PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: COTTON YARN ANTITRUST
LITIGATION
ATLANTIC TEXTILES, on behalf of
itself and all others similarly
situated; SOUTH CAROLINA TEES,
INCORPORATED, on behalf of itself
and all others similarly situated;
LISA LESAVOY, Successor in Interest
to Apparel Sales & Printing,
Incorporated, on behalf of herself
and all others similarly situated;
ARMEN COMPANY, INCORPORATED, on
behalf of itself and all others No. 05-2392
similarly situated; MEKFIR
INTERNATIONAL CORPORATION, on
behalf of itself and all others
similarly situated; DELL CARTIER
ASSOCIATES, INCORPORATED, on behalf
of itself and all others similarly
situated; PERFECT FIT GLOVE
COMPANY, LLC, individually and on
behalf of all others similarly
situated; RONALD LITTLE, formerly
doing business as Star Flight
Hosiery, Incorporated, on behalf of
himself and all others similarly
2 In Re: COTTON YARN ANTITRUST LITIGATION
situated; THOMASTON MILLS,
INCORPORATED, by and through
Charles Crumley, Trustee in
Bankruptcy, on behalf of itself and
all others similarly situated,
Plaintiffs-Appellees,
v.
AVONDALE INCORPORATED; AVONDALE
MILLS, INCORPORATED,
Defendants-Appellants,
and
FRONTIER SPINNING MILLS,
INCORPORATED; PARKDALE AMERICA,
LLC; PARKDALE MILLS,
INCORPORATED; UNIFI, INCORPORATED,
Defendants.
In Re: COTTON YARN ANTITRUST LITIGATION 3
In Re: COTTON YARN ANTITRUST
LITIGATION
ATLANTIC TEXTILES, on behalf of
itself and all others similarly
situated; SOUTH CAROLINA TEES,
INCORPORATED, on behalf of itself
and all others similarly situated;
LISA LESAVOY, Successor in Interest
to Apparel Sales & Printing,
Incorporated, on behalf of herself
and all others similarly situated;
ARMEN COMPANY, INCORPORATED, on
behalf of itself and all others No. 05-2393
similarly situated; MEKFIR
INTERNATIONAL CORPORATION, on
behalf of itself and all others
similarly situated; DELL CARTIER
ASSOCIATES, INCORPORATED, on behalf
of itself and all others similarly
situated; PERFECT FIT GLOVE
COMPANY, LLC, individually and on
behalf of all others similarly
situated; RONALD LITTLE, formerly
doing business as Star Flight
Hosiery, Incorporated, on behalf of
himself and all others similarly
4 In Re: COTTON YARN ANTITRUST LITIGATION
situated; THOMASTON MILLS,
INCORPORATED, by and through
Charles Crumley, Trustee in
Bankruptcy, on behalf of itself and
all others similarly situated,
Plaintiffs-Appellees,
v.
FRONTIER SPINNING MILLS,
INCORPORATED,
Defendant-Appellant,
and
AVONDALE INCORPORATED; AVONDALE
MILLS, INCORPORATED; PARKDALE
AMERICA, LLC; PARKDALE MILLS,
INCORPORATED; UNIFI, INCORPORATED,
Defendants.
Appeals from the United States District Court
for the Middle District of North Carolina, at Durham.
James A. Beaty, Jr., District Judge.
(MDL-04-1622-1-JAB)
Argued: September 18, 2006
Decided: October 12, 2007
Before WILLIAMS, Chief Judge, TRAXLER, Circuit Judge, and
Thomas E. JOHNSTON, United States District Judge for the
Southern District of West Virginia, sitting by designation.
Vacated and remanded by published opinion. Judge Traxler wrote the
opinion for the court, in which Chief Judge Williams concurred as to
Part II and in which Judge Johnston concurred as to Parts I, II(A), and
II(B)(1). Chief Judge Williams wrote an opinion dissenting from Part
In Re: COTTON YARN ANTITRUST LITIGATION 5
I of the opinion of the court. Judge Johnston wrote an opinion dissent-
ing from Parts II(B)(2) and II(B)(3) of the opinion of the court.
COUNSEL
ARGUED: Shari Ross Lahlou, CROWELL & MORING, L.L.P.,
Washington, D.C.; Jeffrey S. Cashdan, KING & SPALDING, L.L.P.,
Atlanta, Georgia, for Appellants. Larry Stephen McDevitt, VAN
WINKLE, BUCK, WALL, STARNES & DAVIS, P.A., Asheville,
North Carolina; Steven A. Asher, WEINSTEIN, KITCHENOFF &
ASHER, L.L.C., Philadelphia, Pennsylvania, for Appellees. ON
BRIEF: Jonathan A. Berkelhammer, Jonathan P. Heyl, SMITH
MOORE, L.L.P., Greensboro, North Carolina; John S. Darden, KING
& SPALDING, L.L.P., Atlanta, Georgia, for Appellants Avondale
Incorporated and Avondale Mills, Incorporated; James T. Williams,
Jr., Jennifer K. Van Zant, BROOKS, PIERCE, MCLENDON, HUM-
PHREY & LEONARD, L.L.P., Greensboro, North Carolina; Kent A.
Gardiner, CROWELL & MORING, L.L.P., Washington, D.C., for
Appellant Frontier Spinning Mills, Incorporated. Anthony J. Bolo-
gnese, Michael E. Gehring, BOLOGNESE & ASSOCIATES, L.L.C.,
Philadelphia, Pennsylvania; Joseph C. Kohn, Steven M. Steingard,
KOHN, SWIFT & GRAF, P.C., Philadelphia, Pennsylvania; Mindee
J. Reuben, WEINSTEIN, KITCHENOFF & ASHER, L.L.C., Phila-
delphia, Pennsylvania; Steven A. Kanner, William H. London,
Melinda J. Morales, MUCH, SHELIST, FREED, DENENBERG,
AMENT & RUBENSTEIN, P.C., Chicago, Illinois; Robert C. Cone,
TUGGLE, DUGGINS & MESCHAN, P.A., Greensboro, North Caro-
lina, for Appellees.
OPINION
TRAXLER, Circuit Judge:
Purchasers of cotton and poly-cotton yarn commenced a class
action against various North Carolina manufacturers of the yarns,
alleging that the manufacturers had engaged in a price-fixing conspir-
acy in violation of the Sherman Act. The manufacturers moved to dis-
6 In Re: COTTON YARN ANTITRUST LITIGATION
miss the suit as to certain plaintiffs, arguing that those plaintiffs were
bound by arbitration clauses that were broad enough to encompass the
antitrust claims. The district court denied the motion. The court con-
cluded that some of the contracts at issue did not include arbitration
clauses. As to those contracts that did include binding arbitration
clauses, the district court concluded that those clauses could not be
enforced because they prevented the plaintiffs from effectively vindi-
cating their statutory antitrust claims. Thus, the end result of the dis-
trict court’s ruling was that no plaintiff was required to submit its
antitrust claims to arbitration.
The manufacturers appeal. We conclude that all contracts at issue
in this appeal include a binding arbitration provision. We also con-
clude that the plaintiffs have failed to establish that the terms of the
arbitration provisions prevent them from effectively vindicating their
statutory rights. We therefore vacate the decision of the district court
and remand for further proceedings.
I.
We turn first to the question of whether the contracts at issue
include binding arbitration clauses. This case involves anti-trust
claims asserted against Avondale Inc., and Avondale Mills, Inc.
(together, "Avondale") and Frontier Spinning Mills, Inc.,1 by a puta-
tive class of those who purchased yarn from these manufacturers
between January 1, 1999, and February 11, 2004. The district court
concluded that all of the Avondale contracts at issue included binding
arbitration provisions, and that some of the Frontier contracts also
included binding arbitration agreements. However, the district court
concluded that the Frontier contracts with plaintiffs Atlantic Textiles,
South Carolina Tees, and Armen Company did not include binding
arbitration clauses.
Starting in 2000 and 2001, the purchasers involved in the Frontier
transactions arranged purchases over the phone, discussing quantity
and price. Frontier then sent written contracts (which refer to them-
1
Parkdale Mills, Inc., and Parkdale America, LLC were also named as
defendants. The Parkdale defendants settled with the plaintiffs before the
court ruled on the arbitration issue and are no longer a part of the case.
In Re: COTTON YARN ANTITRUST LITIGATION 7
selves as "sales contracts" and "confirmations") that confirmed the
terms discussed and included additional terms, including an arbitra-
tion clause. The contracts provided that they were subject to "The
Yarn Rules of 1989," J.A. 79, and stated that "[e]xcept to the extent
a future transaction is governed by a signed contract between the par-
ties, the terms and conditions hereof, including, without limitation,
the arbitration provision, shall govern all further transactions." J.A.
80. The contracts were signed by Frontier, but the record contains no
copy of the contracts signed by the purchasers. The contracts at issue,
however, state that acceptance of the product constitutes acceptance
of the contract terms.
New contracts were not sent with each shipment of yarn, because
orders often contemplated multiple separate shipments, but Frontier
did send invoices to the purchasers with each shipment. The invoices
are not signed by either party. They do not include an arbitration pro-
vision, nor do they explicitly incorporate the terms of the sales con-
tracts. According to an affidavit submitted by Frontier, however, the
order number referenced on the face of each invoice "is the last four
or five digits of the contract number." J.A. 746.
State contract law governs the question of whether the parties have
agreed to arbitrate, see First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938, 944 (1995); Hightower v. GMRI, Inc., 272 F.3d 239, 242
(4th Cir. 2001), and the parties agree that North Carolina law governs
the Frontier transactions. Because the transactions involve the sale of
goods, they are governed by North Carolina’s version of the Uniform
Commercial Code.
The district court concluded that the contracts for sale in the Fron-
tier transactions were oral, formed over the phone when the parties
talked about price, quantity, and delivery. Because arbitration was not
mentioned in those conversations, the district court concluded that
arbitration was not a term of the oral agreements. Applying N.C. Gen.
Stat. Ann. § 25-2-207 (the UCC’s "battle of the forms" provision), the
district court concluded that the arbitration clauses included in the
contracts and confirmations sent by Frontier did not become part of
the contract because, under North Carolina law, a proposed arbitration
clause is a material alteration of a contract. See N.C. Gen. Stat. Ann.
§ 25-2-207(2)(b) (2006) (stating that additional terms contained in a
8 In Re: COTTON YARN ANTITRUST LITIGATION
confirmation of a contract between merchants become part of the con-
tract unless the terms materially alter the contract);2 Frances Hosiery
Mills, Inc. v. Burlington Indus., Inc., 204 S.E.2d 834, 842-43 (N.C.
1974) (concluding that an arbitration provision included in a contract
confirmation did not become part of the contract because the arbitra-
tion requirement materially altered the contract).
