[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
FEBRUARY 22, 2008
No. 06-16352 THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 06-60753-CV-DMM
WORLD RENTALS AND SALES, LLC,
a Florida limited-liability company,
CRUZ R. RODRIGUEZ, et al.,
Plaintiffs-Counter-
Defendants-Appellants,
versus
VOLVO CONSTRUCTION EQUIPMENT RENTS, INC.,
a Delaware corporation,
Defendant-Appellee,
VOLVO COMMERCIAL FINANCE LLC,
a Delaware limited-liability company,
Defendant-Counter-
Claimant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(February 22, 2008)
Before TJOFLAT, MARCUS and WILSON, Circuit Judges.
MARCUS, Circuit Judge:
In this appeal, we address under what circumstances a party may be
compelled to arbitrate an agreement it did not sign. Appellants World Rentals and
Sales, LLC (“World Rentals”), Cruz R. Rodriguez, Cruz R. Rodriguez General
Contractors, Inc., and Cruz R. Rodriguez General Contractor, LLC (collectively the
“World Parties”), advance several arguments for why the appellee Volvo
Commercial Finance, LLC (“Volvo Finance”) should be compelled to arbitrate
under an agreement signed only by one of its affiliates, Volvo Construction
Equipment Rents, Inc. (“Volvo Rents”). After thorough review, we affirm the
district court’s denial of the World Parties’ motion to compel arbitration.
I.
Although the parties lock horns over the merits of their underlying claims,
the facts essential to this appeal are undisputed. Volvo Rents sells and leases
Volvo construction equipment through franchisees. Beginning in March 2003,
Volvo Rents entered into three agreements - - a Development Agreement and two
Franchise Agreements (collectively the “Franchise Agreements”) - - with World
Rentals.1 The Franchise Agreements contain the following arbitration provisions:
1
Specifically, on March 15, 2003, Volvo Rents and World Rentals signed a Development
Agreement in which Volvo Rents granted the right and World Rentals accepted the obligation
2
[A]ll disputes, claims, controversies or causes of actions arising
between Franchisee and Franchisor shall be finally resolved by
arbitration pursuant to the then-prevailing Commerical Rules of the
American Arbitration Association (“AAA”). . . . The award of the
arbitrator shall be the sole and exclusive remedy between Franchisor
and Franchisee regarding any claims, counterclaims, cross-claims,
issues or accountings (“Claims”) presented or pled to the arbitrator . . . .
Doc. 33 Ex. A2 § 24.5.2 Notably, the agreements also expressly state that the term
“Franchisor” refers “only” to Volvo Rents, “and not [Volvo Rents’] parents or
affiliates[.]” Doc. 33 Ex. A1 § 16.4 (Development Agreement); Doc. 33 Ex. A2 §
25.4 (first Franchise Agreement); Doc. 33 Ex. A3 § 25.4 (second Franchise
Agreement).
World Rentals obtained financing for its franchise from Volvo Finance, an
affiliate of Volvo Rents. The financing arrangement between World Rentals and
Volvo Finance is embodied in fifteen documents, which we refer to as the “Loan
Documents.” The Loan Documents list as events of default, among others, (1) the
failure to make timely payments on the outstanding loans, and (2) default or breach
of the Franchise Agreements by World Rentals. In September 2004, Cruz R.
“to establish and operate” a Volvo Rents franchise in South Florida. Doc. 33 Ex. A1 § 1.1. That
same day, Volvo Rents and World Rentals signed a Franchise Agreement that allowed World
Rentals to use Volvo Rents’ proprietary marks, trade secrets, and other intellectual property.
Volvo Rents and World Rentals entered into a second Franchise Agreement on July 3, 2004.
2
Taking our cue from the parties, we have quoted the arbitration clause in the March 15,
2003 Franchise Agreement. The arbitration clause in the second Franchise Agreement has
slightly different language, but the parties assign no significance to the differences, nor can we
discern any.
3
Rodriguez, Cruz R. Rodriguez General Contractor, Inc., and Cruz R. Rodriguez
General Contractor, LLC executed guaranty and subordination agreements that
guaranteed all of World Rentals’ obligations under the Loan Documents.
