     Case: 13-20159    Document: 00512684938      Page: 1   Date Filed: 07/02/2014




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                    FILED
                                                                    July 2, 2014

                                  No. 13-20159                    Lyle W. Cayce
                                                                       Clerk

RASHEED AL RUSHAID; AL RUSHAID PETROLEUM INVESTMENT
CORPORATION; AL RUSHAID PARKER DRILLING, LIMITED,

                                            Plaintiffs–Appellees,
v.

NATIONAL OILWELL VARCO, INCORPORATED; NATIONAL OILWELL
VARCO, L.P.; NOW OILFIELD SERVICES, INCORPORATED; NATIONAL
OILWELL VARCO NORWAY; GRANT PRIDECO, L.P.; GRANT PRIDECO
HOLDINGS, L.L.C.; NATIONAL OILWELL NORWAY, A.S.; NOW
OILFIELD SERVICES, L.L.C.,

                                            Defendants–Appellants.



                 Appeal from the United States District Court
                      for the Southern District of Texas


Before OWEN, SOUTHWICK, and GRAVES, Circuit Judges.
PRISCILLA R. OWEN, Circuit Judge:
      Defendants appeal the district court’s denial of a motion to compel
arbitration submitted by National Oilwell Varco Norway (NOV Norway). The
district court denied the motion on two grounds, concluding: (1) there was no
arbitration agreement and (2) NOV Norway waived any right to arbitration by
substantially invoking the judicial process to the prejudice of plaintiffs. Because
we conclude that there was an arbitration agreement and that NOV Norway
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                                      No. 13-20159

cannot be held responsible for the actions of its codefendants in this case, we
vacate and remand.
                                             I
       In 2011, Al Rushaid Parker Drilling, Ltd. (ARPD), Rasheed al Rushaid,
and Al Rushaid Petroleum Investment Corp. (collectively, plaintiffs) filed suit in
Texas state court against National Oilwell Varco, Inc.; National Oilwell Varco
LP (NOV LP); NOW Oilfield Services, LLC; NOV Norway; Grant Prideco, LP;
and Grant Prideco Holding, LLC (collectively, defendants). The dispute arose
out of various, separate contracts between ARPD and individual defendants.
These contracts were formed when ARPD would send one of the defendant
entities a purchase order in response to that defendant’s price quotation. Under
Texas law, this was sufficient to form a contract.1
       ARPD served all of the defendants except NOV Norway by August 2011.
In September of that year, defendants (with the exception of NOV Norway)
removed the matter to federal court based on an arbitration clause contained in
a price quotation issued by NOV LP. That clause stated that “Varco retains the
right to arbitrate and any all [sic] disputes that may arise in connection with the
sale of its Equipment, Product or Services.” Defendants concede that the
contracts with some of the other defendants did not contain arbitration
provisions.
       In December 2011, the district court denied plaintiffs’ motion to remand.
Shortly thereafter, the parties (again with the exception of NOV Norway, which
had still not been served) held a scheduling conference with the district court.
Considering that plaintiffs were seeking hundreds of millions of dollars,
discovery would need to be conducted on multiple continents, and the trial would
involve many witnesses and extend longer than two weeks, the district court set

       1
         See TEX. BUS. & COM. CODE ANN. § 2.207 (West 2009); Tubelite, a Div. of Indal, Inc.
v. Risica & Sons, Inc., 819 S.W.2d 801, 803-04 (Tex. 1991).

