OPINION OF THE COURT
BARRY, Circuit Judge:
In 1996, after years of negotiation, a Joint Venture Agreement ("the Agreement") was entered into between DuPont China ("DPC"), Rhone Poulenc Fiber and Resin Intermediates ("Rhodia Fiber"), and Liaoyang Petro Chemical Fiber Company ("LYPFC"), a Chinese entity. DPC and Rhodia Fiber are subsidiaries of E.I. DuPont
I. The Joint Venture Agreement
While DuPont does not purport to have sued on the Agreement itself, there is no dispute that the Agreement was at the heart of the proceedings before the District Court and is at the heart of this appeal. We begin, therefore, with the relevant provisions of the Agreement and the background of how this litigation came to be.
Each party to the Agreement — DPC, Rhodia Fiber and LYPFC — was to contribute significant capital to the joint venture in relation to its interest in the venture. In ¶ 7.02, the parties agreed that:
¶ 7.02 (emphasis added). Nothing in this paragraph obligated either parent company — DuPont or Rhodia — to provide any guarantees or loans; rather, guarantees and/or loans were obligations of the subsidiaries.
Even though the parent companies were not parties to the Agreement, it was stated in the Agreement that they would "assist the Company in the balancing of foreign exchange during the Company's initial years of operation by exporting 14,000 tons and 6,000 tons per year of nylon 6,6 polymer flake respectively in accordance to the DuPont Polymer Flake Export Sales
Two provisions of the Agreement are of particular relevance and, thus, particular importance here. First, the Agreement contained an arbitration clause:
¶ 25.01 (emphasis added). Second, the Agreement provided that it was
After the joint venture failed, DuPont filed a three count Complaint against Rhodia Fiber and Rhodia. In the first count, entitled "Third Party Beneficiary Claims," DuPont alleged that "DuPont, as the ultimate parent of DCH and as the party required to provide loan guaranties [sic] on behalf of its subsidiary DCH, was an intended party beneficiary of the Joint Venture Contract," and that "Rhodia Fiber materially breached the Joint Venture Contract by, without limitation, failing to provide or secure the required loan guaranties [sic]." A80-81. In the second count, entitled "Breach of Agreement to Secure and Provide Guaranties/Promissory Estoppel," DuPont alleged that it was harmed by the breach by Rhodia Fiber
In response, the defendants moved to compel arbitration and to dismiss the action for lack of personal jurisdiction, insufficient service of process, failure to join an indispensable party, and forum non conveniens. DuPont then filed a First Amended Complaint significantly altering its theory of liability. For starters, DuPont dropped the first count of the Complaint, which alleged a breach of the Agreement to which it was an intended third party beneficiary. The first count of the Amended Complaint, entitled "Breach of Agreement to Secure and Provide Guaranties/Promissory Estoppel," instead mimicked the second count of the Complaint, i.e., alleging that at a meeting on January 22, 1998, Bruno deSoyres on behalf of Rhodia, the parent, and Rhodia Fiber, the subsidiary, entered into an oral agreement with DuPont to further support the joint venture by securing and providing loan guarantees, and abide by the obligations contemplated by the Agreement. According to the Amended Complaint,
DuPont alleged that the "Rhodia Group" breached this oral agreement, and, thus, DuPont named both the parent and the subsidiary in this count as well as the two remaining counts. The second count of the Amended Complaint mimicked the third count of the Complaint, i.e., alleging that at the January 1998 meeting the "Rhodia Group" made false statements regarding its intent to support the joint venture and induced DuPont by material misrepresentations
As noted above, the District Court denied defendants' motion to dismiss the complaint and to compel arbitration, and they appealed. We turn to the issues we are called upon to decide.
Should Arbitration Have Been Compelled as to a Non Signatory?
The thrust of this appeal is whether the District Court erred in its refusal to compel arbitration.
Sandvik AB v. Advent International Corp., 220 F.3d 99, 104-05 (3d Cir.2000) (internal citations omitted). The liberal policy "favoring arbitration agreements ... is at bottom a policy guaranteeing the enforcement of private contractual arrangements," id., and under the FAA, "a court may only compel a party to arbitrate where that party has entered into a written agreement to arbitrate that covers the dispute." Bel-Ray Co., Inc. v. Chemrite (Pty) Ltd., 181 F.3d 435, 444 (3d Cir.1999) ("Arbitration is strictly a matter of contract. If a party has not agreed to arbitrate, the courts have no authority to mandate that he do so.").
