Intergen N v. v. Grina

United States Court of Appeals
For the First Circuit

No. 03-1056

INTERGEN N.V.,
Plaintiff, Appellee,

v.

ERIC F. GRINA, ALSTOM (SWITZERLAND) LIMITED, AND ALSTOM POWER NV,
Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Robert E. Keeton, U.S. District Judge]

Before

Selya, Circuit Judge,
Stapleton* and Baldock,** Senior Circuit Judges.

John M. Townsend, Hughes Hubbard & Reed LLP, Barry Y. Weiner,
Christopher P. Litterio, and Ruberto, Israel & Weiner, P.C. on
brief for appellants.
Evan Slavitt, Bodoff & Slavit LLP, George Anthony Smith,
Thomas Philip Wilson, and Sutherland Asbill & Brennan LLP on brief
for appellee.

September 22, 2003

_______________
*Of the Third Circuit, sitting by designation.
**Of the Tenth Circuit, sitting by designation.
 SELYA, Circuit Judge. This case invites us to fit a

complex set of corporate pegs into a series of unfamiliar holes

drilled by international conventions and federal statutes. But the

pegs are square, the holes are round, and the fit is inexact.

Given the facts of this case, the obvious bar to arbitrability is

the abecedarian tenet that a party cannot be forced to arbitrate if

it has not agreed to do so. The defendants advance several

theories designed to circumvent this tenet. After answering a

question of first impression in this circuit as to what legal

standard controls in cases brought under chapter 2 of the Federal

Arbitration Act (FAA), 9 U.S.C. §§ 201-208, we examine these

theories. In the end, we discern no sufficient legal basis for

compelling arbitration here. Consequently, we uphold the order

entered below.

I. BACKGROUND

We divide our discussion of the relevant background into

three segments. Except as otherwise indicated, the facts are not

disputed.

A. The Cast of Characters.

Plaintiff-appellee InterGen N.V. is an energy company

based in the Netherlands. InterGen finances and develops electric

power generation facilities throughout the world. During the

summer and fall of 1995, InterGen launched the 750-megawatt

Rocksavage power project, located in the United Kingdom. In its

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preliminary workup, InterGen entertained competitive bids for gas-

fired turbines. After consulting with its technical services

advisor and corporate cousin Bechtel Power Corporation, InterGen

settled on GT26 gas turbines manufactured by defendant-appellant

ALSTOM Power N.V. One persuasive attribute of the successful bid,

InterGen alleges, was the manufacturer's pledge to vet the GT26

technology at a special testing facility in Birr, Switzerland.

Shortly after choosing the GT26 gas turbines for the Rocksavage

plant, InterGen decided to go forward with another electronic power

generation facility — Coryton, also located in the U.K. — and opted

to use the same turbines there.

Both the Rocksavage and Coryton developments were encased

in individual Cayman Island corporations, namely, Rocksavage Power

Company (RPC) and Coryton Energy Company (CEC). Both corporations

were beneficially owned by another Cayman Islands corporation,

International Generating Company (a wholly owned subsidiary of

InterGen).1 In exchange for developing the projects, making key

design decisions (such as the selection of the turbines), and

infusing capital, InterGen received an equity stake in each

project.

1
The record indicates that InterGen and its panoply of
subsidiaries have undergone frequent corporate transformations
since 1995 (when this tale began). None of those developments
alters the underlying reality: the Rocksavage and Coryton projects
have at all times been owned and controlled by InterGen or entities
under its direct or indirect suzerainty.

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 Bechtel Power also has numerous corporate relatives. The

patriarch is Bechtel Group, Inc., and Bechtel Power, Bechtel

Limited, and Bechtel Enterprises Energy B.V. (one of InterGen's

parent companies) are all part of the family. The specific nature

of the ties among the Bechtel entities need not concern us. What

does matter is that Bechtel Power had an ongoing relationship as

Intergen's technical services advisor during construction and

development of the Rocksavage and Coryton projects. Another

Bechtel company — Bechtel Limited — entered into a separate

contract with RPC to act as the engineering, procurement, and

construction (EPC) contractor. Pursuant to that contract, Bechtel

Limited negotiated and signed an agreement to purchase turbines and

related equipment from an indirectly owned subsidiary of ALSTOM

Power, namely, ALSTOM Power Generation (APG).

On June 21, 1996 (some five months after Bechtel Limited

and APG executed the Rocksavage purchase order),2 RPC and APG

entered into a services agreement through which APG would maintain

the turbines, and a support agreement in which APG promised to

deliver certain technology upgrades and risk protection. CEC and

APG entered into a similar support agreement on the same date that

Bechtel Limited and APG signed the Coryton purchase order (June 5,

2
The defendants suggest that the parties at some point amended
the Rocksavage purchase order to substitute Bechtel Power for
Bechtel Limited. Appellants' Br. at 15-16. We need not determine
whether this amendment in fact occurred, as such a change, in and
of itself, would not affect our analysis.

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1998). Each of these five contracts — the two purchase orders, the

services agreement, and the two support agreements — contained

liquidated damages provisions and specified that English law would

govern disputes arising thereunder. Each also contained clauses

providing for mandatory arbitration.

