Case: 15-20260 Document: 00513383807 Page: 1 Date Filed: 02/17/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 17, 2016
No. 15-20260
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; GRANT PRIDECO, L.P.; GRANT PRIDECO HOLDINGS, L.L.C.;
NATIONAL OILWELL VARCO 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 STEWART, Chief Judge, and REAVLEY, and DAVIS, Circuit Judges.
REAVLEY, Circuit Judge:
This case reaches the Fifth Circuit for a second time. And, though the
litigation has been pending for five years, we are asked for a second time to
reverse an order denying a motion to compel arbitration. We previously found
that defendant National Oilwell Varco Norway (“NOV Norway”) had a
contractual right to arbitration before the International Chamber of Commerce
(“ICC”). See generally Al Rushaid v. Nat’l Oilwell Varco, Inc., 757 F.3d 416
Case: 15-20260 Document: 00513383807 Page: 2 Date Filed: 02/17/2016
No. 15-20260
(5th Cir. 2014). The remaining defendants, nonsignatories to that agreement,
contend that they, too, are entitled to arbitration.
I.
Our prior opinion sets forth the relevant facts of this case. See Al
Rushaid, 757 F.3d at 418–19. As that opinion explains, in 2011, plaintiffs Al
Rushaid Parker Drilling, Ltd. (“ARPD”), Rasheed al Rushaid, and Al Rushaid
Petroleum Investment Corp. sued defendants National Oilwell Varco, Inc.;
National Oilwell Varco LP (“NOV LP”); NOW Oilfield Services, LLC; NOV
Norway; Grant Prideco, LP; and Grant Prideco Holding, LLC, in Texas state
court. Generally speaking, the prior business relationship between the parties
had been that of buyer and seller, as memorialized by a series of contracts
comprised of price quotations and corresponding purchase orders. The lawsuit
involves not only alleged breaches of the contracts, but also allegations that
the defendants bribed key ARPD employees. While the other defendants were
served in 2011, NOV Norway was not served until August 2012. Id. at 418.
By that time, the case had been removed to federal court “based on an
arbitration clause contained in a price quotation issued by NOV LP.” Id.
Despite the NOV LP arbitration clause, the defendants did not seek to
compel arbitration and instead proceeded to discovery and set a trial date.
When NOV Norway was served, however, it promptly sought to compel
arbitration based on a price quotation issued by NOV Norway to ARPD. The
district court denied the motion, ruling that the NOV Norway arbitration
clause was not a part of the parties’ agreement and that, in any event, NOV
Norway had waived its right to arbitrate. Id. On appeal, we disagreed on both
counts but expressly noted that our decision did “not, however, necessarily
require the district court to compel any of the other parties to arbitrate their
dispute or to stay proceedings.” Id. at 424.
2
Case: 15-20260 Document: 00513383807 Page: 3 Date Filed: 02/17/2016
No. 15-20260
On remand, the defendants jointly moved to compel arbitration. The
motion was based on both arbitration clauses—the one found in NOV Norway’s
price quotation and the one found in NOV LP’s price quotation. While NOV
LP asserted an arbitration clause to which it was a signatory, the other
defendants (hereinafter, the “Nonsignatory Defendants”) conceded they are not
signatories to either arbitration clause. With respect to the NOV Norway
arbitration clause, all defendants (including NOV LP) argued an entitlement
to arbitration based on principles of equitable estoppel. With respect to the
NOV LP arbitration clause, which was asserted in the alternative, NOV LP
asserted a contractual right to arbitration while the Nonsignatory Defendants
again relied on equitable estoppel. 1
The district court rejected all arguments based on equitable estoppel,
but found that NOV LP was contractually entitled to arbitration. Because that
arbitration clause did not specify a forum, the district court ordered arbitration
within the Southern District of Texas. All defendants have appealed. To sum
up, if left undisturbed, the proceedings have fragmented. Claims against NOV
Norway will be arbitrated before the ICC. Claims against NOV LP will be
arbitrated within the Southern District of Texas. And claims against the
Nonsignatory Defendants will be litigated in Texas state court.