On appeal, Frontier contends that arbitration of disputes is a well-
established custom in the textile industry, and that, as a "usage of
trade," arbitration was automatically part of the agreement reached by
the parties. Frontier thus argues that because arbitration was already
part of the agreement, it was not an "additional term" that could be
knocked out as a material alteration under § 25-2-207(2)(b). We
agree.
N.C. Gen. Stat. Ann. § 25-1-201, which sets out the UCC’s general
definitions, defines an agreement as "the bargain of the parties in fact,
as found in their language or inferred from other circumstances,
including course of performance, course of dealing, or usage of trade
as provided in G.S. 25-1-303." N.C. Gen. Stat. Ann. § 25-1-201(b)(3)
(2006) (emphasis added).3 The authors of the definitive treatise on the
Uniform Commercial Code have explained that by virtue of § 2-201,
[t]he express agreement may be silent on a matter, yet usage
of trade . . . may fill the gap. . . .
***
The agreement of the parties includes that part of their
bargain that may be found in course of dealing, usage of
trade, or course of performance. These sources are relevant
2
The parties agree that they are "merchants" within the meaning of the
UCC.
3
North Carolina amended portions of its UCC effective October 1,
2006, well after the proceedings below concluded. See 2006 N.C. Sess.
Laws S.L. 2006-112 (S.B. 1555). Although the amendments changed the
language of some UCC sections relevant to this case, the changes are not
material to our analysis of the issues. We therefore refer to the current
version of the statutes at issue.
In Re: COTTON YARN ANTITRUST LITIGATION 9
not only to the interpretation of express contract terms but
may themselves constitute contract terms.
J. White & R. Summers, Uniform Commercial Code §§ 3-2, 3-3 (4th
ed. 1995) (footnote omitted). Accordingly, if arbitration is a usage of
trade in the textile industry, then it was included in the parties’ agree-
ment notwithstanding the fact that there was no mention of arbitration
in the oral agreements. And if arbitration was already part of the
agreement, the contracts and confirmations (which included an
explicit arbitration clause) did not add additional terms, and § 25-2-
207(2)(b) is irrelevant, at least as to the general requirement to submit
any claim to arbitration. The question, then, is whether arbitration of
disputes is a usage of trade in the textile industry.
"Usage of trade" is defined as "any practice or method of dealing
having such regularity of observance in a place, vocation, or trade as
to justify an expectation that it will be observed with respect to the
transaction in question." N.C. Gen. Stat. Ann. § 25-1-303(c) (2006).
"The existence and scope of such a usage must be proved as facts. If
it is established that such a usage is embodied in a trade code or simi-
lar record, the interpretation of the record is a question of law." Id.
In our view, Frontier has met its burden of proving that arbitration
is a usage of trade in the textile industry. The "Yarn Rules" incorpo-
rated in the Frontier sales contracts and confirmations are a collection
of "industry rules regarding contract terms and conditions and indus-
try norms" that have been gathered and reported by the American
Yarn Spinners Association for more than 50 years. J.A. 541. As to
arbitration, the Yarn Rules state that "[p]arties to the sale and pur-
chase of yarns are members of the textile industry, which has, for over
fifty years, settled disputes by arbitration in accordance with the terms
and conditions of contracts which have tended to become standard
and in accordance with equity and good conscience and the customs
and practices of the trade." J.A. 542-43. Thus, the Yarn Rules them-
selves are strong evidence that arbitration is a usage of trade in the
textile industry.
Moreover, numerous cases have noted that arbitration of disputes
is standard in the textile industry. See Chelsea Square Textiles, Inc.
v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 296 (2d Cir. 1999)
10 In Re: COTTON YARN ANTITRUST LITIGATION
("We believe that a textile buyer is generally on notice that an agree-
ment to purchase textiles is not only likely, but almost certain, to con-
tain a provision mandating arbitration in the event of disputes, and
must object to such a provision if it seeks to avoid arbitration."); Ste-
dor Enters., Ltd. v. Armtex, Inc., 947 F.2d 727, 733 (4th Cir. 1991)
("‘[I]n industries such as fabrics and textiles . . . the specialized nature
of the product has led to the widespread use of arbitration clauses and
knowledgeable arbitrators.’" (quoting Pervel Indus., Inc. v. T M Wall-
covering, Inc., 871 F.2d 7, 8 (2d Cir. 1989))); Genesco, Inc. v. T.
Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir. 1987) ("[T]he widespread
use of arbitration clauses in the textile industry puts a contracting
party . . . on notice that its agreement probably contains such a
clause."); Helen Whiting, Inc. v. Trojan Textile Corp., 121 N.E.2d
367, 370 (N.Y. 1954) ("[W]e can almost take judicial notice that arbi-
tration clauses are commonly used in the textile industry . . . ."). We
conclude that this evidence is sufficient to establish that arbitration is
a usage of trade in the textile industry.
The purchasers submitted affidavits establishing that their corpo-
rate officers had never heard arbitration mentioned in their dealings
with Frontier and that disputes were generally resolved informally.
One executive stated that, to his knowledge, arbitration is not custom-
arily used in the industry. The UCC, however, does not require that
a party to a contract have actual knowledge of a usage of trade before
that usage of trade is incorporated into the contract. See N.C. Gen.
Stat. Ann. § 25-1-303(c) (defining usage of trade as "any practice or
method of dealing having such regularity of observance in a place,
vocation or trade as to justify an expectation that it will be observed
with respect to the transaction in question." (emphasis added)); White
& Summers, § 3-3 ("[I]t is not necessary for both parties to be con-
sciously aware of the trade usage. It is enough if the trade usage is
such as to justify an expectation of its observance."); id. ("[A] party
can be chargeable with a usage of trade of which it is ignorant . . .").
Accordingly, the plaintiffs’ affidavits are insufficient to overcome
Frontier’s showing.
Because Frontier sufficiently established that arbitration is a usage
of trade, the oral contracts included an agreement to arbitrate notwith-
standing the fact that arbitration was not mentioned in the telephone
conversations. As to the general obligation to arbitrate, there is no
In Re: COTTON YARN ANTITRUST LITIGATION 11
reason to consider whether the arbitration clauses contained in the
sales contracts and confirmations would become part of the contract
under N.C. Gen. Stat. Ann. § 25-2-207(2)(b).4
The usage of trade established by Frontier is simply that arbitration
is the manner in which disputes are resolved in the textile industry,
and only that general obligation became part of the contract without
regard to § 25-2-207(2). The terms and conditions under which any
arbitration would proceed were set forth in the sales contracts and
confirmations, and those terms and conditions proceeding must be
viewed as additional terms subject to analysis under § 25-2-207(2).
4
Our resolution of this issue is not inconsistent with Supak & Sons
Manufacturing Co. v. Pervel Indus., 593 F.2d 135 (4th Cir. 1979), and
Frances Hosiery Mills, Inc. v. Burlington Industries, Inc., 204 S.E.2d
834 (N.C. 1974). In Supak and Frances Hosiery, the courts refused to
compel arbitration after applying § 25-2-207 and concluding that the
arbitration clauses materially altered the contracts. See Supak, 593 F.2d
at 136-37; Frances Hosiery, 204 S.E.2d at 842-43. Our colleague sug-
gests that Supak and Frances Hosiery established a per se rule that arbi-
tration is a material alteration of a contract and that this per se rule
prevents us from considering the facts of an individual case when deter-
mining whether an arbitration clause materially alters a contract. Supak
and Frances Hosiery may well establish a per se rule. In our judgment,
that rule governs only the inquiry under § 25-2-207(2)(b): whether addi-
tional terms contained in a confirmation will become part of a contract.
Because we have concluded that the oral agreement between the parties
included a obligation to submit disputes to arbitration, the arbitration
clause in the confirmation is not an additional term and § 25-2-207(2)(b)
simply does not factor into to our analysis on that point. The Supak rule
that arbitration clauses materially alter the terms of a contract that does
not otherwise include an arbitration requirement cannot somehow pre-
clude inquiry into the threshold question of whether the contract already
includes an arbitration requirement.
We also note that while Supak and Frances Hosiery both involved
contracts for the sale of textiles, neither court considered whether arbitra-
tion was a usage of trade in the textile industry, and there is no indication
that the issue was raised in either case. Given that usage of trade is a
question of fact that must be proved by the party asserting it, the courts’
silence on the usage of trade question in Supak and Frances Hosiery can-
not be viewed as rejection of the contention that arbitration is a usage of
trade in the textile industry.
12 In Re: COTTON YARN ANTITRUST LITIGATION
Because the oral agreement included the obligation to submit any dis-
putes to arbitration, we do not believe that the details of the arbitra-
tion proceeding materially altered the contract. Those additional terms
therefore became part of the contract under § 25-2-207. See N.C. Gen.
Stat. Ann. § 25-2-207(2)(b) (explaining that additional terms con-
tained in a confirmation of a contract between merchants become part
of the contract unless the terms materially alter the contract).5
Accordingly, we reverse the district court’s conclusion that there
was no binding agreement to arbitrate between the parties to the Fron-
tier transactions.
II.
We turn now to the broader question of whether the arbitration
agreements are enforceable.
It is by now well established that the Federal Arbitration Act
reflects "a liberal federal policy favoring arbitration agreements."
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24 (1983). Claims asserted under federal statutes generally are arbitra-
ble, so long as the wording of the arbitration agreement is sufficiently
broad to encompass the statutory claim and Congress has not indi-
cated its intent to prohibit arbitration of a given statutory claim. See
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). As
the Supreme Court has explained,
By agreeing to arbitrate a statutory claim, a party does not
forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judi-
cial, forum. It trades the procedures and opportunity for
review of the courtroom for the simplicity, informality, and
expedition of arbitration. We must assume that if Congress
intended the substantive protection afforded by a given stat-
5
Although the initial agreement to arbitrate disputes was (as a usage of
trade) part of the oral agreement, we believe that the subsequent written
confirmations setting out the terms governing such arbitration are suffi-
cient to satisfy the Federal Arbitration Act’s requirement of a written
agreement to arbitrate. See 9 U.S.C.A. § 2.
In Re: COTTON YARN ANTITRUST LITIGATION 13
ute to include protection against waiver of the right to a
judicial forum, that intention will be deducible from text or
legislative history. Having made the bargain to arbitrate, the
party should be held to it unless Congress itself has evinced
an intention to preclude a waiver of judicial remedies for the
statutory rights at issue.
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 628 (1985) (citation omitted).
