United States Court of Appeals
For the First Circuit
Nos. 01-1512
01-1513
01-1514
01-1515
RESTORATION PRESERVATION MASONRY, INC., in its own capacity and
as subrogee of Dunlop Equipment Co., Inc.;
DUNLOP EQUIPMENT CO., INC.,
Plaintiffs, Appellees,
v.
GROVE EUROPE LTD.; GROVE WORLDWIDE CO., INC.; BRONTO SKYLIFT;
BET, PLC & PTP, LTD; FEDERAL SIGNAL CORP.; FEDERAL SIGNAL CORP.
(FINLAND) OY AB,
Defendants, Appellants.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph Tauro, U.S. District Judge]
Before
Lynch, Circuit Judge,
Stahl, Senior Circuit Judge, and
Howard, Circuit Judge.
John A. Sakakeeny, with whom were Stephen W. Sutton and Sutton
& Sakakeeny, LLP, on brief for appellee Restoration Preservation
Masonry, Inc.
Edward L. Kirby, Jr., Lauren A. Boice, and Edward L. Kirby,
Jr. & Assoc., were on brief for appellee Dunlop Equipment Co., Inc.
Barry Weiner, with whom were Christopher P. Litterio, and
Ruberto, Israel & Weiner, P.C., on brief for appellants Federal
Signal Corp. and Federal Signal Corp. (Finland) Oy Ab.
David A. Hilton, with whom was Morrison, Mahoney & Miller, on
brief for appellants Bronto Skylift, Grove Europe, Ltd. and Grove
Worldwide Co., Inc.
James P. Donohue, with whom was Sloan & Walsh, on brief for
appellants BET, PLC and PTP, Ltd.
April 1, 2003
2
LYNCH, Circuit Judge. In 1993, there was a tragic
construction accident caused by a collapsing mast climber --
mechanized scaffolding equipment with a mobile work platform that
can hydraulically ascend a mast -- leaving one man dead and another
with a life of pain and paralysis. The families were paid
approximately $8 million; the money came from Restoration
Preservation Machinery, Inc. ("RPM") and Dunlop Equipment Co., Inc.
("Dunlop"). These two companies, the plaintiffs-appellees here,
then sought in two 1996 state court actions to recover the money on
theories of indemnification or contribution from five other
companies, defendants-appellants here, in the complicated chain of
sale of the defective mast climber: Grove Europe, Ltd., Grove
Worldwide Co., Inc., Bronto Skylift ("Bronto"), BET, PLC, and PTP,
Ltd. Two additional defendants were added in 2000: Federal Signal
Corp. ("Federal USA") and its subsidiary Federal Signal Corp.
(Finland) Oy Ab ("Federal Finland"). Asserting in 2000 that these
claims had to be arbitrated, the defendants removed the case to
federal court and sought to compel arbitration pursuant to the
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 9 U.S.C. § 205 (2000). The district court remanded and
then denied the motion to compel arbitration as moot. We affirm.
I.
On September 2, 1993, Charles MacGlashing and another
brick mason, James Proctor, both employees of RPM, were working on
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a renovation project at the Longwood Towers complex in Brookline,
Massachusetts. MacGlashing and Proctor were removing stone from
the parapet of one of the towers when the mast climber they were
using collapsed. Both men fell eight stories to the ground.
Proctor died; MacGlashing survived, but suffered serious injuries
including broken bones, internal and neurological damage, a
ruptured aorta and bladder, a perforated colon, and lung damage.
MacGlashing was hospitalized for six months after the accident, and
left partially paralyzed and in constant pain.
MacGlashing and his wife filed suit against Dunlop in
federal court. Dunlop filed a third-party complaint against RPM,
seeking indemnification pursuant to their lease agreement. The
court granted summary judgment to the MacGlashings and Dunlop on
Dunlop's third-party indemnification claim. As a result of a
combined settlement with Dunlop and a verdict against RPM, the
MacGlashings collected approximately $5.7 million dollars from
Dunlop and RPM. RPM appealed the summary judgment ruling, but it
was affirmed. MacGlashing v. Dunlop Equip. Co., 89 F.3d 932, 941
(1st Cir. 1996).
MacGlashing's ex-wife also filed suit against Dunlop, on
behalf of MacGlashing's minor children, in state court. Proctor's
family filed suit against Dunlop in state court as well. In both
of the state court actions, Dunlop also entered third-party
indemnification complaints against RPM. In each, summary judgment
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was entered in Dunlop's favor on the indemnity claims against RPM.
