## Facts

- Logan & Kanawha Coal Co., LLC (L&K) faxed Detherage Coal Sales, LLC (DCS) a coal purchase order stating that “terms & conditions on the following pages” were part of the contract, but the fax transmission contained only two pages and did not include any additional terms.
- DCS’s owner revised the quantity term on the purchase order, signed it, and returned it; L&K accepted the change, signed, and returned the executed purchase order, again transmitting only the cover sheet and the purchase order.
- L&K maintained a separate multi-page “Standard Terms & Conditions” document containing an arbitration clause; DCS did not receive it at the time of contract formation.
- Months later, L&K sent DCS a letter enclosing the executed purchase order and L&K’s Standard Terms & Conditions; DCS thereafter delivered coal, and a dispute later arose over performance.
- L&K demanded American Arbitration Association arbitration based on its Standard Terms & Conditions.
- DCS designated an arbitrator while expressly reserving objections to arbitrability, did not appear at the hearing, and moved to dismiss the arbitration for lack of any agreement to arbitrate.
- The arbitration panel proceeded and issued an award for L&K.
- In federal court, L&K moved to confirm and DCS moved to vacate; the district court vacated the award for lack of an enforceable arbitration agreement, and L&K appealed.

## Issues

1. Whether an enforceable agreement to arbitrate existed where the executed purchase order referenced “terms & conditions on the following pages,” but those pages were not provided at formation.
2. Whether L&K’s later delivery of its Standard Terms & Conditions and DCS’s continued performance established assent to modify the contract to include arbitration.
3. Whether prior dealings involving related Detherage-owned entities could supply assent to arbitrate for this contract.
4. Whether DCS’s limited participation in the arbitration process, while reserving objections, waived its right to contest arbitrability.
5. Whether vacatur was proper under the Federal Arbitration Act because the arbitrators exceeded their powers by issuing an award absent an arbitration agreement.

## Decision

- The Fourth Circuit affirmed the order vacating the arbitration award.
- The court agreed there was no binding agreement to arbitrate between L&K and DCS.
- The purchase order’s reference to “terms & conditions on the following pages” did not incorporate an arbitration clause because the referenced pages were not provided to DCS at contract formation.
- The later mailing of L&K’s Standard Terms & Conditions did not retroactively add arbitration; at most it proposed a modification lacking clear assent by DCS.
- Prior transactions with other Detherage-owned companies did not establish an arbitration obligation for DCS in the absence of a clear agreement in this contract.
- DCS did not waive its arbitrability objection by designating an arbitrator while consistently reserving its challenge.
- Because no arbitration agreement existed, the arbitrators lacked authority and the award was properly vacated as exceeding arbitral powers.

## Legal Principles

- Arbitration is consensual; a party may be compelled to arbitrate only when a valid agreement to arbitrate exists under ordinary contract principles, notwithstanding the federal policy favoring arbitration.
- Incorporation by reference requires that the referenced document be sufficiently identified and available at formation so the other party can assent; a reference to missing “following pages” does not incorporate unseen terms.
- Terms sent after contract formation do not become part of the contract absent clear assent to a modification; continued performance of an existing agreement, without more, is insufficient to accept a material new term like arbitration.
- Course of dealing may inform interpretation of existing terms but does not create an arbitration clause where the operative contract documents do not include or effectively incorporate one.
- Limited participation in arbitration proceedings does not create consent to arbitrate or waive arbitrability objections when the party consistently preserves its challenge.
- Under 9 U.S.C. § 10(a)(4), an arbitration award may be vacated when arbitrators exceed their powers by deciding disputes in the absence of a valid arbitration agreement.

## Conclusion

The Fourth Circuit upheld vacatur of the arbitration award because the parties’ executed purchase order did not incorporate L&K’s arbitration clause, later-sent terms and continued performance did not show assent to add arbitration, prior dealings could not supply missing consent, and DCS preserved its arbitrability objection, leaving the arbitrators without authority to issue a merits award.


Logan & Kanawha Coal Co., LLC v. Detherage Coal Sales, LLC, 514 F. App’x 365 (4th Cir. 2013)