Arbitration Agreement - Chapter 01 - AAA Yearbook on Arbitration and the Law - 27th Edition
Stephen K. Huber
Ben H. Sheppard Jr.
1 PDF Download
Originally from AAA Yearbook on Arbitration and the Law - 27th Edition
1.01 Contract Formation
Nebraska Machinery Co. v. Cargotec Solutions, LLC, 762 F.3d
737 (8th Cir. 2014)
When fact issues exist as to the formation of the arbitration
agreement, the FAA requires the court to hold a trial to resolve those
fact issues before the court can determine whether the arbitration
Cargotec purchased engines from NMC, and installed them in its
yard trucks. After a Cargotec dealer was sued for the engine’s
performance, Cargotec agreed to indemnify the dealer. Cargotec then
demanded indemnification from NMC based on the purchase order
documents the parties exchanged for the sale of the engines. Cargotec
filed a demand for arbitration against NMC in accordance with the
purchase orders, alleging NMC had contractually agreed to indemnify
Cargotec for losses associated with the purchased engines.
NMC commenced an action in district court, seeking a declaration
that Cargotec’s demand for arbitration was improper because Cargotec’s
arbitration provisions did not become part of the contract for the sale of
goods between the parties. Cargotec moved to compel arbitration. The
district court granted NMC’s motion to determine arbitrability, denied
Cargotec’s motion to compel arbitration, and entered judgment in
NMC’s favor. Cargotec appealed.
The court held that pursuant to FAA Section 4, a bench trial
resolving factual disputes relating to the formation of the arbitration
agreement was necessary. Because issues of fact remained with respect
to the formation of the arbitration agreement, the district court erred in
failing to order a trial to resolve these material factual disputes
concerning whether the parties agreed to arbitration, as the FAA
instructs. The district court’s order was vacated, and the case remanded
for the district court to hold a bench trial, make findings of fact, and
apply the UCC provisions in light of those facts.
Citations and References
a. Howard v. Ferrellgas Partners, L.P., 748 F.3d 975 (10th Cir.
2014) (determining the district court erred in not ordering a
bench trial before summary judgment because without factual
finding about whose story to credit, the court does not know
whether the parties agreed to arbitrate the dispute).
b. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764
(3d Cir. 2013) (holding that a district court may not deny a
motion to compel arbitration unless there is a genuine issue of
fact of whether that parties agreed to arbitrate).
c. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.3d
51 (3d Cir. 1980) (in the event that the making of the arbitration
agreement, which is a matter of contract between the parties, is
an issue, then the court shall proceed summarily to the trial of
d. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156 (3d
Cir. 2009) (allegations that a party never agreed to arbitrate
create a genuine issue of fact as to the existence of an agreement
to arbitrate, and the task of weighing the evidence and choosing
which side to believe would have been for a jury).