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                                   No. 13-20159

a trial date of June 2013 and informed the parties that the date was firm.
Following the conference, the parties engaged in pre-trial activities. Specifically,
defendants moved for a more definite statement, sought protective orders,
propounded interrogatories and requests for production, and moved to compel
responses. According to the district court’s findings, defendants “served over 400
separate document requests and 129 interrogatories” and “Plaintiff[s] reported
producing over 130,000 pages of documents.”
      On August 14, 2012, plaintiffs served NOV Norway pursuant to the Hague
Convention. After service was effected, the other defendants continued to
participate in litigation in the district court, including filing a motion to enforce
a consent judgment. NOV Norway, however, took steps to arbitrate, sending
plaintiffs a demand to arbitrate on September 7 and including in its October 12
answer an affirmative defense that “Plaintiffs are not entitled to litigate their
claims because they have agreed to arbitration.” On November 19, NOV Norway
moved to compel arbitration of all of the claims against all of the defendants and
stay proceedings.
      The premise for NOV Norway’s motion was not the price quotation issued
by NOV LP. Instead, it was a different price quotation, one that NOV Norway
had issued to ARPD. Subsection 3.1 of NOV Norway’s price quotation, titled
“The ORGALIME,” provides: “Terms and conditions are based on the general
conditions stated in the enclosed ORGALIME S2000.” The ORGALIME, in turn,
provides that “[a]ll disputes arising out of or in connection with the contract
shall be finally settled under the Rules of Arbitration of the International
Chamber of Commerce.”
      In March 2013, the district court denied NOV Norway’s motion to compel
arbitration on two grounds. First it held that there was no agreement to
arbitrate because the term “based on” found in subsection 3.1 of the quotation
was insufficient to incorporate the ORGALIME and its arbitration provision.

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Second, the court held that NOV Norway waived any right to arbitrate by
“substantially invok[ing] the judicial process” to the detriment of plaintiffs.
Defendants appeal, claiming that the district court erred on both points. They
further contend that, in addition to compelling arbitration, the district court
should have stayed all proceedings pending the outcome of the arbitration on the
ground of equitable estoppel. After the notice of appeal was filed, the district
court stayed proceedings pending our decision. Title 9 U.S.C. section 16(a)(1)(C)
provides that a party may seek interlocutory review of “an order . . . denying an
application . . . to compel arbitration.”2
                                              II
       It is uncontested that the dispute at issue falls within the scope of the
broad arbitration provision contained in the ORGALIME.3                        The parties’
disagreement concerns whether the reference to the ORGALIME in NOV
Norway’s quotation was sufficient to incorporate the terms and conditions of the
ORGALIME. This question is one of contract interpretation and “courts apply
the contract law of the particular state that governs the agreement,” which the
parties in this case agree is Texas.4 Although “there is a strong federal policy
favoring arbitration, the policy does not apply to the initial determination
whether there is a valid agreement to arbitrate.”5
       Under Texas law, “[a] written contract must be construed to give effect to
the parties’ intent expressed in the text as understood in light of the facts and



       2
           9 U.S.C. § 16(a)(1)(C).
       3
         See Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1068 (5th
Cir. 1998) (holding when presented with a similar arbitration clause that “it is only necessary
that the dispute ‘touch’ matters covered by the [agreement] to be arbitrable”).
       4
           Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004).
       5
           Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004).

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                                        No. 13-20159

circumstances surrounding the contract’s execution.”6 Courts should “give
contract terms their plain and ordinary meaning unless the instrument indicates
the parties intended a different meaning.”7 Moreover, “courts should examine
and consider the entire writing in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless.”8
       With respect to incorporation, the Supreme Court of Texas has held that
“[t]he language used is not important provided the document signed . . . plainly
refers to another writing.”9 Texas courts of appeals, however, have frequently
held that a “mere reference” to another document is insufficient to incorporate
that writing when the facts and circumstances surrounding the agreement do
not indicate that incorporation was intended.10 One decision held that the mere
mention of “General Terms and Conditions of Sale” in a contract’s table of
contents and as a heading was insufficient to incorporate a separate, unattached
document containing the same title.11 Likewise, the statement that a district
court’s judgment was entered “pursuant to” a stipulation was insufficient to
incorporate the terms of that stipulation when it was equally plausible that the




       6
        Hous. Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469
(Tex. 2011).
       7
            Dynergy Midstream Servs., Ltd. v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009).
       8
            Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).
       9
        In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004) (quoting Owen v.
Hendricks, 433 S.W.2d 164, 166 (Tex. 1968)) (second alteration in original).
       10
       E.g., Tribble & Stephens Co. v. RGM Constructors, L.P., 154 S.W.3d 639, 665 (Tex.
App.—Houston [14th Dist.] 2004, pet. denied).
       11
         Trico Marine Servs., Inc. v. Stewart & Stevenson Technical Servs., Inc., 73 S.W.3d
545, 549-50 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).