The arbitration clauses in the two purchase orders are

identical; in terms, each clause applies to "[a]ny and all

controversies, disputes or claims between Buyer and Seller arising

out of or in any way relating to this Agreement," and requires that

"any dispute or difference arising out of or in connection with

this Agreement, including any question regarding its existence,

validity or termination, shall be referred to and finally resolved

by arbitration under the rules of the London Court of International

Arbitration." The purchase orders define "Buyer" as "the Bechtel

entity shown in the Purchase Order Agreement form"; "Seller" as

"the Party who has been awarded the Agreement"; and "Agreement" as

meaning the purchase order itself. The services and support

agreements contain similarly worded arbitration provisions.

B. The Underlying Dispute.

In mid-1998, problems relating to the GT26 turbines

started to surface. InterGen alleges that manufacturing and design

defects in the turbines caused (and continue to cause) extensive

outages that have prevented the Rocksavage facility from operating

at full capacity. InterGen further alleges that the turbines

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commissioned for the Coryton facility (which is not yet in

commercial operation) are similarly defective.

Over time, this dissatisfaction led to litigation. On

July 20, 2001, InterGen brought suit in a Massachusetts state

court. It named as defendants ALSTOM Power, APG (formerly known as

ABB Power Generation), ALSTOM Power UK Holdings (an ALSTOM

subsidiary that owns APG), and Eric Grina, a Massachusetts resident

who allegedly acted as ALSTOM Power's agent for many of the

relevant negotiations.3

The complaint alleged in substance that InterGen relied

on ALSTOM Power's misrepresentations when choosing turbines for the

Rocksavage and Coryton projects; that this selection was contingent

upon the manufacturer's assurances that the turbines would be

adequately tested before their installation on site; that the

manufacturer made other, related representations to InterGen; that

the ALSTOM interests neither intended to pre-test the GT26 turbines

at Birr nor to fulfill their other representations; that InterGen

invested substantial amounts of capital in the two projects in

reliance on the manufacturer's knowingly false representations;

that the turbines failed miserably; and that InterGen suffered

3
The complaint also named as defendants ABB Limited and its
wholly owned subsidiary, ABB Asea Brown Boveri, Limited (which
controlled APG from 1995 to 2000). On April 19, 2002, the district
court dismissed the action as to these defendants for want of in
personam jurisdiction. That ruling is not before us and,
accordingly, we eschew any further reference to those entities.

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economic losses as a result. The complaint channeled these

allegations into six state-law causes of action: intentional

deceit, negligent deceit, unfair trade practices, promissory

estoppel, tortious interference with advantageous relations, and

quantum meruit. The complaint neither sought to recover for breach

of contract nor to enforce any contractual right.

C. Travel of the Case.

On October 16, 2001, the defendants removed the action to

the federal district court. They posited that the arbitration

provisions in the purchase orders and the services and support

agreements bound InterGen and that these provisions fell within the

Convention on the Recognition and Enforcement of Foreign Arbitral

Awards (the New York Convention), June 10, 1958, 21 U.S.T. 2517,

330 U.N.T.S. 38. Because chapter 2 of the FAA implements the New

York Convention, the defendants were able to predicate removal of

the action to the federal court on 9 U.S.C. § 205 (allowing removal

of any "action or proceeding pending in a State court [that]

relates to an arbitration agreement or award falling under the

Convention"). On October 26, 2001, the defendants moved to compel

arbitration, see id. § 206, and to stay proceedings pending

completion of the anticipated arbitration. InterGen opposed these

motions, noting that it had neither signed any of the underlying

contracts nor agreed to arbitrate the claims asserted in its

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complaint. For essentially the same reasons, it asked that the

case be returned to the state court.

On December 19, 2001, the district court addressed the

pending motions at a status conference. Remarking the sparseness

of the record, the court adjudged all the pending motions premature

and denied them without prejudice. It simultaneously ordered the

parties to conduct discovery limited to the questions of

arbitrability and personal jurisdiction. The parties complied, and

a contentious period of pretrial discovery ensued.

On July 31, 2002, InterGen filed an amended complaint as

of right. See Fed. R. Civ. P. 15(a). The amended complaint

discarded the quantum meruit claim. More significantly, it revised

the roster of parties in such a way that no signatory to any

agreement that contained an arbitration clause remained as a party;

InterGen was the sole plaintiff and ALSTOM Power, ALSTOM

(Switzerland) Limited, and Grina were the sole defendants. For

ease in reference, we denominate the three remaining defendants,

collectively, as "ALSTOM."

In short order, InterGen renewed its motion to remand the

case to the state court and ALSTOM renewed its motion to force

arbitration. On October 31, 2002, the district court, ruling ore

sponte, denied InterGen's motion to remand. The following week,

the court issued a rescript in which it denied ALSTOM's motion.

The court rested its ruling on the premise that, under the

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Constitution, it lacked "authority to compel proceedings in

London." InterGen N.V. v. Grina, No. 01-11774, slip op. at 3 (D.

Mass. Nov. 6, 2002) (unpublished). The court reasoned that because

the motion contemplated an arbitration to be held abroad, the court

"ha[d] available to it no means of enforcement," and, thus, was

"without authority" to proceed. Id. at 3-4.

A party has the right to appeal immediately from an order

denying a motion to compel arbitration. See 9 U.S.C. §

16(a)(1)(C). Availing itself of this option, ALSTOM filed a timely

interlocutory appeal. In addressing that appeal, we first

memorialize the applicable standard of review; then explain why we

depart from the district court's reasoning; and, finally, examine

afresh the applicability of the various arbitration clauses.

