                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-1-2004

Bouriez v. Carnegie Mellon Univ
Precedential or Non-Precedential: Precedential

Docket No. 03-1709P




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Recommended Citation
"Bouriez v. Carnegie Mellon Univ" (2004). 2004 Decisions. Paper 897.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/897


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                      PRECEDENTIAL
               ___________                               (Filed: March 1, 2004)

   UNITED STATES COURT OF                                     ___________
APPEALS FOR THE THIRD CIRCUIT
                                                James A. Vollins, Esq. (Argued)
               No. 03-1709                      Squire, Sanders & Dempsey
               ___________                      127 Public Square
                                                4900 Key Tower
      CHRISTIAN BOURIEZ;                        Cleveland, OH 44114-1304
    MONTANELLE BEHEER B.V.,                            Counsel for Appellants

                           Appellants,
                                                George E. Yokitis, Esq. (Argued)
                    vs.                         DeForest, Koscelnik & Yokitis
                                                436 Seventh Avenue
 CARNEGIE MELLON UNIVERSITY                     3000 Koppers Building
         ___________                            Pittsburgh, PA 15219
                                                       Counsel for Appellee
   APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE                                 ___________
     WESTERN DISTRICT OF
        PENNSYLVANIA                                  OPINION OF THE COURT
                                                           ___________
         (D.C. No. 02-cv-02104)
                                                NYGAARD, Circuit Judge.
           District Judge:
    The Honorable Arthur J. Schwab                     Christian Bouriez and M ontanelle
            ___________                         Beheer B.V. (collectively referred to as
                                                “Bouriez”) appeal the District Court’s
              ARGUED                            order compelling arbitration and
           JANUARY 27, 2004                     dismissing their case. We will reverse
                                                and remand.
             BEFORE:
      NYGAARD and FUENTES,
         Circuit Judges, and
       O’NEILL,* District Judge.

                                                (...continued)
*        Honorable Thomas N. O’Neill,           States District Court for the Eastern
Jr., Senior District Judge for the United       District of Pennsylvania, sitting by
                               (continued...)   designation.
                     I.
                                                          By the end of 2000, Carnegie
       In 1996, Carnegie Mellon                   Mellon was in need of additional funds
University entered into an agreement (the         for the Project. Carnegie Mellon again
“1996 Agreement”) with Zeta Projects              approached Bouriez and he agreed to
Limited. Under the terms of this                  assist Carnegie Mellon in finding
Agreement, Zeta Projects would fund               additional investors. Before finding
certain of Carnegie Mellon’s research             those investors, the Project underwent an
projects. In 1997, Governors Refining             audit and, according to Bouriez, that
Technologies assumed Zeta Projects’               audit revealed that Carnegie Mellon
position in the 1996 Agreement.                   never had Proof-of-Concept for the
Governors Refining was a partially                Project. As a result of this discovery,
owned subsidiary of Governors                     Bouriez did not try to find additional
Technologies Corp.                                investors for the Project and sued
                                                  Carnegie Mellon. Bouriez claims that
        In 1999, Carnegie Mellon                  Carnegie Mellon made
approached Bouriez about investing in a           misrepresentations to him about the
research project (“the Project”) that was         status of the Project in order to convince
being conducted under the 1996                    him to purchase shares in Governors
Agreement. 1 According to Bouriez,                Technologies and, thereby fund the
Carnegie Mellon represented to him that           Project.
they had Proof-of-Concept on the
technology at issue. Bouriez agreed to                    Carnegie Mellon filed a
support the Project and did so by                  motion seeking to compel Bouriez to
investing in, and thereby becoming a              arbitrate his claims and to have his
shareholder of, Governors Technologies.           federal action dismissed. Carnegie
Governors Technologies then took the              Mellon based this motion on the
$5,000,000 that Bouriez invested and              arbitration clause contained in the 1996
used it to fund the Project.                      Agreement. The clause requires that,
                                                  “Any dispute or claim arising out of or
                                                  relating to the Agreement will be settled
                                                  by arbitration in Pittsburgh,
1.      The 1996 Agreement does not
                                                  Pennsylvania.” App. 24. Neither
specifically lay out research projects, but
                                                  Bouriez nor Governors Technologies
contemplates that proposals will be
                                                  signed this Agreement.
submitted pursuant to the terms of that
Agreement. The project that Governors
                                                         The District Court granted
Refining was involved in was submitted
                                                  Carnegie Mellon’s motion after finding
under this procedure and involved the
                                                  that Bouriez “as agent[] of [Governors
upgrading of crude petroleum using
                                                  Technologies], [is] bound by [his]
microwave-enhanced catalytic cracking.