In the MacGlashing state action, MacGlashing's children and Dunlop
received a judgment of $145,000 against RPM. In the Proctor state
action, Dunlop and Proctor's heirs received a judgment of $2
million against RPM. In total, RPM paid over $7 million dollars.
Dunlop paid approximately $1 million. Dunlop and RPM now seek
indemnification or contribution from other companies in the chain
of sale of the defective mast climber.
This chain dates back to 1993, when Bronto sold a number
of new aerial lifts to a joint venture comprised of BET and PTP.
As part of the purchase price, Bronto took in trade sixty used mast
climbers from BET and PTP. At the same time, Grove Europe also
sold aerial lifts to BET and PTP, receiving in trade sixty-two used
mast climbers. (The mast climbers were manufactured by still
another company, Access Engineering.) Grove Europe and Bronto then
sold the used mast climbers to Dunlop. That sale took place on
August 2, 1993. The bill of sale, which was signed by Bronto,
Grove Europe and Dunlop, contains an arbitration clause:
The construction, validity and performance of any
contract shall be governed by the laws of England
(including English conflict of laws) and all disputes
which arise out of or in connection with any contract
shall be settled by arbitration in England in accordance
with provisions of the Arbitration Acts for the time
being in force.
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Dunlop took delivery of the mast climbers from BET and PTP depots.
It then leased four mast climbers to RPM on July 7, 1993. The
accident took place two months later.
Following the judgments in suits brought by the families
of MacGlashing and Proctor, Dunlop and Restoration sought recovery
from Bronto, Grove Europe, Grove Worldwide, BET, and PTP. Grove
Worldwide is a U.S. company; its relation to Grove Europe, a
British company, is not specified in the record. In August 1996,
Dunlop filed suit in Suffolk Superior Court against Bronto, Grove
Europe, BET, and PTP. The following month, RPM filed a similar
suit in Middlesex Superior Court against Grove Europe, Grove
Worldwide, and Bronto, for indemnification and contribution, and
later amended the complaint to include negligence, negligent
failure to warn, and breach of warranties. Grove Europe and Bronto
responded by filing motions to dismiss for lack of personal
jurisdiction. Grove Worldwide answered the complaint in June 1997
and asserted as one of its affirmative defenses that the parties
were bound to submit the matter to arbitration. But it did not
move to compel arbitration. RPM subsequently amended its claim to
add BET and PTP as defendants. BET and PTP filed motions to
dismiss for lack of personal jurisdiction. None of the motions to
dismiss were granted. These two state court suits were ultimately
consolidated in July 2000.
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The parties engaged in discovery from 1997 through 2000.
Five people were deposed, including two depositions in London. RPM
and Dunlop exchanged requests for production of documents and
interrogatories with defendants other than Grove Worldwide.
Experts were retained to conduct failure analyses on the
scaffolding equipment. Thirteen status conferences were held in
the Middlesex Court litigation. During the course of discovery,
plaintiffs learned that on August 4, 1995 Federal Finland had
purchased the assets and liabilities of Bronto.
Federal USA, the sole shareholder of Federal Finland,
joined the asset purchase contract as a guarantor. Under the
contract, Federal Finland purchased all assets of Bronto, including
Bronto's proprietary information, records, trade rights, and causes
of actions. Federal Finland also assumed many of Bronto's
liabilities. Product liability on items sold prior to the
effective date of the transfer was excluded, except for claims
"arising under contract or warranty."1 The asset purchase contract
limited assignment of assumed contracts only where consent was
required and where the assignment itself constituted a breach of
the pre-existing contract.
1
Plaintiffs contend that this restriction does not include
the mast climbers at issue, because the asset sale contract
specifies products "manufactured, sold and delivered" prior to the
effective date. (emphasis added) The mast climbers were not
manufactured by Bronto.
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In December 1999, RPM amended its complaint to add
Federal USA, and in March 2000 further amended it to add Federal
Finland, as necessary defendants. On June 12, 2000, Dunlop filed
an amended complaint adding Federal USA and Federal Finland as
defendants. Federal USA responded to RPM's amended complaint by
filing a motion to dismiss in March 2000, asserting that Federal
Finland was the party that had purchased Bronto's assets. Federal
USA then sought to withdraw its motion to dismiss in April 2000 so
that it could file for summary judgment. In May 2000, both
Federals filed a notice of removal in state court based on
diversity jurisdiction. However, they never filed the notice of
removal in U.S. district court and shortly thereafter abandoned
this effort to remove the case. Meanwhile, neither of the Federals
conducted any discovery.