II. STANDARD OF REVIEW

The baseline rule is that "abstract questions as to

whether particular disputes do (or do not) come within the four

corners of an expressly limited arbitration provision are legal in

nature." Paul Revere Variable Annuity Ins. Co. v. Kirschhofer, 226

F.3d 15, 18-19 (1st Cir. 2000). Because this case raises questions

of that genre, we review the district court's refusal to compel

arbitration de novo. Id. at 19. We are not wedded to the lower

court's rationale, but, rather, may affirm its order on any

independent ground made manifest by the record. See, e.g., Houlton

Citizens' Coalition v. Town of Houlton, 175 F.3d 178, 184 (1st Cir.

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1999); Freeman v. Package Mach. Co., 865 F.2d 1331, 1349-50 (1st

Cir. 1988).

III. THE DISTRICT COURT'S ANALYSIS

An evaluation of the district court's analysis requires

a general understanding of the New York Convention. The Convention

is an international agreement designed "to encourage the

recognition and enforcement of commercial arbitration agreements in

international contracts and to unify the standards by which

agreements to arbitrate are observed and arbitral awards are

enforced." Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15

(1974). The United States acceded to this treaty on September 30,

1970. To implement it, Congress enacted chapter 2 of the FAA.

The arbitration clauses at issue here come within the

Convention's ambit. See generally DiMercurio v. Sphere Drake Ins.,

202 F.3d 71, 74 & n.2 (1st Cir. 2000); Ledee v. Ceramiche Ragno,

684 F.2d 184, 186-87 (1st Cir. 1982). A district court's duty to

enforce arbitration clauses that so qualify cannot seriously be

questioned. See 9 U.S.C. § 201 (directing that the New York

Convention "shall be enforced in United States courts"). Article

II of the Convention requires contracting states to "recognize an

agreement in writing under which the parties undertake to submit to

arbitration all or any differences which have arisen or which may

arise between them." 21 U.S.T. at 2519, 330 U.N.T.S. at 38. To

give force to this requirement, the Convention stipulates that a

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court of a contracting state "shall, at the request of one of the

parties, refer the parties to arbitration, unless it finds that the

said agreement is null and void, inoperative or incapable of being

performed." 21 U.S.T. at 2519, 330 U.N.T.S. at 40.

Given this regime, it clearly appears that enforcing

arbitration clauses under the New York Convention is an obligation,

not a matter committed to district court discretion. See Ledee,

684 F.2d at 187 & n.3; I.T.A.D. Assocs., Inc. v. Podar Bros., 636

F.2d 75, 77 (4th Cir. 1981); McCreary Tire & Rubber Co. v. CEAT

S.p.A., 501 F.2d 1032, 1037 (3d Cir. 1974). To facilitate the

performance of this obligatory task, the FAA confers an

armamentarium of powers. This arsenal includes the express

authority to "direct that arbitration be held in accordance with

the agreement at any place therein provided for, whether that place

is within or without the United States." 9 U.S.C. § 206.

Federal district courts have taken this grant of

authority at face value and regularly have compelled arbitrations

at venues beyond the ordering court's jurisdiction. See, e.g.,

Hart Enters. Int'l, Inc. v. Anhui Provincial Imp. & Exp. Corp., 888

F. Supp. 587, 591 (S.D.N.Y. 1995) (ordering parties to arbitrate in

Beijing); Filanto S.p.A. v. Chilewich Int'l Corp., 789 F. Supp.

1229, 1241 (S.D.N.Y. 1992) (ordering parties to arbitrate in

Moscow). These decisions square with the explicit mandate of

section 206.

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 Despite the clarity of the statutory imperative, the

court below feared that it lacked the muscle to enforce an order

that the parties arbitrate in London. Grina, slip op. at 3-4. It

concluded that if an order to arbitrate was unenforceable, it must

be outside the FAA's scope. Id. We think that this analysis both

misconstrues the statute and misconceives the law.

Chapter 2 of the FAA makes it crystal clear that the

statute contemplates foreign arbitrations. See 9 U.S.C. § 206.

The district court's contrary ruling rests on its perceived

inability to send court officers to London to enforce a command.

Grina, slip op. at 3. While this is a valid concern in the sense

that a federal court may not exercise its injunctive powers beyond

the reach of its jurisdiction, see Pa. Bureau of Corr. v. U.S.

Marshals Serv., 474 U.S. 34, 40 (1985); United States v. N.Y. Tel.

Co., 434 U.S. 159, 172-73 (1977), it overlooks alternative means of

enforcement. Where, as here, a federal court has personal

jurisdiction over the parties, the limitations on its ability to

enforce an injunction in a foreign forum are not an obstacle to its

issuance of an order compelling arbitration. The court has other

means at hand for enforcing such an order. It may, for example,

enter a default or an order of dismissal (depending upon which

party refuses to arbitrate), or adjudge a recalcitrant party in

contempt. See, e.g., LaPrade v. Kidder Peabody & Co., 146 F.3d

899, 900, 907 (D.C. Cir. 1998) (affirming contempt finding and

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imposition of sanctions for "vexatious and dilatory tactics" with

respect to compelled arbitration); Morris v. Morgan Stanley & Co.,

942 F.2d 648, 653 (9th Cir. 1991) (affirming order of dismissal for

refusal to arbitrate); Ames v. Standard Oil Co., 108 F.R.D. 299,

302 (D.D.C. 1985) (similar).

