Third Circuit disposition — 03-1709

PRECEDENTIAL
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UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
No. 03-1709
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CHRISTIAN BOURIEZ;
MONTANELLE BEHEER B.V.,
Appellants,
vs.
CARNEGIE MELLON UNIVERSITY
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APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF
PENNSYLVANIA
(D.C. No. 02-cv-02104)
District Judge:
The Honorable Arthur J. Schwab
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ARGUED
JANUARY 27, 2004
BEFORE:
NYGAARD and FUENTES,
Circuit Judges, and
O’NEILL,* District Judge.
(Filed: March 1, 2004)
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James A. Vollins, Esq. (Argued)
Squire, Sanders & Dempsey
127 Public Square
4900 Key Tower
Cleveland, OH 44114-1304
Counsel for Appellants
George E. Yokitis, Esq. (Argued)
DeForest, Koscelnik & Yokitis
436 Seventh Avenue
3000 Koppers Building
Pittsburgh, PA 15219
Counsel for Appellee
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OPINION OF THE COURT
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NYGAARD, Circuit Judge.
Christian Bouriez and M ontanelle
Beheer B.V. (collectively referred to as
“Bouriez”) appeal the District Court’s
order compelling arbitration and
dismissing their case. We will reverse
and remand.
* Honorable Thomas N. O’Neill,
Jr., Senior District Judge for the United
(continued...)
(...continued)
States District Court for the Eastern
District of Pennsylvania, sitting by
designation.

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I.
In 1996, Carnegie Mellon
University entered into an agreement (the
“1996 Agreement”) with Zeta Projects
Limited. Under the terms of this
Agreement, Zeta Projects would fund
certain of Carnegie Mellon’s research
projects. In 1997, Governors Refining
Technologies assumed Zeta Projects’
position in the 1996 Agreement.
Governors Refining was a partially
owned subsidiary of Governors
Technologies Corp.
In 1999, Carnegie Mellon
approached Bouriez about investing in a
research project (“the Project”) that was
being conducted under the 1996
Agreement.1 According to Bouriez,
Carnegie Mellon represented to him that
they had Proof-of-Concept on the
technology at issue. Bouriez agreed to
support the Project and did so by
investing in, and thereby becoming a
shareholder of, Governors Technologies.
Governors Technologies then took the
$5,000,000 that Bouriez invested and
used it to fund the Project.
By the end of 2000, Carnegie
Mellon was in need of additional funds
for the Project. Carnegie Mellon again
approached Bouriez and he agreed to
assist Carnegie Mellon in finding
additional investors. Before finding
those investors, the Project underwent an
audit and, according to Bouriez, that
audit revealed that Carnegie Mellon
never had Proof-of-Concept for the
Project. As a result of this discovery,
Bouriez did not try to find additional
investors for the Project and sued
Carnegie Mellon. Bouriez claims that
Carnegie Mellon made
misrepresentations to him about the
status of the Project in order to convince
him to purchase shares in Governors
Technologies and, thereby fund the
Project.
Carnegie Mellon filed a
motion seeking to compel Bouriez to
arbitrate his claims and to have his
federal action dismissed. Carnegie
Mellon based this motion on the
arbitration clause contained in the 1996
Agreement. The clause requires that,
“Any dispute or claim arising out of or
relating to the Agreement will be settled
by arbitration in Pittsburgh,
Pennsylvania.” App. 24. Neither
Bouriez nor Governors Technologies
signed this Agreement.
The District Court granted
Carnegie Mellon’s motion after finding
that Bouriez “as agent[] of [Governors
Technologies], [is] bound by [his]
1. The 1996 Agreement does not
specifically lay out research projects, but
contemplates that proposals will be
submitted pursuant to the terms of that
Agreement. The project that Governors
Refining was involved in was submitted
under this procedure and involved the
upgrading of crude petroleum using
microwave-enhanced catalytic cracking.

