In Re Cotton Yarn Antitrust Litigation

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: COTTON YARN ANTITRUST 

LITIGATION

ATLANTIC TEXTILES, on behalf of

itself and all others similarly

situated; SOUTH CAROLINA TEES,

INCORPORATED, on behalf of itself

and all others similarly situated;

LISA LESAVOY, Successor in Interest

to Apparel Sales & Printing,

Incorporated, on behalf of herself

and all others similarly situated;

ARMEN COMPANY, INCORPORATED, on

behalf of itself and all others  No. 05-2392

similarly situated; MEKFIR

INTERNATIONAL CORPORATION, on

behalf of itself and all others

similarly situated; DELL CARTIER

ASSOCIATES, INCORPORATED, on behalf

of itself and all others similarly

situated; PERFECT FIT GLOVE

COMPANY, LLC, individually and on

behalf of all others similarly

situated; RONALD LITTLE, formerly

doing business as Star Flight

Hosiery, Incorporated, on behalf of

himself and all others similarly



2 In Re: COTTON YARN ANTITRUST LITIGATION

situated; THOMASTON MILLS, 

INCORPORATED, by and through

Charles Crumley, Trustee in

Bankruptcy, on behalf of itself and

all others similarly situated,

Plaintiffs-Appellees,

v.

AVONDALE INCORPORATED; AVONDALE

MILLS, INCORPORATED, 

Defendants-Appellants,

and

FRONTIER SPINNING MILLS,

INCORPORATED; PARKDALE AMERICA,

LLC; PARKDALE MILLS,

INCORPORATED; UNIFI, INCORPORATED,

Defendants.



In Re: COTTON YARN ANTITRUST LITIGATION 3

In Re: COTTON YARN ANTITRUST 

LITIGATION

ATLANTIC TEXTILES, on behalf of

itself and all others similarly

situated; SOUTH CAROLINA TEES,

INCORPORATED, on behalf of itself

and all others similarly situated;

LISA LESAVOY, Successor in Interest

to Apparel Sales & Printing,

Incorporated, on behalf of herself

and all others similarly situated;

ARMEN COMPANY, INCORPORATED, on

behalf of itself and all others  No. 05-2393

similarly situated; MEKFIR

INTERNATIONAL CORPORATION, on

behalf of itself and all others

similarly situated; DELL CARTIER

ASSOCIATES, INCORPORATED, on behalf

of itself and all others similarly

situated; PERFECT FIT GLOVE

COMPANY, LLC, individually and on

behalf of all others similarly

situated; RONALD LITTLE, formerly

doing business as Star Flight

Hosiery, Incorporated, on behalf of

himself and all others similarly



4 In Re: COTTON YARN ANTITRUST LITIGATION

situated; THOMASTON MILLS, 

INCORPORATED, by and through

Charles Crumley, Trustee in

Bankruptcy, on behalf of itself and

all others similarly situated,

Plaintiffs-Appellees,

v.

FRONTIER SPINNING MILLS,

INCORPORATED, 

Defendant-Appellant,

and

AVONDALE INCORPORATED; AVONDALE

MILLS, INCORPORATED; PARKDALE

AMERICA, LLC; PARKDALE MILLS,

INCORPORATED; UNIFI, INCORPORATED,

Defendants.



Appeals from the United States District Court

for the Middle District of North Carolina, at Durham.

James A. Beaty, Jr., District Judge.

(MDL-04-1622-1-JAB)

Argued: September 18, 2006

Decided: October 12, 2007

Before WILLIAMS, Chief Judge, TRAXLER, Circuit Judge, and

Thomas E. JOHNSTON, United States District Judge for the

Southern District of West Virginia, sitting by designation.

Vacated and remanded by published opinion. Judge Traxler wrote the

opinion for the court, in which Chief Judge Williams concurred as to

Part II and in which Judge Johnston concurred as to Parts I, II(A), and

II(B)(1). Chief Judge Williams wrote an opinion dissenting from Part

In Re: COTTON YARN ANTITRUST LITIGATION 5

I of the opinion of the court. Judge Johnston wrote an opinion dissent-

ing from Parts II(B)(2) and II(B)(3) of the opinion of the court.

COUNSEL

ARGUED: Shari Ross Lahlou, CROWELL & MORING, L.L.P.,

Washington, D.C.; Jeffrey S. Cashdan, KING & SPALDING, L.L.P.,

Atlanta, Georgia, for Appellants. Larry Stephen McDevitt, VAN

WINKLE, BUCK, WALL, STARNES & DAVIS, P.A., Asheville,

North Carolina; Steven A. Asher, WEINSTEIN, KITCHENOFF &

ASHER, L.L.C., Philadelphia, Pennsylvania, for Appellees. ON

BRIEF: Jonathan A. Berkelhammer, Jonathan P. Heyl, SMITH

MOORE, L.L.P., Greensboro, North Carolina; John S. Darden, KING

& SPALDING, L.L.P., Atlanta, Georgia, for Appellants Avondale

Incorporated and Avondale Mills, Incorporated; James T. Williams,

Jr., Jennifer K. Van Zant, BROOKS, PIERCE, MCLENDON, HUM-

PHREY & LEONARD, L.L.P., Greensboro, North Carolina; Kent A.

Gardiner, CROWELL & MORING, L.L.P., Washington, D.C., for

Appellant Frontier Spinning Mills, Incorporated. Anthony J. Bolo-

gnese, Michael E. Gehring, BOLOGNESE & ASSOCIATES, L.L.C.,

Philadelphia, Pennsylvania; Joseph C. Kohn, Steven M. Steingard,

KOHN, SWIFT & GRAF, P.C., Philadelphia, Pennsylvania; Mindee

J. Reuben, WEINSTEIN, KITCHENOFF & ASHER, L.L.C., Phila-

delphia, Pennsylvania; Steven A. Kanner, William H. London,

Melinda J. Morales, MUCH, SHELIST, FREED, DENENBERG,

AMENT & RUBENSTEIN, P.C., Chicago, Illinois; Robert C. Cone,

TUGGLE, DUGGINS & MESCHAN, P.A., Greensboro, North Caro-

lina, for Appellees.

OPINION

TRAXLER, Circuit Judge:

Purchasers of cotton and poly-cotton yarn commenced a class

action against various North Carolina manufacturers of the yarns,

alleging that the manufacturers had engaged in a price-fixing conspir-

acy in violation of the Sherman Act. The manufacturers moved to dis-

6 In Re: COTTON YARN ANTITRUST LITIGATION

miss the suit as to certain plaintiffs, arguing that those plaintiffs were

bound by arbitration clauses that were broad enough to encompass the

antitrust claims. The district court denied the motion. The court con-

cluded that some of the contracts at issue did not include arbitration

clauses. As to those contracts that did include binding arbitration

clauses, the district court concluded that those clauses could not be

enforced because they prevented the plaintiffs from effectively vindi-

cating their statutory antitrust claims. Thus, the end result of the dis-

trict court’s ruling was that no plaintiff was required to submit its

antitrust claims to arbitration.

The manufacturers appeal. We conclude that all contracts at issue

in this appeal include a binding arbitration provision. We also con-

clude that the plaintiffs have failed to establish that the terms of the

arbitration provisions prevent them from effectively vindicating their

statutory rights. We therefore vacate the decision of the district court

and remand for further proceedings.

I.

We turn first to the question of whether the contracts at issue

include binding arbitration clauses. This case involves anti-trust

claims asserted against Avondale Inc., and Avondale Mills, Inc.

(together, "Avondale") and Frontier Spinning Mills, Inc.,1 by a puta-

tive class of those who purchased yarn from these manufacturers

between January 1, 1999, and February 11, 2004. The district court

concluded that all of the Avondale contracts at issue included binding

arbitration provisions, and that some of the Frontier contracts also

included binding arbitration agreements. However, the district court

concluded that the Frontier contracts with plaintiffs Atlantic Textiles,

South Carolina Tees, and Armen Company did not include binding

arbitration clauses.

Starting in 2000 and 2001, the purchasers involved in the Frontier

transactions arranged purchases over the phone, discussing quantity

and price. Frontier then sent written contracts (which refer to them-

1

Parkdale Mills, Inc., and Parkdale America, LLC were also named as

defendants. The Parkdale defendants settled with the plaintiffs before the

court ruled on the arbitration issue and are no longer a part of the case.

In Re: COTTON YARN ANTITRUST LITIGATION 7

selves as "sales contracts" and "confirmations") that confirmed the

terms discussed and included additional terms, including an arbitra-

tion clause. The contracts provided that they were subject to "The

Yarn Rules of 1989," J.A. 79, and stated that "[e]xcept to the extent

a future transaction is governed by a signed contract between the par-

ties, the terms and conditions hereof, including, without limitation,

the arbitration provision, shall govern all further transactions." J.A.

80. The contracts were signed by Frontier, but the record contains no

copy of the contracts signed by the purchasers. The contracts at issue,

however, state that acceptance of the product constitutes acceptance

of the contract terms.

New contracts were not sent with each shipment of yarn, because

orders often contemplated multiple separate shipments, but Frontier

did send invoices to the purchasers with each shipment. The invoices

are not signed by either party. They do not include an arbitration pro-

vision, nor do they explicitly incorporate the terms of the sales con-

tracts. According to an affidavit submitted by Frontier, however, the

order number referenced on the face of each invoice "is the last four

or five digits of the contract number." J.A. 746.

State contract law governs the question of whether the parties have

agreed to arbitrate, see First Options of Chicago, Inc. v. Kaplan, 514

U.S. 938, 944 (1995); Hightower v. GMRI, Inc., 272 F.3d 239, 242

(4th Cir. 2001), and the parties agree that North Carolina law governs

the Frontier transactions. Because the transactions involve the sale of

goods, they are governed by North Carolina’s version of the Uniform

Commercial Code.

The district court concluded that the contracts for sale in the Fron-

tier transactions were oral, formed over the phone when the parties

talked about price, quantity, and delivery. Because arbitration was not

mentioned in those conversations, the district court concluded that

arbitration was not a term of the oral agreements. Applying N.C. Gen.