We therefore hold that so long as the parties are bound

to arbitrate and the district court has personal jurisdiction over

them, the court is under an unflagging, nondiscretionary duty to

grant a timely motion to compel arbitration and thereby enforce the

New York Convention as provided in chapter 2 of the FAA, even

though the agreement in question requires arbitration in a distant

forum. Since the arbitration clauses at issue here fall within the

scope of the New York Convention, the district court erred in

refusing to order arbitration on the ground that it lacked

authority to enforce an injunction abroad.

IV. ARBITRABILITY

Our rejection of the district court's rationale does not

end the matter. Courts sometimes reach a correct result for an

incorrect reason, and we sometimes affirm a district court's

judgment even though we disavow its reasoning. InterGen says that

this is such a case.

A party who attempts to compel arbitration must show that

a valid agreement to arbitrate exists, that the movant is entitled

to invoke the arbitration clause, that the other party is bound by

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that clause, and that the claim asserted comes within the clause's

scope. The third of these four elements is dispositive here; as we

shall explain, InterGen is not bound by the arbitration clauses

contained in any of the several contracts described above.

A. General Principles.

We begin with first principles: "arbitration is a matter

of contract and a party cannot be required to submit to arbitration

any dispute which he has not agreed so to submit." AT&T Techs.,

Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986)

(quoting United Steelworkers v. Warrior & Gulf Navig. Co., 363 U.S.

574, 582 (1960)). We have interpreted this precept to mean that "a

party seeking to substitute an arbitral forum for a judicial forum

must show, at a bare minimum, that the protagonists have agreed to

arbitrate some claims." McCarthy v. Azure, 22 F.3d 351, 354-55

(1st Cir. 1994) (emphasis in original). The upshot is that courts

should be extremely cautious about forcing arbitration in

"situations in which the identity of the parties who have agreed to

arbitrate is unclear." Id. at 355; accord Bel-Ray Co. v. Chemrite

(Pty) Ltd., 181 F.3d 435, 444 (3d Cir. 1999).

This point looms large in any reasoned analysis of the

issues on appeal. The signatories to the purchase orders are APG

and Bechtel Limited, neither of which is a party to this

litigation. The signatories to the various services and support

agreements (e.g., APG, RPC, CEC) likewise are strangers to these

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proceedings. In short, no party to this case, plaintiff or

defendant, is a signatory to any of the five agreements. Thus, if

ALSTOM is to invoke any of the designated arbitration clauses

against InterGen, it somehow must go beyond the four corners of the

agreements themselves and show both that it is entitled to the

agreements' benefits and that InterGen is obliged to shoulder their

burdens. Because we conclude that InterGen is not required to

arbitrate, see text infra, we do not have occasion to inquire

further into whether ALSTOM, itself a nonsignatory, has the right

to demand arbitration.

ALSTOM presents a cornucopia of theories to support the

notion that nonsignatories can be bound by an arbitration provision

in a contract executed solely by others. Because we must evaluate

these theories through the prism of the appropriate legal standard,

we first ask what law governs.

As between state law and federal common law, we conclude

that uniform federal standards are appropriate. This is a federal

question case, 28 U.S.C. § 1331, and we therefore look to federal

choice of law principles. See Texas Indus., Inc. v. Redcliff

Materials, Inc., 451 U.S. 630, 642 (1981). "If the federal statute

in question demands national uniformity, federal common law

provides the determinative rules of decision." Bhd. of Locomotive

Eng'rs v. Springfield Terminal Ry. Co., 210 F.3d 18, 26 (1st Cir.

2000) (citing United States v. Kimball Foods, Inc., 440 U.S. 715,

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728 (1979)). The federal statute in question here is chapter 2 of

the FAA (which adopts and implements the New York Convention). A

central goal of the New York Convention — and the driving force

behind Congress's enactment of chapter 2 — was to set out uniform

rules governing the recognition and enforcement of international

arbitration awards. See Scherk, 417 U.S. at 520 n.15. Applying

varying state standards in cases falling within the Convention's

ambit would be in tension with the elemental purpose of chapter 2.

We hold, therefore, that federal common law provides the benchmark

against which the cogency of ALSTOM's theories must be measured.4

See Smith/Enron Cogeneration Ltd. P'ship v. Smith Cogeneration

Int'l, Inc., 198 F.3d 88, 96 (2d Cir. 1999), cert. denied, 531 U.S.

815 (2000). We turn to this task mindful that federal common law

incorporates general principles of contract and agency law. See

Thompson-CSF, S.A. v. Am. Arbit. Ass'n, 64 F.3d 773, 776 (2d Cir.

1995); McCarthy, 22 F.3d at 355; see also 9 U.S.C. § 2.

4
To be sure, it might be argued that the parties chose English
law to govern disputes arising out of their contracts and that,
therefore, their intent was to look to English legal principles.
But none of the parties have suggested that we import English law
for this purpose. Accordingly, any such argument has been waived.
See Fed. R. Civ. P. 44.1 ("A party who intends to raise an issue
concerning the law of a foreign country shall give notice by
pleadings or other reasonable written notice."); see also Carey v.
Bahama Cruise Lines, 864 F.2d 201, 205-06 (1st Cir. 1988); Cavic v.
Grand Bahama Dev. Co., 701 F.2d 879, 882-83 (11th Cir. 1983).