                                              2
principal’s [Governors Technologies]              inappropriate to force a party to arbitrate
agreement to arbitrate” and “[Bouriez]            their disputes unless that party agreed to
embraced the Agreement and directly               such arbitration. E.I. Dupont de
benefitted therefrom and thus [is]                Nemours & Co. v. Rhone Poulenc Fiber
equitable [sic] estopped from avoiding its        & Resin Intermediates, S.A.S., 269 F.3d
arbitration clause.” App. at 6.                   187, 194 (3d Cir. 2001). A party,
                                                  however, can be compelled to arbitrate
                    II.                           under an agreement, even if he or she did
                                                  not sign that agreement, if common law
       We have jurisdiction over this             principles of agency and contract support
appeal under 28 U.S.C. § 1291.2 We                such an obligation on his or her part. Id.
exercise plenary review over the District         at 194-95.
Court’s order compelling arbitration.
Pritzker v. Merrill Lynch, Pierce, Fenner                Generally, the common law
& Smith, Inc., 7 F.3d 1110, 1113 (3d              theories used to bind a non-signatory to
Cir. 1993).                                       an arbitration clause include third party
                                                  beneficiary, agency and equitable
        The right to a jury trial is a            estoppel. Here, Carnegie Mellon argued,
fundamental right that is expressly               and the District Court accepted, that
protected by the Seventh Amendment to             Bouriez could be compelled to arbitrate
the United States Constitution. Molthan           under the 1996 Agreement based on the
v. Temple Univ. of Com. Sys. of Higher            principles of agency and equitable
Educ., 778 F.2d 955, 963 (3d Cir. 1985).          estoppel.
Although the Federal Arbitration Act
“establishes a strong federal policy in                   In its agency analysis, the District
favor of compelling arbitration over              Court found that Bouriez was an agent of
litigation,” this Court has held that it is       Governors Technologies and, therefore,
                                                  was bound to arbitrate under the 1996
                                                  Agreement. Bouriez raises several
                                                  factual arguments regarding his status as
2.       We note that as its primary form
                                                  an agent of Governors Technologies and
of relief, Carnegie Mellon requested that
                                                  Governors Technologies’ obligation to
the District Court compel arbitration and
                                                  arbitrate under an agreement assumed,
dismiss Bouriez’s federal action. We
                                                  not by Governors Technologies, but by
express no opinion as to whether, had
                                                  Governors Refining. However, even
Carnegie Mellon requested a stay under
                                                  assuming Bouriez was an agent of
Section 3 of the Federal Arbitration Act,
                                                  Governors Technologies and it was
9 U.S.C. § 3, it would have been proper
                                                  obligated to arbitrate under the 1996
for the District Court to dismiss this
                                                  Agreement, this does not mean Bouriez
action, and for us to hear an appeal from
                                                  was also obligated to arbitrate his claims.
that dismissal.

                                              3
In Bel-Ray Co. v. Chemrite, we held that        Group., Inc., 215 F.3d 677 (7th Cir.
an agent can only be bound by the               2000).
agreements of his principal when that
principal acted with the agent’s actual,                In Industrial Electronics, iPower
implied, or apparent authority. 181 F.3d        approached Industrial Electronics in an
435, 445 (3d Cir. 1999). There is no            attempt to convince it to join an
evidence that Governors Technologies,           association of other companies. Id. at
Governors Refining, or any other entity         678-79. Once established, that
was acting with implied, actual or              association would enter into a franchise
apparent authority for Bouriez when it          agreement with iPower, for iPower to
agreed to the 1996 Agreement. In fact,          provide computer software that would
the record shows that Bouriez did not           allow customers to purchase from all
even become involved in the Project until       members of the association in a single
1999, approximately two years after             order. Id. Industrial Electronics decided
Governors Refining assumed the 1996             to enter into the association, which was
Agreement. Therefore, the District Court        created as a limited liability corporation.
is incorrect in its conclusion that any         Id. at 679. One year later, the association
agency relationship between Bouriez and         entered into the intended franchise
Governors Technologies obligated him to         agreement with iPower. Id.
arbitrate.
                                                        Eventually, Industrial Electronics
        A person may also be equitably          came to believe that iPower
estopped from challenging an agreement          misrepresented certain facts and
that includes an arbitration clause when        fraudulently induced Industrial
that person embraces the agreement and          Electronics to enter the association. Id.
directly benefits from it. E.I. Dupont,         It sued iPower. Id. In an attempt to
269 F.3d at 199-200. Here, there is             compel arbitration, iPower argued that
simply no evidence in the record to             Industrial Electronics was bound by an
indicate that Bouriez directly benefitted       arbitration clause that existed in the
from the 1996 Agreement. At most, the           franchise agreement between iPower and
facts show that Bouriez became a                the association. Id. The Court of
minority shareholder in Governors               Appeals for the Seventh Circuit correctly
Technologies for the sole purpose of            observed that Industrial Electronics’
funding the Project. There is no                claims were not based on the franchise
evidence that any benefit the Project           agreement, but on iPower’s statements
would produce would go to him directly.         that induced it to enter into the
In this respect, this case is nearly            association. Id. at 680-81. Thus,
identical to Industrial Electronics Corp.       Industrial Electronics was not exploiting
of Wisconsin v. iPower Distribution             or directly benefitting from the
                                                agreement that contained the arbitration

                                            4
clause, and would not be equitably
estopped from avoiding that clause.

        The facts here are not
distinguishable and we find Industrial
Electronics persuasive. Bouriez is
complaining that Carnegie Mellon
wrongly induced him to enter into a
shareholder agreement with Governors
Technologies. While the purpose of that
agreement was that Bouriez could
provide money to Governors
Technologies that Governors
Technologies would use to fund
Carnegie Mellon, the fact remains that
Bouriez’s claims deal with his
shareholder agreement, and not the 1996
Agreement. As in Industrial Electronics,
“A dispute that arises under one
agreement may be litigated
notwithstanding a mandatory arbitration
clause in a second agreement, even
where the two agreements are closely
intertwined.” Id. at 681. Such is the
circumstance here. The District Court’s
contrary conclusion fails to acknowledge
that Bouriez was one step removed from
the 1996 Agreement and, therefore, is not
equitably estopped from avoiding the
arbitration clause contained in that
Agreement.

                  III.

      For the foregoing reasons, we will
remand the cause.
_________________________




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