Because arbitration is a creature of contract law, when asked to enforce an
1. Was DuPont a Third Party Beneficiary?
Appellants maintain that DuPont was an intended third party beneficiary of the Agreement and, thus, DuPont is bound by the arbitration clause. The District Court held that DuPont was not a third party beneficiary and, even if it were, because the claims asserted by DuPont do not arise from any "third party beneficiary" status under the Agreement, DuPont was not bound to arbitrate its claims as a third party beneficiary. The District Court was correct.
In a series of cases, courts have allowed non-signatory third party beneficiaries to compel arbitration against signatories of arbitration agreements. John Hancock Life Ins. Co. v. Wilson, 254 F.3d 48, 59-61 (2d Cir.2001) (member of NASD which was bound by its membership to arbitrate disputes, was properly compelled to arbitrate by third party beneficiary of that agreement); Spear, Leeds & Kellogg v. Central Life Assurance Co., 85 F.3d 21, 29-30 (2d Cir.1996) (same with respect to NYSE rules). In the reverse situation, we have also bound a non-signatory third party beneficiary to a forum selection clause in the underlying contract. Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202-04 (3d Cir.1983), overruled on other grounds by Lauro Lines v. Chasser, 490 U.S. 495, 109 S.Ct. 1976, 104 L.Ed.2d 548 (1989). Thus, whether seeking to avoid or compel arbitration, a third party beneficiary has been bound by contract terms where its claim arises out of the underlying contract to which it was an intended third party beneficiary.
Appellants rely heavily on Coastal Steel in attempting to show that DuPont was as an intended third party beneficiary. In that case, a New Jersey company, Coastal Steel, entered into a contract with Farmer Norton which contained an arbitration clause. To fulfill that contract, and at Coastal's suggestion, Farmer Norton contracted with Tilghman for the purchase of a blast unit. The contract between Farmer Norton and Tilghman contained a forum selection clause which named England as the forum. While in bankruptcy, Coastal filed suit against, inter alia, Farmer Norton (also bankrupt), Tilghman, and its American parent alleging breach arising out of the Farmer Norton — Tilghman contract. The Bankruptcy Court and District Court denied Tilghman's motion to dismiss in favor of the forum selection clause contained in the Farmer Norton — Tilghman contract. We reversed, and held that
Appellants argue that DuPont, "whose employees negotiated this contract, has admitted that it was obligated to make a loan guarantee on behalf of DuPont China and that it was the intended beneficiary of the contract which allegedly required Rhodia Fiber to provide a similar guarantee." Appellants' Br. at 40. This argument is flawed for at least two reasons. First, unlike the clear third party beneficiary relationship in Coastal, there is no evidence that DuPont was an intended third party beneficiary under the Agreement. Under Delaware law, which is the law the parties discuss, to qualify as a third party beneficiary of a contract, (a) the contracting parties must have intended that the third party beneficiary benefit from the contract, (b) the benefit must have been intended as a gift or in satisfaction of a pre-existing obligation to that person, and (c) the intent to benefit the third party must be a material part of the parties' purpose in entering into the contract. Guardian Constr. Co. v. Tetra Tech Richardson, Inc., 583 A.2d 1378, 1386 (1990) ("In order for third-party beneficiary rights to be created, not only is it necessary that performance of the contract confer a benefit upon a third person that was intended, but the conferring of the beneficial effect on such third-party, whether it be creditor or donee, should be a material part of the contract's purpose."). Thus, if it was not the promisee's intention to confer direct benefits upon a third party, but rather such third party happens to benefit from the performance of the promise either coincidentally or indirectly, then the third party will have no enforceable rights under the contract. Appellants have not offered any evidence that DuPont was anything more than an incidental third party beneficiary.
The parties to the Agreement were only LYPFC (the Chinese entity), Rhodia Fiber and DCH; moreover, the Agreement provided that it was
A158, ¶ 27.03. The arbitration clause itself anticipated only three beneficiaries to the Agreement, all of them parties. It stated that if disputes could not be resolved amicably and "one Party has given both of the other Parties written notice of the existence of the dispute, then, the dispute shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SAIC") for the time being in force." ¶ 25.01 (emphasis added). Although DuPont as the parent
Appellants argue, however, that DuPont was a third party beneficiary because (a) DuPont negotiated the Agreement, (b) DuPont's claims "mirror DuPont China's claims in arbitration, all of which stem from the Joint Venture Contract," (c) DuPont was positioned to derive more than shareholder benefits from the joint venture, and (d) DuPont claimed in the initial Complaint that it was a third party beneficiary of the Agreement and that it was required to guarantee the joint venture company's debt under the Agreement. We disagree.