Stat. Ann. § 25-2-207 (the UCC’s "battle of the forms" provision), the

district court concluded that the arbitration clauses included in the

contracts and confirmations sent by Frontier did not become part of

the contract because, under North Carolina law, a proposed arbitration

clause is a material alteration of a contract. See N.C. Gen. Stat. Ann.

§ 25-2-207(2)(b) (2006) (stating that additional terms contained in a

8 In Re: COTTON YARN ANTITRUST LITIGATION

confirmation of a contract between merchants become part of the con-

tract unless the terms materially alter the contract);2 Frances Hosiery

Mills, Inc. v. Burlington Indus., Inc., 204 S.E.2d 834, 842-43 (N.C.

1974) (concluding that an arbitration provision included in a contract

confirmation did not become part of the contract because the arbitra-

tion requirement materially altered the contract).

On appeal, Frontier contends that arbitration of disputes is a well-

established custom in the textile industry, and that, as a "usage of

trade," arbitration was automatically part of the agreement reached by

the parties. Frontier thus argues that because arbitration was already

part of the agreement, it was not an "additional term" that could be

knocked out as a material alteration under § 25-2-207(2)(b). We

agree.

N.C. Gen. Stat. Ann. § 25-1-201, which sets out the UCC’s general

definitions, defines an agreement as "the bargain of the parties in fact,

as found in their language or inferred from other circumstances,

including course of performance, course of dealing, or usage of trade

as provided in G.S. 25-1-303." N.C. Gen. Stat. Ann. § 25-1-201(b)(3)

(2006) (emphasis added).3 The authors of the definitive treatise on the

Uniform Commercial Code have explained that by virtue of § 2-201,

[t]he express agreement may be silent on a matter, yet usage

of trade . . . may fill the gap. . . .

***

The agreement of the parties includes that part of their

bargain that may be found in course of dealing, usage of

trade, or course of performance. These sources are relevant

2

The parties agree that they are "merchants" within the meaning of the

UCC.

3

North Carolina amended portions of its UCC effective October 1,

2006, well after the proceedings below concluded. See 2006 N.C. Sess.

Laws S.L. 2006-112 (S.B. 1555). Although the amendments changed the

language of some UCC sections relevant to this case, the changes are not

material to our analysis of the issues. We therefore refer to the current

version of the statutes at issue.

In Re: COTTON YARN ANTITRUST LITIGATION 9

not only to the interpretation of express contract terms but

may themselves constitute contract terms.

J. White & R. Summers, Uniform Commercial Code §§ 3-2, 3-3 (4th

ed. 1995) (footnote omitted). Accordingly, if arbitration is a usage of

trade in the textile industry, then it was included in the parties’ agree-

ment notwithstanding the fact that there was no mention of arbitration

in the oral agreements. And if arbitration was already part of the

agreement, the contracts and confirmations (which included an

explicit arbitration clause) did not add additional terms, and § 25-2-

207(2)(b) is irrelevant, at least as to the general requirement to submit

any claim to arbitration. The question, then, is whether arbitration of

disputes is a usage of trade in the textile industry.

"Usage of trade" is defined as "any practice or method of dealing

having such regularity of observance in a place, vocation, or trade as

to justify an expectation that it will be observed with respect to the

transaction in question." N.C. Gen. Stat. Ann. § 25-1-303(c) (2006).

"The existence and scope of such a usage must be proved as facts. If

it is established that such a usage is embodied in a trade code or simi-

lar record, the interpretation of the record is a question of law." Id.

In our view, Frontier has met its burden of proving that arbitration

is a usage of trade in the textile industry. The "Yarn Rules" incorpo-

rated in the Frontier sales contracts and confirmations are a collection

of "industry rules regarding contract terms and conditions and indus-

try norms" that have been gathered and reported by the American

Yarn Spinners Association for more than 50 years. J.A. 541. As to

arbitration, the Yarn Rules state that "[p]arties to the sale and pur-

chase of yarns are members of the textile industry, which has, for over

fifty years, settled disputes by arbitration in accordance with the terms

and conditions of contracts which have tended to become standard

and in accordance with equity and good conscience and the customs

and practices of the trade." J.A. 542-43. Thus, the Yarn Rules them-

selves are strong evidence that arbitration is a usage of trade in the

textile industry.

Moreover, numerous cases have noted that arbitration of disputes

is standard in the textile industry. See Chelsea Square Textiles, Inc.

v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 296 (2d Cir. 1999)

10 In Re: COTTON YARN ANTITRUST LITIGATION

("We believe that a textile buyer is generally on notice that an agree-

ment to purchase textiles is not only likely, but almost certain, to con-

tain a provision mandating arbitration in the event of disputes, and

must object to such a provision if it seeks to avoid arbitration."); Ste-

dor Enters., Ltd. v. Armtex, Inc., 947 F.2d 727, 733 (4th Cir. 1991)

("‘[I]n industries such as fabrics and textiles . . . the specialized nature

of the product has led to the widespread use of arbitration clauses and

knowledgeable arbitrators.’" (quoting Pervel Indus., Inc. v. T M Wall-

covering, Inc., 871 F.2d 7, 8 (2d Cir. 1989))); Genesco, Inc. v. T.

Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir. 1987) ("[T]he widespread

use of arbitration clauses in the textile industry puts a contracting

party . . . on notice that its agreement probably contains such a

clause."); Helen Whiting, Inc. v. Trojan Textile Corp., 121 N.E.2d

367, 370 (N.Y. 1954) ("[W]e can almost take judicial notice that arbi-

tration clauses are commonly used in the textile industry . . . ."). We

conclude that this evidence is sufficient to establish that arbitration is

a usage of trade in the textile industry.

The purchasers submitted affidavits establishing that their corpo-

rate officers had never heard arbitration mentioned in their dealings

with Frontier and that disputes were generally resolved informally.

One executive stated that, to his knowledge, arbitration is not custom-

arily used in the industry. The UCC, however, does not require that

a party to a contract have actual knowledge of a usage of trade before

that usage of trade is incorporated into the contract. See N.C. Gen.

Stat. Ann. § 25-1-303(c) (defining usage of trade as "any practice or

method of dealing having such regularity of observance in a place,

vocation or trade as to justify an expectation that it will be observed

with respect to the transaction in question." (emphasis added)); White

& Summers, § 3-3 ("[I]t is not necessary for both parties to be con-

sciously aware of the trade usage. It is enough if the trade usage is

such as to justify an expectation of its observance."); id. ("[A] party

can be chargeable with a usage of trade of which it is ignorant . . .").

Accordingly, the plaintiffs’ affidavits are insufficient to overcome

Frontier’s showing.

Because Frontier sufficiently established that arbitration is a usage

of trade, the oral contracts included an agreement to arbitrate notwith-

standing the fact that arbitration was not mentioned in the telephone

conversations. As to the general obligation to arbitrate, there is no

In Re: COTTON YARN ANTITRUST LITIGATION 11

reason to consider whether the arbitration clauses contained in the

sales contracts and confirmations would become part of the contract

under N.C. Gen. Stat. Ann. § 25-2-207(2)(b).4

The usage of trade established by Frontier is simply that arbitration

is the manner in which disputes are resolved in the textile industry,

and only that general obligation became part of the contract without

regard to § 25-2-207(2). The terms and conditions under which any

arbitration would proceed were set forth in the sales contracts and

confirmations, and those terms and conditions proceeding must be

viewed as additional terms subject to analysis under § 25-2-207(2).

4

Our resolution of this issue is not inconsistent with Supak & Sons

Manufacturing Co. v. Pervel Indus., 593 F.2d 135 (4th Cir. 1979), and

Frances Hosiery Mills, Inc. v. Burlington Industries, Inc., 204 S.E.2d

834 (N.C. 1974). In Supak and Frances Hosiery, the courts refused to

compel arbitration after applying § 25-2-207 and concluding that the

arbitration clauses materially altered the contracts. See Supak, 593 F.2d

at 136-37; Frances Hosiery, 204 S.E.2d at 842-43. Our colleague sug-

gests that Supak and Frances Hosiery established a per se rule that arbi-

tration is a material alteration of a contract and that this per se rule

prevents us from considering the facts of an individual case when deter-

mining whether an arbitration clause materially alters a contract. Supak

and Frances Hosiery may well establish a per se rule. In our judgment,

that rule governs only the inquiry under § 25-2-207(2)(b): whether addi-

tional terms contained in a confirmation will become part of a contract.

Because we have concluded that the oral agreement between the parties

included a obligation to submit disputes to arbitration, the arbitration

clause in the confirmation is not an additional term and § 25-2-207(2)(b)

simply does not factor into to our analysis on that point. The Supak rule

that arbitration clauses materially alter the terms of a contract that does

not otherwise include an arbitration requirement cannot somehow pre-

clude inquiry into the threshold question of whether the contract already

includes an arbitration requirement.

We also note that while Supak and Frances Hosiery both involved

contracts for the sale of textiles, neither court considered whether arbitra-

tion was a usage of trade in the textile industry, and there is no indication

that the issue was raised in either case. Given that usage of trade is a

question of fact that must be proved by the party asserting it, the courts’

silence on the usage of trade question in Supak and Frances Hosiery can-

not be viewed as rejection of the contention that arbitration is a usage of

trade in the textile industry.

12 In Re: COTTON YARN ANTITRUST LITIGATION

Because the oral agreement included the obligation to submit any dis-

putes to arbitration, we do not believe that the details of the arbitra-

tion proceeding materially altered the contract. Those additional terms

therefore became part of the contract under § 25-2-207. See N.C. Gen.

Stat. Ann. § 25-2-207(2)(b) (explaining that additional terms con-

tained in a confirmation of a contract between merchants become part

of the contract unless the terms materially alter the contract).5

Accordingly, we reverse the district court’s conclusion that there

was no binding agreement to arbitrate between the parties to the Fron-

tier transactions.

II.

We turn now to the broader question of whether the arbitration

agreements are enforceable.