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phrase was meant as “mere decretal language confirming that the judgment was
decided based upon the pleadings and evidence in the case.”12
       However, when the reference to the other document is clear and the
circumstances indicate that the intent of the parties was incorporation, courts
have held that a document may be incorporated, even in the absence of specific
language of incorporation.13 A Texas court of appeals recently held that an
instrument that referenced a separate contract six times and invited the parties
to consult it incorporated that document, even though there was no language of
incorporation.14
       In the Terms & Conditions section of the NOV Norway price quotation, the
subsection titled “The ORGALIME” provides: “Terms and conditions are based
on the general conditions stated in the enclosed ORGALIME S2000.” The
district court cited two rationales in holding that this provision did not
incorporate the ORGALIME. First, after examining cases interpreting “based
on” and “based upon,” the court concluded that the phrase does not mean
“govern,” but “supported by but not actually derived from.” Second, the court
noted that some of the provisions of the ORGALIME “overlap” with terms in the
price quotation and that such overlapping is inconsistent with incorporation.
       Defendants take issue with both rationales. They argue that the district
court failed to give “based on” its plain meaning in this commercial context.
Moreover, they contend that there is no “overlap”; rather, the price quotation




       12
          See Berwick v. Wagner, 336 S.W.3d 805, 810 (Tex. App.—Houston [1st Dist.] 2011,
pet. denied) (quoting Trim v. Daniels, 862 S.W.2d 8, 10 (Tex.App.—Houston [1st Dist.] 1992,
writ denied)).
       13
         See, e.g., Gray & Co. Realtors, Inc. v. Atl. Hous. Found., Inc., 228 S.W.3d 431, 436
(Tex. App.—Dallas 2007, no pet.).
       14
            Id.

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                                  No. 13-20159

departs from the ORGALIME where that document specifically contemplates
variation. We agree.
      Although multiple interpretations of “based on” might be possible in the
abstract, in the contract at issue only one definition of “based on” comports with
its commonly understood meaning in the context of the parties’ multi-million
dollar purchase agreement for oil rig equipment. The ORGALIME is a nearly
3500-word document consisting of forty-five sections of typical contractual
provisions that address matters such as risk of loss, force majeure, title, and
timing of delivery and payment. The Terms & Conditions section of the NOV
Norway quotation is less than 300 words and has nine subsections. These
subsections largely address issues not mentioned in the ORGALIME, such as
how long the quotation remains valid and how the purchaser may obtain
training.
      As plaintiffs note, two of the subsections of the Terms & Conditions of the
quotation establish the timing of payment and delivery, but the ORGALIME has
different payment and delivery terms. While the “Payment” section of the
ORGALIME provides for payments in three installments, the quotation states
that 30% of the contract must be paid ten days after the “issuance of contract”
and the remaining 70% when the equipment is ready for shipment.              The
ORGALIME specifically contemplates that its delivery and payment terms will
only be used if the parties do not set their own terms. The “Payment” section of
the ORGALIME provides that payment should be made in thirds “[u]nless
otherwise agreed.” The “Time for Delivery, Delay” section contains similar
language. The parties contemplated and contracted that absent a specific
agreement regarding the details of a particular transaction, the terms of the
ORGALIME were applicable.
      As is common in the commercial context, the ORGALIME is designed to
serve as a foundational “set of general conditions for the supply of products,