First, that DuPont negotiated the Agreement, without more, has nothing to do with whether it was a third party beneficiary. Second, appellants err in their contention that DuPont's claims mirror DPC's claims in arbitration. DPC is arbitrating the breach of the underlying Agreement and seeking its lost profits and the recoupment of its investment whereas DuPont is litigating its losses arising out of a 1998 oral agreement that was breached and misrepresentations made by appellants' representative outside of the Agreement.
Appellants' third party beneficiary argument fails for yet another, perhaps more obvious, reason. Appellants point out that "[t]he Court in Coastal Steel applied the forum selection clause to all claims that implicated the underlying contract to which Coastal Steel was third-party beneficiary, including claims for negligent design, breach of implied warranty and misrepresentation." Appellants' Br. at 37. Coastal Steel, its progeny and Delaware law make clear that a third party beneficiary will only be bound by the terms of the underlying contract where the claims asserted by that beneficiary arise from its third party beneficiary status. Industrial Electronics Corp. v. iPower Distribution Group, Inc., 215 F.3d 677, 680 (7th Cir.2000) (third party beneficiary non-signatory was not compelled to arbitrate claims because the claims did not arise out of the contract from which it derived its third party status); Spear, 85 F.3d at 29-30. None of DuPont's amended claims, however, arise out of its alleged third party beneficiary status under the Agreement; rather, DuPont's claims arise from the misrepresentations allegedly made to it by appellants' representative.
Next, appellants argue that DuPont's intimate involvement with the Sanlong project renders it liable under traditional agency principles because DPC acted as DuPont's disclosed agent and, under principles of agency law, DuPont is bound by DPC's Agreement. The District Court correctly rejected this argument, a conclusion underscored by the fact that appellants have failed to cite either the relevant factors we should consider in determining whether DCH acted as DuPont's agent or any case that would carry the day.
Traditional principles of agency law may bind a non-signatory to an arbitration agreement. Thomson-CSF, S.A. v. American Arbitration Assoc., 64 F.3d 773, 776 (2d Cir.1995). Under Delaware law:
Phoenix Canada Oil Co. v. Texaco, Inc., 842 F.2d 1466, 1477 (3d Cir.1988) (citations omitted). To bind a principal by its agent's acts, the plaintiff must demonstrate that the agent was acting on behalf of the principal and that the cause of action arises out of that relationship. Id.
Appellants rely principally on J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315 (4th Cir.1988) and Phoenix Canada in support of their agency
Appellants also invoke Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir.1993), but Pritzker is inapposite. In Pritzker, we bound an agent to the principal's arbitration agreement. Here, appellants seek to hold a principal to an agent's agreement and the rationale of Pritzker does not apply with equal force. In Pritzker, a trustee of a pension plan sued its broker, Merrill Lynch, and a related company to recover for violations of ERISA. Merrill Lynch moved to compel arbitration and the District Court denied that motion. We reversed, holding that (a) the trustees were bound to arbitrate their claims against Merrill Lynch as signatories to a binding arbitration agreement, and (b) over the trustees' objection, the trustees were bound to arbitrate the dispute against the individual broker and the sister company, neither of which signed the aforementioned agreement. Specifically, with respect to the broker, we found that where the principal is bound to arbitration and the complaints arise out of the agent's conduct on behalf of that principal, the agent is bound by the principal's agreement to arbitrate disputes. Id. at 1122. With respect to the sister company, we summarily found that company bound as an agent and possibly as an alter-ego of Merrill Lynch. Id.
In the case sub judice, unlike Pritzker, appellants seek to hold DuPont liable as a principal, not as an agent; moreover, unlike Pritzker, DuPont could act on its own.
Appellants' attempt to bind DuPont on agency principles fails.
3. Equitable Estoppel
Finally, appellants argue that DuPont is equitably estopped from avoiding the arbitration clause in the Agreement. We have never applied an equitable estoppel theory to bind a non-signatory to an arbitration clause although there appears to be no reason why, in an appropriate case, we would refrain from doing so.