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 B. Judicial Estoppel.

ALSTOM's first theory invokes the doctrine of judicial

estoppel. It asserts that the factual allegations in InterGen's

original complaint, taken in the aggregate, amount to an admission

that InterGen was not merely a passive investor in the Rocksavage

and Coryton projects, but, rather, the principal architect of those

projects — an architect whose responsibilities included acting as

the chief negotiator for the acquisition of the gas turbines.

Although InterGen largely retracted these averments in amending its

complaint, ALSTOM asseverates that InterGen should be judicially

estopped from disclaiming its initial admissions. See Appellants'

Br. at 41 (maintaining that fairness should prevent InterGen from

"avoiding arbitration by manipulating its pleadings").

As a general matter, the doctrine of judicial estoppel

prevents a litigant from pressing a claim that is inconsistent with

a position taken by that litigant either in a prior legal

proceeding or in an earlier phase of the same legal proceeding.

See Pegram v. Herdrich, 530 U.S. 211, 227 n.8 (2000); see also 18

James Wm. Moore et al., Moore's Federal Practice § 134.30, at 134-

62.1 (3d ed. 2003). The doctrine is designed to ensure that

parties proceed in a fair and aboveboard manner, without making

improper use of the court system. New Hampshire v. Maine, 532 U.S.

742, 749-50 (2001). Consistent with that root purpose, the

doctrine is flexible and not subject to mechanical rules for

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determining its applicability. Id. at 751. Courts are prone to

invoke it "when a litigant is playing fast and loose with the

courts," and not otherwise. Patriot Cinemas, Inc. v. Gen. Cinemas

Corp., 834 F.2d 208, 212 (1st Cir. 1987) (citation and internal

quotation marks omitted).

Leaving to one side the question of whether ALSTOM has

accurately characterized InterGen's original and amended

complaints, this case is a poor candidate for judicial estoppel.

It is not a situation in which a party has adopted one position,

secured a favorable decision, and then taken a contradictory

position in search of legal advantage. To the contrary, InterGen

plausibly attributes its revised pleadings to information gleaned

during pretrial discovery. We would not want to institute a rule

that unduly inhibits a plaintiff from appropriately adjusting its

complaint either to correct errors or to accommodate facts learned

during pretrial discovery.

Perhaps more important, InterGen amended its complaint

prior to the issuance of any substantive ruling addressed to the

original complaint. Thus, InterGen gained absolutely no advantage

from its original pleading.

That is not to say that statements made in a superseded

complaint are null and void for all purposes. Under certain

circumstances, such statements may be party admissions, usable as

such despite subsequent amendment of the complaint. See, e.g.,

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Wiseman v. Reposa, 463 F.2d 226, 227 (1st Cir. 1972); Raulie v.

United States, 400 F.2d 487, 526 (10th Cir. 1968). That does not

mean, however, that a plaintiff is strictly bound by its initial

complaint. An amended complaint supersedes the original complaint,

and facts that are neither repeated nor otherwise incorporated into

the amended complaint no longer bind the pleader. See Kelley v.

Crosfield Catalysts, 135 F.3d 1202, 1204 (7th Cir. 1998)

(describing such omitted facts as "functus officio"); see also 3

Moore's Federal Practice, supra § 15.17[3], at 15-69. Absent some

sign of unfair advantage — and none exists here — the mere

retraction of statements made in an original complaint does not

justify the invocation of judicial estoppel.

C. Equitable Estoppel.

In a related vein, ALSTOM strives to convince us that the

doctrine of equitable estoppel should operate to prevent InterGen

from declining to arbitrate. We are not persuaded.

Pertinently, the doctrine of equitable estoppel precludes

a party from enjoying rights and benefits under a contract while at

the same time avoiding its burdens and obligations. See, e.g.,

Hughes Masonry Co. v. Greater Clark County Sch. Bldg. Corp., 659

F.2d 836, 838-39 (7th Cir. 1981); see generally Med. Air Tech.

Corp. v. Marwan Inv., Inc., 303 F.3d 11, 18 (1st Cir. 2002)

(dictum; collecting cases). On this basis, "a party may be

estopped from asserting that the lack of his signature on a written

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contract precludes enforcement of the contract's arbitration clause

when he has consistently maintained that other provisions of the

same contract should be enforced to benefit him." Int'l Paper Co.

v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th

Cir. 2000).

In an effort to fit the case at hand within the contours

of this model, ALSTOM asserts that InterGen's claims depend upon

rights that derive from the purchase orders and other agreements;

that its claims for damages are, in effect, an attempt to enforce

contractual remedies; and that, therefore, InterGen should be

estopped from contesting the applicability of the various

arbitration clauses. In constructing this argument, ALSTOM focuses

specifically on InterGen's allegation, made only in the original

complaint, that it is "the successor to all rights of predecessor

entities related to the actions and omissions alleged" in the

pleading. In ALSTOM's view, this allegation signals InterGen's

intention to assert the contractual rights of RPC and CEC.

We reject these importunings. While ALSTOM accurately

quotes the original complaint, that document has very limited

significance. See supra Part IV(B). Moreover, InterGen's claims

for damages offer no footing for the assertion of equitable

estoppel. The claimed damages are not contract damages per se; the

amended complaint instead paints a consistent picture portraying

InterGen as an investor that relied upon certain extra-contractual

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assurances and sustained losses of its own funds when those

assurances came to naught.