Neither the Loan Documents nor the guarantees contains an arbitration
clause. But two of the Loan Documents - - the Working Capital Facility
Agreement, dated July 15, 2003, and the Amended Rental Inventory Financing
Agreement, dated September 24, 2004 - - contain the following incorporation
provision:
All schedules, exhibits, and other documents attached to or referred
[sic] in this Agreement now or at any time hereafter are hereby
incorporated in this Agreement by this reference in their entirety as if
fully restated in this Agreement.
Doc. 4 Ex. C § 24(h); Doc. 4 Ex. E § 18(m).
For reasons disputed by the parties and not relevant here, World Rentals’
franchise business quickly deteriorated. By early 2005, World Rentals stopped
making principal payments to Volvo Finance, which alleges that it refrained from
declaring a default for over a year while World Rentals attempted to sell its Volvo
Rents franchise. In May 2006, Volvo Finance learned that a $24,000 interest
payment from World Rentals had been returned unpaid.
On May 30, 2006, facing imminent legal action by Volvo Finance, the
World Parties sued Volvo Rents and Volvo Finance in the United States District
4
Court for the Southern District of Florida. Asserting various contract and tort
claims, the complaint essentially alleged that Volvo Rents and Volvo Finance
made fraudulent representations that induced the World Parties to sign the
Franchise Agreements, Loan Documents, and guaranty agreements. Volvo
Finance promptly filed counterclaims against the World Parties for, among other
things, breach of the Loan Documents. Volvo Finance alleged as the event of
default that World Rentals failed to make required payments under the Loan
Documents. Volvo Finance did not rely on any breach of the Franchise
Agreements. On July 11, the World Parties amended their complaint to add
additional claims and a request for declarations that (1) the arbitration provisions in
the Franchise Agreements were unenforceable, and that (2) both Volvo entities’
right to invoke those arbitration provisions had been waived by Volvo Finance’s
participation in the litigation.
On August 2, Volvo Rents moved to stay the World Parties’ claims against it
so that their dispute could be arbitrated under the arbitration provisions contained
in the Franchise Agreements. Volvo Finance, on the other hand, sought dismissal,
or in the alternative, summary judgment on the claims filed against it. The World
Parties then repudiated their amended complaint by (1) agreeing that the arbitration
provision was enforceable, and (2) cross-moving to stay all claims and compel
5
arbitration of the entire dispute, including the claims filed by and against Volvo
Finance. The district court initially granted the World Parties’ cross-motion and
ordered arbitration of the entire dispute, but reversed course on reconsideration,
concluding that Volvo Finance could not be compelled to arbitrate. Thus, under
the district court’s orders, the dispute between the World Parties and Volvo Rents
would proceed to arbitration, but the dispute between the World Parties and Volvo
Finance would be litigated in federal court.
The World Parties timely appealed, seeking an order compelling Volvo
Finance to arbitrate. We have jurisdiction over this interlocutory appeal under
Title 9 U.S.C. § 16(a)(1)(A) and (B).
II.
Under federal law, arbitration is “a matter of consent, not coercion.” Volt
Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479
(1989). Accordingly, a party ordinarily will not be “compelled to arbitrate unless
that party has entered into an agreement to do so.” Employers Ins. of Wausau v.
Bright Metal Specialties, 251 F.3d 1316, 1322 (11th Cir. 2001). We have
recognized, however, that “common law principles of contract and agency law”
allow a signatory (such as World Rentals) to bind a non-signatory (such as Volvo
Finance) to an arbitration agreement under any of five distinct theories: “(1)
6
incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/alter-ego;
and (5) estoppel.” Id. The World Parties rely primarily on incorporation by
reference, but they also argue that Volvo Finance can be compelled to arbitrate
under theories of agency, veil-piercing, and estoppel. None of these arguments is
persuasive.
A.
