from the United States District Court for the Southern
District of Texas
HIGGINBOTHAM, GRAVES, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge
IQ Products Co. sued Defendant-Appellee WD-40 Co., and WD-40
filed a motion to compel arbitration. Over IQ's
objections, the district court granted the motion, finding
that the parties intended to arbitrate the "gateway
issue" of whether their claims were arbitrable. After
prevailing in arbitration, WD-40 filed a motion to confirm
its award. IQ filed a motion to vacate the award on the
ground that the arbitrators had exceeded their authority
because the claims were not arbitrable. The district court
denied IQ's motion to vacate and granted WD-40's
motion to confirm. IQ appealed, and we now affirm.
is a widely used household lubricant often packaged in
aerosol cans. WD-40 Company produces a lubricant concentrate
and develops specifications for the chemical formulas,
packaging, and manufacturing of its products, but uses
independent contract packagers to manufacture the products
according to those specifications. In 1992, IQ Products
Company, a longtime manufacturer of aerosol and non-aerosol
consumer products, began serving as a contract packager for
WD-40 branded products.
1996, WD-40 began to develop a new WD-40 formula using carbon
dioxide as the propellant rather than propane/butane. Around
the same time, WD-40 proposed that it and IQ enter into a
written contract concerning WD-40 products. IQ had concerns
about engineering challenges associated with replacing the
low-pressure propane/butane propellant with a high-pressure
carbon-dioxide propellant. IQ described its concerns in a
letter from IQ's Chief Executive Officer, Yohanne Gupta,
about negotiation of the proposed agreement:
As I am not aware of the extent of research and development
work which WD-40 may have conducted already for the new
formula, or the research and development work which WD-40
intends to conduct henceforth, and as I am not aware of the
new specifications for the WD-40 product, I suggest that this
Agreement be executed after this information is established.
Otherwise, my agreeing to the Agreement at present will
clearly not include the scope of work, cost of product, and
IQ's responsibilities for the new formula WD-40 products.
requested that the parties meet to discuss IQ's concerns.
parties' meeting on April 10, 1996, IQ agreed to execute
the Manufacturing and License and Product Purchase Agreement
(the "1996 Agreement"), but added a handwritten
notation expressly limiting the definition of the
"Product" to which the agreement applied to "a
penetrating, lubricating spray product identified and labeled
'WD-40' based on propane/butane-propelled formulation
and specifications." This revision was initialed by both
parties and dated April 10, 1996, the same date the 1996
Agreement was executed.
1996 Agreement is the only contract between the parties that
contains an arbitration clause. This clause provides:
Any controversy or claim arising out of, or related to this
Agreement, or any modification or extension thereof, shall be
settled by arbitration in accordance with the Arbitration
Rules of the American Arbitration Association . . . .
1996 Agreement also includes an integration clause, which
states that the agreement "may be amended or modified
only by a written instrument signed by an officer of both
receiving WD-40's assurances that it had performed
extensive testing of the carbon dioxide-based formula, IQ
began manufacturing WD-40 products with that formula and new
specifications. The parties did not consider executing any
other written agreement until 2011.
2011, WD-40 issued a Request for Proposal (RFP) to
restructure its supply-chain business model and asked its
packagers-including IQ-to bid for long-term supply
agreements. WD-40 selected IQ's bid in July 2011, and
gave written notice of its intent to terminate the 1996
Agreement to allow the parties to negotiate a new long-term
the parties' negotiations of the new long-term agreement,
IQ informed WD-40 that an internal audit had revealed a
problem with WD-40's packaging specifications. IQ
recommended that WD-40 address the alleged problem by
revising its design and specifications. IQ also expressed
concerns about WD-40's quality control specifications ...