A trial date of September 18, 2000 had been scheduled.
In June 2000, Federal USA moved to reset the tracking order to
allow for a motion for summary judgment. At an August 2, 2000
status conference, all defendants filed a notice of removal to
federal court, citing their intention to exercise their arbitration
rights. On August 14, 2000, the plaintiffs filed a motion to
remand the case to state court. Two weeks later, before the
district court acted, the defendants filed a motion to compel
arbitration and to stay the district court proceedings.
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On February 22, 2001, the district court allowed the
motion to remand to Middlesex Superior Court, citing this court's
decision in Menorah Insurance Co. v. INX Reinsurance Corp., 72 F.3d
218 (1st Cir. 1995), and denied the defendants' motion to compel
arbitration as moot. No further reasons were given. Defendants
appeal the district court's ruling, arguing that the jurisdictional
ruling was in error, and that there had been no waiver supporting
the district court's ruling against compelling arbitration.
II.
Plaintiffs argue that we lack jurisdiction to examine the
remand order because it was based on a determination of the
district court's lack of subject matter jurisdiction over the
removed case. 28 U.S.C. § 1447(d) mandates that "[a]n order
remanding a case to the State court from which it was removed is
not reviewable on appeal or otherwise . . . ." Section 1447(d)
applies where the district court finds that it lacks subject matter
jurisdiction. The district court's opinion here is notably terse;
we conclude from the citation to Menorah that the court reasoned
that subject matter jurisdiction was lacking because of a waiver of
the right to arbitrate by the defendants. The parties agree that
is what the district court meant by the citation to Menorah.
Plaintiffs read § 1447(d) broadly as a blanket
prohibition blocking any sort of appellate review of decisions
remanding arbitration cases that had been removed to federal court
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under 9 U.S.C. § 205 and subsequently remanded. See, e.g., Transit
Cas. Co. v. Certain Underwriters at Lloyd's of London, 119 F.3d
619, 625 (8th Cir. 1997) (remand order not reviewable on appeal).
But see Beiser v. Weyler, 284 F.3d 665, 672-74 (5th Cir. 2002)
(asserting appellate jurisdiction, criticizing conflation of
jurisdictional and merits inquiries in remanding arbitration cases
"into a single step," and arguing that the consequences of such a
conflation are "both irrational and inconsistent with . . .
precedents" because of the importance of international comity, the
goal of development of a uniform body of law regarding the
Convention, the international business community's need for
predictability, and the general federal policy of solicitude toward
arbitration).
In Menorah, we confronted a similar argument but declined
to decide the jurisdictional issue, holding "Since [plaintiff]
easily wins an affirmance on the substantive issue of waiver, we
decline to decide the jurisdictional issues raised by it." 72 F.3d
at 223 n.9 (citing Norton v. Mathews, 427 U.S. 524, 528-33 (1976)
(where the merits can easily be resolved in favor of the party
challenging jurisdiction, resolution of complex jurisdictional
inquiry may be avoided)). We follow a similar course here. As the
plaintiffs concede, "jurisdiction does not have to be resolved for
this Court to enter a final ruling on the merits that the
defendants have no right to arbitrate."
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The decision in Steel Co. v. Citizens for a Better
Environment, 523 U.S. 83 (1998), does not require that we reach the
jurisdictional question. In Steel Co., the Court attacked the
practice of so-called "hypothetical jurisdiction," id. at 94, and
concluded that "Article III jurisdiction is always an antecedent
question," id. at 101. The Supreme Court itself has made it clear
that Steel Co. does not establish an unyielding sequence of
decision-making regardless of circumstances. See Ruhrgas AG v.
Marathon Oil Co., 526 U.S. 574, 578 (1999). In Steel Co., Justice
Breyer, concurring, noted with approval that "[t]his Court has
previously made clear that courts may 'reserve difficult questions
of . . . jurisdiction when the case could alternatively be resolved
on the merits in the favor of the same party.'" 523 U.S. at 111
(quoting Norton, 427 U.S. at 532).
Steel Co. does not create an absolute rule against
bypassing questions of a jurisdictional nature. See Parella v.