It is by now well established that the Federal Arbitration Act

reflects "a liberal federal policy favoring arbitration agreements."

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,

24 (1983). Claims asserted under federal statutes generally are arbitra-

ble, so long as the wording of the arbitration agreement is sufficiently

broad to encompass the statutory claim and Congress has not indi-

cated its intent to prohibit arbitration of a given statutory claim. See

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). As

the Supreme Court has explained,

By agreeing to arbitrate a statutory claim, a party does not

forgo the substantive rights afforded by the statute; it only

submits to their resolution in an arbitral, rather than a judi-

cial, forum. It trades the procedures and opportunity for

review of the courtroom for the simplicity, informality, and

expedition of arbitration. We must assume that if Congress

intended the substantive protection afforded by a given stat-

5

Although the initial agreement to arbitrate disputes was (as a usage of

trade) part of the oral agreement, we believe that the subsequent written

confirmations setting out the terms governing such arbitration are suffi-

cient to satisfy the Federal Arbitration Act’s requirement of a written

agreement to arbitrate. See 9 U.S.C.A. § 2.

In Re: COTTON YARN ANTITRUST LITIGATION 13

ute to include protection against waiver of the right to a

judicial forum, that intention will be deducible from text or

legislative history. Having made the bargain to arbitrate, the

party should be held to it unless Congress itself has evinced

an intention to preclude a waiver of judicial remedies for the

statutory rights at issue.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.

614, 628 (1985) (citation omitted).

In Mitsubishi, the Supreme Court concluded that antitrust claims

arising from international transactions are suitable for arbitration. See

id. at 636-37. Although the Supreme Court has yet to directly con-

sider the arbitrability of domestic antitrust claims, the Court’s analysis

of the question in Mitsubishi is equally applicable to domestic anti-

trust claims, as confirmed by language in subsequent cases. See Gil-

mer, 500 U.S. at 28 ("The Sherman Act, the Securities Exchange Act

of 1934, RICO, and the Securities Act of 1933 all are designed to

advance important public policies, but . . . claims under those statutes

are appropriate for arbitration."); Shearson/American Express, Inc. v.

McMahon, 482 U.S. 220, 232 (1987) ("In Mitsubishi, . . . we recog-

nized that arbitral tribunals are readily capable of handling the factual

and legal complexities of antitrust claims, notwithstanding the

absence of judicial instruction and supervision."); id. at 239 (explain-

ing that "[a]lthough the holding in Mitsubishi was limited to the inter-

national context, much of its reasoning is equally applicable" to the

question of whether domestic RICO claims may be subject to arbitra-

tion (citation omitted)); see also Kotam Elec., Inc. v. JBL Consumer

Prods., 93 F.3d 724, (11th Cir. 1996) (en banc) ("In light of Mitsu-

bishi and its progeny . . . , we hold that . . . arbitration agreements

concerning domestic antitrust claims are enforceable."). We therefore

have no difficulty concluding that domestic antitrust claims, as a

class, are suitable for arbitration. And as the district court concluded,

the arbitration clauses at issue in this case are broad enough to encom-

pass the plaintiffs’ antitrust claims. Thus, as an initial matter, it would

appear that the claims asserted by the plaintiffs should be subject to

arbitration.

However, even if an arbitration clause is broad enough to encom-

pass a statutory claim for which Congress has not precluded arbitra-

14 In Re: COTTON YARN ANTITRUST LITIGATION

tion, arbitration of the claim will not be compelled if the prospective

litigant cannot effectively vindicate his statutory rights in the arbitral

forum. See Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79,

90 (2000) ("[E]ven claims arising under a statute designed to further

important social policies may be arbitrated because so long as the pro-

spective litigant effectively may vindicate his or her statutory cause

of action in the arbitral forum, the statute serves its functions." (inter-

nal quotation marks and alterations omitted)). The party seeking to

avoid arbitration bears the burden of establishing that he cannot effec-

tively vindicate his statutory rights under the terms of an arbitration

agreement. See Green Tree, 531 U.S. at 92; Booker v. Robert Half

Int’l, Inc., 413 F.3d 77, 81 (D.C. Cir. 2005). Mere speculation about

how the terms of the arbitration agreement might be construed by the

arbitrator or how the agreement might affect the prospective litigant

is insufficient to carry that burden. See Green Tree, 531 U.S. at 90-91

(explaining that while "the existence of large arbitration costs could

preclude a litigant . . . from effectively vindicating her federal statu-

tory rights in the arbitral forum . . . [,] the record does not show that

Randolph will bear such costs if she goes to arbitration. . . . The ‘risk’

that Randolph will be saddled with prohibitive costs is too speculative

to justify the invalidation of an arbitration agreement.").

Although the precise language varies from contract to contract, all

of the arbitration clauses at issue in this case prevent joinder — multi-

ple plaintiffs may not join their claims against a single defendant, nor

may a single plaintiff bring claims against multiple defendants in a

single proceeding. The district court concluded that these provisions

prevented the plaintiffs from effectively vindicating their antitrust

claims, and the court therefore declined to enforce the arbitration

clauses.

A.

We first consider whether the no-joinder terms of the arbitration

agreements prevent the plaintiffs from effectively vindicating their

statutory rights.

The plaintiffs contend that because they allege the existence of a

price-fixing conspiracy, the inability to join all defendants in a single

proceeding prevents them from vindicating their statutory rights.

In Re: COTTON YARN ANTITRUST LITIGATION 15

They claim that "[s]evering the conspiracy into separate parts would

deprive Plaintiffs of the full benefit of their proof, and make the prov-

ing of the conspiracy, if not impossible, extremely difficult." Brief of

Appellees at 31. Because the plaintiffs seek damages caused by the

"conspiratorial actions of all the Defendants," the plaintiffs contend

that individual arbitration proceedings would "[s]hift[ ] the focus . . .

from the ‘combined acts’ of the Defendants to the ‘individual acts’ of

the single Defendant before the arbitral forum" and would thereby

"eviscerate" their antitrust conspiracy claims. Brief of Appellees at

32. We find this argument unpersuasive.

Contrary to the argument of the plaintiffs, we do not believe that

the plaintiffs’ inability under the terms of the arbitration clauses to

sue both remaining defendants in a single proceeding affects their

ability to prove a price-fixing conspiracy. Preliminarily, we note that

the antitrust statutes themselves do not grant private plaintiffs a right

to proceed against all co-conspirators in a single action; the vagaries

of the relevant venue and service-of-process requirements will some-

times require the dismissal of claims against an alleged co-

conspirator. See, e.g., Piedmont Label Co. v. Sun Garden Packing

Co., 598 F.2d 491, 495 (9th Cir. 1979) (concluding that claim against

one alleged co-conspirator must be dismissed because venue was

improper); cf. Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 384

(1953) ("Congress . . . placed definite limits on venue in treble dam-

age actions. Certainly Congress realized in so doing that many such

cases would not lie in one district as to all defendants, unless venue

was waived. It must, therefore, have contemplated that such proceed-

ings might be severed and transferred or filed in separate districts

originally."). Accordingly, the no-joinder terms of the arbitration

agreements do not deprive the plaintiffs of any statutorily-conferred

right.

Moreover, while many antitrust plaintiffs are able to proceed

against all co-conspirators in a single action, the fact remains that co-

conspirators are not necessary parties; a plaintiff can prove the exis-

tence of a conspiracy in an action against just one of the members of

the conspiracy. See Fed R. Civ. P. 20; Fed. R. Civ. P. 23; see also

Georgia v. Pennsylvania R.R. Co., 324 U.S. 439, 463 (1945) ("In a

suit to enjoin a[n anti-trust] conspiracy not all the conspirators are

necessary parties defendant."); Wilson P. Abraham Constr. Corp. v.

16 In Re: COTTON YARN ANTITRUST LITIGATION

Tex. Indus., Inc., 604 F.2d 897, 904 n.15 (5th Cir. 1979) ("Antitrust

coconspirators are jointly and severally liable for all damages caused

by the conspiracy to which they were a party. A private plaintiff need

not sue all coconspirators but may choose to proceed against any one

or more of them." (citations omitted)). The presence of only one

defendant in a given arbitration proceeding thus in no sense would

prevent the plaintiffs from proving the existence of a conspiracy.

Moreover, it is important to note that because the Parkdale defen-

dants have settled, only two defendants remain. Consequently, each

plaintiff would be required to pursue at most two arbitration proceed-

ings in the place of one lawsuit. And because the defendants would

be jointly and severally liable, a plaintiff who finds pursuing two

actions unduly burdensome could simply seek to hold one defendant

liable for all damages caused by the conspiracy.6

The district court relied on Continental Ore Co. v. Union Carbide

and Carbon Corp., 370 U.S. 690 (1962), and Jung v. Association of

American Medical Colleges, 300 F. Supp. 2d 119 (D.D.C. 2004), in

support of its conclusion that the anti-joinder provisions prevented the

plaintiffs from effectively vindicating their rights under the Sherman

Act. We agree with the manufacturers that these cases are inapposite.

Continental Ore and Jung both involved attempts to dissect a single

conspiracy claim into pieces, effectively treating the subparts of the

claim as separate suits.

In Jung, the court rejected the defendant’s attempt to compel arbi-

tration of only one part of a larger conspiracy claim, but the court did

not address the propriety of requiring a plaintiff to proceed against co-

conspirators individually. See Jung, 300 F. Supp. 2d at 155. In this

6

Although the plaintiffs do not specifically address it, we find nothing

in the record that would permit us to conclude that the prohibition against

joinder of plaintiffs provision would prevent the plaintiffs from vindicat-

ing their statutory rights. The plaintiffs did not initially seek to pursue a

class action or even to file jointly their initial complaints. Instead, they

filed seven separate actions, six in the Middle District of North Carolina

and one in the Eastern District of North Carolina. Thus, the plaintiffs’

own conduct suggests that they believed joinder of plaintiffs was unnec-

essary to pursue their actions successfully.