At any rate, there is a more jagged rent in the fabric of

ALSTOM's argument. Although federal courts generally "have been

willing to estop a signatory from avoiding arbitration with a

nonsignatory when the issues the nonsignatory is seeking to resolve

in arbitration are intertwined with the agreement that the estopped

party has signed," Thompson-CSF, 64 F.3d at 779 (emphasis in

original), they have been hesitant to estop a nonsignatory seeking

to avoid arbitration. In the latter situation, estoppel has been

limited to "cases [that] involve non-signatories who, during the

life of the contract, have embraced the contract despite their non-

signatory status but then, during litigation, attempt to repudiate

the arbitration clause in the contract." E.I. DuPont de Nemours &

Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d

187, 200 (3d Cir. 2001); accord Am. Bureau of Shipping v. Tencara

Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir. 1999) (holding a

nonsignatory bound by a contract under which it received the direct

benefits of lower insurance rates and the ability to sail under the

French flag). The record in this case simply does not support a

claim that InterGen embraced the contracts and sought to derive

direct benefits from them during their currency. Hence, there is

no cognizable basis for equitable estoppel.

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 D. Third-Party Beneficiary.

ALSTOM argues that InterGen, though not a signatory to

the purchase orders, was nonetheless a third-party beneficiary of

them (and, therefore, should be bound by the arbitration clauses

contained therein). We do not agree.

It is well settled that third-party beneficiary status

does not allow the holder to avoid the effect of otherwise

enforceable contract provisions. See, e.g., Coastal Steel Corp. v.

Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983),

overruled on other grounds by Lauro Lines v. Chasser, 490 U.S. 495

(1989); Trans-Bay Eng'rs & Builders, Inc. v. Hills, 551 F.2d 370,

378 (D.C. Cir. 1976). It follows, then, that a third-party

beneficiary of a contract containing an arbitration clause can be

subject to that clause and compelled to arbitrate on the demand of

a signatory. See E.I. Dupont, de Nemours, 269 F.3d at 195; Indus.

Elecs. Corp. v. Power Distrib. Group, 215 F.3d 677, 680 (7th Cir.

2000); cf. Coastal Steel, 709 F.2d at 202-04 (binding a

nonsignatory third-party beneficiary to a forum selection clause).

The threshold question here is whether InterGen is a third-party

beneficiary of the purchase orders.

We must approach this threshold with care since the law

requires "special clarity" to support a finding "that the

contracting parties intended to confer a benefit" on a third party.

McCarthy, 22 F.3d at 362; accord Mowbray v. Moseley, Hallgarten,

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Estabrook & Weeden, Inc., 795 F.2d 1111, 1117 (1st Cir. 1986); 3 E.

Allan Farnsworth, Farnsworth on Contracts § 10.3, at 13-23 (2d ed.

1998). In measuring ALSTOM's showing against this rigorous

requirement, we focus on the specific terms of the purchase orders.

Throughout, we bear in mind that courts ought not to distort the

clear intention of contracting parties or reach conclusions at odds

with the unambiguous language of a contract. EEOC v. Waffle House,

Inc., 534 U.S. 279, 294 (2002).

The two purchase orders are peas in a pod — identical in

all material respects — and their text provides clear guidance.

Each purchase order's arbitration clause applies to "[a]ny and all

controversies, disputes or claims between Buyer and Seller." The

words "Buyer" and "Seller" are explicitly defined. Applying those

definitions, the Buyer is Bechtel Limited and the Seller is APG.

There are no third-party rights afforded to InterGen. We decline

ALSTOM's invitation to read into the purchase orders rights and

obligations that the contracting parties did not see fit to

include. The fact that each purchase order contains an integration

clause reinforces this result. See McCarthy, 22 F.3d at 358

(emphasizing that courts should hesitate "to read unwritten terms

into agreements containing [integration clauses]").

ALSTOM attempts to blunt the force of this reasoning by

pointing to language in the purchase orders stating that "[t]o the

extent that Buyer is not the ultimate consumer of the Equipment

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being purchased herein, all rights, benefits and remedies conferred

upon Buyer by this Agreement shall also accrue and be available to

and are for the express benefit of Owner." We find threadbare

ALSTOM's suggestion that this language assigns rights and benefits

to InterGen (and, thus, extends the arbitration provisions to it).

InterGen is not the "Owner." Rather, the term "Owner" is defined

as meaning either RPC or CEC (depending upon which purchase order

one reads).5

ALSTOM's rejoinder is that InterGen is (at least

indirectly) the parent company of RPC and CEC and, in the original

complaint, linked itself with those entities. That rejoinder does

not get ALSTOM very far. In the first place, the operative

pleading is the amended complaint, see supra Part IV(B), and that

pleading does not paint so intimate a corporate picture. In the

second place, even were we prepared to accept both the phraseology

of the original complaint and ALSTOM's self-serving interpretation

of it, an intimate corporate relationship, without more, is not

tantamount to an assignment of specific rights. There is an

important distinction between a nonsignatory who may benefit from

a signatory's exercise of its contractual rights (because of, say,

5
Interestingly, the purchase order for the Coryton project
contains additional language extending the definition of "Owner" to
CEC's "successors in title and permitted assignees." ALSTOM makes
no claim that this additional language is significant here, and
there is nothing to show either that CEC had a successor in title
or that APG permitted it to assign any rights.

