Tenth Circuit Upholds Arbitration Clause in Drilling Equipment Dispute

    On January 2, 2012, the Tenth Circuit dismissed a Plaintiff’s case and compelled the parties to arbitrate a dispute overturning an Oklahoma District Court. EEC, Inc. v. Baker Hughes Oilfield Operations, Inc., This holding supports the federal policy embodied under the Federal Arbitration Act to encourage arbitration of private disputes, but recognizes that one-sided arbitration agreements may be unenforceable.

    The Tenth Circuit sorted out a twisted affair involving the underlying contract—governing the use of gas drilling equipment—and several delivery tickets signed upon receipt of the equipment, that each contained different arbitration provisions. The equipment user argued that the contracts were illusory because one of the arbitration contracts allowed for one-sided changing of the agreement by the owner. Although the Tenth Circuit recognized the possibility a contract would be illusory if it could be unilaterally altered, it found that in this case the earlier contract prohibited amendment without written agreement of both sides. Because the contract was not illusory, the Tenth Circuit held that the original arbitration agreement was enforceable and dismissed the case.

    While supporting arbitration generally, this case should warn individuals and businesses seeking to enjoy the benefits of arbitration that their contracting must comply with regular contract law.

For more information, contact Spencer Edelman.