Taking the World Parties’ primary argument first, they say that the
incorporation provisions contained in two of the fifteen Loan Documents
incorporate by reference the arbitration provisions contained in the Franchise
Agreements, and thus Volvo Finance can be compelled to arbitrate. This argument
actually raises two issues. First, do the incorporation provisions in the Loan
Documents incorporate the arbitration clauses in the Franchise Agreements? And
second, if so, does the dispute between the World Parties and Volvo Finance fall
within the terms of those arbitration provisions? Because these inquiries turn on
the meaning of contractual language and the district court did not consider any
extrinsic evidence to determine the parties’ intent, we review the district court’s
denial of the World Parties’ motion to compel arbitration de novo. See Zaklama v.
Mount Sinai Med. Ctr., 906 F.2d 650, 652 (11th Cir. 1990) (“Contract
interpretation, generally a question of law, is subject to de novo review on
7
appeal.”).3
To begin with, two of the fifteen Loan Documents provide: “All . . .
documents . . . referred [to] in [this Loan Document] . . . are hereby incorporated . .
. in their entirety as if fully restated in this [Loan Document].” Those two Loan
Documents also specifically “refer to” the Franchise Agreements by including a
breach of the Franchise Agreements among the events of default. Accordingly, the
World Parties argue that the plain language of the two Loan Documents
incorporates the Franchise Agreements “in their entirety,” which of course includes
the arbitration provisions in those agreements. Volvo Finance, on the other hand,
claims that the incorporation language in the two Loan Documents is simply vague
boilerplate that was never intended to incorporate the arbitration provisions in the
Franchise Agreements. According to Volvo Finance, an incorporation provision
should be read to incorporate an arbitration clause in a separate contract only if the
arbitration clause itself is specifically mentioned in the incorporation provision.
It is clear, however, that an arbitration clause can be incorporated even if the
relevant incorporation language does not specifically refer to it. Thus, for
3
The standard of review may be different where the incorporation provision is
ambiguous and the district court turned to extrinsic evidence to determine the parties’ intent.
See Case Int’l Co. v. T.L. James & Co., Inc., 907 F.2d 65, 66-67 (8th Cir. 1990) (reviewing for
clear error the denial of a motion to compel based on an incorporation-by-reference theory where
the district court examined extrinsic evidence to interpret an ambiguous contract). Because the
incorporation provision in this case is unambiguous, we have no occasion to decide this issue.
8
example, in J.S. & H. Construction Co. v. Richmond County Hospital Authority,
473 F.2d 212 (5th Cir. 1973), a construction subcontract incorporated by reference
the “General Conditions” of the prime contract between the owner and the general
contractor.4 Based on the specific facts of the case (which we have more to say
about later), a panel of the former Fifth Circuit concluded that the subcontractor
could be bound to arbitrate a dispute under the arbitration clause contained in the
General Conditions, even though the incorporation provision in the subcontract did
not specifically mention that arbitration clause. See J.S. & H., 473 F.2d at 215.
Accordingly, we agree with the World Parties that the unambiguous language of
the Loan Documents incorporates the arbitration clauses in the Franchise
Agreements.
But that is not the end of the matter. We still must determine whether the
4
Ordinarily, we would look to state law to determine the meaning of the incorporation
language in the Loan Documents. See, e.g., AgGrow Oils, L.L.C. v. Nat’l Union Fire Ins. Co.,
242 F.3d 777, 780-81 (8th Cir. 2001) (applying state law to determine whether a non-signatory
could be bound under an incorporation-by-reference theory); see also Caley v. Gulfstream
Aerospace Corp., 428 F.3d 1359, 1368 (11th Cir. 2005) (“[S]tate law generally governs whether
an enforceable contract or agreement to arbitrate exists.”). The parties, however, have not cited
relevant state law on this issue. Indeed, it is not clear to us which state’s law should apply,
because the locus of the underlying transaction appears to be Florida but at least some of the
Loan Documents contain North Carolina choice-of-law provisions. But in any event, after
reviewing Florida and North Carolina case law, we are convinced that both states’ laws are fully
consistent with J.S. & H. Construction. See Kaye v. Macari Bldg. & Design, Inc., 967 So.2d
1112, 1113 (Fla. Dist. Ct. App. 2007) (incorporation by reference applied to bind a non-
signatory even though the incorporation provision did not specifically mention the arbitration
clause in the incorporated document); Booker v. Everhart, 240 S.E.2d 360, 363 (N.C. 1978)
(explaining that when a note incorporated other documents by reference, “the parties made the
note ‘subject to’ any and all possible conditions contained in those prior documents”).
