Nebraska Machinery Co. v. Cargotec Solutions, LLC, formerly known as Kalmar Industries, USA, LLC, No. 13-2753 (8th Cir. Aug. 7, 2014) [click for opinion]
Cargotec manufactures heavy machinery for the shipping and container industry. Nebraska Machinery is a dealer that specializes in the sales, rental, and servicing of Caterpillar equipment. Cargotec sent Nebraska Machinery a purchase order that included an indemnification provision and an arbitration clause. In response, Nebraska Machinery forwarded an order confirmation, which did not include an arbitration clause or an indemnification provision. Both parties denied having accepted the other's terms and conditions.
When Nebraska Machinery's engines installed in trucks manufactured by Cargotec proved unsatisfactory to the end customer, the customer sued the Cargotec dealer, which brought cross-claims against Cargotec and Nebraska Machinery. Cargotec then filed a demand for arbitration in Kansas, alleging that Nebraska Machinery had contractually agreed to indemnify Cargotec for losses associated with the engines. Nebraska Machinery then filed an action in the district court for the district of Nebraska seeking a declaration that Cargotec's demand for arbitration and indemnification was improper. Cargotec countered with a motion to compel arbitration, which was denied. Cargotec appealed.
Cargotec argued that the arbitration provision incorporated the rules of the American Arbitration Association, which specifically provide that arbitrators, not the court, are authorized to determine the issue of arbitrability. The Eighth Circuit had previously held that an arbitration provision that incorporates the AAA Rules was "a clear and unmistakable expression of the parties' intent to reserve the question of arbitrability for the arbitrator and not the court." Here, however, there was the threshold question whether the arbitration agreement itself is valid—that is, whether the parties actually agreed to arbitrate in the first place. The Eighth Circuit held that that issue was for the court to decide.
Regarding the merits of the enforceability of the clause, Cargotec argued that the district court erred in failing to order a trial to resolve material factual disputes concerning whether the parties
agreed to arbitration and indemnification. The Eighth Circuit agreed and sent the case back to the district court for a summary trial on the issue.