Ret. Bd. of the R.I. Employees' Ret. Sys., 173 F.3d 46, 53-54 (1st
Cir. 1999). Parella noted that while Article III jurisdictional
disputes are subject to Steel Co., statutory jurisdictional
disputes are not. Id. This rule is well established in this
circuit. See Davignon v. Clemmey, Nos. 01-1862, 02-1293, 02-1346,
2003 WL 721803, at *5 (1st Cir. Mar. 4, 2003) (holding that an
appellate court remains free to bypass problematic jurisdictional
issues provided those issues do not implicate Article III 'case' or
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'controversy' requirement); United States v. Woods, 210 F.3d 70, 74
n.2 (1st Cir. 1999) (following Parella and concluding that Steel
Co. is limited to Article III subject matter jurisdiction issues);
Kelly v. Marcantorio, 187 F.3d 192, 197 (1st Cir. 2000) (same,
emphasizing that courts should not reach constitutional issues in
advance of the necessity of deciding them); Cablevision of Boston,
Inc. v. Pub. Improvement Comm'n, 184 F.3d 88, 100 n.9 (1st Cir.
1999) (following Parella); see also Seale v. INS, No. 02-1431, slip
op. at 14 (1st Cir. Mar. 14, 2003) (identifying another exception
to Steel Co., consistent with Parella, where a court's prior case
law "foreordains" the outcome on the merits so as to deny recovery,
a Steel Co. inquiry into jurisdiction is not required). Other
circuits similarly have held that Steel Co. applies only to Article
III constitutional limitations on jurisdiction. See Fama v. Comm'r
of Corr. Servs., 235 F.3d 804, 817 n.11 (2d Cir. 2000); Larsen v.
Senate of Pa., 152 F.3d 240, 245 (3d Cir. 1998); Kauthar SDN BHD v.
Sternberg, 149 F.3d 659, 663 n.4 (7th Cir. 1998); see also Ctr. for
Reprod. Law & Policy v. Bush, 304 F.3d 183, 195 (2d Cir. 2002)
(refraining from jurisdictional inquiry in case where outcome was
"foreordained" by circuit precedent and noting that "[w]here the
precise merits question has already been decided in another case by
the same court, it is the adjudication of the standing question
that resembles an advisory opinion -- the very concern that
animates the Steel Co. rule").
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Under Parella and its progeny, a jurisdictional inquiry
is not required here given that the question invokes statutory
jurisdiction.
III.
Review of a district court's determination of waiver of
arbitration is plenary. Navieros Inter-Americanos, S.A. v. M/V
Vasilia Express, 120 F.3d 304, 316 (1st Cir. 1997).
Analysis of the question of whether the right to
arbitration was waived takes place against a backdrop of strong
federal policy in favor of arbitration. See Moses H. Cone Mem'l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("[A]ny
doubts concerning the scope of arbitrable issues should be resolved
in favor of arbitration, whether the problem at hand is the
construction of the contract language itself or an allegation of
waiver, delay, or a like defense to arbitrability."). This policy
"applies with special force in the field of international
commerce." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 631 (1985). "[C]oncerns of international
comity, respect for the capacities of foreign and transnational
tribunals, and sensitivity to the need of the international
commercial system for predictability in the resolution of disputes
require that we enforce the parties' agreement, even assuming that
a contrary result would be forthcoming in a domestic context." Id.
at 629; see also Menorah, 72 F.3d at 220-21.
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The policy in favor of arbitration does not supersede
basic contract principles, however. "The FAA directs courts to
place arbitration agreements on equal footing with other contracts,
but it 'does not require parties to arbitrate when they have not
agreed to do so.'" EEOC v. Waffle House, Inc., 534 U.S. 279, 293
(2002) (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland
Stanford Junior Univ., 489 U.S. 468, 478 (1989)). "[A]rbitration
is simply a matter of contract between the parties; it is a way to
resolve those disputes -- but only those disputes -- that the
parties have agreed to submit to arbitration." First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995).
Parties are free to waive their rights to arbitration by
contract. Jones Motor Co. v. Teamsters Local Union No. 633, 671
F.2d 38, 42 (1st Cir. 1982) (Breyer, J.). Waiver can either be
express or implied. Id. But "[w]aiver is not to be lightly
inferred, and mere delay in seeking arbitration without some
resultant prejudice to a party cannot carry the day." Creative
Solutions Group, Inc. v. Pentzer Corp., 252 F.3d 28, 32 (1st Cir.
2001) (quotation omitted). In considering whether an implied
waiver has taken place, federal courts traditionally consider an
array of factors:
[W]hether the party has actually participated in the
lawsuit or has taken other action inconsistent with his
right, . . . whether the litigation machinery has been
substantially invoked and the parties were well into
preparation of a lawsuit by the time an intention to
arbitrate was communicated by the defendant to the
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plaintiff, . . . whether there has been a long delay in
seeking a stay or whether the enforcement of arbitration
was brought up when the trial was near at hand . . . .