9
dispute between the World Parties and Volvo Finance falls within the scope of that
arbitration clause. We are convinced that it does not.
To determine what disputes the parties agreed to arbitrate, we begin, as we
must, with the language of the applicable arbitration provision, keeping in mind
“that any doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration[.]” Klay v. All Defendants, 389 F.3d 1191, 1201 (11th Cir.
2004). Here, the relevant arbitration provisions are contained in the Franchise
Agreements between World Rentals and Volvo Rents. Those provisions cover
“[a]ll disputes, claims, controversies or causes of action arising between Franchisee
and Franchisor.” (emphasis added). The Franchise Agreements define the term
“Franchisor” this way:
Franchisee [i.e., World Rentals] further acknowledges that: (i) the
term “Franchisor” as used in this Agreement shall refer only to Volvo
Construction Equipment Rents, Inc. and not Franchisor’s parents or
affiliates; (ii) Franchisor is not authorized to contract for or on behalf
of its parent or any of its affiliates; and (iii) this Agreement shall not
be deemed to bind or otherwise restrict Franchisor’s parent or any of
its affiliates.
Doc. 33 Ex. A2 § 25.4. It could not be clearer that the term “Franchisor” refers
“only” to Volvo Rents and not to any of Volvo Rents’ “affiliates,” such as Volvo
Finance. Thus, the applicable arbitration clause unambiguously limits its reach
only to disputes between the World Parties and Volvo Rents; plainly and expressly
10
it excludes any disputes between the World Parties and Volvo Finance.
Under circumstances like these, other courts likewise have concluded that
the non-signatory - - in this case Volvo Finance - - cannot be compelled to
arbitrate. Thus, for example, in Transcontinental & Western Air v. Parker, 144
F.2d 735 (8th Cir. 1944), a widow sued her husband’s employer for death benefits
promised in her husband’s employment contract. The employer sought a stay
based on a provision in the contract requiring arbitration of all “disputes ‘between
Employer and Employee,’” but the Eighth Circuit denied the stay because the
widow was “suing in her own right” and could not be considered the “Employee”
within the meaning of the contract. Id. at 736. Therefore, the arbitration clause
“was not broad enough to cover the present controversy between” the widow and
the employer. Id.5
Similarly, in Import Export Steel Corp. v. Mississippi Valley Barge Line
Co., 351 F.2d 503 (2d Cir. 1965), a steel company (the “charterer”) signed a
charter agreement with a ship owner to transport steel coils from Germany to
Louisiana. The charter agreement provided for arbitration between the ship owner
and the charterer, and the charter agreement was incorporated by reference into
bills of lading, which listed an affiliate of the charterer as the notify party. After
5
The Eighth Circuit did not address whether the widow could be compelled to arbitrate
under an estoppel theory.
11
the ship foundered off the Azores, the affiliate attempted to invoke the arbitration
clause incorporated into the bills of lading. The Second Circuit refused to allow
the affiliate to invoke the arbitration clause in the charter agreement because,
among other things, that clause unambiguously covered only disputes between the
owner and the charterer, not the charterer’s affiliates:
[T]he arbitration clause incorporated in the bills of lading is restrictive
in scope in that it is limited to disputes between the [owners] and the
[c]harterers. . . . It would be unduly stretching the language of this
arbitration clause to say that [the affiliate], a mere notify party, or
even owner of the cargo as it claims to be, is one of the [owners] or
[c]harterers.
Id. at 505-06 (internal quotation marks omitted).
More recently, the Second Circuit has explained the general point illustrated
by Transcontinental & Western Air and Import Export Steel this way: “[A]n
arbitration agreement restricted to the immediate parties does not bind a non-party,
notwithstanding words of incorporation or reference in a separate contract by
which that non-party is bound.” Progressive Cas. Ins. Co. v. C.A. Reaseguradora
Nacional de Venezuela, 991 F.2d 42, 47 (2d Cir. 1993) (internal quotation marks
omitted).