As the Second Circuit recently explained, there are two theories of equitable estoppel in this context. First, courts have held non-signatories to an arbitration clause when the non-signatory knowingly exploits the agreement containing the arbitration clause despite having never signed the agreement. Thomson-CSF, S.A. v. American Arbitration Assoc., 64 F.3d 773, 778 (2d Cir.1995). Second, courts have bound a signatory to arbitrate with a non-signatory "at the nonsignatory's insistence because of `the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and[the fact that] the claims were intimately founded in and intertwined with the underlying contract obligations.'" Id. at 779 (quoting Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir.1993)) (quoting McBro Planning
Under the first theory, courts prevent a non-signatory from embracing a contract, and then turning its back on the portions of the contract, such as an arbitration clause, that it finds distasteful. See, e.g., American Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir.1999) (non-signatory bound by contract under which it received the direct benefits of lower insurance and the ability to sail under the French flag); Thomson-CSF, S.A., 64 F.3d at 779 (finding only indirect benefit insufficient to invoke equitable estoppel against a non-signatory). As the Fourth Circuit explained, "In the arbitration context, the doctrine recognizes that a party may be estopped from asserting that the lack of his signature on a written contract precludes enforcement of the contract's arbitration clause when he has consistently maintained that other provisions of the same contract should be enforced to benefit him. "To allow [a plaintiff] to claim the benefit of the contract and simultaneously avoid its burdens would both disregard equity and contravene the purposes underlying enactment of the Arbitration Act.'" International Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th Cir.2000) (internal citation omitted).
Generally, these cases involve non-signatories who, during the life of the contract, have embraced the contract despite their non-signatory status but then, during litigation, attempt to repudiate the arbitration clause in the contract. See, e.g., Tencara Shipyard, 170 F.3d at 353 (non-signatory derived benefit from contract and could not avoid the arbitration clause contained therein).
What gives us some pause, however, is that a close examination of the Amended Complaint reveals that, at bottom, DuPont's claims against the subsidiary, Rhodia Fiber, arise, at least in part, from the underlying Agreement. Parenthetically, it is difficult to decipher exactly what DuPont claims each appellant has done giving rise to liability because in its Amended Complaint DuPont lumps them together as
The Amended Complaint does not allege only that Rhodia, the parent, breached its oral agreement to provide loan guarantees to its subsidiary. If this were DuPont's only claim in this case, the Amended Complaint would have named one, and only one, defendant — Rhodia. Instead, the Amended Complaint also named Rhodia Fiber, the subsidiary, as a defendant because, DuPont alleges, Rhodia Fiber breached its oral promise to DuPont that it would continue to abide by its obligations in the Agreement, i.e., securing loan guarantees for the joint venture. To the extent that DuPont presses a claim against Rhodia Fiber for breaching its oral commitment to perform under the Agreement, DuPont alleges a claim which can well be argued (a) embraces the underlying Agreement and (b) requires proof that Rhodia Fiber ultimately breached the underlying Agreement. The question, then, is whether having alleged that it entered into a separate oral agreement with Rhodia Fiber binding Rhodia Fiber to the very obligations it undertook in the Agreement, DuPont is now equitably estopped from avoiding another provision of the Agreement, i.e., the arbitration clause. This is a close call.
On the one hand, we must be careful about disregarding the corporate form and treating a non-signatory like a signatory. On the other hand, by alleging, albeit by virtue of a separate oral agreement, that Rhodia Fiber failed to secure loan guarantees, DuPont's claim against Rhodia Fiber implicates, at least in part, the very Agreement which DuPont repudiates to avoid arbitration. It is, however, that separate oral agreement that saves the day for DuPont because, wholly apart from whether Rhodia Fiber breached the Agreement, what is at the core of this case is the conduct and the statements of appellants' representative in January of 1998.
With reference to the second theory of equitable estoppel, appellants rely on a series of cases in which signatories were held to arbitrate related claims against parent companies who were not signatories to the arbitration clause. In each of these cases, a signatory was bound to arbitrate claims brought by a non-signatory because of the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the non-signatory's obligations and duties in the contract and the fact that the claims were intertwined with the underlying contractual obligations. Thomson-CSF, S.A., 64 F.3d at 779. In essence, a non-signatory voluntarily pierces its own veil to arbitrate claims against a signatory that are derivative of its corporate-subsidiary's claims against the same signatory. Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir.2000) (non-signatory able to compel signatory to arbitrate claims related to the contract which contained an arbitration clause); J.J. Ryan & Sons, 863 F.2d at 320-21 (discussed above); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir.1993) (compelling signatory to arbitrate claims against non-signatory that were intertwined with claims arising from contract governed by arbitration clause); Hughes Masonry Co., Inc. v. Greater Clark County Sch. Bldg. Corp., 659 F.2d 836, 840-41 (7th Cir.1981) (same); McBro Planning and Dev. Co. v. Triangle Elec. Const. Co., Inc., 741 F.2d 342, 344 (11th Cir.1984) (non-signatory to contract containing arbitration clause was bound by signatory to arbitrate dispute where claims were inextricably intertwined with duties created in underlying contract and non-signatory signed a related contract which contained an arbitration
Indeed, the Second Circuit recently rejected the same "distinction without a difference" argument:
Thomson-CSF, S.A., 64 F.3d at 779 (internal citations omitted). The 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. The District Court recognized that this was so, holding that the corporate form cannot be discarded and a non-signatory required to arbitrate unless its conduct falls within one of the accepted principles of agency or contract law that permit doing so.