In Re: COTTON YARN ANTITRUST LITIGATION 17

case, the defendants seek arbitration of all issues relating to the exis-

tence of a price-fixing conspiracy; that there must be separate arbitra-

tion proceedings for each defendant simply does not amount to an

improper splitting of a single conspiracy claim. In Continental Ore,

the court made it clear that when considering the conduct of any one

defendant, the fact-finder must be able to consider not only the

actions of that one defendant, but those of the entire conspiracy, look-

ing at "the whole picture and not merely at the individual figures in

it." 370 U.S. at 699 (internal quotation marks omitted). Nothing in

Continental Ore, however, suggests that a comprehensive view of the

entire conspiracy can be made only if all of the co-conspirators are

parties to the action.

As noted above, co-conspirators are not necessary parties in an

action against a single conspirator. There is nothing in the arbitration

agreements that would prevent the plaintiffs from presenting evidence

about the actions of non-party defendants in order to establish the

existence of the price-fixing conspiracy alleged by the plaintiffs.

Accordingly, the mere fact that the plaintiffs may not join the defen-

dants in a single arbitration proceeding does not prevent the plaintiffs

from effectively vindicating their statutory rights. While individual

proceedings may be less efficient than a single proceeding, that ineffi-

ciency is a function of Congress’s preference for resolution of dis-

putes by arbitration and cannot be a basis for defeating the arbitration

that Congress was seeking to encourage. See Moses H. Cone Mem’l

Hosp., 460 U.S. at 20 ("It is true, therefore, that if Mercury obtains

an arbitration order for its dispute, the Hospital will be forced to

resolve these related disputes in different forums. That misfortune,

however, is not the result of any choice between the federal and state

courts; it occurs because the relevant federal law requires piecemeal

resolution when necessary to give effect to an arbitration agree-

ment.").

We recognize, of course, that requiring each plaintiff to proceed

separately against each defendant will entail additional expense. The

possibility that a party to an arbitration clause will be inconvenienced

and will incur some extra expense, however, does not necessarily

mean that the party cannot effectively vindicate its statutory rights

through arbitration. For example, we have held that the inability to

bring a class action does not in and of itself render an arbitration

18 In Re: COTTON YARN ANTITRUST LITIGATION

agreement unenforceable, see, e.g., Adkins v. Labor Ready, Inc., 303

F.3d 496, 503 (4th Cir. 2002); Snowden v. Checkpoint Check Cash-

ing, 290 F.3d 631, 638-39 (4th Cir. 2002), but we have acknowledged

that if a party could demonstrate that the prohibition on class actions

likely would make arbitration prohibitively expensive, such a show-

ing could invalidate an agreement, see Adkins, 303 F.3d at 502-03.

The plaintiffs in this case developed no evidentiary record below

establishing how much it would cost to proceed individually against

each defendant or how those increased costs would affect their ability

to proceed in arbitration. The absence of an evidentiary record on this

issue leaves us with mere speculation about the actual cost of individ-

ual proceedings and something little better than a wild guess about the

ability of the corporate plaintiffs to bear those speculative costs. This

kind of uninformed speculation about cost falls far short of satisfying

the plaintiffs’ burden of proving that the costs of proceeding individu-

ally against the defendants would be prohibitive and thus would pre-

vent them from effectively vindicating their statutory rights. See

Green Tree, 531 U.S. at 90-91; Bradford v. Rockwell Semiconductor

Sys., Inc., 238 F.3d 549, 558 (4th Cir. 2001) (affirming district court’s

decision to compel arbitration because plaintiff "has offered no evi-

dence that he was unable to pay the $4,470.88 that he was billed by

the AAA, or that the fee-splitting provision deterred him from pursu-

ing his statutory claim or would have deterred others similarly situ-

ated" (emphasis added)).

The plaintiffs also suggest that when the no-joinder provisions are

considered in light of the restricted discovery available in arbitration,

it becomes apparent that the prohibition against joinder prevents them

from effectively vindicating their statutory rights. The plaintiffs argue

that no third-party discovery would be available in arbitration. Given

the importance of discovery to establishing an antitrust claim, see,

e.g., In re Uranium Antitrust Litig., 480 F. Supp. 1138, 1155 (N.D.

Ill. 1979) ("[T]he heart of any American antitrust case is the discov-

ery of business documents. Without them, there is virtually no case."

(internal quotation marks omitted)), the plaintiffs contend that the

limited discovery available in arbitration would prevent them from

proving their antitrust claims. We disagree.

While discovery generally is more limited in arbitration than in liti-

gation, that fact is simply one aspect of the trade-off between the

In Re: COTTON YARN ANTITRUST LITIGATION 19

"procedures and opportunity for review of the courtroom [and] the

simplicity, informality, and expedition of arbitration" that is inherent

in every agreement to arbitrate. Mitsubishi, 473 U.S. at 628. Because

limited discovery is a consequence of perhaps every agreement to

arbitrate, it cannot, standing alone, be a reason to invalidate an arbi-

tration agreement. And while the plaintiffs contend that antitrust

claims are uniquely dependent on the ability to engage in wide-

ranging discovery, the Supreme Court has at least implicitly rejected

the argument that discovery limitations render antitrust claims unsuit-

able for arbitration. See Gilmer, 500 U.S. at 31 ("Gilmer also com-

plains that the discovery allowed in arbitration is more limited than

in the federal courts, which he contends will make it difficult to prove

discrimination. It is unlikely, however, that age discrimination claims

require more extensive discovery than other claims that we have

found to be arbitrable, such as RICO and antitrust claims.").

Even if there could be a particular case where the restricted discov-

ery available in arbitration would effectively prevent a plaintiff from

proving his antitrust claim, the plaintiffs have fallen far short of estab-

lishing that this is such a case. The plaintiffs do not contend that they

would be unable to obtain adequate discovery from the defendant

manufacturer in each of the separate arbitration proceedings, and they

do not identify any other entity that might have discoverable informa-

tion.7 Thus, even in separate arbitration proceedings, the plaintiffs

will be able to obtain discovery from each of the defendants. Because

the plaintiffs have identified no arbitration rule that would prevent

them from introducing in a proceeding against one manufacturer

information obtained from another manufacturer, the plaintiffs simply

have not established that they will be handicapped by the level of dis-

covery available in arbitration to such an extent that they would be

unable to prove their claims.

7

We also note the possibility that discovery could be compelled by the

district court. See COMSAT Corp. v. Nat’l Sci. Found., 190 F.3d 269,

276 (4th Cir. 1999) (noting that while arbitrators generally lack the abil-

ity to compel third parties to provide pre-trial discovery materials, we

have nonetheless "contemplated that a party might, under unusual cir-

cumstances, petition the district court to compel pre-arbitration discovery

upon a showing of special need or hardship").

20 In Re: COTTON YARN ANTITRUST LITIGATION

As noted above, the plaintiffs bear the burden of showing that the

terms of the arbitration agreement would preclude them from effec-

tively vindicating their statutory rights. See Green Tree, 531 U.S. at

92. This burden is a substantial one and cannot be satisfied by a mere

listing of ways that the arbitration proceeding will differ from a court

proceeding, or by speculation about difficulties that might arise in

arbitration. See id.; cf. Microstrategy, Inc. v. Lauricia, 268 F.3d 244,

251-52 (4th Cir. 2001) ("[T]he party opposing arbitration bears a

heavy burden of proving waiver. . . . [T]hat proof must be concrete,

not merely speculative." (internal quotation marks omitted). The

plaintiffs’ arguments about the discovery limitations attendant to arbi-

tration proceedings fall well short of satisfying their burden. Accord-

ingly, we conclude that the plaintiffs have failed to establish that the

no-joinder provision of the arbitration agreements prevents them from

effectively vindicating their statutory rights. The district court there-

fore erred when concluding that the restriction against joinder of par-

ties rendered the arbitration agreements unenforceable.

B.

We now consider the issue of the contractually-established limita-

tions period. The Clayton Act, 15 U.S.C.A. § 15b (West 1997), estab-

lishes a four-year limitations period in which to bring a claim for a

violation of the Sherman Act, 15 U.S.C.A. § 1 (West 1997). The arbi-

tration agreements, however, establish a one-year period in which

claims must be brought. The plaintiffs contend that the shortened lim-

itations period renders the arbitration agreements unenforceable.8

8

We note that South Carolina law prohibits contractual shortening of

statutes of limitation. See S.C. Code Ann. § 15-3-140 (West 2005). If the

South Carolina statute applies to the contracts that are subject to South

Carolina law, a question that we need not and do not decide here, then

the shortened limitation period could not be applied to the South Caro-

lina plaintiffs and thus would not impair their ability to vindicate their

statutory rights. But because North Carolina has no similar prohibition

against contractual shortening of statutory limitation periods, we must

still consider the enforceability of the one-year limitation period con-

tained in the arbitration agreements.

In Re: COTTON YARN ANTITRUST LITIGATION 21

1.

As a general rule, statutory limitations periods may be shortened by

agreement, so long as the limitations period is not unreasonably short.

See Missouri, Kan., & Tex. Ry. Co. v. Harriman Bros., 227 U.S. 657,

672 (1913); Atlantic Coast Line R. Co. v. Pope, 119 F.2d 39, 44 (4th

Cir. 1941). There is no language in the Clayton Act that would pre-

vent parties from agreeing contractually to a shortened limitations

provision. See 15 U.S.C.A. § 15b; cf. Stephan v. Goldinger, 325 F.3d

874, 876-77 (7th Cir. 2003) (concluding that statutory limitations

period established by the Commodity Exchange Act could be contrac-

tually shortened, noting that language of statute did not preclude

shortening). The question, then, is whether the one-year period is rea-

sonable.

Courts have frequently found contractual limitations periods of one

year (or less) to be reasonable. See, e.g., Thurman v. DaimlerChrys-

ler, Inc., 397 F.3d 352, 357-59 (6th Cir. 2004) (finding a 6-month

limitation period to be reasonable in a case raising claims under 42

U.S.C.A. § 1981); Northlake Reg’l Med. Ctr. v. Waffle House Sys.