This rule is consistent with, indeed it is dictated by general principles of
arbitration and contract law. To repeat the starting point of our analysis, arbitration
is “a matter of consent, not coercion[.]” Volt, 489 U.S. at 479. Generally, courts
12
will not find that a party has consented to arbitration absent a written agreement to
do so. To be sure, when interpreting agreements to arbitrate, courts must apply the
“liberal federal policy favoring arbitration agreements,” but this policy “only
applies to disputes that the parties have agreed to arbitrate.” Becker v. Davis, 491
F.3d 1292, 1298 (11th Cir. 2007) (internal quotation marks omitted). There is no
federal policy favoring arbitration of disputes that the parties have unambiguously
excluded from their arbitration agreements. See Volt, 489 U.S. at 478 (explaining
that the FAA does not “prevent parties who do agree to arbitrate from excluding
certain claims from the scope of their arbitration agreement”).
Here, the arbitration provisions in the Franchise Agreements are expressly
limited to the immediate parties (Volvo Rents and World Rentals), and they
expressly exclude any affiliates such as Volvo Finance. In other words, the
language of the arbitration provisions expressly and unambiguously exclude from
their scope any dispute between the World Parties and Volvo Finance. Thus, we
are constrained to conclude that the district court correctly refused to compel
Volvo Finance to arbitrate on an incorporation-by-reference theory. Any other
result would not only “unduly stretch,” but completely rewrite the arbitration
clause, and compel a non-party to arbitrate in the absence of ever having agreed to
13
do so in the first place.6 Accordingly, Volvo Finance cannot be compelled to
arbitrate with the World Parties.
B.
We turn to the World Parties’ three remaining arguments: agency, veil-
piercing, and estoppel. The district court did not address them, and after reviewing
the World Parties’ submissions to the district court, we doubt that any of them
were raised adequately below. See In re Pan Am. World Airways, Inc., 905 F.2d
1457, 1462 (11th Cir. 1990) (“[I]f a party hopes to preserve a claim, argument,
theory, or defense for appeal, she must first clearly present it to the district court,
that is, in such a way as to afford the district court an opportunity to recognize and
rule on it.”). This would be reason enough not to address them at all. But in any
event, none of these arguments has merit.
1. Agency and Veil-piercing. A non-signatory may be compelled to
arbitrate under an agency theory if a signatory signed the arbitration agreement as
6
This is not to say that an arbitration agreement limited to the immediate parties can
never be effectively incorporated by reference. For example, in J.S. & H., in addition to typical
incorporation language, the subcontract at issue provided that the subcontractor “agrees to be
bound to the Contractor by all of the terms of the agreement between the Contractor and the
Owner . . . and to assume toward the Contractor all of the obligations and the responsibilities that
the Contractor . . . assumes toward the Owner.” 473 F.2d at 214 n.3. This language may be
sufficient to compel a subcontractor to arbitrate with the contractor, because arbitration is surely
one of the “obligations” that the contractor assumed toward the owner in the prime contract. But
the incorporation provisions in the Loan Documents at issue here contain no similar language,
and thus Volvo Finance cannot be compelled to arbitrate its dispute with the World Parties under
an incorporation-by-reference theory.
14
the non-signatory’s agent. See Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64
F.3d 773, 777 (2d Cir. 1995) (“Traditional principles of agency law may bind a
nonsignatory to an arbitration agreement.”). Likewise, a non-signatory may be
compelled to arbitrate if it so dominated a signatory that it is appropriate to pierce
the signatory’s corporate veil and hold the non-signatory liable on the contract
containing the arbitration provision. See, e.g., Fisser v. Int’l Bank, 282 F.2d 231,
234-35 (2d Cir. 1960). Whether either of these theories applies turns on the
specific facts of each case. See, e.g., Nitro Distrib., Inc. v. Alticor, Inc., 453 F.3d
995, 999 (8th Cir. 2006) (affirming denial of motion to compel arbitration because
the petitioner failed to demonstrate that the signatory “had actual or apparent
authority to act on behalf of” the non-signatory); Thomson-CSF, 64 F.3d at 777
(rejecting the petitioner’s veil-piercing argument for similar reasons).