In Mitsubishi, the Supreme Court concluded that antitrust claims
arising from international transactions are suitable for arbitration. See
id. at 636-37. Although the Supreme Court has yet to directly con-
sider the arbitrability of domestic antitrust claims, the Court’s analysis
of the question in Mitsubishi is equally applicable to domestic anti-
trust claims, as confirmed by language in subsequent cases. See Gil-
mer, 500 U.S. at 28 ("The Sherman Act, the Securities Exchange Act
of 1934, RICO, and the Securities Act of 1933 all are designed to
advance important public policies, but . . . claims under those statutes
are appropriate for arbitration."); Shearson/American Express, Inc. v.
McMahon, 482 U.S. 220, 232 (1987) ("In Mitsubishi, . . . we recog-
nized that arbitral tribunals are readily capable of handling the factual
and legal complexities of antitrust claims, notwithstanding the
absence of judicial instruction and supervision."); id. at 239 (explain-
ing that "[a]lthough the holding in Mitsubishi was limited to the inter-
national context, much of its reasoning is equally applicable" to the
question of whether domestic RICO claims may be subject to arbitra-
tion (citation omitted)); see also Kotam Elec., Inc. v. JBL Consumer
Prods., 93 F.3d 724, (11th Cir. 1996) (en banc) ("In light of Mitsu-
bishi and its progeny . . . , we hold that . . . arbitration agreements
concerning domestic antitrust claims are enforceable."). We therefore
have no difficulty concluding that domestic antitrust claims, as a
class, are suitable for arbitration. And as the district court concluded,
the arbitration clauses at issue in this case are broad enough to encom-
pass the plaintiffs’ antitrust claims. Thus, as an initial matter, it would
appear that the claims asserted by the plaintiffs should be subject to
arbitration.
However, even if an arbitration clause is broad enough to encom-
pass a statutory claim for which Congress has not precluded arbitra-
14 In Re: COTTON YARN ANTITRUST LITIGATION
tion, arbitration of the claim will not be compelled if the prospective
litigant cannot effectively vindicate his statutory rights in the arbitral
forum. See Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79,
90 (2000) ("[E]ven claims arising under a statute designed to further
important social policies may be arbitrated because so long as the pro-
spective litigant effectively may vindicate his or her statutory cause
of action in the arbitral forum, the statute serves its functions." (inter-
nal quotation marks and alterations omitted)). The party seeking to
avoid arbitration bears the burden of establishing that he cannot effec-
tively vindicate his statutory rights under the terms of an arbitration
agreement. See Green Tree, 531 U.S. at 92; Booker v. Robert Half
Int’l, Inc., 413 F.3d 77, 81 (D.C. Cir. 2005). Mere speculation about
how the terms of the arbitration agreement might be construed by the
arbitrator or how the agreement might affect the prospective litigant
is insufficient to carry that burden. See Green Tree, 531 U.S. at 90-91
(explaining that while "the existence of large arbitration costs could
preclude a litigant . . . from effectively vindicating her federal statu-
tory rights in the arbitral forum . . . [,] the record does not show that
Randolph will bear such costs if she goes to arbitration. . . . The ‘risk’
that Randolph will be saddled with prohibitive costs is too speculative
to justify the invalidation of an arbitration agreement.").
Although the precise language varies from contract to contract, all
of the arbitration clauses at issue in this case prevent joinder — multi-
ple plaintiffs may not join their claims against a single defendant, nor
may a single plaintiff bring claims against multiple defendants in a
single proceeding. The district court concluded that these provisions
prevented the plaintiffs from effectively vindicating their antitrust
claims, and the court therefore declined to enforce the arbitration
clauses.
A.
We first consider whether the no-joinder terms of the arbitration
agreements prevent the plaintiffs from effectively vindicating their
statutory rights.
The plaintiffs contend that because they allege the existence of a
price-fixing conspiracy, the inability to join all defendants in a single
proceeding prevents them from vindicating their statutory rights.
In Re: COTTON YARN ANTITRUST LITIGATION 15
They claim that "[s]evering the conspiracy into separate parts would
deprive Plaintiffs of the full benefit of their proof, and make the prov-
ing of the conspiracy, if not impossible, extremely difficult." Brief of
Appellees at 31. Because the plaintiffs seek damages caused by the
"conspiratorial actions of all the Defendants," the plaintiffs contend
that individual arbitration proceedings would "[s]hift[ ] the focus . . .
from the ‘combined acts’ of the Defendants to the ‘individual acts’ of
the single Defendant before the arbitral forum" and would thereby
"eviscerate" their antitrust conspiracy claims. Brief of Appellees at
32. We find this argument unpersuasive.
Contrary to the argument of the plaintiffs, we do not believe that
the plaintiffs’ inability under the terms of the arbitration clauses to
sue both remaining defendants in a single proceeding affects their
ability to prove a price-fixing conspiracy. Preliminarily, we note that
the antitrust statutes themselves do not grant private plaintiffs a right
to proceed against all co-conspirators in a single action; the vagaries
of the relevant venue and service-of-process requirements will some-
times require the dismissal of claims against an alleged co-
conspirator. See, e.g., Piedmont Label Co. v. Sun Garden Packing
Co., 598 F.2d 491, 495 (9th Cir. 1979) (concluding that claim against
one alleged co-conspirator must be dismissed because venue was
improper); cf. Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 384
(1953) ("Congress . . . placed definite limits on venue in treble dam-
age actions. Certainly Congress realized in so doing that many such
cases would not lie in one district as to all defendants, unless venue
was waived. It must, therefore, have contemplated that such proceed-
ings might be severed and transferred or filed in separate districts
originally."). Accordingly, the no-joinder terms of the arbitration
agreements do not deprive the plaintiffs of any statutorily-conferred
right.
Moreover, while many antitrust plaintiffs are able to proceed
against all co-conspirators in a single action, the fact remains that co-
conspirators are not necessary parties; a plaintiff can prove the exis-
tence of a conspiracy in an action against just one of the members of
the conspiracy. See Fed R. Civ. P. 20; Fed. R. Civ. P. 23; see also
Georgia v. Pennsylvania R.R. Co., 324 U.S. 439, 463 (1945) ("In a
suit to enjoin a[n anti-trust] conspiracy not all the conspirators are
necessary parties defendant."); Wilson P. Abraham Constr. Corp. v.
16 In Re: COTTON YARN ANTITRUST LITIGATION
Tex. Indus., Inc., 604 F.2d 897, 904 n.15 (5th Cir. 1979) ("Antitrust
coconspirators are jointly and severally liable for all damages caused
by the conspiracy to which they were a party. A private plaintiff need
not sue all coconspirators but may choose to proceed against any one
or more of them." (citations omitted)). The presence of only one
defendant in a given arbitration proceeding thus in no sense would
prevent the plaintiffs from proving the existence of a conspiracy.
Moreover, it is important to note that because the Parkdale defen-
dants have settled, only two defendants remain. Consequently, each
plaintiff would be required to pursue at most two arbitration proceed-
ings in the place of one lawsuit. And because the defendants would
be jointly and severally liable, a plaintiff who finds pursuing two
actions unduly burdensome could simply seek to hold one defendant
liable for all damages caused by the conspiracy.6
The district court relied on Continental Ore Co. v. Union Carbide
and Carbon Corp., 370 U.S. 690 (1962), and Jung v. Association of
American Medical Colleges, 300 F. Supp. 2d 119 (D.D.C. 2004), in
support of its conclusion that the anti-joinder provisions prevented the
plaintiffs from effectively vindicating their rights under the Sherman
Act. We agree with the manufacturers that these cases are inapposite.
Continental Ore and Jung both involved attempts to dissect a single
conspiracy claim into pieces, effectively treating the subparts of the
claim as separate suits.
In Jung, the court rejected the defendant’s attempt to compel arbi-
tration of only one part of a larger conspiracy claim, but the court did
not address the propriety of requiring a plaintiff to proceed against co-
conspirators individually. See Jung, 300 F. Supp. 2d at 155. In this
6
Although the plaintiffs do not specifically address it, we find nothing
in the record that would permit us to conclude that the prohibition against
joinder of plaintiffs provision would prevent the plaintiffs from vindicat-
ing their statutory rights. The plaintiffs did not initially seek to pursue a
class action or even to file jointly their initial complaints. Instead, they
filed seven separate actions, six in the Middle District of North Carolina
and one in the Eastern District of North Carolina. Thus, the plaintiffs’
own conduct suggests that they believed joinder of plaintiffs was unnec-
essary to pursue their actions successfully.
In Re: COTTON YARN ANTITRUST LITIGATION 17
case, the defendants seek arbitration of all issues relating to the exis-
tence of a price-fixing conspiracy; that there must be separate arbitra-
tion proceedings for each defendant simply does not amount to an
improper splitting of a single conspiracy claim. In Continental Ore,
the court made it clear that when considering the conduct of any one
defendant, the fact-finder must be able to consider not only the
actions of that one defendant, but those of the entire conspiracy, look-
ing at "the whole picture and not merely at the individual figures in
it." 370 U.S. at 699 (internal quotation marks omitted). Nothing in
Continental Ore, however, suggests that a comprehensive view of the
entire conspiracy can be made only if all of the co-conspirators are
parties to the action.
As noted above, co-conspirators are not necessary parties in an
action against a single conspirator. There is nothing in the arbitration
agreements that would prevent the plaintiffs from presenting evidence
about the actions of non-party defendants in order to establish the
existence of the price-fixing conspiracy alleged by the plaintiffs.
Accordingly, the mere fact that the plaintiffs may not join the defen-
dants in a single arbitration proceeding does not prevent the plaintiffs
from effectively vindicating their statutory rights. While individual
proceedings may be less efficient than a single proceeding, that ineffi-
ciency is a function of Congress’s preference for resolution of dis-
putes by arbitration and cannot be a basis for defeating the arbitration
that Congress was seeking to encourage. See Moses H. Cone Mem’l
Hosp., 460 U.S. at 20 ("It is true, therefore, that if Mercury obtains
an arbitration order for its dispute, the Hospital will be forced to
resolve these related disputes in different forums. That misfortune,
however, is not the result of any choice between the federal and state
courts; it occurs because the relevant federal law requires piecemeal
resolution when necessary to give effect to an arbitration agree-
ment.").
We recognize, of course, that requiring each plaintiff to proceed
separately against each defendant will entail additional expense. The
possibility that a party to an arbitration clause will be inconvenienced
and will incur some extra expense, however, does not necessarily
mean that the party cannot effectively vindicate its statutory rights
through arbitration. For example, we have held that the inability to
bring a class action does not in and of itself render an arbitration
18 In Re: COTTON YARN ANTITRUST LITIGATION
agreement unenforceable, see, e.g., Adkins v. Labor Ready, Inc., 303
F.3d 496, 503 (4th Cir. 2002); Snowden v. Checkpoint Check Cash-
ing, 290 F.3d 631, 638-39 (4th Cir. 2002), but we have acknowledged
that if a party could demonstrate that the prohibition on class actions
likely would make arbitration prohibitively expensive, such a show-
ing could invalidate an agreement, see Adkins, 303 F.3d at 502-03.