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                                       No. 13-20159

which could be used worldwide.”15 On top of this foundation, parties may add or
modify terms in order to tailor the contract to their specific needs. That is the
obvious purpose of the Terms & Conditions section of the quotation. It covers
issues, like training, that are not addressed in the ORGALIME, and modifies
issues, like timing of payment, in order to accommodate the parties’ specific
needs or desires in a discrete transaction.
      This interpretation is further confirmed by the other language in
subsection 3.1. As noted, that provision states, “Terms and conditions are based
on the general conditions stated in the enclosed ORGALIME S2000.” If “based
on” simply meant “supported by,” “general” would be meaningless. The word
“general” has meaning only if the ORGALIME comprises the foundational,
general terms of the contract and the provisions in the Terms & Conditions
section are the specific terms designed to tailor the contract to this commercial
context.
       Because the parties’ agreement reflects the ORGALIME was part of the
terms and conditions of their agreement, we conclude that the district court
erred in holding there was no agreement to arbitrate.
                                             III
      Although parties may have an agreement to arbitrate, “[t]he right to
arbitrate a dispute, like all contractual rights, is subject to waiver.”16 Under this
circuit’s precedent, a party waives its right to arbitrate if it (1) “substantially
invokes the judicial process” and (2) thereby causes “detriment or prejudice” to




      15
           EUROPEAN ENG’G INDUS. ASS’N, ORGALIME S2012 GENERAL CONDITIONS
P    R   E    S   E    N     T    A    T    I   O    N        (   2   0    1 2 ) ,
http://www.orgalime.org/sites/default/files/Orgalime_S2012_presentation.pdf.
      16
           Nicholas v. KBR, Inc., 565 F.3d 904, 907 (5th Cir. 2009).

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                                       No. 13-20159

the other party.17 However, in light of the federal policy favoring arbitration,
“[t]here is a strong presumption against finding a waiver of arbitration.”18
      The district court reasoned that NOV Norway’s codefendants had
substantially invoked the judicial process to the detriment of plaintiffs by
making over 400 document requests that required the production of more than
130,000 pages in documents and engaging in substantial motion practice.
Although NOV Norway did not participate in these actions, the court determined
that they were attributable to NOV Norway because (a) all of the defendants are
jointly owned and controlled and the same counsel represents all of them; (b)
NOV Norway benefitted from the discovery; and (c) NOV Norway obtained the
benefit of the judicial process by refusing informal service.
      Defendants contend that the district court erred for three reasons. First,
they assert that the actions of NOV Norway’s codefendants were insufficient to
invoke the judicial process. Second, even if they were sufficient, they did not
cause plaintiffs prejudice. Lastly, the codefendants’ actions cannot be attributed
to NOV Norway because it is a separate juridical person. Because we agree that
the actions of the other defendants cannot be attributed to NOV Norway in this
case and that NOV Norway did not substantially invoke the judicial process, we
need not address the other two contentions.
      As discussed above, there is no dispute that NOV Norway took steps to
arbitrate as soon as it was served in August 2012. Less than one month after it
was served, NOV Norway sent plaintiffs a letter demanding arbitration. The
following month, it stated in its answer that litigation was impermissible
because of the arbitration clause. On November 19, approximately three months
after being served, it officially moved to compel arbitration. Although the other


      17
           Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir. 1986).
      18
           Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344 (5th Cir. 2004).

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                                        No. 13-20159

defendants continued their litigation activities during this time, there is no
indication that NOV Norway participated in any of these actions. NOV Norway
did not invoke the judicial process at all, much less substantially. NOV Norway
did not waive its right to arbitrate unless the actions of its codefendants are
attributable to it.
       Our court has yet to address when, if ever, the actions of an arbitration
proponent’s codefendants may be imputed to that proponent for the purposes of
determining waiver. At least two other courts, however, have confronted the
issue. They have held that the actions of an arbitration proponent’s affiliates
may be imputed to the proponent for the purposes of determining waiver when
principles of agency or corporate law, such as the alter ego doctrine, would
counsel such imputation.19 These holdings are consistent with this court’s other
jurisprudence on both arbitration and waiver. Both this court and the Supreme
Court have held that principles of agency and contract law should be applied to
determine whether an affiliate’s agreement to arbitrate can bind a
nonsignatory.20 Similarly, this court has held that a corporation can be bound
by its affiliate’s waiver of personal jurisdiction if the alter-ego or successor-
corporation doctrine would impute the affiliate’s actions to the corporation.21
       In holding that the actions of NOV Norway’s proponents could be
attributed to it, however, the district court did not apply these principles.
Instead, it articulated other reasons for attributing the codefendants’ actions to


