Summary of a Recent
Judicial Development in
Commercial Transactions

Arbitration Clause in Rice Purchase Contract Does Not Apply to
Related but Separate Oral Contract

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Gedimex, S.A. v. Nidera, Inc., No. 08-10332, 2008 WL 3890259 (11th Cir. Aug. 28, 2008), the Eleventh Circuit Court of Appeals held that arbitration clauses from contracts for the purchase of rice did not apply to a related but separate oral contract for the supplying of empty bags to be used for shipping the rice.

Background

Gedimex purchased fifty large shipments of rice from Nidera, Inc. over the course of five years, with each shipment being governed by an identical contract for sale that included an arbitration clause. Id. at *1. During this time, the parties entered into a separate oral contract in which Nidera agreed to supply Gedimex with empty bags at cost to facilitate shipment of the rice, and Gedimex later sued Nidera for breach of that oral contract. Id. Nidera moved to dismiss or stay the case pending arbitration, claiming that the subject matter of the dispute was covered by the arbitration clause in the rice purchase contracts. Id. The district court denied the motion and concluded that the bulk rice contracts were separate and independent from the empty bag contract, so the arbitration clause in the rice contracts did not apply, and Nidera appealed. Id.

Arguments

Nidera argued that the arbitration clause from the rice contracts controlled the oral contract for empty bags as well. Id.

Analysis and Holdings

The court agreed that the arbitration clauses from the rice contracts did not apply to the oral contract, because each of the clauses explicitly stated that it covered only disputes arising out of that particular contract, and that the dispute over the empty bag contract was not "a fairly direct result of the performance" of any of the duties set forth in the rice contracts. Id. at *2. The court reasoned that although the contracts were clearly related, the empty bag contract and the alleged breach of that contract could have existed even without the rice contracts, and therefore the arbitration clause from the rice purchase contracts did not encompass this dispute. Id.

The case was decided on August 28, 2008.