II.
The district court’s order was interlocutory in nature, and our appellate
jurisdiction is therefore circumscribed. We may review orders denying the
compulsion of arbitration and, therefore, undisputedly have jurisdiction over
the appeal as it pertains to the Nonsignatory Defendants. 9 U.S.C. § 16(a)(1).
1 Certain of the Nonsignatory Defendants also argued that, by its terms, NOV LP’s
arbitration clause applied to them. That argument was rejected by the district court and has
not been advanced on appeal.
3
Case: 15-20260 Document: 00513383807 Page: 4 Date Filed: 02/17/2016
No. 15-20260
NOV LP, however, is another matter. Its motion to compel arbitration
was granted. We do not have jurisdiction to review interlocutory orders
compelling arbitration. 9 U.S.C. § 16(b)(3). Appellants, however, point out
that the order granting NOV LP’s motion to compel arbitration within the
Southern District of Texas also denied NOV LP’s motion to compel arbitration
before the ICC. Given these circumstances, Appellants argue we have
appellate jurisdiction under section 16 of the Federal Arbitration Act (“FAA”)
or the collateral order doctrine. Alternatively, Appellants contend we should
exercise pendent appellate jurisdiction over the matter.
The FAA functions “to move the parties to an arbitrable dispute out of
court and into arbitration as quickly and easily as possible” and represents a
“statutory policy of rapid and unobstructed enforcement of arbitration
agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 22, 103 S. Ct. 927, 940 (1983). Section 16 serves this function and policy by
precluding interlocutory appeal where an order compelling arbitration has
been granted and allowing immediate appeal of orders denying the compulsion
of arbitration. As the Fourth Circuit has stated, “Congress sought to prevent
parties from frustrating arbitration through lengthy preliminary appeals.”
Stedor Enterprises, Ltd. v. Armtex, Inc., 947 F.2d 727, 730 (4th Cir. 1991).
In light of the foregoing, the Second Circuit has held that “a party cannot
appeal a district court’s order unless, at the end of the day, the parties are
forced to settle their dispute other than by arbitration.” Augustea Impb Et
Salvataggi v. Mitsubishi Corp., 126 F.3d 95, 99 (2d Cir. 1997). Under
circumstances somewhat similar to those present here, the Ninth Circuit
agreed. See Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1153 (9th
Cir. 2004). In Bushley, a defendant moved to compel arbitration under two
separate arbitration clauses, and the district court declined to compel
arbitration before the National Association of Securities Dealers but compelled
4
Case: 15-20260 Document: 00513383807 Page: 5 Date Filed: 02/17/2016
No. 15-20260
arbitration before the defendant’s “Employment Dispute Resolution Program.”
Id. at 1151. The defendant appealed that portion of the order denying
arbitration. Id. at 1152. Recognizing the “conflict over the applicability of two
different arbitration provisions that directed arbitration in two different
forums,” the Ninth Circuit followed Augustea and held that “Section 16’s
purpose of promoting arbitration would be frustrated by further litigation over”
the proper forum. Id. at 1154.
Here, as in Bushley, we are asked to consider the appeal of a party whose
motion to compel was granted, “albeit not in the ‘first-choice’” forum. See id.
Consistent with the purpose of Section 16 and with every circuit that has
considered this issue, we hold that Section 16 forbids appellate review.
We also lack jurisdiction under the collateral order doctrine. The
collateral order doctrine is a “‘narrow’ exception” that “should stay that way
and never be allowed to swallow the general rule.” Digital Equip. Corp. v.