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an equity stake) and a third-party beneficiary. See E.I. DuPont de

Nemours, 269 F.3d at 196-97 (explaining that a parent company not

explicitly named in an agreement "was not an intended third party

beneficiary . . . any more than any parent who expects to benefit

from the success of . . . [its] subsidiary"). In other words, a

benefitting third party is not necessarily a third-party

beneficiary. McCarthy, 22 F.3d at 362.

That ends this aspect of the matter. InterGen, as an

elder in a corporate family that included both RPC and CEC, plainly

stood to gain from their commercial successes. But that verity is

not enough to make ALSTOM's point. The critical fact is that the

purchase orders neither mention nor manifest an intent to confer

specific legal rights upon InterGen. Consequently, ALSTOM may not

require InterGen to fulfill any corresponding legal duties (such as

the duty to arbitrate).

E. Agency.

ALSTOM also contends that InterGen became bound by the

arbitration clauses when Bechtel Limited executed the purchase

orders. This contention invokes traditional principles of agency

law in an effort to show that Bechtel Limited acted as InterGen's

agent. The effort founders.

It is hornbook law that an agent can commit its

(nonsignatory) principal to an arbitration agreement. See

Restatement (Second) of Agency § 7 (1958); see also Thompson-CSF,

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64 F.3d at 777; In re Oil Spill by the Amoco Cadiz, 659 F.2d 789,

795-96 (7th Cir. 1981); cf. Pritzker v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 7 F.3d 1110, 1122 (3d Cir. 1993) (extending

a principal's arbitration obligation to its nonsignatory agent).

But the requirements for such vicarious responsibility are

exacting: "[n]ot only must an [agency] arrangement exist . . . so

that one [party] acts on behalf of the other and within usual

agency principles, but the arrangement must be relevant to the

[legal obligation in dispute]." Phoenix Can. Oil Co. v. Texaco,

Inc., 842 F.2d 1466, 1477 (3d Cir. 1988). For present purposes,

that means that ALSTOM must demonstrate not only that Bechtel

Limited was InterGen's agent but also that it acted as such in

executing the purchase orders.

InterGen concedes that the technical services agreement

entered into by and between it and Bechtel Power created a

circumscribed agency relationship. But Bechtel Limited — not

Bechtel Power — executed the purchase orders and committed to

arbitrate disputes arising thereunder.

More importantly, ALSTOM cannot establish, on this

record, an agency relationship between InterGen and any Bechtel

entity that extended to the execution of the purchase orders. The

technical services agreement covers only preliminary tasks (e.g.,

licensing, permitting, and design). That agreement (and, thus, the

agency relationship created thereby) did not extend to the

-26-
acquisition of the gas turbines. Acquisition was the subject of a

separate set of contracts (the EPC agreement and, ultimately, the

purchase orders). InterGen was not a party to any of those

agreements.

To recapitulate, although InterGen may have had an agency

relationship with a Bechtel entity for certain (limited) purposes,

the record is bereft of any evidence suggesting that a Bechtel

entity acted as InterGen's agent in committing to carry out the

purchase orders. Without evidence of such a commitment, InterGen

cannot, under applicable principles of agency law, be bound by the

arbitration clauses contained in the purchase orders.

F. Alter Ego.

ALSTOM's final avenue to arbitrability also proves to be

a dead end. It suggests that InterGen is the alter ego of RPC and

CEC (and, therefore, that those entities' obligations to arbitrate

bind InterGen as well). In support of this thesis, ALSTOM notes

that both RPC and CEC are (at least indirectly) subsidiaries of

InterGen; that both are staffed by InterGen employees; that their

boards of directors are composed of InterGen officials; and that

officers of InterGen acted on their behalf in various matters,

including execution of the services and support agreements.

InterGen does not dispute these raw facts but deems them

insufficient to establish an alter ego relationship.

-27-
 Under federal common law, there is no precise litmus test

for determining when the corporate form should be ignored. Alman

v. Danin, 801 F.2d 1, 3 (1st Cir. 1986). The overarching

principle, however, is that the corporate form may be disregarded

only if considerations of fairness or public necessity warrant such

a step. Town of Brookline v. Gorsuch, 667 F.2d 215, 221 (1st Cir.

1981). From this first principle, we must derive a test tailored

to the demands of the federal statute at issue.

We are unaware of any decision that has devised a test

for alter ego liability in a case involving chapter 2 of the FAA,

and the parties have cited none. Given this lack of direct

precedential guidance, we borrow from the standards developed in

other statutory contexts that manifest a need for national

uniformity, most notably ERISA and the NLRA. The relevant cases

suggest an inquiry focusing on (1) whether the entities in question

have ignored the independence of their separate operations, (2)

whether the defendant employed the multiplicity of entities as part

of an artifice or scheme to defraud, and (3) whether holding the

corporate form inviolate would lead to substantial injustice or

inequity. See United Elec., Radio & Mach. Workers v. 163 Pleasant

St. Corp., 960 F.2d 1080, 1092-93 (1st Cir. 1992) (addressing the

ERISA context); see also NLRB v. Greater Kan. City Roofing, 2 F.3d

1047, 1052 (10th Cir. 1993) (collapsing the inquiry into a

substantially similar two-part test in the NLRA context).

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 Applying this type of test inevitably takes the inquirer

down a murky road so courts have hung lanterns to light the way.