Other relevant factors are whether the defendants have
invoked the jurisdiction of the court by filing a
counterclaim without asking for a stay of the
proceedings, . . . whether important intervening steps
(e.g., taking advantage of judicial discovery procedures
not available in arbitration . . .) had taken place, . .
. and whether the other party was affected, misled, or
prejudiced by the delay . . . .
Jones Motor, 671 F.2d at 44 (quoting Reid Burton Constr., Inc. v.
Carpenters Dist. Council, 614 F.2d 698, 702 (10th Cir. 1980)). In
Menorah, this court emphasized that "in order for plaintiffs to
prevail on their claim of waiver, they must show prejudice." 72
F.3d at 221 (internal quotation omitted); accord Creative
Solutions, 252 F.3d at 32.
A. Waiver By Grove Europe, Grove Worldwide, Bronto,
PTP and BET
Applying the Jones Motor factors to the parties that were
defendants before 2000 (Grove Europe, Grove Worldwide, Bronto, PTP,
and BET), the conduct of each constitutes an implied waiver.
There are no per se rules as to the length of delay
necessary to amount to waiver, see Menorah, 72 F.3d at 222 (citing
case in which thirteen months' delay was found insufficient to
constitute waiver). Here, the four years' delay from filing in
August 1996 to removal in August 2000, encompassing a period of
active state court litigation, greatly exceeds that found
acceptable in this circuit. See Creative Solutions, 252 F.3d at 33
(delay of five months is not waiver); see also Navieros, 120 F.3d
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at 316 (one-month delay in context of expedited litigation
sufficient to find waiver); Menorah, 72 F.3d at 222 (delay of more
than fifteen months sufficient); Jones Motor, 671 F.2d at 42 (delay
of more than one year sufficient).
The length of delay must be evaluated in the context of
litigation activities engaged in during that time. See, e.g.,
Creative Solutions, 252 F.3d at 33 (waiver not found when there was
no discovery or other activity aside from plaintiff's filing a
request for production); Jones Motor, 671 F.2d at 42 (waiver found
when party seeking arbitration engaged in deposition-taking, a pre-
trial conference, cross-motions for summary judgment, and oral
argument). The defendants here were involved in at least five
depositions and thirteen pre-trial conferences. Prejudice to the
plaintiffs is easily inferred from the necessary expenditures over
that period of time. See Menorah, 72 F.3d at 222 (no error in
finding that litigation expenses over the course of a more than
fifteen-month delay amounted to prejudice); see also Navieros, 120
F.3d at 316 (prejudice found as a result of expenses related to
litigation that would not have been incurred in arbitration
proceedings).
Furthermore, the context of these defendants' belated
assertion of their right to arbitrate also points to waiver.
Removal to federal court to compel arbitration occurred in August
2000, less than two months before the scheduled trial date. Jones
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Motor directs attention to "whether the enforcement of arbitration
was brought up when the trial was near at hand." 671 F.2d at 44;
see Navieros, 120 F.3d at 316 (moving for arbitration the day
before trial considered as part of waiver analysis). Given a four-
year-long litigation, first raising arbitration less than two
months before trial unquestionably constitutes invoking it "when
the trial was near at hand."
Grove Worldwide stands in a slightly different posture.
It asserted arbitration as an affirmative defense in its June 1997
answer to the Middlesex complaint. Grove Worldwide never
participated in document discovery. But it also never followed up
on its 1997 claim of arbitration and let the matter rest until
2000. The length of its delay results in the same prejudice to
plaintiffs and so Grove Worldwide has also waived.
B. Waiver By Federal USA and Federal Finland
Defendants Federal USA and Federal Finland argue that
they have not waived a right to arbitrate because the delay between
the time they were joined as defendants and the time they moved to
compel arbitration is not sufficient to establish prejudice.
Federal USA was not served until January 2000 and Federal Finland
was not joined as defendant by RPM until March 2000. Dunlop,
meanwhile, did not join either of the Federals as defendants until
June 2000. Subsequently, neither of the Federals participated in
discovery.