In sum, the thrust of the claims in the Amended Complaint are far enough removed from the Agreement such that DuPont should not be equitably estopped from repudiating the arbitration clause contained in the Agreement.
II. Is the Issue of Personal Jurisdiction Now Appealable?
DuPont has moved to dismiss appellants' appeal from the District Court's concededly interlocutory order denying appellants' motion to dismiss for want of personal jurisdiction. Appellants ask this Court to exercise its discretion in favor of review under the doctrine of pendent appellate jurisdiction. We reject appellants' request.
The doctrine of pendent appellate jurisdiction, in its broadest formulation, allows an appellate court in its discretion
Id. at 47, 115 S.Ct. 1203 (internal footnotes omitted). Despite this rather absolute language, the Court did not foreclose entirely the availability of pendent appellate jurisdiction:
Id. at 50-51, 115 S.Ct. 1203 (internal citations omitted).
Building on this guarded endorsement of pendent appellate jurisdiction in certain limited circumstances, we and other Circuits have recognized "a discretionary, though `narrow,' doctrine of pendent appellate jurisdiction. But we have also concluded that the doctrine should be used `sparingly,' and only where there is a sufficient overlap in the facts relevant to both the appealable and nonappealable issues to warrant plenary review. We have also stated that `pendent appellate jurisdiction over an otherwise unappealable order is available only to the extent necessary to ensure meaningful review of an appealable order.'" In re Montgomery County, 215 F.3d 367, 375-76 (3d Cir.2000) (emphasis in original) (citations omitted); see also In re Tutu Wells, 120 F.3d at 382. Essentially, post-Swint, we have defined pendent appellate jurisdiction to mirror the Supreme Court's two examples: inextricably intertwined orders or review of the non-appealable order where it is necessary to ensure meaningful review of the appealable order.
Although we have not addressed whether we should exercise pendent jurisdiction over an appeal of a motion to compel arbitration, other Circuits have done so. Where personal jurisdiction is inextricably intertwined with the immediately appealable decision on a motion to compel arbitration or other immediately appealable order, Courts of Appeals have exercised pendent jurisdiction over a personal jurisdiction issue, but those Courts have been careful to explain that the basis of the
Where, however, personal jurisdiction is not "interrelated" or "intertwined" with the merits of the immediately appealable order, Courts of Appeals exercise restraint and forego review until the unrelated issue is appealable in its own right. See, e.g., United States Fidelity and Guaranty Co. v. Braspetro Oil Services Co., 199 F.3d 94, 97 (2d Cir.1999) (exercising pendent appellate jurisdiction over interrelated personal jurisdiction issue but refusing to review interlocutory forum issue because it has "little or nothing in common with" the appealable order); Rein v. Socialist People's Libyan Arab Jamahiriya, 162 F.3d 748, 759 (2d Cir.1998); see also Associated Business Telephone Systems, Corp. v. Greater Capital Corp., 861 F.2d 793, 796 (3d Cir.1988) (passing on personal jurisdiction of defendant company against whom injunction was granted to ensure that injunction was granted against party over whom the district court had authority, but refusing to review personal jurisdiction of individual defendants who were not affected by injunction). The fact that personal jurisdiction is or can be case-dispositive does not alter the analysis for two reasons. First, denials of motions to dismiss for want of personal jurisdiction are not ordinarily immediately appealable. Second, as the Second Circuit explained:
Rein v. Socialist People's Libyan Arab Jamahiriya, 162 F.3d 748, 759 (2d Cir.1998).
We undoubtedly have jurisdiction over the District Court's refusal to compel arbitration and, as the previous section of this opinion indicates, that issue can be discussed at length and resolved without any reference to whether there was personal jurisdiction over appellants or whether the meeting in Delaware attended by their representative amounted to "minimum contacts." Indeed, for purposes of reviewing and resolving the arbitration issue, we were bound to accept as true
For the foregoing reasons, we will affirm the judgment of the District Court insofar as it denied appellants' motion to compel arbitration and will dismiss the appeal from the denial of appellants' motion to dismiss for lack of personal jurisdiction.