       19
           See Doctor’s Assocs., Inc. v. Distajo, 66 F.3d 438, 456-57 (2d Cir. 1995) (holding that
actions of proponent’s affiliates could be imputed to proponent if the affiliates “were mere alter
egos” of the proponent); Yates v. Doctor’s Assocs., Inc., 193 Ill. App. 3d 431, 440 (Ill. App. Ct.
1990) (holding actions of affiliate attributable to proponent since affiliate was “at least its
agent”).
       20
          See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-32 (2009); Rice Co. (Suisse),
S.A. v. Precious Flowers Ltd., 523 F.3d 528, 537-38 (5th Cir. 2008).
       21
            Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640, 654 (5th Cir. 2002).

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NOV Norway, namely that (a) it shared ownership and counsel with the
codefendants; (b) it benefitted from its codefendants’ discovery in the district
court; and (c) it facilitated the lengthy discovery process by refusing informal
service. These facts are not determinative, either in isolation or in combination.
Punishing a defendant for refusing to accept informal service flies in the face of
Federal Rule of Civil Procedure 4. That Rule specifically requires that “[a]
summons . . . be served with a copy of the complaint,” even when the defendant
cannot be served within the United States.22 Although we have counseled
flexibility in determining whether a plaintiff has timely served a foreign
defendant, we have by no means dispensed with the requirement.23 Were we to
now punish a defendant for exercising its right to require service under Rule 4,
we would practically obliterate the requirement, as defendants with arbitration
clauses would have to accept informal process in order to maintain their right
to arbitrate.
       Attributing the actions of an arbitration proponent’s codefendants to it
simply because it benefitted from those actions would cast an unduly wide net.
As defendants note, a defendant joined after litigation has started often benefits
from the litigation activities that have been conducted up to that point. To
deprive a party of its right to arbitrate merely because of those benefits would
not be reasonable if the party was not responsible for the litigation activities.
       Imputing to a party the actions of its codefendants merely on the ground
that the entities are jointly owned or controlled or share representation would




       22
          FED. R. CIV. P. 4(c), (f); Lozano v. Bosdet, 693 F.3d 485, 489 (5th Cir. 2012) (explaining
that the district court may dismiss a complaint when it “determines in its discretion that the
plaintiff has not demonstrated reasonable diligence in attempting service”).
       23
           See Lozano, 693 F.3d at 488-89 (declining to adopt Ninth Circuit’s holding that
plaintiff has unlimited time to serve a defendant).

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contravene the fundamental principle of corporate separateness.24 We decline
to wholly depart from this principle and impute to a party the actions of its
corporate affiliates without regard to the entities’ separate corporate statuses.25
       There has been no showing that NOV Norway was the alter ego of its
affiliates or that there were grounds to pierce the defendants’ corporate veils.
Only then would it be appropriate to hold NOV Norway responsible for its
codefendants’ actions. No evidence in the record supports the conclusion that
NOV Norway is the alter ego or that veil-piercing is appropriate.
       Similarly, under Texas law, “the limitation on liability afforded by the
corporate structure can be ignored only when the corporate form has been used
as part of a basically unfair device to achieve an inequitable result.”26 This
includes “when the corporate structure has been abused to perpetuate a fraud,
evade an existing obligation, achieve or perpetuate a monopoly, circumvent a
statute, protect a crime, or justify wrong.”27 Moreover, the Supreme Court of