Employee Benefit Plan, 160 F.3d 1301, 1303-04 (11th Cir. 1998)

(finding reasonable a 90-day limitations term contained in an ERISA-

governed employee benefits plan); see also Morrison v. Circuit City

Stores, Inc., 317 F.3d 646, 673 n.16 (6th Cir. 2003) (en banc) (enforc-

ing one-year limitations provision contained in arbitration agreement).

Moreover, North Carolina has by statute deemed one-year limitations

periods reasonable in contracts, like the ones at issue here, that are

subject to the Uniform Commercial Code. See N.C. Gen. Stat. Ann.

§ 25-2-725(1) (2006) (permitting parties to contracts subject to the

UCC to shorten a statute of limitations to not less than one year).

Because we are considering the shortening of a federal statute of limi-

tations, the North Carolina statute is not determinative of the issue.

Nonetheless, that the contractual limitations period is per se reason-

able under the state law that governs the contract formation provides

strong support for the reasonableness of the contractual limitations

period.

The plaintiffs contend that the one-year period is "patently unrea-

sonable," Brief of Appellees at 45, because it is a drastic reduction

from the otherwise applicable four-year statutory limitations period.

22 In Re: COTTON YARN ANTITRUST LITIGATION

According to the plaintiffs, there is an "increased chance" that their

complaint might be found to have been filed outside the limitations

period and that the shortened limitations period "could have the effect

of greatly reducing the amount of recoverable damages." Brief of

Appellees at 44 (emphasis added).

The plaintiffs’ arguments amount to little more than an observation

that the limitations period under the arbitration agreements is shorter

than that provided by federal law and the unremarkable recognition

that limitations provisions affect the amount of damages that may be

recovered. These same arguments, of course, could be made every

time a contract establishes a shorter limitations period than that of an

otherwise applicable statute. Given the established rule that statutory

limitations periods can be contractually shortened, so long as the con-

tractual period is not unreasonably short, the plaintiffs’ remarking-on-

the-obvious cannot suffice to carry their burden of establishing that

the contractual limitations period is unreasonable.

Antitrust is a complex area of the law, and antitrust trials (or arbi-

tration proceedings) can be long and involved. There is no basis in the

record, however, for us to conclude that the same difficulty and com-

plexity also attends to the plaintiff’s initial determination to pursue an

antitrust claim, so as to make a one-year limitations period unreason-

ably short. Accordingly, we conclude that one-year limitations period

established in the arbitration agreements is reasonable.

2.

Our conclusion that the contractual limitations period is reasonable,

however, does not fully resolve the plaintiffs’ challenges to the arbi-

tration agreements. "By agreeing to arbitrate a statutory claim, a party

does not forgo the substantive rights afforded by the statute; it only

submits to their resolution in an arbitral, rather than a judicial,

forum." Mitsubishi, 473 U.S. at 628. Thus, we must consider whether

the contractual limitations period is inconsistent with any substantive

rights conferred under the antitrust laws. If it is, then the contractual

limitations period would not be enforceable. See, e.g., Kristian v.

Comcast Corp., 446 F.3d 25, 48 (1st Cir. 2006) (in case involving

arbitration of antitrust claims, concluding that arbitration agreement’s

ban on treble damages was unenforceable, because right to recover

In Re: COTTON YARN ANTITRUST LITIGATION 23

treble damages is a substantive right); Robert Half Int’l, 413 F.3d at

83 (concluding that arbitration agreement’s ban on punitive damages

was not enforceable because civil rights statute under which the plain-

tiff was proceeding provided for punitive damages); Hadnot v. Bay,

Ltd., 344 F.3d 474, 478 & n.14 (5th Cir. 2003) (concluding that arbi-

tration agreement’s ban on punitive damages was not enforceable as

to the plaintiff’s Title VII claim); Morrison, 317 F.3d at 673 (con-

cluding that arbitration agreement’s restriction on the damages recov-

erable was not enforceable because it was inconsistent with the

damages authorized by Title VII).

Section 15b was added to the antitrust statutes in 1955, more than

forty years after "the original substantive liabilities were established."

American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 558 n.29 (1974),

and we have found only two cases where courts have considered

whether § 15b is substantive or procedural. In Kristian v. Comcast

Corp., the First Circuit concluded that an antitrust plaintiff’s chal-

lenge to the one-year limitations period included in the arbitration

agreement must be submitted to the arbitrator and did not prevent the

court from compelling arbitration. In the course of its discussion,

however, the court described the limitations issue as a procedural one.

See Kristian, 446 F.3d at 43. And the Eighth Circuit, in a case decided

not long after § 15b was enacted (but which did not involve questions

of arbitration), likewise viewed the limitations period as procedural

rather than substantive. See Kansas City, Mo. v. Federal Pac. Elec.

Co., 310 F.2d 271, 282-83 (8th Cir. 1962).

We also believe that § 15b should not be viewed as establishing

substantive rights.9 As noted above, there was no federal limitations

9

While the legislative history is not determinative of the question, we

note that when § 15b was enacted, at least some members of Congress

viewed it as purely procedural in nature, not substantive. See American

Pipe & Constr. Co. v. Utah, 414 U.S. 538, 558 n.29 (1974) ("During

debate a member of the House Judiciary Committee reporting the bill

was asked, ‘[A]m I correct in assuming that this limitation provided by

this amendment is strictly a procedural limitation and has nothing to do

with substance?’ to which he replied: ‘It was the specific purpose of the

committee in reporting this bill to in no way affect the substantive rights

of individual litigants. It is simply a procedural change and suggested

with the thought of setting up a uniform statute of limitations. That is the

sole purpose.’" (quoting 101 Cong. Rec. 5131 (1955) (remarks of Reps.

Murray and Quigley))).

24 In Re: COTTON YARN ANTITRUST LITIGATION

period during the early life of the Sherman Act. Until § 15b was

enacted in 1955, private antitrust actions were governed by the most

analogous state statute of limitations. See, e.g., id. at 282; Moviecolor

Ltd. v. Eastman Kodak Co., 288 F.2d 80, 82 (2d Cir. 1961). If Con-

gress was content for so long to permit antitrust plaintiffs to be sub-

ject to different limitations periods (which of course affected the

amount of damages that could be recovered), it seems difficult to con-

clude that Congress, by merely establishing a uniform limitations

period, intended to vest plaintiffs in all antitrust cases with a substan-

tive and non-waivable right to wait four years before bringing suit and

to recover a full four years’ worth of damages.

Accordingly, we conclude that § 15b does not establish substantive

rights. A contractual modification of the otherwise applicable limita-

tions therefore is not foreclosed by the Supreme Court’s admonition

that arbitration agreements may not dispossess plaintiffs of the sub-

stantive rights established by the statute under which their claims

arose.

3.

While statutory claims are arbitrable unless Congress has specifi-

cally provided otherwise, agreements to arbitrate statutory claims may

nonetheless be unenforceable if the terms of the agreement prevent

the plaintiff from effectively vindicating his statutory rights. See

Green Tree, 531 U.S. at 90; Mitsubishi, 473 U.S. at 636-37. Accord-

ingly, we must now determine whether the one-year limitations

period, though generally reasonable, could somehow prevent the

plaintiffs from effectively vindicating their statutory rights. The plain-

tiffs’ arguments on this point are the same as those urged in support

of their view that the limitations period is unreasonable. They contend

that their antitrust claims might be found to be untimely filed under

a one-year limitations period and that the one-year period could sub-

stantially reduce the amount of damages recoverable.

Implicit in the plaintiffs’ argument about the amount of damages

recoverable is the view that a plaintiff’s rights under the antitrust laws

are vindicated only if the plaintiff can recover damages for the full

four-year period permitted under the Clayton Act. We disagree. We

have explained that the "crucial inquiry" when considering a claim

In Re: COTTON YARN ANTITRUST LITIGATION 25

that an arbitration agreement prevents a plaintiff from vindicating his

statutory rights "is whether the particular claimant has an adequate

and accessible substitute forum in which to resolve his statutory

rights." Bradford, 238 F.3d at 556. Given our conclusion that the

Clayton Act’s four-year limitation period does not create substantive,

non-waivable rights for antitrust plaintiffs, we cannot conclude that

the arbitral forum is inadequate or inaccessible merely because the

plaintiff may recover a lesser quantum of damages than he might have

in a judicial forum.

Also implicit in the plaintiffs’ arguments and the decision of the

district court is the assumption that if the plaintiffs’ claims are

untimely under the terms of the arbitration agreements, then the plain-

tiffs necessarily cannot effectively vindicate their statutory rights in

the arbitral forum. As noted above, the relevant question is whether

the arbitration agreement provides the plaintiff with an "adequate and

accessible substitute forum." Id. We have recognized the possibility

that very high arbitration costs could render the arbitral forum inac-

cessible to a given plaintiff, see, e.g., Adkins, 303 F.3d at 502-03;

Bradford, 238 F.3d at 556, but it seems quite a different matter to

allow a plaintiff’s failure to commence an action within the reason-

able contractually-established limitations period to render an other-

wise adequate and appropriate arbitral forum suddenly inadequate or

inaccessible. Cf. In re Vial, 115 F.3d 1192, 1194 n.5 (4th Cir. 1997)

(en banc) (explaining that while a federal prisoner may file a petition

seeking relief under 28 U.S.C.A. § 2241 if § 2255 is inadequate or

ineffective, § 2255 is not inadequate simply because the prisoner is

procedurally barred from obtaining relief under § 2255). To do so

would be to give plaintiffs a back-door escape from the effects of

their agreement to arbitrate and would be inconsistent with the strong

federal policy favoring arbitration. See Moses H. Cone, 460 U.S. at

24 (explaining that the Federal Arbitration Act reflects "a liberal fed-

eral policy favoring arbitration agreements"). We need not, however,

resolve this question at this point in the proceedings, because, as we

will explain below, the plaintiffs have failed to establish that their

claims are untimely under the one-year limitations provisions set forth

in the arbitration agreements.