The plaintiffs in this case developed no evidentiary record below
establishing how much it would cost to proceed individually against
each defendant or how those increased costs would affect their ability
to proceed in arbitration. The absence of an evidentiary record on this
issue leaves us with mere speculation about the actual cost of individ-
ual proceedings and something little better than a wild guess about the
ability of the corporate plaintiffs to bear those speculative costs. This
kind of uninformed speculation about cost falls far short of satisfying
the plaintiffs’ burden of proving that the costs of proceeding individu-
ally against the defendants would be prohibitive and thus would pre-
vent them from effectively vindicating their statutory rights. See
Green Tree, 531 U.S. at 90-91; Bradford v. Rockwell Semiconductor
Sys., Inc., 238 F.3d 549, 558 (4th Cir. 2001) (affirming district court’s
decision to compel arbitration because plaintiff "has offered no evi-
dence that he was unable to pay the $4,470.88 that he was billed by
the AAA, or that the fee-splitting provision deterred him from pursu-
ing his statutory claim or would have deterred others similarly situ-
ated" (emphasis added)).
The plaintiffs also suggest that when the no-joinder provisions are
considered in light of the restricted discovery available in arbitration,
it becomes apparent that the prohibition against joinder prevents them
from effectively vindicating their statutory rights. The plaintiffs argue
that no third-party discovery would be available in arbitration. Given
the importance of discovery to establishing an antitrust claim, see,
e.g., In re Uranium Antitrust Litig., 480 F. Supp. 1138, 1155 (N.D.
Ill. 1979) ("[T]he heart of any American antitrust case is the discov-
ery of business documents. Without them, there is virtually no case."
(internal quotation marks omitted)), the plaintiffs contend that the
limited discovery available in arbitration would prevent them from
proving their antitrust claims. We disagree.
While discovery generally is more limited in arbitration than in liti-
gation, that fact is simply one aspect of the trade-off between the
In Re: COTTON YARN ANTITRUST LITIGATION 19
"procedures and opportunity for review of the courtroom [and] the
simplicity, informality, and expedition of arbitration" that is inherent
in every agreement to arbitrate. Mitsubishi, 473 U.S. at 628. Because
limited discovery is a consequence of perhaps every agreement to
arbitrate, it cannot, standing alone, be a reason to invalidate an arbi-
tration agreement. And while the plaintiffs contend that antitrust
claims are uniquely dependent on the ability to engage in wide-
ranging discovery, the Supreme Court has at least implicitly rejected
the argument that discovery limitations render antitrust claims unsuit-
able for arbitration. See Gilmer, 500 U.S. at 31 ("Gilmer also com-
plains that the discovery allowed in arbitration is more limited than
in the federal courts, which he contends will make it difficult to prove
discrimination. It is unlikely, however, that age discrimination claims
require more extensive discovery than other claims that we have
found to be arbitrable, such as RICO and antitrust claims.").
Even if there could be a particular case where the restricted discov-
ery available in arbitration would effectively prevent a plaintiff from
proving his antitrust claim, the plaintiffs have fallen far short of estab-
lishing that this is such a case. The plaintiffs do not contend that they
would be unable to obtain adequate discovery from the defendant
manufacturer in each of the separate arbitration proceedings, and they
do not identify any other entity that might have discoverable informa-
tion.7 Thus, even in separate arbitration proceedings, the plaintiffs
will be able to obtain discovery from each of the defendants. Because
the plaintiffs have identified no arbitration rule that would prevent
them from introducing in a proceeding against one manufacturer
information obtained from another manufacturer, the plaintiffs simply
have not established that they will be handicapped by the level of dis-
covery available in arbitration to such an extent that they would be
unable to prove their claims.
7
We also note the possibility that discovery could be compelled by the
district court. See COMSAT Corp. v. Nat’l Sci. Found., 190 F.3d 269,
276 (4th Cir. 1999) (noting that while arbitrators generally lack the abil-
ity to compel third parties to provide pre-trial discovery materials, we
have nonetheless "contemplated that a party might, under unusual cir-
cumstances, petition the district court to compel pre-arbitration discovery
upon a showing of special need or hardship").
20 In Re: COTTON YARN ANTITRUST LITIGATION
As noted above, the plaintiffs bear the burden of showing that the
terms of the arbitration agreement would preclude them from effec-
tively vindicating their statutory rights. See Green Tree, 531 U.S. at
92. This burden is a substantial one and cannot be satisfied by a mere
listing of ways that the arbitration proceeding will differ from a court
proceeding, or by speculation about difficulties that might arise in
arbitration. See id.; cf. Microstrategy, Inc. v. Lauricia, 268 F.3d 244,
251-52 (4th Cir. 2001) ("[T]he party opposing arbitration bears a
heavy burden of proving waiver. . . . [T]hat proof must be concrete,
not merely speculative." (internal quotation marks omitted). The
plaintiffs’ arguments about the discovery limitations attendant to arbi-
tration proceedings fall well short of satisfying their burden. Accord-
ingly, we conclude that the plaintiffs have failed to establish that the
no-joinder provision of the arbitration agreements prevents them from
effectively vindicating their statutory rights. The district court there-
fore erred when concluding that the restriction against joinder of par-
ties rendered the arbitration agreements unenforceable.
B.
We now consider the issue of the contractually-established limita-
tions period. The Clayton Act, 15 U.S.C.A. § 15b (West 1997), estab-
lishes a four-year limitations period in which to bring a claim for a
violation of the Sherman Act, 15 U.S.C.A. § 1 (West 1997). The arbi-
tration agreements, however, establish a one-year period in which
claims must be brought. The plaintiffs contend that the shortened lim-
itations period renders the arbitration agreements unenforceable.8
8
We note that South Carolina law prohibits contractual shortening of
statutes of limitation. See S.C. Code Ann. § 15-3-140 (West 2005). If the
South Carolina statute applies to the contracts that are subject to South
Carolina law, a question that we need not and do not decide here, then
the shortened limitation period could not be applied to the South Caro-
lina plaintiffs and thus would not impair their ability to vindicate their
statutory rights. But because North Carolina has no similar prohibition
against contractual shortening of statutory limitation periods, we must
still consider the enforceability of the one-year limitation period con-
tained in the arbitration agreements.
In Re: COTTON YARN ANTITRUST LITIGATION 21
1.
As a general rule, statutory limitations periods may be shortened by
agreement, so long as the limitations period is not unreasonably short.
See Missouri, Kan., & Tex. Ry. Co. v. Harriman Bros., 227 U.S. 657,
672 (1913); Atlantic Coast Line R. Co. v. Pope, 119 F.2d 39, 44 (4th
Cir. 1941). There is no language in the Clayton Act that would pre-
vent parties from agreeing contractually to a shortened limitations
provision. See 15 U.S.C.A. § 15b; cf. Stephan v. Goldinger, 325 F.3d
874, 876-77 (7th Cir. 2003) (concluding that statutory limitations
period established by the Commodity Exchange Act could be contrac-
tually shortened, noting that language of statute did not preclude
shortening). The question, then, is whether the one-year period is rea-
sonable.
Courts have frequently found contractual limitations periods of one
year (or less) to be reasonable. See, e.g., Thurman v. DaimlerChrys-
ler, Inc., 397 F.3d 352, 357-59 (6th Cir. 2004) (finding a 6-month
limitation period to be reasonable in a case raising claims under 42
U.S.C.A. § 1981); Northlake Reg’l Med. Ctr. v. Waffle House Sys.
Employee Benefit Plan, 160 F.3d 1301, 1303-04 (11th Cir. 1998)
(finding reasonable a 90-day limitations term contained in an ERISA-
governed employee benefits plan); see also Morrison v. Circuit City
Stores, Inc., 317 F.3d 646, 673 n.16 (6th Cir. 2003) (en banc) (enforc-
ing one-year limitations provision contained in arbitration agreement).
Moreover, North Carolina has by statute deemed one-year limitations
periods reasonable in contracts, like the ones at issue here, that are
subject to the Uniform Commercial Code. See N.C. Gen. Stat. Ann.
§ 25-2-725(1) (2006) (permitting parties to contracts subject to the
UCC to shorten a statute of limitations to not less than one year).
Because we are considering the shortening of a federal statute of limi-
tations, the North Carolina statute is not determinative of the issue.
Nonetheless, that the contractual limitations period is per se reason-
able under the state law that governs the contract formation provides
strong support for the reasonableness of the contractual limitations
period.
The plaintiffs contend that the one-year period is "patently unrea-
sonable," Brief of Appellees at 45, because it is a drastic reduction
from the otherwise applicable four-year statutory limitations period.
22 In Re: COTTON YARN ANTITRUST LITIGATION
According to the plaintiffs, there is an "increased chance" that their
complaint might be found to have been filed outside the limitations
period and that the shortened limitations period "could have the effect
of greatly reducing the amount of recoverable damages." Brief of
Appellees at 44 (emphasis added).
The plaintiffs’ arguments amount to little more than an observation
that the limitations period under the arbitration agreements is shorter
than that provided by federal law and the unremarkable recognition
that limitations provisions affect the amount of damages that may be
recovered. These same arguments, of course, could be made every
time a contract establishes a shorter limitations period than that of an
otherwise applicable statute. Given the established rule that statutory
limitations periods can be contractually shortened, so long as the con-
tractual period is not unreasonably short, the plaintiffs’ remarking-on-
the-obvious cannot suffice to carry their burden of establishing that
the contractual limitations period is unreasonable.
Antitrust is a complex area of the law, and antitrust trials (or arbi-
tration proceedings) can be long and involved. There is no basis in the
record, however, for us to conclude that the same difficulty and com-
plexity also attends to the plaintiff’s initial determination to pursue an
antitrust claim, so as to make a one-year limitations period unreason-
ably short. Accordingly, we conclude that one-year limitations period
established in the arbitration agreements is reasonable.
2.
Our conclusion that the contractual limitations period is reasonable,
however, does not fully resolve the plaintiffs’ challenges to the arbi-
tration agreements. "By agreeing to arbitrate a statutory claim, a party
does not forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judicial,
forum." Mitsubishi, 473 U.S. at 628. Thus, we must consider whether
the contractual limitations period is inconsistent with any substantive
rights conferred under the antitrust laws. If it is, then the contractual
limitations period would not be enforceable. See, e.g., Kristian v.
