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Colorado-Arkansas-Texas Distributing, L.L.C. v. American Eagle Food Products

November 30, 2007


The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.


This case arises from an arbitration award in favor of defendant, American Eagle Food Products, Inc. ("AEF"), against plaintiff, Colorado-Arkansas-Texas Distributing, L.L.C., ("CAT"). AEF initiated arbitration to resolve its claim that CAT breached various contracts by refusing to accept delivery of merchandise.*fn1 CAT sued in New York state court to enjoin the arbitration, but the arbitration proceeded.*fn2 AEF removed the case to this Court and filed a counterclaim to confirm the arbitration award.*fn3 Before the Court are cross-motions for summary judgment.*fn4 AEF seeks summary judgment confirming the arbitration award. CAT argues that the arbitration award is unenforceable because CAT never agreed to arbitrate and moves for summary judgment denying AEF's claim.

All parties agreed that the Court would decide such questions of fact as might be necessary to fully resolve the matter on the basis of the existing record.*fn5 These are the Court's findings of facts and conclusions of law based on that record.


CAT, a Colorado limited liability company, distributes and sells edible nuts. AEF, a New Jersey corporation, sells edible nuts. Mr. Lyda is the managing member of CAT, and Mr. Sobeck is the president of AEF.*fn6

CAT and AEF have had a business relationship since some time prior to 2004.*fn7 CAT ordered nuts from AEF on numerous occasions, either directly or through a broker.*fn8 AEF followed up each order by issuing a "sales order" form.*fn9 The forms contained the following language:

"This contract is entered into subject to the terms, conditions, and agreements printed on the back hereof.

"Arbitration: Any controversy or claim arising out of this contract shall be settled in binding arbitration by the Association of Food Industries, Inc., of New York in accordance with its rules then obtaining.

"Thank you for your business. If this confirmation is incorrect, please contact us immediately. If it is correct, sign and return one copy immediately."*fn10

It is common in the nut industry and in the CAT-AEF relationship to make an oral order that is confirmed by a sales order or other document.*fn11 CAT frequently, but not always, signed and returned the sales order forms, but the parties performed whether or not CAT signed the form.*fn12

At issue in this case are fifteen AEF sales orders issued to CAT, all of which contained the standard arbitration clause. Seven of the forms (numbered 22595-22601) are dated February 10, 2005, and eight of the forms (numbered 22659-22666) February 23, 2005.*fn13 According to AEF, it issued these sales orders immediately after CAT placed orders with AEF.*fn14

February 10 Sales Orders On February 10, 2005, Lyda entered an oral agreement with Sobeck to buy cashews from AEF.*fn15 Sobeck prepared sales order forms confirming the order and faxed them to Lyda on the same day.*fn16 Each form included an arbitration clause and indicated that it "[c]onfirm[ed] phone order from Tim Lyda to Gene Sobeck."*fn17 The fax cover sheet instructed CAT: "Please advise your purchase order numbers and return with signature immediately (all contracts will be null and void if not signed an returned)."*fn18 CAT did not respond to the fax, either to inform AEF that it had not placed an order or to sign the sales orders.*fn19

CAT argues that the February 10 sales orders did not establish an agreement to arbitrate because CAT never signed the documents. CAT, however, does not dispute that the parties reached an oral agreement on February 10.*fn20 Indeed, the language of the February 10 sales orders indicates that there was an oral agreement, and CAT never objected to the purported confirmation. Moreover, the parties behaved as if they had reached an oral agreement before CAT filed suit in this case.

Mr. Lyda's deposition testimony, to the extent it attempts to deny that the sales orders confirmed an oral agreement, is not credible. Lyda refers to the sales order forms as "proposals" and asserts that "I sign documents when I confirm [a phone order],"*fn21 but there is no evidence that AEF had any reason to think that there was no oral agreement or that the oral agreement was not binding until CAT confirmed by signing the sales orders.*fn22 On these issues, ...

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