According to an affidavit submitted by Frontier, however, the order number referenced on the face of each invoice “is the last four or five digits of the contract number.” J.A. 746.

State contract law governs the question of whether the parties have agreed to arbitrate, see First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Hightower v. GMRI, Inc., 272 F.3d 239, 242 (4th Cir.2001), and the parties agree that North Carolina law governs the Frontier transactions. Because the transactions involve the sale of goods, they are governed by North Carolina’s version of the Uniform Commercial Code.

The district court concluded that the contracts for sale in the Frontier transactions were oral, formed over the phone when the parties talked about price, quantity, and delivery. Because arbitration was not mentioned in those conversations, the district court concluded that arbitration was not a term of the oral agreements. Applying N.C. GemStat. Ann. § 25-2-207 (the UCC’s “battle of the forms” provision), the district court concluded that the arbitration clauses included in the contracts and confirmations sent by Frontier did not become part of the con[279]*279tract because, under North Carolina law, a proposed arbitration clause is a material alteration of a contract. See N.C. Gen. Stat. Ann. § 25-2-207(2)(b) (2006) (stating that additional terms contained in a confirmation of a contract between merchants become part of the contract unless the terms materially alter the contract);2 Frances Hosiery Mills, Inc. v. Burlington Indus., Inc., 285 N.C. 344, 204 S.E.2d 834, 842-43 (1974) (concluding that an arbitration provision included in a contract confirmation did not become part of the contract because the arbitration requirement materially altered the contract).

On appeal, Frontier contends that arbitration of disputes is a well-established custom in the textile industry, and that, as a “usage of trade,” arbitration was automatically part of the agreement reached by the parties. Frontier thus argues that because arbitration was already part of the agreement, it was not an “additional term” that could be knocked out as a material alteration under § 25-2-207(2)(b). We agree.

N.C. Gen.Stat. Ann. § 25-1-201, which sets out the UCC’s general definitions, defines an agreement as “the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of 'performance, course of dealing, or usage of trade as provided in G.S. 25-1-303.” N.C. Gen. Stat. Ann. § 25 — 1—201(b)(3) (2006) (emphasis added).3 The authors of the definitive treatise on the Uniform Commercial Code have explained that by virtue of § 2-201,

[t]he express agreement may be silent on a matter, yet usage of trade ... may fill the gap....
The agreement of the parties includes that part of their bargain that may be found in course of dealing, usage of trade, or course of performance. These sources are relevant not only to the interpretation of express contract terms but may themselves constitute contract terms.

J. White & R. Summers, Uniform Commercial Code §§ 3-2, 3-3 (4th ed.1995) (footnote omitted). Accordingly, if arbitration is a usage of trade in the textile industry, then it was included in the parties’ agreement notwithstanding the fact that there was no mention of arbitration in the oral agreements.

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Bluebook (online)
505 F.3d 274, 64 U.C.C. Rep. Serv. 2d (West) 214, 2007 U.S. App. LEXIS 23979, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-textiles-v-avondale-inc-ca4-2007.