Comcast Corp., 446 F.3d 25, 48 (1st Cir. 2006) (in case involving
arbitration of antitrust claims, concluding that arbitration agreement’s
ban on treble damages was unenforceable, because right to recover
In Re: COTTON YARN ANTITRUST LITIGATION 23
treble damages is a substantive right); Robert Half Int’l, 413 F.3d at
83 (concluding that arbitration agreement’s ban on punitive damages
was not enforceable because civil rights statute under which the plain-
tiff was proceeding provided for punitive damages); Hadnot v. Bay,
Ltd., 344 F.3d 474, 478 & n.14 (5th Cir. 2003) (concluding that arbi-
tration agreement’s ban on punitive damages was not enforceable as
to the plaintiff’s Title VII claim); Morrison, 317 F.3d at 673 (con-
cluding that arbitration agreement’s restriction on the damages recov-
erable was not enforceable because it was inconsistent with the
damages authorized by Title VII).
Section 15b was added to the antitrust statutes in 1955, more than
forty years after "the original substantive liabilities were established."
American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 558 n.29 (1974),
and we have found only two cases where courts have considered
whether § 15b is substantive or procedural. In Kristian v. Comcast
Corp., the First Circuit concluded that an antitrust plaintiff’s chal-
lenge to the one-year limitations period included in the arbitration
agreement must be submitted to the arbitrator and did not prevent the
court from compelling arbitration. In the course of its discussion,
however, the court described the limitations issue as a procedural one.
See Kristian, 446 F.3d at 43. And the Eighth Circuit, in a case decided
not long after § 15b was enacted (but which did not involve questions
of arbitration), likewise viewed the limitations period as procedural
rather than substantive. See Kansas City, Mo. v. Federal Pac. Elec.
Co., 310 F.2d 271, 282-83 (8th Cir. 1962).
We also believe that § 15b should not be viewed as establishing
substantive rights.9 As noted above, there was no federal limitations
9
While the legislative history is not determinative of the question, we
note that when § 15b was enacted, at least some members of Congress
viewed it as purely procedural in nature, not substantive. See American
Pipe & Constr. Co. v. Utah, 414 U.S. 538, 558 n.29 (1974) ("During
debate a member of the House Judiciary Committee reporting the bill
was asked, ‘[A]m I correct in assuming that this limitation provided by
this amendment is strictly a procedural limitation and has nothing to do
with substance?’ to which he replied: ‘It was the specific purpose of the
committee in reporting this bill to in no way affect the substantive rights
of individual litigants. It is simply a procedural change and suggested
with the thought of setting up a uniform statute of limitations. That is the
sole purpose.’" (quoting 101 Cong. Rec. 5131 (1955) (remarks of Reps.
Murray and Quigley))).
24 In Re: COTTON YARN ANTITRUST LITIGATION
period during the early life of the Sherman Act. Until § 15b was
enacted in 1955, private antitrust actions were governed by the most
analogous state statute of limitations. See, e.g., id. at 282; Moviecolor
Ltd. v. Eastman Kodak Co., 288 F.2d 80, 82 (2d Cir. 1961). If Con-
gress was content for so long to permit antitrust plaintiffs to be sub-
ject to different limitations periods (which of course affected the
amount of damages that could be recovered), it seems difficult to con-
clude that Congress, by merely establishing a uniform limitations
period, intended to vest plaintiffs in all antitrust cases with a substan-
tive and non-waivable right to wait four years before bringing suit and
to recover a full four years’ worth of damages.
Accordingly, we conclude that § 15b does not establish substantive
rights. A contractual modification of the otherwise applicable limita-
tions therefore is not foreclosed by the Supreme Court’s admonition
that arbitration agreements may not dispossess plaintiffs of the sub-
stantive rights established by the statute under which their claims
arose.
3.
While statutory claims are arbitrable unless Congress has specifi-
cally provided otherwise, agreements to arbitrate statutory claims may
nonetheless be unenforceable if the terms of the agreement prevent
the plaintiff from effectively vindicating his statutory rights. See
Green Tree, 531 U.S. at 90; Mitsubishi, 473 U.S. at 636-37. Accord-
ingly, we must now determine whether the one-year limitations
period, though generally reasonable, could somehow prevent the
plaintiffs from effectively vindicating their statutory rights. The plain-
tiffs’ arguments on this point are the same as those urged in support
of their view that the limitations period is unreasonable. They contend
that their antitrust claims might be found to be untimely filed under
a one-year limitations period and that the one-year period could sub-
stantially reduce the amount of damages recoverable.
Implicit in the plaintiffs’ argument about the amount of damages
recoverable is the view that a plaintiff’s rights under the antitrust laws
are vindicated only if the plaintiff can recover damages for the full
four-year period permitted under the Clayton Act. We disagree. We
have explained that the "crucial inquiry" when considering a claim
In Re: COTTON YARN ANTITRUST LITIGATION 25
that an arbitration agreement prevents a plaintiff from vindicating his
statutory rights "is whether the particular claimant has an adequate
and accessible substitute forum in which to resolve his statutory
rights." Bradford, 238 F.3d at 556. Given our conclusion that the
Clayton Act’s four-year limitation period does not create substantive,
non-waivable rights for antitrust plaintiffs, we cannot conclude that
the arbitral forum is inadequate or inaccessible merely because the
plaintiff may recover a lesser quantum of damages than he might have
in a judicial forum.
Also implicit in the plaintiffs’ arguments and the decision of the
district court is the assumption that if the plaintiffs’ claims are
untimely under the terms of the arbitration agreements, then the plain-
tiffs necessarily cannot effectively vindicate their statutory rights in
the arbitral forum. As noted above, the relevant question is whether
the arbitration agreement provides the plaintiff with an "adequate and
accessible substitute forum." Id. We have recognized the possibility
that very high arbitration costs could render the arbitral forum inac-
cessible to a given plaintiff, see, e.g., Adkins, 303 F.3d at 502-03;
Bradford, 238 F.3d at 556, but it seems quite a different matter to
allow a plaintiff’s failure to commence an action within the reason-
able contractually-established limitations period to render an other-
wise adequate and appropriate arbitral forum suddenly inadequate or
inaccessible. Cf. In re Vial, 115 F.3d 1192, 1194 n.5 (4th Cir. 1997)
(en banc) (explaining that while a federal prisoner may file a petition
seeking relief under 28 U.S.C.A. § 2241 if § 2255 is inadequate or
ineffective, § 2255 is not inadequate simply because the prisoner is
procedurally barred from obtaining relief under § 2255). To do so
would be to give plaintiffs a back-door escape from the effects of
their agreement to arbitrate and would be inconsistent with the strong
federal policy favoring arbitration. See Moses H. Cone, 460 U.S. at
24 (explaining that the Federal Arbitration Act reflects "a liberal fed-
eral policy favoring arbitration agreements"). We need not, however,
resolve this question at this point in the proceedings, because, as we
will explain below, the plaintiffs have failed to establish that their
claims are untimely under the one-year limitations provisions set forth
in the arbitration agreements.
Generally speaking, an antitrust claim arises and the statute of limi-
tations "begins to run when a defendant commits an act that injures
26 In Re: COTTON YARN ANTITRUST LITIGATION
a plaintiff’s business." Zenith Radio Corp. v. Hazeltine Research,
Inc., 401 U.S. 321, 338 (1971). "In the context of a continuing con-
spiracy to violate the antitrust laws, . . . this has usually been under-
stood to mean that each time a plaintiff is injured by an act of the
defendants a cause of action accrues to him to recover the damages
caused by that act and that, as to those damages, the statute of limita-
tions runs from the commission of the act." Id. Thus, in cases like this
one involving allegations of "a price-fixing conspiracy that brings
about a series of unlawfully high priced sales over a period of years,
each overt act that is part of the violation and that injures the plaintiff,
e.g., each sale to the plaintiff, starts the statutory period running
again." Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997) (internal
quotation marks omitted).
The complaint that consolidated the various individual actions
brought by the plaintiffs was filed in January 2005, but the district
court’s docket reveals that the individual complaints were filed in
March, April, May, and August of 2004. Under Klehr, then, the plain-
tiffs’ claims would be timely even under a one-year limitations period
so long as the plaintiffs made a purchase from the Defendants within
a year before the complaints were filed. For the plaintiffs to carry
their burden of showing that the terms of the arbitration agreement
would prevent them from effectively vindicating their statutory rights,
they should at least demonstrate that they made no purchases in the
year before the complaints were filed. The plaintiffs, however, have
made no effort to make such a showing. There is no factual record to
support their assertion that their claims might be time-barred, or even
an explanation of why they believe their claims might be barred.
Moreover, the record contains evidence of sales taking place as late
as November 2003 and January 2004, well within a year before the
complaints were filed. Thus, at least as to some of the plaintiffs, there
is evidence affirmatively demonstrating that a one-year statute of lim-
itations would not prevent them from proceeding on their antitrust
claims.
The plaintiffs’ contention that a one-year limitations period would
prevent them from proceeding on their antitrust claims also fails to
account for the doctrine of fraudulent concealment, which is read into
all federal statutes of limitations, including § 15b, see Holmberg v.
In Re: COTTON YARN ANTITRUST LITIGATION 27
Armbrecht, 327 U.S. 392, 397 (1946); Supermarket of Marlinton, Inc.
v. Meadow Gold Dairies, Inc., 71 F.3d 119, 122 (4th Cir. 1995).
The purpose of the fraudulent concealment tolling doctrine
is to prevent a defendant from concealing a fraud, or com-
mitting a fraud in a manner that it concealed itself until the
defendant could plead the statute of limitations to protect it.
Thus, pursuant to this doctrine, when the fraud has been
concealed or is of such a character as to conceal itself, and
the plaintiff is not negligent or guilty of laches, the limita-
tions period does not begin to run until the plaintiff discov-
ers the fraud.
Meadow Gold Dairies, 71 F.3d at 122 (citation, internal quotation
marks and alteration omitted).
The plaintiffs’ complaint alleges that the Defendants fraudulently
concealed their anti-competitive activities until February 11, 2004,
when a shareholder in Parkdale (the manufacturer that settled before
this appeal was filed) announced that Parkdale had participated in
activities with competitors that may have violated antitrust laws. As
noted above, the class action complaint was filed in January 2005 and
the individual complaints were filed in 2004. If the fraudulent con-
cealment doctrine applies to the contractually-established limitations
period,10 the plaintiffs’ claim would appear to be timely filed.
We need not and do not decide whether the doctrine of fraudulent
concealment applies in this case. The arbitration agreements provide
that "[a]ll issues relating to Statute of Limitations barring or prevent-
ing the commencement of proceedings are not arbitrable and shall be
determined by the Court and not the arbitrators." J.A. 202.11 Questions
10
See Stephan v. Goldinger, 325 F.3d 874, 877 (7th Cir. 2003) (con-
cluding that "[o]ne year . . . is not an unreasonably short time for bring-
ing a suit, at least given tolling doctrines that we assume . . . would be
read into a contractual limitations period just as they are into a statutory
one, unless negatived by clear language" (citations omitted)).
