In this case, plaintiff Aliments Krispy Kernels, a Canadian “snack purveyor,” brought suit to confirm an arbitration award it received against Nichols Farms, a pistachio grower, in New Jersey federal district court. Nichols Farms moved to vacate the award. The New Jersey district court granted Nichol’s motion to vacate the arbitration award. Aliments appealed to the Third Circuit.
The background of this case is as follows. The underlying arbitration involved a breach of contract claim. Aliments and Nichols, through brokers, had exchanged some sales confirmations for Aliments to purchase pistachios from Nichols, none of which were signed and some, but not all, of the sale confirmations created by the brokers contained arbitration clauses. Nichols ended up refusing to deliver the pistachios without advance payment from Aliments, based on Aliments’ credit application. Aliments eventually bought the pistachios from another seller, and then sought to recoup the extra cost from Nichols in arbitration. Nichols refused to participate in the arbitration because it alleged that the sales confirmations it received did not contain arbitration clauses. Aliments was awarded $222,100 against Nichols in the arbitration, which Nichols refused to pay.
In the action to confirm or vacate the award, the district court allowed months of discovery and then vacated the award, finding no genuine issue of fact on the issue of whether the parties entered into a “an express unequivocal agreement” to arbitrate.
On appeal, the Third Circuit disagreed with the district court, vacated its decision and remanded for further proceedings. In its decision, the Third Circuit noted that its previous expressed standard to be applied in the context of whether to enforce an arbitration agreement under the Federal Arbitration Act — that there must be “an express and unequivocal agreement” to an arbitration contract — is outdated and no longer valid. Rather, the Third Circuit noted that “[t]he legal standard is simply that we apply the relevant state contract law to questions of arbitrability, which may be decided as a matter of law only if there is no genuine issue of material fact when viewing the facts in the light most favorable to the nonmoving party.”
In its analysis, the Third Circuit then found that per New Jersey’s “choice-of-law rules,” New Jersey law (rather than New York) on contract formation, applied to the determination of whether Aliments and Nichols agreed to arbitrate Aliment’s breach of contract claim. The Court then also found that multiple issues of material fact prevented it from concluding that Nichols and Aliments made an agreement to arbitrate. Thus, the Third Circuit vacated and remanded to the New Jersey district court for further proceedings.