Generally speaking, an antitrust claim arises and the statute of limi-

tations "begins to run when a defendant commits an act that injures

26 In Re: COTTON YARN ANTITRUST LITIGATION

a plaintiff’s business." Zenith Radio Corp. v. Hazeltine Research,

Inc., 401 U.S. 321, 338 (1971). "In the context of a continuing con-

spiracy to violate the antitrust laws, . . . this has usually been under-

stood to mean that each time a plaintiff is injured by an act of the

defendants a cause of action accrues to him to recover the damages

caused by that act and that, as to those damages, the statute of limita-

tions runs from the commission of the act." Id. Thus, in cases like this

one involving allegations of "a price-fixing conspiracy that brings

about a series of unlawfully high priced sales over a period of years,

each overt act that is part of the violation and that injures the plaintiff,

e.g., each sale to the plaintiff, starts the statutory period running

again." Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997) (internal

quotation marks omitted).

The complaint that consolidated the various individual actions

brought by the plaintiffs was filed in January 2005, but the district

court’s docket reveals that the individual complaints were filed in

March, April, May, and August of 2004. Under Klehr, then, the plain-

tiffs’ claims would be timely even under a one-year limitations period

so long as the plaintiffs made a purchase from the Defendants within

a year before the complaints were filed. For the plaintiffs to carry

their burden of showing that the terms of the arbitration agreement

would prevent them from effectively vindicating their statutory rights,

they should at least demonstrate that they made no purchases in the

year before the complaints were filed. The plaintiffs, however, have

made no effort to make such a showing. There is no factual record to

support their assertion that their claims might be time-barred, or even

an explanation of why they believe their claims might be barred.

Moreover, the record contains evidence of sales taking place as late

as November 2003 and January 2004, well within a year before the

complaints were filed. Thus, at least as to some of the plaintiffs, there

is evidence affirmatively demonstrating that a one-year statute of lim-

itations would not prevent them from proceeding on their antitrust

claims.

The plaintiffs’ contention that a one-year limitations period would

prevent them from proceeding on their antitrust claims also fails to

account for the doctrine of fraudulent concealment, which is read into

all federal statutes of limitations, including § 15b, see Holmberg v.

In Re: COTTON YARN ANTITRUST LITIGATION 27

Armbrecht, 327 U.S. 392, 397 (1946); Supermarket of Marlinton, Inc.

v. Meadow Gold Dairies, Inc., 71 F.3d 119, 122 (4th Cir. 1995).

The purpose of the fraudulent concealment tolling doctrine

is to prevent a defendant from concealing a fraud, or com-

mitting a fraud in a manner that it concealed itself until the

defendant could plead the statute of limitations to protect it.

Thus, pursuant to this doctrine, when the fraud has been

concealed or is of such a character as to conceal itself, and

the plaintiff is not negligent or guilty of laches, the limita-

tions period does not begin to run until the plaintiff discov-

ers the fraud.

Meadow Gold Dairies, 71 F.3d at 122 (citation, internal quotation

marks and alteration omitted).

The plaintiffs’ complaint alleges that the Defendants fraudulently

concealed their anti-competitive activities until February 11, 2004,

when a shareholder in Parkdale (the manufacturer that settled before

this appeal was filed) announced that Parkdale had participated in

activities with competitors that may have violated antitrust laws. As

noted above, the class action complaint was filed in January 2005 and

the individual complaints were filed in 2004. If the fraudulent con-

cealment doctrine applies to the contractually-established limitations

period,10 the plaintiffs’ claim would appear to be timely filed.

We need not and do not decide whether the doctrine of fraudulent

concealment applies in this case. The arbitration agreements provide

that "[a]ll issues relating to Statute of Limitations barring or prevent-

ing the commencement of proceedings are not arbitrable and shall be

determined by the Court and not the arbitrators." J.A. 202.11 Questions

10

See Stephan v. Goldinger, 325 F.3d 874, 877 (7th Cir. 2003) (con-

cluding that "[o]ne year . . . is not an unreasonably short time for bring-

ing a suit, at least given tolling doctrines that we assume . . . would be

read into a contractual limitations period just as they are into a statutory

one, unless negatived by clear language" (citations omitted)).

11

The quoted language comes from a Frontier arbitration agreement.

The relevant language in the Avondale contracts is largely identical. See

J.A. 268.

28 In Re: COTTON YARN ANTITRUST LITIGATION

about the timeliness of the action and the applicability of the doctrine

of fraudulent concealment will thus be determined by the district

court on remand. For purposes of our decision now, it suffices to say

that because it is far from certain that the one-year limitations period

will have any effect on the plaintiffs’ ability to prosecute their anti-

trust claims, the plaintiffs have not carried their burden of demonstrat-

ing that the terms of the arbitration agreement will prevent them from

effectively vindicating their statutory rights. See PacifiCare Health

Sys., Inc. v. Book, 538 U.S. 401, 406-07 (2003) (refusing to invalidate

arbitration agreement that precluded award of punitive damages,

which plaintiff contended was inconsistent with the treble damages

authorized by the RICO statute, because it was unclear whether the

arbitrator would interpret the arbitration to preclude an award of tre-

ble damages); Morrison, 317 F.3d at 673 n.16 (enforcing one-year

limitations provision of arbitration agreement because the plaintiff

"failed to show that the one-year limitations period in the agreement

unduly burdened her or would unduly burden any other claimant

wishing to assert claims arising from their employment").

On remand, the district court, after consideration of the principles

discussed above, must determine whether the plaintiffs’ claims were

timely filed. If the district court concludes that the claims were

timely, the court should stay the actions and order the plaintiffs to

proceed in arbitration. If the district court concludes that the claims

were not timely, the court must then determine, in light of the con-

cerns that we have identified above, see supra at page 25, whether

that fact renders the contractual limitations period unenforceable.

Finally, if the district court concludes that the one-year limitations

period bars the plaintiffs’ claims and is unenforceable, the district

court must then consider whether severance of the limitations provi-

sions, rather than invalidation of the arbitration agreements, would be

the appropriate remedy. See, e.g., Terminix Int’l Co. v. Palmer Ranch

Ltd. P’ship, 432 F.3d 1327, 1331 (11th Cir. 2005) ("If all the provi-

sions of the arbitration clause are enforceable, then the court must

compel arbitration according to the terms of the agreement. If, how-

ever, some or all of its provisions are not enforceable, then the court

must determine whether the unenforceable provisions are sever-

able."); see also Kristian, 446 F.3d at 64 (concluding that various pro-

visions in an arbitration agreement would prevent antitrust claimants

from effectively vindicating their statutory rights, but severing the

In Re: COTTON YARN ANTITRUST LITIGATION 29

offending provisions and compelling arbitration); Hadnot, 344 F.3d at

478 (severing unenforceable restriction on punitive damages and

ordering parties to proceed to arbitration); Spinetti v. Service Corp.

Int’l, 324 F.3d 212, 219-23 (3d Cir. 2003) (concluding that arbitration

agreement provisions regarding attorney’s fees and the payment of

the costs of arbitration were unenforceable, but severing those terms

and requiring the parties to proceed to arbitration); Gannon v. Circuit

City Stores, Inc., 262 F.3d 677, 683 (8th Cir. 2001) (severing unen-

forceable ban on the recovery of punitive damages from the arbitra-

tion agreement and compelling arbitration).

III.

To summarize, we conclude that arbitration is a usage of the trade

in the textile industry and that an agreement to arbitrate therefore

became a term of the Frontier contracts without the need for analysis

of the battle of the forms under N.C. Gen. Stat. Ann. § 25-2-207. We

conclude that the terms of the arbitration agreements prohibiting join-

der of plaintiffs or defendants do not prevent the plaintiffs from effec-

tively vindicating their statutory rights. And while the requirement of

proceeding separately perhaps in some case could be prohibitively

expensive, the plaintiffs in this case have failed to carry their burden

of demonstrating that the costs of separate arbitration proceedings

would be so high that they could not proceed with their claims. We

also conclude that the Clayton Act’s four-year limitations period is

not a substantive portion of the federal antitrust laws and that the fed-

eral limitations period may be shortened by contract. The one-year

limitation period established in the arbitration agreements is not

unreasonably short, and the plaintiffs have failed to demonstrate that

the one-year limitation period will prevent them from pursuing their

antitrust claims. Accordingly, we hereby vacate the district court’s

judgment and we remand to the district court for further proceedings

consistent with this opinion.12

VACATED AND REMANDED

12

In addition to seeking to compel arbitration, the manufacturers also

requested a stay pending arbitration of the claims of two plaintiffs with

30 In Re: COTTON YARN ANTITRUST LITIGATION

WILLIAMS, Chief Judge, concurring in part and dissenting in part:

I fully concur in Part II of the majority opinion (the section

addressing the enforceabilty of the arbitration clauses). I respectfully

disagree, however, with the analysis and conclusion in Part I (the sec-

tion addressing whether all of the parties to the Frontier transactions

have contracts containing binding arbitration agreements). I have two

primary points of contention in this regard. First, I believe that this

case is indistinguishable from Supak & Sons Mfg. Co. v. Pervel

Indus., 593 F.2d 135 (4th Cir. 1979). Second, I do not believe that it

is possible to distinguish Supak by applying N.C. Gen. Stat. Ann.

§ 25-2-207 (2005) (North Carolina’s version of U.C.C. § 2-207) to

each individual term of the arbitration clauses at issue, rather than

addressing the arbitration clause as a whole.

I.

The district court, applying § 25-2-207, found that the arbitration

clauses contained in the written confirmations sent by Frontier did not

become part of the contracts between Frontier and those plaintiffs that

did not sign and return the confirmation forms. This finding reflected

the district court’s belief that the North Carolina Supreme Court’s

decision in Frances Hosiery Mills, Inc. v. Burlington Indust., Inc.,

204 S.E.2d 834, 842 (N.C. 1974), and our decision in Supak were

controlling. Because the case before us is indistinguishable from

Frances Hosiery and Supak, I believe the district court did not err in

following our precedent.

whom the manufacturers had no dealings during the period alleged in the

class action. Given its conclusion that arbitration was not required, the

district court did not consider the motion to stay. On appeal, the manu-

facturers contend that the district court erred by denying the motion. We

decline to consider the argument at this juncture. A decision to stay

related claims pending arbitration is a matter entrusted to the discretion

of the district court. See Moses H. Cone Mem. Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 20 n.23 (1983) ("In some cases . . . it may be advis-

able to stay litigation among the nonarbitrating parties pending the out-

come of the arbitration. That decision is one left to the district court . . .

as a matter of its discretion to control its docket."). The district court on

remand should reconsider whether a stay is warranted.