11
The quoted language comes from a Frontier arbitration agreement.
The relevant language in the Avondale contracts is largely identical. See
J.A. 268.
28 In Re: COTTON YARN ANTITRUST LITIGATION
about the timeliness of the action and the applicability of the doctrine
of fraudulent concealment will thus be determined by the district
court on remand. For purposes of our decision now, it suffices to say
that because it is far from certain that the one-year limitations period
will have any effect on the plaintiffs’ ability to prosecute their anti-
trust claims, the plaintiffs have not carried their burden of demonstrat-
ing that the terms of the arbitration agreement will prevent them from
effectively vindicating their statutory rights. See PacifiCare Health
Sys., Inc. v. Book, 538 U.S. 401, 406-07 (2003) (refusing to invalidate
arbitration agreement that precluded award of punitive damages,
which plaintiff contended was inconsistent with the treble damages
authorized by the RICO statute, because it was unclear whether the
arbitrator would interpret the arbitration to preclude an award of tre-
ble damages); Morrison, 317 F.3d at 673 n.16 (enforcing one-year
limitations provision of arbitration agreement because the plaintiff
"failed to show that the one-year limitations period in the agreement
unduly burdened her or would unduly burden any other claimant
wishing to assert claims arising from their employment").
On remand, the district court, after consideration of the principles
discussed above, must determine whether the plaintiffs’ claims were
timely filed. If the district court concludes that the claims were
timely, the court should stay the actions and order the plaintiffs to
proceed in arbitration. If the district court concludes that the claims
were not timely, the court must then determine, in light of the con-
cerns that we have identified above, see supra at page 25, whether
that fact renders the contractual limitations period unenforceable.
Finally, if the district court concludes that the one-year limitations
period bars the plaintiffs’ claims and is unenforceable, the district
court must then consider whether severance of the limitations provi-
sions, rather than invalidation of the arbitration agreements, would be
the appropriate remedy. See, e.g., Terminix Int’l Co. v. Palmer Ranch
Ltd. P’ship, 432 F.3d 1327, 1331 (11th Cir. 2005) ("If all the provi-
sions of the arbitration clause are enforceable, then the court must
compel arbitration according to the terms of the agreement. If, how-
ever, some or all of its provisions are not enforceable, then the court
must determine whether the unenforceable provisions are sever-
able."); see also Kristian, 446 F.3d at 64 (concluding that various pro-
visions in an arbitration agreement would prevent antitrust claimants
from effectively vindicating their statutory rights, but severing the
In Re: COTTON YARN ANTITRUST LITIGATION 29
offending provisions and compelling arbitration); Hadnot, 344 F.3d at
478 (severing unenforceable restriction on punitive damages and
ordering parties to proceed to arbitration); Spinetti v. Service Corp.
Int’l, 324 F.3d 212, 219-23 (3d Cir. 2003) (concluding that arbitration
agreement provisions regarding attorney’s fees and the payment of
the costs of arbitration were unenforceable, but severing those terms
and requiring the parties to proceed to arbitration); Gannon v. Circuit
City Stores, Inc., 262 F.3d 677, 683 (8th Cir. 2001) (severing unen-
forceable ban on the recovery of punitive damages from the arbitra-
tion agreement and compelling arbitration).
III.
To summarize, we conclude that arbitration is a usage of the trade
in the textile industry and that an agreement to arbitrate therefore
became a term of the Frontier contracts without the need for analysis
of the battle of the forms under N.C. Gen. Stat. Ann. § 25-2-207. We
conclude that the terms of the arbitration agreements prohibiting join-
der of plaintiffs or defendants do not prevent the plaintiffs from effec-
tively vindicating their statutory rights. And while the requirement of
proceeding separately perhaps in some case could be prohibitively
expensive, the plaintiffs in this case have failed to carry their burden
of demonstrating that the costs of separate arbitration proceedings
would be so high that they could not proceed with their claims. We
also conclude that the Clayton Act’s four-year limitations period is
not a substantive portion of the federal antitrust laws and that the fed-
eral limitations period may be shortened by contract. The one-year
limitation period established in the arbitration agreements is not
unreasonably short, and the plaintiffs have failed to demonstrate that
the one-year limitation period will prevent them from pursuing their
antitrust claims. Accordingly, we hereby vacate the district court’s
judgment and we remand to the district court for further proceedings
consistent with this opinion.12
VACATED AND REMANDED
12
In addition to seeking to compel arbitration, the manufacturers also
requested a stay pending arbitration of the claims of two plaintiffs with
30 In Re: COTTON YARN ANTITRUST LITIGATION
WILLIAMS, Chief Judge, concurring in part and dissenting in part:
I fully concur in Part II of the majority opinion (the section
addressing the enforceabilty of the arbitration clauses). I respectfully
disagree, however, with the analysis and conclusion in Part I (the sec-
tion addressing whether all of the parties to the Frontier transactions
have contracts containing binding arbitration agreements). I have two
primary points of contention in this regard. First, I believe that this
case is indistinguishable from Supak & Sons Mfg. Co. v. Pervel
Indus., 593 F.2d 135 (4th Cir. 1979). Second, I do not believe that it
is possible to distinguish Supak by applying N.C. Gen. Stat. Ann.
§ 25-2-207 (2005) (North Carolina’s version of U.C.C. § 2-207) to
each individual term of the arbitration clauses at issue, rather than
addressing the arbitration clause as a whole.
I.
The district court, applying § 25-2-207, found that the arbitration
clauses contained in the written confirmations sent by Frontier did not
become part of the contracts between Frontier and those plaintiffs that
did not sign and return the confirmation forms. This finding reflected
the district court’s belief that the North Carolina Supreme Court’s
decision in Frances Hosiery Mills, Inc. v. Burlington Indust., Inc.,
204 S.E.2d 834, 842 (N.C. 1974), and our decision in Supak were
controlling. Because the case before us is indistinguishable from
Frances Hosiery and Supak, I believe the district court did not err in
following our precedent.
whom the manufacturers had no dealings during the period alleged in the
class action. Given its conclusion that arbitration was not required, the
district court did not consider the motion to stay. On appeal, the manu-
facturers contend that the district court erred by denying the motion. We
decline to consider the argument at this juncture. A decision to stay
related claims pending arbitration is a matter entrusted to the discretion
of the district court. See Moses H. Cone Mem. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 20 n.23 (1983) ("In some cases . . . it may be advis-
able to stay litigation among the nonarbitrating parties pending the out-
come of the arbitration. That decision is one left to the district court . . .
as a matter of its discretion to control its docket."). The district court on
remand should reconsider whether a stay is warranted.
In Re: COTTON YARN ANTITRUST LITIGATION 31
Frances Hosiery and Supak established binding precedent govern-
ing the construction of § 25-2-207 in the context of contractual
arrangements virtually identical to those at issue in this case. In Fran-
ces Hosiery, the parties formed an oral contract for the sale of yarn,
and when the seller shipped yarn to the buyer, it included invoices
purporting to be "contracts" and containing arbitration clauses. 204
S.E.2d at 836-37, 841. The North Carolina Supreme Court determined
that the invoices were confirmations within the meaning of § 25-2-
207 and ultimately held that the arbitration clause constituted a pro-
posed additional term that materially altered the contract. Id. at 842-
43. In Supak, we applied the holding of Frances Hosiery to an oral
contract for the sale of fabric followed by a written confirmation con-
taining an arbitration clause. 593 F.2d at 136. In so doing, we
explained that Frances Hosiery established a rule that "the addition
of an arbitration clause constitutes a per se material alteration of the
contract," and as a result, the arbitration clause in the confirmation
form did not become part of the parties’ contract. Id. at 136.1*
*In Supak & Sons Mfg. Co. v. Pervel Indus., 593 F.2d 135 (4th Cir.
1979), we also rejected the argument that Frances Hosiery’s per se rule
was preempted by the Federal Arbitration Act (FAA) because it served
to restrict the validity and enforceability of arbitration agreements. See
id. at 137 (stating that "U.C.C. § 2-207, as judicially construed in . . .
North Carolina" does not "restrict the validity or enforceability of arbitra-
tion agreements,[ ] but is rather a general rule of contract formation")
(footnote omitted). Frontier argues that Supak was wrongly decided in
this regard and was impliedly overruled by Saturn Distrib. Corp. v. Wil-
liams, 905 F.2d 719 (4th Cir. 1990). Saturn Distrib. Corp.’s recognition
that the Federal Arbitration Act (FAA) "preempt[s] state rules of contract
formation which single out arbitration clauses and unreasonably burden
the ability to form arbitration agreements," id. at 723, does not call the
into question Supak’s validity, as Supak also acknowledged that the FAA
"is preemptive of conflicting state laws which restrict the validity or
enforceability of arbitration agreements," Supak, 593 F.2d at 137. In Sat-
urn Distrib. Corp., we distinguished the Virginia statute held to be pre-
empted by the FAA from "the general rule of contract formation" at issue
in Supak, and did not question Supak’s validity. 905 F.2d at 723. More-
over, even if there were tension between the two decisions, one panel of
this court cannot overrule another panel. See McMellon v. United States,
387 F.3d 329, 334 (4th Cir. 2004) (en banc) ("[W]e conclude that when
there is an irreconcilable conflict between opinions issued by three-judge
panels of this court, the first case to decide the issue is the one that must
be followed, unless and until it is overruled by this court sitting en banc
or by the Supreme Court.").
32 In Re: COTTON YARN ANTITRUST LITIGATION
Supak addressed the application of the same statute at issue here —
§ 25-2-207 — to a factual scenario indistinguishable from that pre-
sented by this case — an oral contract formed by merchants in the
textile industry that was followed by a written confirmation contain-
ing an arbitration clause. In Supak, we did not deem it necessary to
inquire into the particular facts of the case at hand in considering
whether the arbitration clause at issue represented a material alter-
ation. Because we interpreted Frances Hosiery as establishing a per
se rule, we simply applied that rule to the arbitration clause at issue.
I am unpersuaded that we can distinguish Supak by virtue of its
silence concerning whether arbitration is a usage of trade in the textile
industry. The majority opinion asserts that we need not follow Supak
because "usage of trade is a question of fact that must be proved by
the party asserting it," and Supak’s silence on the usage of trade issue
therefore "cannot be viewed as rejection of the contention that arbitra-
tion is a usage of trade in the textile industry." Ante at 11 n.4. The
issue, however, is not whether Supak rejected the idea that arbitration
could be a trade usage in the textile industry. The question is whether
Supak precludes us from conducting an inquiry into the facts of each
case to determine whether the arbitration clause at issue is a material
alteration, rather than simply applying Frances Hosiery’s per se rule.