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We assume arguendo, in the Federals' favor, that they, as
non-signatories to the contract containing the arbitration clause,
may assert a claim to arbitration based on their relationship with
Bronto.2 Still, Bronto clearly waived its right to enforce the
arbitration clause,3 and the Federals are bound by that waiver
because it occurred before the plaintiffs had notice of the asset
purchase. See Restatement (Second) of Contracts § 336(2) (1981)
("The right of any assignee is subject to any defense or claim of
the obligor which accrues before the obligor receives notification
of the assignment, but not to defenses or claims which accrue
thereafter except as stated in this Section or as provided by
2
While it is generally true that "a contract cannot bind a
nonparty," Waffle House, 534 U.S. at 294, there are exceptions
allowing non-signatories to compel arbitration. A non-signatory
may be bound by or acquire rights under an arbitration agreement
under ordinary state-law principles of agency or contract. See 1
G.M. Wilner, Domke on Commercial Arbitration § 10:00, at 1-2 & 3
n.5 (rev. ed. 2002). A number of circuits have allowed a non-
signatory to compel arbitration under a limited equitable estoppel
theory. See Grigson v. Creative Artists Agency, 210 F.3d 524, 527
(5th Cir. 2000); Sunkist Soft Drinks, Inc. v. Sunkist Growers,
Inc., 10 F.3d 753, 757 (11th Cir. 1993); Hughes Masonry Co. v.
Greater Clark County Sch. Bldg. Corp., 659 F.2d 836, 841 n.9 (7th
Cir. 1981); see also Med. Air Tech. Corp. v. Marwan Inv., Inc., 303
F.3d 11, 18-19 (1st Cir. 2002) (noting existence of equitable
estoppel).
3
Bronto did not raise arbitration as an affirmative defense;
instead it filed a motion to dismiss for lack of personal
jurisdiction in June 1998. Bronto never raised its right to
arbitrate at any time before 2000. Moreover, Bronto participated
in discovery, moving in September 1997 for more time to respond,
and responding to RPM's request for document production in January
1998. Through this delay, participation in litigation, and
resultant prejudice to plaintiffs, Bronto waived its right to
arbitrate before plaintiffs knew of the asset purchase.
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statute.") (emphasis added); cf. U.C.C. § 9-318(1)(b), 3A U.L.A.
460 (1992) (rights of an assignee are subject to "any other defense
or claim of the account debtor against the assignor which accrues
before the account debtor receives notification of the
assignment"); In re Calore Express Co., 288 F.3d 22, 47 (1st Cir.
2002) (applying Massachusetts law and finding that timing of notice
of assignment under § 9-318(1)(b) governs outcome).4
Nevertheless, the Federals argue that they are not bound
by Bronto's actions because those actions occurred after the August
1995 asset purchase. The Federals contend their rights as
assignees are measured at the time of the assignment, and so
plaintiffs -- the obligors -- cannot raise a defense of waiver
based on Bronto's conduct. But as said, basic contract law
principles do not limit obligors to only those defenses that arose
before the assignment. Instead, the inquiry turns on when the
4
There is a lurking choice of law question. In diversity
cases, we apply the forum state's choice of law rules. See Auto
Europe, LLC v. Conn. Indem. Co., 321 F.3d 60, 64 (1st Cir. 2003).
We do not decide here whether Massachusetts would enforce the
contractual choice of law or its own law. The asset purchase
contract incorporates Finnish law. However, parties do not argue
that Finnish law governs the assignment, nor do they present
relevant Finnish law. Under Massachusetts law, "we need not take
judicial notice of the law of a foreign jurisdiction where, as
here, it is not brought to our attention by the record or the
briefs, and where, as here, counsel apparently tried the case on
the theory that the relevant [foreign] law was the same as our
own." Tsacoyeanes v. Canadian Pac. Ry. Co., 162 N.E. 23, 24 (Mass.
1959) (citations omitted). The parties have proceeded on state
contract law, as do we.
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obligor received notification of the assignment. As a result, the
obligor can employ defenses that emerged subsequent to assignment:
The assignee takes what the assignor had 'warts and all,'
for an assignment does not deprive the obligor of any
defenses or claims arising out of the agreement that the
obligor could have asserted against the assignor absent
assignment. The obligor may assert these defenses and
claims against the assignee, regardless of whether the
assignee knew of their existence at the time of
assignment or whether they had even come into existence
at that time.
3 E.A. Farnsworth, Farnsworth On Contracts § 11.8, at 106 (2d ed.
1998)(emphasis added). In short, the Federals are bound by
Bronto's actions prior to the plaintiffs' 1999 discovery of the
ownership change.
For these reasons, the Federals do not have a right to
compel arbitration under the 1993 bill of sale.
IV.
The district court's rulings on the motion to remand and
denial of the motion to compel arbitration are affirmed.
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