In Re: COTTON YARN ANTITRUST LITIGATION 31

Frances Hosiery and Supak established binding precedent govern-

ing the construction of § 25-2-207 in the context of contractual

arrangements virtually identical to those at issue in this case. In Fran-

ces Hosiery, the parties formed an oral contract for the sale of yarn,

and when the seller shipped yarn to the buyer, it included invoices

purporting to be "contracts" and containing arbitration clauses. 204

S.E.2d at 836-37, 841. The North Carolina Supreme Court determined

that the invoices were confirmations within the meaning of § 25-2-

207 and ultimately held that the arbitration clause constituted a pro-

posed additional term that materially altered the contract. Id. at 842-

43. In Supak, we applied the holding of Frances Hosiery to an oral

contract for the sale of fabric followed by a written confirmation con-

taining an arbitration clause. 593 F.2d at 136. In so doing, we

explained that Frances Hosiery established a rule that "the addition

of an arbitration clause constitutes a per se material alteration of the

contract," and as a result, the arbitration clause in the confirmation

form did not become part of the parties’ contract. Id. at 136.1*

*In Supak & Sons Mfg. Co. v. Pervel Indus., 593 F.2d 135 (4th Cir.

1979), we also rejected the argument that Frances Hosiery’s per se rule

was preempted by the Federal Arbitration Act (FAA) because it served

to restrict the validity and enforceability of arbitration agreements. See

id. at 137 (stating that "U.C.C. § 2-207, as judicially construed in . . .

North Carolina" does not "restrict the validity or enforceability of arbitra-

tion agreements,[ ] but is rather a general rule of contract formation")

(footnote omitted). Frontier argues that Supak was wrongly decided in

this regard and was impliedly overruled by Saturn Distrib. Corp. v. Wil-

liams, 905 F.2d 719 (4th Cir. 1990). Saturn Distrib. Corp.’s recognition

that the Federal Arbitration Act (FAA) "preempt[s] state rules of contract

formation which single out arbitration clauses and unreasonably burden

the ability to form arbitration agreements," id. at 723, does not call the

into question Supak’s validity, as Supak also acknowledged that the FAA

"is preemptive of conflicting state laws which restrict the validity or

enforceability of arbitration agreements," Supak, 593 F.2d at 137. In Sat-

urn Distrib. Corp., we distinguished the Virginia statute held to be pre-

empted by the FAA from "the general rule of contract formation" at issue

in Supak, and did not question Supak’s validity. 905 F.2d at 723. More-

over, even if there were tension between the two decisions, one panel of

this court cannot overrule another panel. See McMellon v. United States,

387 F.3d 329, 334 (4th Cir. 2004) (en banc) ("[W]e conclude that when

there is an irreconcilable conflict between opinions issued by three-judge

panels of this court, the first case to decide the issue is the one that must

be followed, unless and until it is overruled by this court sitting en banc

or by the Supreme Court.").

32 In Re: COTTON YARN ANTITRUST LITIGATION

Supak addressed the application of the same statute at issue here —

§ 25-2-207 — to a factual scenario indistinguishable from that pre-

sented by this case — an oral contract formed by merchants in the

textile industry that was followed by a written confirmation contain-

ing an arbitration clause. In Supak, we did not deem it necessary to

inquire into the particular facts of the case at hand in considering

whether the arbitration clause at issue represented a material alter-

ation. Because we interpreted Frances Hosiery as establishing a per

se rule, we simply applied that rule to the arbitration clause at issue.

I am unpersuaded that we can distinguish Supak by virtue of its

silence concerning whether arbitration is a usage of trade in the textile

industry. The majority opinion asserts that we need not follow Supak

because "usage of trade is a question of fact that must be proved by

the party asserting it," and Supak’s silence on the usage of trade issue

therefore "cannot be viewed as rejection of the contention that arbitra-

tion is a usage of trade in the textile industry." Ante at 11 n.4. The

issue, however, is not whether Supak rejected the idea that arbitration

could be a trade usage in the textile industry. The question is whether

Supak precludes us from conducting an inquiry into the facts of each

case to determine whether the arbitration clause at issue is a material

alteration, rather than simply applying Frances Hosiery’s per se rule.

Compare N&D Fashions, Inc. v. DHJ Indust., Inc., 548 F.2d 722, 726

& n.7 (8th Cir. 1976) (stating that although cases such as Frances

Hosiery have held that an arbitration clause materially alters a con-

tract under UCC § 2-207, "the better reasoned position is that the

question whether an additional term in a written confirmation consti-

tutes a ‘material alteration’ is a question of fact to be resolved by the

circumstances of each particular case"). Supak did not attempt to limit

Frances Hosiery to its particular facts, but rather treated the decision

as establishing a per se rule. A per se rule applies "without reference

to additional facts." See Black’s Law Dictionary (8th ed. 2004) (defin-

ing "per se" as "[o]f, in, or by itself; standing alone, without reference

to additional facts"). Accordingly, I read Supak differently than the

majority. I therefore believe that the district court did not err in apply-

ing Frances Hosiery’s per se rule rather than resolving the factual

question of whether Frontier had established a usage of trade.

II.

I do not believe that we can distinguish Supak by asserting that

because arbitration is a trade usage in the textile industry, the portion

In Re: COTTON YARN ANTITRUST LITIGATION 33

of the arbitration clause requiring the parties to submit their disputes

to arbitration was not an "additional term" within the meaning of

§ 25-2-207(2) for two reasons. First, terms consistent with a trade

usage may nevertheless constitute "additional terms" for purposes of

§ 25-2-207(2). Second, the existence of a trade usage is a question of

fact that the district court has not resolved.

A.

Under § 25-2-207(2), "additional terms [in a written confirmation]

are to be construed as proposals for addition to the contract." N.C.

Gen. Stat. § 25-2-207(2). Between merchants, the additional terms

become part of the contract unless "(a) the offer expressly limits

acceptance to the terms of the offer; (b) they materially alter [the con-

tract]; or (c) notification of objection to them has already been given

or is given within a reasonable time after notice of them is received."

§ 25-2-207(2)(a)-(c).

The official comments to § 25-2-207 suggest that terms consistent

with a trade usage may nevertheless be "additional" for purposes of

§ 25-2-207(2). Comment 5 lists examples of clauses that "involve no

element of unreasonable surprise" and therefore should not be consid-

ered material alterations. Among these examples are "a clause provid-

ing for interest on overdue invoices or fixing the seller’s standard

credit terms where they are within the range of trade practice and do

not limit any credit bargained for" and "a clause limiting the right of

rejection for defects which fall within the customary trade tolerances

for acceptance ‘with adjustment’ or otherwise limiting remedy in a

reasonable manner." § 25-2-207 cmt. 5 (emphasis added). Thus, com-

ment 5 suggests that the drafters of § 25-2-207(2) contemplated that

terms consistent with trade usage might represent additional terms

that would be screened for materiality. Moreover, comment 1 indi-

cates that § 25-2-207 "is intended to deal with two typical situations,"

one of which "is where an agreement has been reached either orally

or by informal correspondence between the parties and is followed by

one or both of the parties sending formal memoranda embodying the

terms so far as agreed upon and adding terms not discussed." § 25-2-

207 cmt. 1 (emphasis added). Thus, comment 1 suggests that the

terms that should be considered "additional" are those that the parties

have not discussed.

34 In Re: COTTON YARN ANTITRUST LITIGATION

At least two of our sister circuits, in interpreting other states’ ver-

sions of U.C.C. § 2-207, have held that terms consistent with a trade

usage or course of dealing may represent "additional terms" but do

not materially alter a contract. In Aceros Prefabricados, S.A. v. Trade-

Arbed, Inc., 282 F.3d 92 (2d Cir. 2002), the Second Circuit noted that

the official comments to New York’s version of UCC § 2-207 "recog-

nize the importance of trade practices to the material alteration analy-

sis," because the examples of proposed terms that do not constitute

material alterations contained in the comments include terms that are

"within customary limits," or "within the range of trade practices,"

while "the common thread among the examples [of material alter-

ations] provided is that they all constitute provisions that significantly

deviate from industry norms." Id. at 101-02 (internal quotation marks

and alteration omitted). There, the Second Circuit relied in part on

"evidence that arbitration is standard practice in the steel industry" to

conclude that an arbitration clause in a confirmation form was not a

material alteration and therefore became part of the parties’ contract.

Id. at 102. Similarly, in Schulze & Burch Biscuit Co. v. Tree Top, Inc.,

831 F.2d 709 (7th Cir. 1987), the Seventh Circuit noted that Illinois’s

version of U.C.C. § 2-207 is followed by official comments suggest-

ing that proposed terms consistent with trade practice or custom do

not materially alter a contract. Id. at 714. In that case, Tree Top was

seeking to enforce an arbitration clause contained in a written confir-

mation. The Seventh Circuit held that the arbitration clause did not

constitute a material alteration of the parties’ contract, because

although Tree Top did not offer proof of a trade usage, it did prove

a course of dealing between the parties that should have put Schulze

on notice that the confirmation was likely to contain such a clause. Id.

at 714-15.