Compare N&D Fashions, Inc. v. DHJ Indust., Inc., 548 F.2d 722, 726
& n.7 (8th Cir. 1976) (stating that although cases such as Frances
Hosiery have held that an arbitration clause materially alters a con-
tract under UCC § 2-207, "the better reasoned position is that the
question whether an additional term in a written confirmation consti-
tutes a ‘material alteration’ is a question of fact to be resolved by the
circumstances of each particular case"). Supak did not attempt to limit
Frances Hosiery to its particular facts, but rather treated the decision
as establishing a per se rule. A per se rule applies "without reference
to additional facts." See Black’s Law Dictionary (8th ed. 2004) (defin-
ing "per se" as "[o]f, in, or by itself; standing alone, without reference
to additional facts"). Accordingly, I read Supak differently than the
majority. I therefore believe that the district court did not err in apply-
ing Frances Hosiery’s per se rule rather than resolving the factual
question of whether Frontier had established a usage of trade.
II.
I do not believe that we can distinguish Supak by asserting that
because arbitration is a trade usage in the textile industry, the portion
In Re: COTTON YARN ANTITRUST LITIGATION 33
of the arbitration clause requiring the parties to submit their disputes
to arbitration was not an "additional term" within the meaning of
§ 25-2-207(2) for two reasons. First, terms consistent with a trade
usage may nevertheless constitute "additional terms" for purposes of
§ 25-2-207(2). Second, the existence of a trade usage is a question of
fact that the district court has not resolved.
A.
Under § 25-2-207(2), "additional terms [in a written confirmation]
are to be construed as proposals for addition to the contract." N.C.
Gen. Stat. § 25-2-207(2). Between merchants, the additional terms
become part of the contract unless "(a) the offer expressly limits
acceptance to the terms of the offer; (b) they materially alter [the con-
tract]; or (c) notification of objection to them has already been given
or is given within a reasonable time after notice of them is received."
§ 25-2-207(2)(a)-(c).
The official comments to § 25-2-207 suggest that terms consistent
with a trade usage may nevertheless be "additional" for purposes of
§ 25-2-207(2). Comment 5 lists examples of clauses that "involve no
element of unreasonable surprise" and therefore should not be consid-
ered material alterations. Among these examples are "a clause provid-
ing for interest on overdue invoices or fixing the seller’s standard
credit terms where they are within the range of trade practice and do
not limit any credit bargained for" and "a clause limiting the right of
rejection for defects which fall within the customary trade tolerances
for acceptance ‘with adjustment’ or otherwise limiting remedy in a
reasonable manner." § 25-2-207 cmt. 5 (emphasis added). Thus, com-
ment 5 suggests that the drafters of § 25-2-207(2) contemplated that
terms consistent with trade usage might represent additional terms
that would be screened for materiality. Moreover, comment 1 indi-
cates that § 25-2-207 "is intended to deal with two typical situations,"
one of which "is where an agreement has been reached either orally
or by informal correspondence between the parties and is followed by
one or both of the parties sending formal memoranda embodying the
terms so far as agreed upon and adding terms not discussed." § 25-2-
207 cmt. 1 (emphasis added). Thus, comment 1 suggests that the
terms that should be considered "additional" are those that the parties
have not discussed.
34 In Re: COTTON YARN ANTITRUST LITIGATION
At least two of our sister circuits, in interpreting other states’ ver-
sions of U.C.C. § 2-207, have held that terms consistent with a trade
usage or course of dealing may represent "additional terms" but do
not materially alter a contract. In Aceros Prefabricados, S.A. v. Trade-
Arbed, Inc., 282 F.3d 92 (2d Cir. 2002), the Second Circuit noted that
the official comments to New York’s version of UCC § 2-207 "recog-
nize the importance of trade practices to the material alteration analy-
sis," because the examples of proposed terms that do not constitute
material alterations contained in the comments include terms that are
"within customary limits," or "within the range of trade practices,"
while "the common thread among the examples [of material alter-
ations] provided is that they all constitute provisions that significantly
deviate from industry norms." Id. at 101-02 (internal quotation marks
and alteration omitted). There, the Second Circuit relied in part on
"evidence that arbitration is standard practice in the steel industry" to
conclude that an arbitration clause in a confirmation form was not a
material alteration and therefore became part of the parties’ contract.
Id. at 102. Similarly, in Schulze & Burch Biscuit Co. v. Tree Top, Inc.,
831 F.2d 709 (7th Cir. 1987), the Seventh Circuit noted that Illinois’s
version of U.C.C. § 2-207 is followed by official comments suggest-
ing that proposed terms consistent with trade practice or custom do
not materially alter a contract. Id. at 714. In that case, Tree Top was
seeking to enforce an arbitration clause contained in a written confir-
mation. The Seventh Circuit held that the arbitration clause did not
constitute a material alteration of the parties’ contract, because
although Tree Top did not offer proof of a trade usage, it did prove
a course of dealing between the parties that should have put Schulze
on notice that the confirmation was likely to contain such a clause. Id.
at 714-15.
In contrast, there is a dearth of precedent supporting the view
adopted in the majority opinion. I am aware of no other case in which
the reviewing court has fragmented an arbitration clause in order to
treat the portion governing the obligation to arbitrate differently than
the portion setting forth the terms and conditions under which arbitra-
tion would proceed. Notably, none of the cases cited by the majority
in support of the proposition that arbitration is a trade usage have con-
cluded that a trade usage cannot represent an additional term for pur-
poses of U.C.C. § 2-207. To the contrary, those cases conform to the
view that arbitration clauses contained in written confirmations of
In Re: COTTON YARN ANTITRUST LITIGATION 35
oral agreements between merchants in the textile industry may repre-
sent additional terms, but do not materially alter a contract. See, e.g.,
Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d
289, 296-97 (2d Cir. 1999) (textile buyer was bound by an arbitration
clause in a written confirmation because he failed to object to its addi-
tion to the contract).
To be sure, some commenters have described the official com-
ments to U.C.C. § 2-207 as "poor from [an] analytical view," because
"[i]f a term stated on a responsive document merely iterates what the
law would otherwise impose, it is arguably not an ‘additional’ term."
Duesenberg & King, Sales and Bulk Transfers § 3.03 (Bender’s
U.C.C. Service 2006) (stating that "[t]his would be true whether the
term were implied by operation of a Code section, through custom
and usage, prior course of dealing, or any other means by which a
matter on which the parties are silent nonetheless becomes a part of
their agreement"). Nevertheless, the official commentary to § 25-2-
207 indicates that the statute’s drafters meant the phrase "additional
terms" to include all "terms not discussed" during the formation of an
oral agreement, regardless of whether those terms in fact alter the
agreement. Accordingly, I would follow the reasoning of our sister
circuits to conclude that terms consistent with a trade usage may con-
stitute "additional terms" within the meaning of § 25-2-207(2), but
generally do not materially alter a contract.
B.
Even assuming that we could conclude that terms in keeping with
a trade usage are not "additional terms" for purposes of § 25-2-207(2),
I believe that it would be inappropriate for us to hold that arbitration
is a trade usage in the textile industry when the district court has not
ruled on this factual issue. See N.C. Gen. Stat. Ann. § 25-1-205(2)
(2006) (stating that the existence and scope of a trade usage "are to
be proved as facts" and if it "is established that such a usage is
embodied in a written trade code or similar writing, the interpretation
of the writing is a question for the court"). To be sure, the "Yarn
Rules" and a number of cases indicate that, in general, arbitration is
commonly used in the textile industry. In North Carolina, however,
Frances Hosiery has been the law for over thirty years. Thus, it seems
that the relevant trade usage in North Carolina could well be that par-
36 In Re: COTTON YARN ANTITRUST LITIGATION
ties enter into arbitration agreements by signing and returning written
confirmations. Many of the plaintiffs in this case assented to Fron-
tier’s arbitration agreements in precisely that manner. Also, the "Yarn
Rules" suggest that merchants in the textile industry should expect to
be bound by arbitration clauses contained in confirmation forms, but
might not necessarily expect to be bound to arbitrate in the absence
of such a writing. (See J.A. at 542-53 (excerpt from the "Yarn Rules"
stating that "[p]arties to the sale and purchase of yarns are members
of the textile industry, which has, for over, fifty years, settled disputes
by arbitration in accordance with the terms and conditions of con-
tracts which have tended to become standard . . ." (emphasis
added)).) Because the district court has not addressed this issue, we
should not take it upon ourselves to find that "Frontier has met its bur-
den of proving that arbitration is a usage of trade . . . ." Ante at 9.
Rather, we should allow the district court to make findings of fact on
remand.
C.
Finally, another issue prevents us from resolving this case by rely-
ing on the UCC’s "gap-filler" provision, codified in North Carolina
as N.C. Gen. Stat. Ann. § 25-1-201 (2006). One might argue that after
concluding that, under Supak, the arbitration clauses contained in the
written confirmations constituted material alterations that did not
become part of the parties’ agreement, the district court should have
turned to § 25-1-201 to fill the gap left by the oral contract’s silence
on the question of arbitration. See N.C. Gen. Stat. Ann. § 25-1-
201(b)(3) (2006) (defining an "agreement" as "the bargain of the par-
ties in fact, as found in their language or inferred from other circum-
stances, including course of performance, course of dealing, or usage
of trade").
Resolving this question after determining that the arbitration
clauses in the written confirmations did not become part of the con-
tracts, however, would be purely an academic exercise. The issue
before this court is whether the district court erred in denying Fron-
tier’s motion to compel arbitration. To compel arbitration under the
Federal Arbitration Act (FAA), a litigant must demonstrate, inter alia,
"a written agreement that includes an arbitration provision which pur-
ports to cover the dispute." Adkins v. Labor Ready, Inc., 303 F.3d
In Re: COTTON YARN ANTITRUST LITIGATION 37
496, 500-01 (4th Cir. 2002) (emphasis added) (internal quotation
marks omitted). Thus, Frontier cannot compel arbitration based on an
implied term in an oral contract. It must proffer a written agreement
containing an arbitration clause that purports to cover its dispute with
the plaintiffs. The writings that Frontier provided to satisfy this
requirement were the confirmations that it sent to the plaintiffs.
Accordingly, Frontier’s ability to compel arbitration depends on
whether or not the arbitration clauses in the written confirmations
became part of its contracts with the plaintiffs.
III.
In sum, I fully concur in Part II of the majority opinion. I therefore
concur in the judgment only with regard to those plaintiffs that either
signed and returned Frontier’s confirmation forms or had contracts
governed by South Carolina law. I respectfully dissent from Part I,
however, because I believe that this case is controlled by our decision
in Supak. Accordingly, I would hold that because the North Carolina
arbitration agreements in Frontier’s confirmation forms did not
become part of the contracts with those plaintiffs that did not sign and
return the forms, the district court did not err in denying Frontier’s
motion to compel arbitration as to those plaintiffs.
