In the past week, the Third Circuit has issued two important decisions on the formation of arbitration agreements. (Sing it Beyoncé! “Okay ladies, now let’s get in formation.”) In one, a class action was allowed to proceed in court because the defendant did not obtain explicit enough agreement to the arbitration, and in another an arbitration award was initially vacated due to questions about whether there had been an arbitration agreement at all.
In Aliments Krispy Kernels, Inc. v. Nichols Farms, __ F.3d __, 2017 WL 1055569 (3d Cir. Mar. 21, 2017), Aliments was attempting to confirm an arbitration award it received, and Nichols Farms was trying to vacate that award. Aliments and Nichols had exchanged some sales confirmations to purchase pistachios, none of which were signed. However, Nichols ended up refusing to deliver the pistachios without advance payment, based on Aliments’ credit application. Aliments bought elsewhere, and then sought to recoup the extra cost from Nichols at arbitration (in which Nichols refused to participate). 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 that issue. On appeal, the Third Circuit vacated and remanded for further proceedings. In the course of its decision, the Third Circuit noted that its previous expressed standard — that there must be express and unequivocal agreement to an arbitration contract — is outdated and that nothing more than relevant state law on contract formation is required.