The independent operations prong, for instance, looks at such

things as

(1) whether a corporation is operated as a
separate entity; (2) commingling of funds and
other assets; (3) failure to maintain adequate
records or minutes; (4) the nature of the
corporation's ownership and control; (5)
absence of corporate assets and
undercapitalization; (6) use of a corporation
as a mere shell, instrumentality or conduit of
an individual or another corporation; (7)
disregard of legal formalities and the failure
to maintain an arms-length relationship among
related entities; and (8) diversion of the
corporation's funds or assets to noncorporate
uses.

United States v. Diviner, 822 F.2d 960, 965 (10th Cir. 1987). The

other prongs are similarly nuanced. These subtleties mean that

courts must apply such tests flexibly and with due regard for the

demands of the federal statute at issue.

In this case, ALSTOM's argument suffers from a failure of

proof. Despite several months of discovery, it has failed to raise

a substantial question about the corporate integrity of either RPC

or CEC. The best that ALSTOM can do is to point out a modest

amount of corporate overlap (including the performance of dual

corporate functions by certain individuals). It is wholly unable

to refute InterGen's contention that the InterGen employees who

managed the subsidiaries did so under specific contractual

agreements for the provision of management services.

-29-
 The case law cautions against invoking an equitable

remedy in situations such as this. Common ownership and common

management, without more, are insufficient to override corporate

separateness and pave the way for alter ego liability. See Alpine

View Co. v. Atlas Coco AB, 205 F.3d 208, 218-19 (5th Cir. 2000);

Mass. Carpenters Cent. Coll'n Agency v. Belmont Concrete Corp., 139

F.3d 304, 308 (1st Cir. 1998); Lili Fashions Corp. v. NLRB, 80 F.3d

743, 749 (2d Cir. 1996); Hunter v. Youthstream Media Networks, 241

F. Supp. 2d 52, 59 (D. Mass. 2002).

In all events, there is a broader reason why we find the

alter ego doctrine inapposite. As a general rule, the doctrine is

thought to be equitable in nature. Consequently, it "can be

invoked only where equity requires the action to assist a third

party." McCarthy, 22 F.3d at 362-63 (citations and internal

quotation marks omitted); see Mass. Carpenters Cent. Coll'n Agency

v. A.A. Bldg. Erectors, Inc., ___ F.3d ___, ___ (1st Cir. 2003)

[No. 02-2006, slip op. at 8] (describing the alter ego doctrine as

"a tool to be employed when the corporate shield, if respected,

would inequitably prevent a party from receiving what is otherwise

due and owing from the person or persons who have created the

shield"). Federal common law emphasizes the equitable character of

the alter ego doctrine, instructing federal courts that "the

corporate form may be disregarded in the interests of justice where

it is used to defeat an overriding public policy," but not

-30-
otherwise. Bangor Punta Operations, Inc. v. Bangor & A.R. Co., 417

U.S. 703, 713 (1974).

In this case, no compelling policy objective would be

served by finding InterGen and its indirect subsidiaries to be

alter egos of each other. While the Supreme Court frequently has

enunciated a federal policy favoring arbitration, e.g., Moses H.

Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983),

that policy does not extend to situations in which the identity of

the parties is in dispute, see McCarthy, 22 F.3d at 355;

Painewebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990).

Here, moreover, strong public policy considerations favor keeping

intact InterGen's elaborate corporate collage. Not the least of

these is the value of deferring to the principle of limited

liability — a principle that we have called "the cornerstone of

corporate law." DeBreceni v. Graf Bros. Leasing, Inc., 828 F.2d

877, 879 (1st Cir. 1987).

In a last-ditch effort to elude the grasp of these

precedents, ALSTOM asserts that InterGen has "admitted that it is

an alter ego of its subsidiaries." Appellants' Br. at 50 (emphasis

in original). But the record will not bear the weight of this

assertion. ALSTOM supports it primarily by citing to an averment

in InterGen's original complaint.6 That complaint has since been

6
The pertinent section of the original complaint reads:
"Intergen N.V. . . . either has the rights or is the successor to
all rights of predecessor entities related to the actions and

-31-
amended to delete the averment, and we previously have explained

why it is not sufficient to support a claim of judicial estoppel.

See supra Part IV(B). The same reasoning suffices to explain why

the excerpted passage is inconclusive for purposes of the alter ego

doctrine.

V. CONCLUSION

Both InterGen and ALSTOM are sophisticated commercial

actors, and each has been quite deliberate in constructing and

deploying an elaborate web of affiliates to handle the Rocksavage

and Coryton projects. As a result of these posturings, neither of

them is a signatory to the underlying contracts. For the reasons

elucidated above, we find unpersuasive ALSTOM's myriad arguments as

to why InterGen should nonetheless be bound to the arbitration

clauses contained in those contracts. Therefore, the claims

asserted by InterGen in its amended complaint are not subject to

compulsory arbitration.

We need go no further. We uphold (albeit for different

reasons) the district court's denial of ALSTOM's motion to compel

arbitration. That is the only matter before us, and we remit the

case to the district court for further proceedings consistent with

this opinion. Since InterGen's motion to remand the action to the

state court implicates the district court's subject matter

omissions alleged in this Complaint."

-32-
jurisdiction, we instruct the court, as the first order of

business, to revisit that issue.

Affirmed.

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