International Paper v. Schwabedissen

CourtCourt of Appeals for the Fourth Circuit
DecidedMarch 14, 2000
Docket98-2482
StatusPublished

This text of International Paper v. Schwabedissen (International Paper v. Schwabedissen) 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
International Paper v. Schwabedissen, (4th Cir. 2000).

Opinion

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

INTERNATIONAL PAPER COMPANY, Plaintiff-Appellant,

v. No. 98-2482 SCHWABEDISSEN MASCHINEN & ANLAGEN GMBH, Defendant-Appellee.

Appeal from the United States District Court for the District of South Carolina, at Greenwood. Solomon Blatt, Jr., Senior District Judge. (CA-93-2727-9-8)

Argued: January 25, 2000

Decided: March 14, 2000

Before MOTZ and KING, Circuit Judges, and John T. COPENHAVER, Jr., United States District Judge for the Southern District of West Virginia, sitting by designation.

_________________________________________________________________

Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge King and Judge Copenhaver joined.

_________________________________________________________________

COUNSEL

ARGUED: William Jefferson Leath, Jr., LEATH, BOUCH & CRAWFORD, Charleston, South Carolina, for Appellant. Keating Lewis Simons, III, LAW OFFICES OF SIMONS & KEAVENY, Charleston, South Carolina, for Appellee. OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

A buyer became dissatisfied with an industrial saw and brought suit against the manufacturer of the saw on the basis of a contract between the distributor and the manufacturer. The question presented to us is whether an arbitration clause in the distributor-manufacturer contract requires the buyer, a nonsignatory to that contract, to arbitrate its claims against the manufacturer. The district court held that it did. Concluding that the buyer cannot sue to enforce the guarantees and warranties of the distributor-manufacturer contract without complying with its arbitration provision, we affirm.

I.

Westinghouse Electric Corporation (a predecessor-in-interest of the International Paper Company) sought to purchase an industrial saw manufactured by Schwabedissen Maschinen & Anlagen GMBH, a German corporation. On April 1, 1991, Westinghouse sent to Wood Systems Incorporated, a United States distributor of Schwabedissen saws, a non-binding letter of intent to purchase a new Schwabedissen double trim saw. Westinghouse personnel then visited Schwa- bedissen's facility in Germany to observe its production process. Upon their return, in a purchase order from Westinghouse to Wood dated May 17, 1991, Westinghouse agreed to buy and Wood agreed to sell the Schwabedissen saw, in accordance with a performance guarantee and certain specifications.

On June 6, 1991, Schwabedissen sent Wood an "Order Confirma- tion/Contract" for the saw Westinghouse sought to purchase, which included extensive specifications. Schwabedissen contends, and the district court found, that this contract also included the terms of two additional documents--the "General Conditions for the Supply and Erection of Plant and Machinery for Import and Export No. 188A, prepared under the auspices of the United Nations Economic Com- mission for Europe" (the "General Conditions"), and the "Annex attached to the General Conditions for the Supply and Erection of Plant and Machinery for Import and Export by the German Mechani- cal Engineering Industry" (the "Annex"). The "General Conditions"

2 contain an arbitration clause providing that "[a]ny dispute arising out of the Contract shall be finally settled, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Com- merce, by one or more arbitrators designated by those Rules," and establish the governing law as that of the country of the contractor. The "Annex" permits the contractor to bring an action before a court rather than an arbitrator "unless and until the dispute has been referred to arbitration by one of the parties."

On June 12, 1991, Wood sent a purchase order for the saw to Sch- wabedissen, together with the specifications from Westinghouse's purchase order. In response, Schwabedissen arranged for delivery of the saw, which was installed at Westinghouse's plant in late Decem- ber 1991. According to Westinghouse, the saw "completely failed to properly operate once installed or at anytime thereafter." No written contract ever existed between Westinghouse and Schwabedissen, but Westinghouse maintains that when difficulty arose as to the saw's operation, Schwabedissen orally agreed to repair the saw, but failed to do so.

On July 9, 1993, after Wood declared bankruptcy, Westinghouse filed a complaint against Schwabedissen in South Carolina state court, alleging breach of contract, rejection, and breach of warranties based on the May 17, 1991, purchase order between Westinghouse and Wood. Westinghouse alleged that Wood acted as an agent for Schwa- bedissen and therefore Schwabedissen was liable under that purchase order. Schwabedissen removed the case to federal court.

On September 21, 1994, Westinghouse filed an amended com- plaint, in which it added allegations based on the Wood- Schwabedissen contract and asserted that it was a third-party benefi- ciary of that contract. Schwabedissen then moved to stay the federal court proceedings pending arbitration, relying on the arbitration clause contained in its contract with Wood.

At argument on the motion to stay, Westinghouse maintained that as a third-party beneficiary of the Wood-Schwabedissen contract, it could compel arbitration in any disputes with a party to the contract, but that a party could not compel a third-party beneficiary to arbitrate. Responding to the district court's skepticism about this contention,

3 Westinghouse withdrew its third-party beneficiary claim. The district court then continued the hearing to allow the parties to brief the issues without that claim.

When the district court again heard argument, Westinghouse con- tended that it had no knowledge of, and so could not be bound by, the "General Conditions" (containing the arbitration clause) assertedly made part of the Wood-Schwabedissen contract. The district court rejected this argument, reasoning that because Westinghouse sought "to take advantage of certain commitments that were made by Schwa- bedissen to" Wood in the Wood-Schwabedissen contract, it was bound by all commitments in that contract, including the arbitration provision.

Westinghouse then argued that, notwithstanding an affidavit of a Schwabedissen employee that the Wood-Schwabedissen contract included the "General Conditions," nothing in the June 6 contract nor June 12 purchase order indicated that Wood had in fact accepted the "General Conditions" as part of its contract with Schwabedissen. The district court again continued the hearing on the motion to stay to allow further discovery. At the subsequent hearing, Schwabedissen produced an agreement between itself and Wood dated February 24, 1993, indicating that the "General Conditions" were part of the June 6 Wood-Schwabedissen contract. Westinghouse offered no contrary evidence. The district court found that the "General Conditions" were part of the Wood-Schwabedissen contract and that Westinghouse was subject to the arbitration provision; therefore, the court granted Sch- wabedissen's motion to stay proceedings pending arbitration. The dis- trict court also substituted the International Paper Company, which had purchased certain Westinghouse assets, for Westinghouse in the litigation.

International Paper filed a request for arbitration before the Interna- tional Court of Arbitration in Geneva. At the conclusion of the arbitral proceedings, the arbitrators ruled in Schwabedissen's favor.

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