Desktop Direct, Inc., 511 U.S. 863, 868, 114 S. Ct. 1992, 1996 (1994) (quoting
Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 430, 105 S. Ct. 2757, 2761
(1985)). Appellants cite no case where a court has used the collateral order
doctrine to exercise jurisdiction over an interlocutory order compelling
arbitration. Section 16 provides a specific framework for determining whether
and when an appeal is proper, and we will not interfere with the statutory
design. See Johnson v. Consumerinfo.com, Inc., 745 F.3d 1019, 1021–22 (9th
Cir. 2014) (“The structure of the statute . . . suggests that Congress intended
to remove appellate jurisdiction from all orders listed in § 16(b)(1)–(4),
regardless of whether any such order could otherwise be deemed collateral.”);
ConArt, Inc. v. Hellmuth, Obata + Kassabaum, Inc., 504 F.3d 1208, 1211 (11th
Cir. 2007) (“Applying the Cohen collateral order doctrine to permit an appeal
that § 16(b) specifically prohibits . . . would amount to using a judge-made
doctrine to erase an unequivocal congressional command.”); ATAC Corp. v.
5
Case: 15-20260 Document: 00513383807 Page: 6 Date Filed: 02/17/2016
No. 15-20260
Arthur Treacher’s, Inc., 280 F.3d 1091, 1101–02 (6th Cir. 2002) (The “argument
that the collateral order doctrine provides this court jurisdiction over the
appeal flies in the face of Congress’s purpose in passing § 16.”).
For similar reasons, without deciding whether pendent appellate
jurisdiction may properly be exercised in this context, we decline to do so. Cf.
IDS Life Ins. Co. v. SunAmerica, Inc., 103 F.3d 524, 528 (7th Cir. 1996) (“By
expressly denying immediate appealability to orders staying federal court
proceedings pending arbitration, Congress may have precluded the application
of the doctrine of pendent appellate jurisdiction to those orders.”). But see
Freeman v. Complex Computing Co., 119 F.3d 1044, 1050 (2d Cir. 1997)
(expressly disagreeing with IDS Life’s ultimate holding “that section 16(b)
precludes the exercise of pendent appellate jurisdiction over orders staying
federal court proceedings pending arbitration”).
We lack jurisdiction over NOV LP’s appeal. Additionally, despite having
nothing to appeal, NOV Norway was listed as an appellant within the
defendants’ notice of appeal. The appeals brought by NOV LP and NOV
Norway must be dismissed.
III.
Generally, we review de novo the denial of a motion to compel
arbitration. Auto Parts Mfg. Miss., Inc. v. King Constr. of Houston, LLC, 782
F.3d 186, 196 (5th Cir. 2015). “We review for abuse of discretion a district
court’s determination of whether equitable estoppel may be invoked to compel
arbitration.” Id. A decision based on a mistake of law or on a clearly erroneous
assessment of the evidence constitutes an abuse of discretion. Id.
“[U]nder the FAA, traditional principles of state law may allow an
arbitration contract to be enforced by or against nonparties to the contract
through a number of state-contract-law theories, including equitable estoppel.”
Crawford Prof’l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 255 (5th Cir.
6
Case: 15-20260 Document: 00513383807 Page: 7 Date Filed: 02/17/2016
No. 15-20260
2014). Texas law governs this particular dispute. 2 Al Rushaid, 757 F.3d at
419. “[W]hile Texas law has long recognized that nonparties may be bound to
a contract under traditional contract rules like agency or alter ego, there has
never been such a rule for concerted misconduct.” In re Merrill Lynch Trust
Co. FSB, 235 S.W.3d 185, 194 (Tex. 2007) (footnote omitted); see also G.T.
Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 529 n.23 (Tex.
2015). Thus, the Texas Supreme Court has “never compelled arbitration based
solely on substantially interdependent and concerted misconduct,” but
estoppel applies “when nonsignatories seek a direct benefit from a contract
with an arbitration clause.” In re Merrill Lynch Trust, 235 S.W.3d at 192.
Appellants advance both “concerted misconduct” estoppel and “direct
benefit” estoppel. The concerted misconduct estoppel theory is foreclosed by In
re Merrill Lynch Trust and G.T. Leach Builders. See Glassell Producing Co. v.