JOHNSTON, District Judge, concurring in part and dissenting in part:
I concur in Part I, Part II(A), and Part II(B)(1) of the majority opin-
ion. I respectfully dissent, however, from Part II(B)(2), Part II(B)(3),
and the result that this case should be remanded for further proceed-
ings in the district court, as described in the majority opinion.
I.
The majority opinion acknowledges that federal statutory claims
are subject to arbitration if the litigants can effectively vindicate their
substantive statutory claims in the arbitral forum. The majority con-
cludes that the Antitrust Act’s four-year limitations period, 15 U.S.C.
§ 15b, is not a "substantive right" and that the arbitration clause’s lim-
itation of this period to one year does not, per se, prevent the plain-
tiffs from "effectively vindicating their statutory rights."1 The
1
Parts II(B)(2) & (3) of the majority opinion. In Part II(B)(1) of the
opinion, the majority concludes that the one year limitation period is not
unreasonably short.
38 In Re: COTTON YARN ANTITRUST LITIGATION
majority then directs the district court, on remand, to examine
whether the plaintiff’s claims are entirely barred by operation of the
one year limitations provision, taking into account the doctrine of
fraudulent concealment. If the plaintiffs’ claims are entirely barred,
then the district must consider severance of the limitations provision,
in addition to invalidation of the arbitration agreement.
I respectfully disagree with Part II(B)(2) and Part II(B)(3) of the
opinion and the majority’s directions to the district court upon
remand. I would hold that the four-year limitations period contained
in 15 U.S.C. § 15b is a non-waivable substantive right, and that the
purported waiver of this right would, in this case, prevent the plain-
tiffs from effectively vindicating their statutory rights. I would further
conclude that severance of this provision is the appropriate remedy,
and remand the case to the district court to order that the case proceed
to arbitration.
II.
The plaintiffs allege that the defendants engaged in a price fixing
conspiracy from the beginning of 1999 through February of 2004,
when the plaintiffs first became aware of the alleged anti-competitive
activity. Based on these allegations, the plaintiffs brought Sherman
Act claims against the defendants in 2004.2
The Sherman Act, 15 U.S.C. § 1, et seq., embodies an important,
and now time-tested, public policy to prohibit market conduct which
unfairly or unduly restrains competition. As Justice Black wrote more
than half a century after its passage:
The Sherman Act was designed to be a comprehensive char-
ter of economic liberty aimed at preserving free and unfet-
tered competition as the rule of trade. It rests on the premise
that the unrestrained interaction of competitive forces will
yield the best allocation of our economic resources, the low-
est prices, the highest quality and the greatest material prog-
ress, while at the same time providing an environment
2
As noted in the majority opinion, various plaintiffs filed actions in
March, April, May, and August of 2004.
In Re: COTTON YARN ANTITRUST LITIGATION 39
conducive to the preservation of our democratic political
and social institutions.
N. Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958). More recently,
Justice Stevens has stated:
The Sherman Act reflects a legislative judgment that ulti-
mately competition will produce not only lower prices, but
also better goods and services. . . . The assumption that
competition is the best method of allocating resources in a
free market recognizes that all elements of a bar-
gain—quality, service, safety, and durability—and not just
the immediate cost, are favorably affected by the free oppor-
tunity to select among alternative offers.
Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695
(1978).
"Ordinarily, a cause of action accrues under the antitrust laws when
the plaintiff suffers an injury to his business." Sanderson v. Spectrum
Labs, Inc., 227 F. Supp. 2d 1001, 1011 (N.D. Ind. 2000) (citing
Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338
(1971)). Generally, there is a four-year limitations period for Sherman
Act claims. 15 U.S.C. § 15b. The arbitration agreements in this case
provide that any claim must be brought within one year "after the
claimed breach occurs" and "[t]he failure to institute arbitration pro-
ceedings within this one year period shall constitute an absolute bar
to [those claims.]"
Application of the one year claims limitation period has two related
effects: (1) limiting the defendants’ exposure for any antitrust claim
to one year from the date of the alleged anti-competitive behavior,
and (2) limiting the plaintiffs’ possible recovery to a one year period.
Thus, while the Antitrust Act effectively requires a four year look-
back period, the contract at issue would only allow the arbitrator to
consider one year of anti-competitive behavior. The plaintiffs assert
that they would be deprived of a substantive right under the statute
— the right to recover damages for three out of the four years of
alleged anti-competitive activity.
40 In Re: COTTON YARN ANTITRUST LITIGATION
III.
Generally, arbitration agreements are enforceable "so long as the
prospective litigant effectively may vindicate its statutory cause of
action in the arbitral forum, [and] the statute will continue to serve
both its remedial and deterrent function." Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637. In other words, an
arbitration agreement cannot operate to waive substantive rights pro-
vided by statute. Id. at 628 ("By agreeing to arbitrate a statutory
claim, a party does not forgo the substantive rights afforded by the
statute; it only submits to their resolution in an arbitral, rather than a
judicial, forum."). In this respect, "the arbitrability of [federal statu-
tory claims] rests on the assumption that the arbitration clause permits
relief equivalent to court remedies." Paladino v. Avnet Computer
Techs., Inc., 134 F.3d 1054, 1062 (11th Cir. 1998). Although the
Supreme Court has never ruled directly on whether an arbitration
clause that does not permit relief equivalent to court remedies might
nevertheless be enforceable, it has indicated a willingness to strike
down arbitration agreements that have the effect of depriving litigants
of remedies prescribed by the antitrust statutes. In Mitsubishi, the
Court noted that in the event that an arbitration agreement’s choice-
of-forum and choice-of-law provisions operated, in effect, as "a pro-
spective waiver of a party’s right to pursue statutory remedies for
antitrust violations, [the Court] would have little hesitation in con-
demning the agreement as against public policy." Id. at 637 n.19.
Applying these principles, our sister circuits have consistently
invalidated arbitration agreements that proscribe the arbitral award of
damages guaranteed by statute. See, e.g., Hadnot v. Bay, Ltd., 344
F.3d 474, 478 & n.14 (5th Cir. 2003) (noting that an arbitration clause
that bans punitive damages is unenforceable in the context of a Title
VII claim because Title VII provides for statutory punitive damages);
Paladino, 134 F.3d at 1062 (11th Cir. 1998) (holding an arbitration
agreement unenforceable because it proscribed an arbitral award of
Title VII damages). The First Circuit recently relied on Mitsubishi’s
condemnation of arbitration agreements that effect a prospective
waiver of plaintiff’s right to pursue statutory remedies, as well as the
mandatory language in the Clayton Act provision providing for treble
damages, 15 U.S.C. § 15(a), to conclude that "the award of treble
damages under the federal antitrust statutes cannot be waived." Kris-
In Re: COTTON YARN ANTITRUST LITIGATION 41
tian v. Comcast Corp., 446 F.3d 25, 48 (1st Cir. 2006) (holding
invalid an arbitration clause that purported to waive the availability
of treble damages under the federal antitrust statutes).3 The issue in
this case differs somewhat from that confronted by the Kristian court
in that enforcement of the arbitration agreement’s limitations provi-
sion would not proscribe the award of a particular type of damages,
but it would instead affect the amount of the award. The practical
effect of the provision, however, is the same. If the contractual limita-
tions provision is enforced, the plaintiffs will not be permitted to
recover treble damages for the injury sustained over the course of the
statutory four-year period. See 15 U.S.C. § 15(a) (providing that a
party "shall recover threefold the damages by him sustained").
I would hold that the enforcement of the arbitration clause, which
facially operates to strip the plaintiffs of seventy-five percent of the
damages to which they would otherwise be entitled under the antitrust
statutes, would defeat the statute’s remedial and deterrent purposes.
Paladino, 134 F.3d at 1062 ("When an arbitration clause has provi-
sions that defeat the remedial purpose of the statute, . . . the arbitra-
tion clause is not enforceable.") The dramatic reduction in damages
would likely fall short of fully compensating the plaintiffs and allow
the defendants the benefit of at least a portion of their alleged illegal
activity.4
3
In Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006), the plain-
tiffs argued that a one-year limitations provision in an arbitration clause
was invalid as applied to their antitrust claims "on the basis of [the]
direct conflict" between the contractual provision and the four year limi-
tations period provided by the Clayton Act. Id. at 43. The First Circuit
concluded that, under its precedent, a dispute over a statute of limitations
was "the sort of procedural prerequisite that is presumed to be for the
arbitrator," not the court. Id. (internal quotation marks omitted). In the
case before us, the specific language of the arbitration agreements pro-
vides that a court, not an arbitrator, must decide statute of limitations
issues. The agreements provide that "‘[a]ll issues relating to Statute of
Limitations barring or preventing the commencement of proceedings are
not arbitrable and shall be determined by the Court and not the arbitrators
who shall have no power or jurisdiction to determine such issues.’" In re
Cotton Yarn Antitrust Litig., 406 F. Supp. 2d 585, 603 (M.D.N.C. 2005).
4
I decline to address whether the doctrine of fraudulent concealment
would have any effect on my analysis of this issue because the parties
arguably did not raise this issue, it has certainly not been developed by
the parties in this appeal, and it was not considered at the district court
level.
42 In Re: COTTON YARN ANTITRUST LITIGATION
IV.
As noted in the majority opinion, the court must consider two rem-
edies after finding an unenforceable term in an arbitration agreement:
severance of the offending term and invalidation of the entire arbitra-
tion agreement. The limitations period, while of great importance to
the defendants, is but one part of the arbitration agreement; it cannot
be viewed as integral to or the primary object of the arbitration agree-
ment. In my view then, the court should sever the offending limita-
tions provisions from the otherwise enforceable arbitration
agreements. See Hadnot, 344 F.3d at 478 ("The purpose of the arbi-
tration provision is to settle any and all disputes arising out of the
employment relationship in an arbitral forum rather than a court of
law. Even with its unlawful limitation on the types or permissible
damage awards lifted, so that the decision maker is free to address
punitive damages, the arbitration clause remains capable of achieving
this goal. In fact, the lifting of that illegal restriction enhances the
ability of the arbitration provision to function fully and adequately
under the law."). I believe that the limitations provisions can and
should be severed from the arbitration agreements, and the case
should be remanded to the district court with directions to send it to
arbitration. Immediate severance of this single provision of the overall
arbitration agreement is a purely legal matter which will allow the
parties to avoid further time and resource-intensive litigation of these
threshold matters, and allow them to move toward a resolution of the
substantive issues of these cases.
I therefore respectfully dissent from Parts II(B)(2) and II(B)(3) of
the majority opinion.