Under Section 4 of the Federal Arbitration Act, the district court (or a jury as
the case may be) must resolve any disputed facts and determine whether the
applicable agency or veil-piercing tests have been met prior to compelling a non-
signatory to arbitrate. See 9 U.S.C. § 4; Thomson-CSF, 64 F.3d at 778 (refusing to
compel arbitration because the moving party failed to present sufficient facts in
support of its veil-piercing argument); see also Chastain v. Robinson-Humphrey
Co., Inc., 957 F.2d 851, 854 (11th Cir. 1992) (“If a party has not signed an
15
agreement containing arbitration language . . . the district court itself must first
decide whether or not the non-signing party can nonetheless be bound by the
contractual language.”).
Here, the World Parties presented no evidence supporting the claims that
Volvo Rents acted as the agent or alter ego of Volvo Finance. Indeed, the only
relevant evidence we can find in this record is an affidavit - - provided by Barry
Natwick, President and Chief Executive Officer of Volvo Rents - - that squarely
refutes the World Parties’ allegations. Thus, even if the World Parties’ agency and
veil-piercing arguments had been adequately presented to the district court (and
they were not), there is no evidentiary basis for compelling arbitration under either.
2. Estoppel. Estoppel also may bar a non-signatory from avoiding
arbitration if the non-signatory relies on a contract containing an arbitration clause.
See Blinco v. Green Tree Serv., LLC, 400 F.3d 1308, 1312 (11th Cir. 2005) (per
curiam); McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342,
344 (11th Cir. 1984). Here, Volvo Finance’s counterclaim against the World
Parties relies on World Rentals’ failure to make timely payments under the Loan
Documents; Volvo Finance does not rely on a breach of the Franchise
Agreements. Thus, an estoppel theory cannot apply because Volvo Finance is not
relying on the Franchise Agreements to make out its claim.
16
Relying on cases allowing non-signatories to invoke arbitration clauses
against signatories - - see Becker v. Davis, 491 F.3d 1292, 1304 (11th Cir. 2007);
MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 948 (11th Cir. 1999) - - the
World Parties also suggest that Volvo Finance should be compelled to arbitrate
based on the World Parties’allegations that Volvo Finance (a non-signatory) and
Volvo Rents (a signatory) were involved in a “common scheme” to defraud.
Notably, however, none of our cases allow a signatory to force a non-signatory into
arbitration simply because the signatory alleges a common scheme involving the
non-signatory and another signatory. This distinction makes sense because the
non-signatory never agreed to arbitrate anything. To nevertheless allow the non-
signatory to be dragged into arbitration against its will would eviscerate the
requirement that arbitration be based on consent, not coercion. Moreover,“[t]he
distinction between signatories and non-signatories is important to ensure that
short of piercing the corporate veil, a court does not ignore the corporate form of a
non-signatory based solely on the interrelatedness of the claims alleged.” E.I.
DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S.,
269 F.3d 187, 202 (3d Cir. 2001); see also Nitro Distrib., 453 F.3d at 999; InterGen
N.V. v. Grina, 344 F.3d 134, 145-46 (1st Cir. 2003); Thomson-CSF, 64 F.3d at
779. Accordingly, the fact that the World Parties simply alleged a common
17
scheme is not enough to force Volvo Finance into arbitration.
In short, the arbitration clauses in the Franchise Agreements between World
Rentals and Volvo Rents do not require arbitration of any dispute between the
World Parties and Volvo Finance, and, on this record, there is no non-contractual
basis for forcing Volvo Finance into arbitration. Accordingly, we affirm the
district court’s denial of the World Parties’ motion to compel Volvo Finance to
arbitrate.7
AFFIRMED.
7
Because we conclude that there is no basis for compelling Volvo Finance to arbitrate,
we have no occasion to reach Volvo Finance’s alternative argument that the World Parties
waived their right to compel arbitration by initiating and participating in the litigation before the
district court.
18