Jared Res., Ltd., 422 S.W.3d 68, 82 (Tex. App. 2014) (describing “direct benefit
estoppel” as “the only form of equitable estoppel recognized in Texas”).
Accordingly, we consider only the direct benefit theory. Thus, if plaintiffs’
claims against the Nonsignatory Defendants arise from or must be determined
by reference to the NOV Norway or NOV LP price quotations, arbitration may
be compelled. See In re Weekley Homes, L.P., 180 S.W.3d 127, 131 (Tex. 2005).
“On the other hand, claims can be brought in tort (and in court) if liability
arises from general obligations imposed by law.” Id.
We “look to the pleadings to determine the nature of [the] claims.” G.T.
Leach Builders, LLC, 458 S.W.3d at 530. The gist of the complaint is that three
2On appeal, defendants claim for the first time that “a question exists as to whether
international commercial arbitration agreements should be” analyzed under federal common
law rather than state law. Having not been raised before the district court, that argument
is waived. See NCDR, L.L.C. v. Mauze & Bagby, P.L.L.C., 745 F.3d 742, 752 (5th Cir. 2014).
Accordingly, we state no view on whether federal law should have been applied.
7
Case: 15-20260 Document: 00513383807 Page: 8 Date Filed: 02/17/2016
No. 15-20260
ARPD employees were “corrupted” by the defendants and accepted bribes and
kickbacks in return for “overpriced contracts” and payment on “inflated
invoices.” To protect this illicit revenue stream, when defendants failed to
satisfy their contractual duties, the corrupted employees concealed the failures
from ARPD’s senior management and owners. Thus, while the action is related
to contracts (including the two price quotations with arbitration clauses), it
cannot be said that plaintiffs are seeking direct benefits from the contracts.
The plaintiffs are not trying to enforce either the NOV Norway or NOV LP
contract against the Nonsignatory Defendants, and liability is instead
premised on “general obligations imposed by law.” 3 In re Weekley Homes, L.P.,
180 S.W.3d at 131–32. The district court did not err. 4
IV.
Appellants warn that permitting the district court’s decision to stand
means plaintiffs’ claims will “be split into three proceedings—two arbitrations
and one state court proceeding, an outcome the NOV Parties have tried to avoid
since the outset of the case.” This is an inevitable and permissible consequence
where one of multiple defendants asserts a right to arbitrate. See Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213, 220–21, 105 S. Ct. 1238, 1242–43 (1985)
(noting that private arbitration agreements must be enforced even if the result
3 We do not overlook the plaintiffs’ breach of contract claims. To the extent the
plaintiffs seek to hold the defendants liable for their respective alleged breaches of the
respective contracts, the signatory/nonsignatory distinction ably sorts the claims. The
Nonsignatory Defendants are not allegedly in breach of the NOV Norway or NOV LP
agreements. Rather, they are allegedly in breach of their own separate agreements. See G.T.
Leach Builders, LLC, 458 S.W.3d at 528–29.
4 On appeal, Appellants contend for the first time that the claims against National
Oilwell Varco, Inc. and NOW Oilfield Services, LLC are subject to arbitration under the NOV
LP contract because the claims “are derivative of, and rest on the identical allegations
asserted against . . . NOV LP.” This argument was not raised before the district court and
has therefore been waived.
8
Case: 15-20260 Document: 00513383807 Page: 9 Date Filed: 02/17/2016
No. 15-20260
is piecemeal or bifurcated litigation). If Appellants had truly prioritized their
desire to try the case efficiently, they could have foregone arbitration.
The appeals brought by NOV LP and NOV Norway are DISMISSED, and
the district court’s order is AFFIRMED. Accordingly, the claims against
defendants National Oilwell Varco, Inc.; NOW Oilfield Services, LLC; Grant
Prideco, LP; and Grant Prideco Holding, LLC, are REMANDED to the District
Court sitting in Harris County, Texas, 165th Judicial District.
9