       24
             See, e.g., United States v. Bestfoods, 524 U.S. 51, 61 (1998) (“It is a general principle
of corporate law deeply ingrained in our economic and legal systems that a parent corporation
. . . is not liable for the acts of its subsidiaries.”) (internal quotation marks omitted). FLETCHER
CYCLOPEDIA OF THE LAW OF CORPORATIONS, § 25 (2013) (“The fact that two or more
corporations have the same shareholders or officers, or both, does not destroy their character
as distinct entities; nor does similarity or identity in names make two corporations the same,
particularly where they are incorporated in different states.”); see also Dickson Marine Inc. v.
Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999) (“Courts have long presumed the
institutional independence of related corporations, such as parent and subsidiary, when
determining if one corporation’s contacts with a forum can be the basis of a related
corporation’s contacts.”); Sims v. Sims (In re Sims), 994 F.2d 210, 217 (5th Cir. 1993) (applying
the principle of corporate separateness in bankruptcy proceedings).
       25
          NEIL A. HELFMAN, 114 AM. JUR. PROOF OF FACTS 403 § 3 (3d ed. 2010) (“Because
limited liability holds such an esteemed place in our jurisprudence, courts have cautioned not
to dispense with it lightly and that a corporation’s identity should be disregarded with great
caution and not precipitately.”) (internal citations and quotation marks omitted).
       26
          SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444, 451 (Tex. 2009)
(internal citations and quotation marks omitted).
       27
            Id.

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Texas has “never held corporations liable for each other’s obligations merely
because of centralized control, mutual purposes, and shared finances. There
must also be evidence of abuse.”28
       Although plaintiffs baldly aver that NOV Norway and its affiliates have
sought to cause delay and expense, there is no evidence in the record that NOV
Norway has abused its corporate form. It merely declined to become a party to
litigation without being formally served. That is not the sort of “unjust” or
“inequitable” action that warrants disregarding the principle of corporate
separateness.29 Accordingly, we hold that the district court erred in concluding
that NOV Norway waived its right to arbitrate.
                                               IV
       As we conclude that the district court erred, any claims against NOV
Norway by ARPD should be submitted to arbitration, as those were the two
parties to the arbitration agreement.               Our conclusion does not, however,
necessarily require the district court to compel any of the other parties to
arbitrate their dispute or to stay proceedings. “In order to be subject to arbitral
jurisdiction, a party must generally be a signatory to a contract containing an
arbitration clause.”30 The only signatories to the agreement at issue in this
appeal were ARPD and NOV Norway. The defendants, however, ask this court
to hold that the doctrine of equitable estoppel requires the district court to stay
all proceedings pending the outcome of arbitration.



       28
            Id. at 455.
       29
         Id. (“By ‘injustice’ and ‘inequity’ we do not mean a subjective perception of unfairness
by an individual judge or juror; rather these words are used . . . as shorthand references for
the kinds of abuse, specifically identified, that the corporate structure should not
shield—fraud, evasion of existing obligations, circumvention of statutes, monopolization,
criminal conduct, and the like.”).
       30
            Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347, 353 (5th Cir. 2003).

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      We decline to do so. “[W]hether to utilize equitable estoppel . . . is within
the district court’s discretion.”31 When a district court fails to exercise its
discretion based on a “misapprehension of the law” as was the case here, this
court remands the action to allow the “district court to exercise [it] in the first
instance.”32 Accordingly, we remand the issue of whether to stay the proceedings
concerning the other parties to the district court.
                                      *        *         *
      The district court’s denial of NOV Norway’s motion to compel is
VACATED. The case is REMANDED to the district court to decide whether to
stay proceedings concerning the other parties under the doctrine of equitable
estoppel.




      31
           Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000).
      32
          Duffy & McGovern Accommodation Servs. v. QCI Marine Offshore, Inc., 448 F.3d
825, 831 (5th Cir. 2006).

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