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principal’s [Governors Technologies]
agreement to arbitrate” and “[Bouriez]
embraced the Agreement and directly
benefitted therefrom and thus [is]
equitable [sic] estopped from avoiding its
arbitration clause.” App. at 6.
II.
We have jurisdiction over this
appeal under 28 U.S.C. § 1291.2 We
exercise plenary review over the District
Court’s order compelling arbitration.
Pritzker v. Merrill Lynch, Pierce, Fenner
& Smith, Inc., 7 F.3d 1110, 1113 (3d
Cir. 1993).
The right to a jury trial is a
fundamental right that is expressly
protected by the Seventh Amendment to
the United States Constitution. Molthan
v. Temple Univ. of Com. Sys. of Higher
Educ., 778 F.2d 955, 963 (3d Cir. 1985).
Although the Federal Arbitration Act
“establishes a strong federal policy in
favor of compelling arbitration over
litigation,” this Court has held that it is
inappropriate to force a party to arbitrate
their disputes unless that party agreed to
such arbitration. E.I. Dupont de
Nemours & Co. v. Rhone Poulenc Fiber
& Resin Intermediates, S.A.S., 269 F.3d
187, 194 (3d Cir. 2001). A party,
however, can be compelled to arbitrate
under an agreement, even if he or she did
not sign that agreement, if common law
principles of agency and contract support
such an obligation on his or her part. Id.
at 194-95.
Generally, the common law
theories used to bind a non-signatory to
an arbitration clause include third party
beneficiary, agency and equitable
estoppel. Here, Carnegie Mellon argued,
and the District Court accepted, that
Bouriez could be compelled to arbitrate
under the 1996 Agreement based on the
principles of agency and equitable
estoppel.
In its agency analysis, the District
Court found that Bouriez was an agent of
Governors Technologies and, therefore,
was bound to arbitrate under the 1996
Agreement. Bouriez raises several
factual arguments regarding his status as
an agent of Governors Technologies and
Governors Technologies’ obligation to
arbitrate under an agreement assumed,
not by Governors Technologies, but by
Governors Refining. However, even
assuming Bouriez was an agent of
Governors Technologies and it was
obligated to arbitrate under the 1996
Agreement, this does not mean Bouriez
was also obligated to arbitrate his claims.
2. We note that as its primary form
of relief, Carnegie Mellon requested that
the District Court compel arbitration and
dismiss Bouriez’s federal action. We
express no opinion as to whether, had
Carnegie Mellon requested a stay under
Section 3 of the Federal Arbitration Act,
9 U.S.C. § 3, it would have been proper
for the District Court to dismiss this
action, and for us to hear an appeal from
that dismissal.

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In Bel-Ray Co. v. Chemrite, we held that
an agent can only be bound by the
agreements of his principal when that
principal acted with the agent’s actual,
implied, or apparent authority. 181 F.3d
435, 445 (3d Cir. 1999). There is no
evidence that Governors Technologies,
Governors Refining, or any other entity
was acting with implied, actual or
apparent authority for Bouriez when it
agreed to the 1996 Agreement. In fact,
the record shows that Bouriez did not
even become involved in the Project until
1999, approximately two years after
Governors Refining assumed the 1996
Agreement. Therefore, the District Court
is incorrect in its conclusion that any
agency relationship between Bouriez and
Governors Technologies obligated him to
arbitrate.
A person may also be equitably
estopped from challenging an agreement
that includes an arbitration clause when
that person embraces the agreement and
directly benefits from it. E.I. Dupont,
269 F.3d at 199-200. Here, there is
simply no evidence in the record to
indicate that Bouriez directly benefitted
from the 1996 Agreement. At most, the
facts show that Bouriez became a
minority shareholder in Governors
Technologies for the sole purpose of
funding the Project. There is no
evidence that any benefit the Project
would produce would go to him directly.
In this respect, this case is nearly
identical to Industrial Electronics Corp.
of Wisconsin v. iPower Distribution
Group., Inc., 215 F.3d 677 (7th Cir.
2000).
In Industrial Electronics, iPower
approached Industrial Electronics in an
attempt to convince it to join an
association of other companies. Id. at
678-79. Once established, that
association would enter into a franchise
agreement with iPower, for iPower to
provide computer software that would
allow customers to purchase from all
members of the association in a single
order. Id. Industrial Electronics decided
to enter into the association, which was
created as a limited liability corporation.
Id. at 679. One year later, the association
entered into the intended franchise
agreement with iPower. Id.
Eventually, Industrial Electronics
came to believe that iPower
misrepresented certain facts and
fraudulently induced Industrial
Electronics to enter the association. Id.
It sued iPower. Id. In an attempt to
compel arbitration, iPower argued that
Industrial Electronics was bound by an
arbitration clause that existed in the
franchise agreement between iPower and
the association. Id. The Court of
Appeals for the Seventh Circuit correctly
observed that Industrial Electronics’
claims were not based on the franchise
agreement, but on iPower’s statements
that induced it to enter into the
association. Id. at 680-81. Thus,
Industrial Electronics was not exploiting
or directly benefitting from the
agreement that contained the arbitration

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clause, and would not be equitably
estopped from avoiding that clause.
The facts here are not
distinguishable and we find Industrial
Electronics persuasive. Bouriez is
complaining that Carnegie Mellon
wrongly induced him to enter into a
shareholder agreement with Governors
Technologies. While the purpose of that
agreement was that Bouriez could
provide money to Governors
Technologies that Governors
Technologies would use to fund
Carnegie Mellon, the fact remains that
Bouriez’s claims deal with his
shareholder agreement, and not the 1996
Agreement. As in Industrial Electronics,
“A dispute that arises under one
agreement may be litigated
notwithstanding a mandatory arbitration
clause in a second agreement, even
where the two agreements are closely
intertwined.” Id. at 681. Such is the
circumstance here. The District Court’s
contrary conclusion fails to acknowledge
that Bouriez was one step removed from
the 1996 Agreement and, therefore, is not
equitably estopped from avoiding the
arbitration clause contained in that
Agreement.
III.
For the foregoing reasons, we will
remand the cause.
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