In contrast, there is a dearth of precedent supporting the view

adopted in the majority opinion. I am aware of no other case in which

the reviewing court has fragmented an arbitration clause in order to

treat the portion governing the obligation to arbitrate differently than

the portion setting forth the terms and conditions under which arbitra-

tion would proceed. Notably, none of the cases cited by the majority

in support of the proposition that arbitration is a trade usage have con-

cluded that a trade usage cannot represent an additional term for pur-

poses of U.C.C. § 2-207. To the contrary, those cases conform to the

view that arbitration clauses contained in written confirmations of

In Re: COTTON YARN ANTITRUST LITIGATION 35

oral agreements between merchants in the textile industry may repre-

sent additional terms, but do not materially alter a contract. See, e.g.,

Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d

289, 296-97 (2d Cir. 1999) (textile buyer was bound by an arbitration

clause in a written confirmation because he failed to object to its addi-

tion to the contract).

To be sure, some commenters have described the official com-

ments to U.C.C. § 2-207 as "poor from [an] analytical view," because

"[i]f a term stated on a responsive document merely iterates what the

law would otherwise impose, it is arguably not an ‘additional’ term."

Duesenberg & King, Sales and Bulk Transfers § 3.03 (Bender’s

U.C.C. Service 2006) (stating that "[t]his would be true whether the

term were implied by operation of a Code section, through custom

and usage, prior course of dealing, or any other means by which a

matter on which the parties are silent nonetheless becomes a part of

their agreement"). Nevertheless, the official commentary to § 25-2-

207 indicates that the statute’s drafters meant the phrase "additional

terms" to include all "terms not discussed" during the formation of an

oral agreement, regardless of whether those terms in fact alter the

agreement. Accordingly, I would follow the reasoning of our sister

circuits to conclude that terms consistent with a trade usage may con-

stitute "additional terms" within the meaning of § 25-2-207(2), but

generally do not materially alter a contract.

B.

Even assuming that we could conclude that terms in keeping with

a trade usage are not "additional terms" for purposes of § 25-2-207(2),

I believe that it would be inappropriate for us to hold that arbitration

is a trade usage in the textile industry when the district court has not

ruled on this factual issue. See N.C. Gen. Stat. Ann. § 25-1-205(2)

(2006) (stating that the existence and scope of a trade usage "are to

be proved as facts" and if it "is established that such a usage is

embodied in a written trade code or similar writing, the interpretation

of the writing is a question for the court"). To be sure, the "Yarn

Rules" and a number of cases indicate that, in general, arbitration is

commonly used in the textile industry. In North Carolina, however,

Frances Hosiery has been the law for over thirty years. Thus, it seems

that the relevant trade usage in North Carolina could well be that par-

36 In Re: COTTON YARN ANTITRUST LITIGATION

ties enter into arbitration agreements by signing and returning written

confirmations. Many of the plaintiffs in this case assented to Fron-

tier’s arbitration agreements in precisely that manner. Also, the "Yarn

Rules" suggest that merchants in the textile industry should expect to

be bound by arbitration clauses contained in confirmation forms, but

might not necessarily expect to be bound to arbitrate in the absence

of such a writing. (See J.A. at 542-53 (excerpt from the "Yarn Rules"

stating that "[p]arties to the sale and purchase of yarns are members

of the textile industry, which has, for over, fifty years, settled disputes

by arbitration in accordance with the terms and conditions of con-

tracts which have tended to become standard . . ." (emphasis

added)).) Because the district court has not addressed this issue, we

should not take it upon ourselves to find that "Frontier has met its bur-

den of proving that arbitration is a usage of trade . . . ." Ante at 9.

Rather, we should allow the district court to make findings of fact on

remand.

C.

Finally, another issue prevents us from resolving this case by rely-

ing on the UCC’s "gap-filler" provision, codified in North Carolina

as N.C. Gen. Stat. Ann. § 25-1-201 (2006). One might argue that after

concluding that, under Supak, the arbitration clauses contained in the

written confirmations constituted material alterations that did not

become part of the parties’ agreement, the district court should have

turned to § 25-1-201 to fill the gap left by the oral contract’s silence

on the question of arbitration. See N.C. Gen. Stat. Ann. § 25-1-

201(b)(3) (2006) (defining an "agreement" as "the bargain of the par-

ties in fact, as found in their language or inferred from other circum-

stances, including course of performance, course of dealing, or usage

of trade").

Resolving this question after determining that the arbitration

clauses in the written confirmations did not become part of the con-

tracts, however, would be purely an academic exercise. The issue

before this court is whether the district court erred in denying Fron-

tier’s motion to compel arbitration. To compel arbitration under the

Federal Arbitration Act (FAA), a litigant must demonstrate, inter alia,

"a written agreement that includes an arbitration provision which pur-

ports to cover the dispute." Adkins v. Labor Ready, Inc., 303 F.3d

In Re: COTTON YARN ANTITRUST LITIGATION 37

496, 500-01 (4th Cir. 2002) (emphasis added) (internal quotation

marks omitted). Thus, Frontier cannot compel arbitration based on an

implied term in an oral contract. It must proffer a written agreement

containing an arbitration clause that purports to cover its dispute with

the plaintiffs. The writings that Frontier provided to satisfy this

requirement were the confirmations that it sent to the plaintiffs.

Accordingly, Frontier’s ability to compel arbitration depends on

whether or not the arbitration clauses in the written confirmations

became part of its contracts with the plaintiffs.

III.

In sum, I fully concur in Part II of the majority opinion. I therefore

concur in the judgment only with regard to those plaintiffs that either

signed and returned Frontier’s confirmation forms or had contracts

governed by South Carolina law. I respectfully dissent from Part I,

however, because I believe that this case is controlled by our decision

in Supak. Accordingly, I would hold that because the North Carolina

arbitration agreements in Frontier’s confirmation forms did not

become part of the contracts with those plaintiffs that did not sign and

return the forms, the district court did not err in denying Frontier’s

motion to compel arbitration as to those plaintiffs.

JOHNSTON, District Judge, concurring in part and dissenting in part:

I concur in Part I, Part II(A), and Part II(B)(1) of the majority opin-

ion. I respectfully dissent, however, from Part II(B)(2), Part II(B)(3),

and the result that this case should be remanded for further proceed-

ings in the district court, as described in the majority opinion.

I.

The majority opinion acknowledges that federal statutory claims

are subject to arbitration if the litigants can effectively vindicate their

substantive statutory claims in the arbitral forum. The majority con-

cludes that the Antitrust Act’s four-year limitations period, 15 U.S.C.

§ 15b, is not a "substantive right" and that the arbitration clause’s lim-

itation of this period to one year does not, per se, prevent the plain-

tiffs from "effectively vindicating their statutory rights."1 The

1

Parts II(B)(2) & (3) of the majority opinion. In Part II(B)(1) of the

opinion, the majority concludes that the one year limitation period is not

unreasonably short.

38 In Re: COTTON YARN ANTITRUST LITIGATION

majority then directs the district court, on remand, to examine

whether the plaintiff’s claims are entirely barred by operation of the

one year limitations provision, taking into account the doctrine of

fraudulent concealment. If the plaintiffs’ claims are entirely barred,

then the district must consider severance of the limitations provision,

in addition to invalidation of the arbitration agreement.

I respectfully disagree with Part II(B)(2) and Part II(B)(3) of the

opinion and the majority’s directions to the district court upon

remand. I would hold that the four-year limitations period contained

in 15 U.S.C. § 15b is a non-waivable substantive right, and that the

purported waiver of this right would, in this case, prevent the plain-

tiffs from effectively vindicating their statutory rights. I would further

conclude that severance of this provision is the appropriate remedy,

and remand the case to the district court to order that the case proceed

to arbitration.

II.

The plaintiffs allege that the defendants engaged in a price fixing

conspiracy from the beginning of 1999 through February of 2004,

when the plaintiffs first became aware of the alleged anti-competitive

activity. Based on these allegations, the plaintiffs brought Sherman

Act claims against the defendants in 2004.2

The Sherman Act, 15 U.S.C. § 1, et seq., embodies an important,

and now time-tested, public policy to prohibit market conduct which

unfairly or unduly restrains competition. As Justice Black wrote more

than half a century after its passage:

The Sherman Act was designed to be a comprehensive char-

ter of economic liberty aimed at preserving free and unfet-

tered competition as the rule of trade. It rests on the premise

that the unrestrained interaction of competitive forces will

yield the best allocation of our economic resources, the low-

est prices, the highest quality and the greatest material prog-

ress, while at the same time providing an environment

2

As noted in the majority opinion, various plaintiffs filed actions in

March, April, May, and August of 2004.

In Re: COTTON YARN ANTITRUST LITIGATION 39

conducive to the preservation of our democratic political

and social institutions.

N. Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958). More recently,

Justice Stevens has stated:

The Sherman Act reflects a legislative judgment that ulti-

mately competition will produce not only lower prices, but

also better goods and services. . . . The assumption that

competition is the best method of allocating resources in a

free market recognizes that all elements of a bar-

gain—quality, service, safety, and durability—and not just

the immediate cost, are favorably affected by the free oppor-

tunity to select among alternative offers.

Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695

(1978).

"Ordinarily, a cause of action accrues under the antitrust laws when

the plaintiff suffers an injury to his business." Sanderson v. Spectrum

Labs, Inc., 227 F. Supp. 2d 1001, 1011 (N.D. Ind. 2000) (citing

Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338

(1971)). Generally, there is a four-year limitations period for Sherman

Act claims. 15 U.S.C. § 15b. The arbitration agreements in this case

provide that any claim must be brought within one year "after the

claimed breach occurs" and "[t]he failure to institute arbitration pro-

ceedings within this one year period shall constitute an absolute bar

to [those claims.]"

Application of the one year claims limitation period has two related

effects: (1) limiting the defendants’ exposure for any antitrust claim

to one year from the date of the alleged anti-competitive behavior,

and (2) limiting the plaintiffs’ possible recovery to a one year period.

Thus, while the Antitrust Act effectively requires a four year look-

back period, the contract at issue would only allow the arbitrator to

consider one year of anti-competitive behavior. The plaintiffs assert

that they would be deprived of a substantive right under the statute

— the right to recover damages for three out of the four years of

alleged anti-competitive activity.

40 In Re: COTTON YARN ANTITRUST LITIGATION

III.

Generally, arbitration agreements are enforceable "so long as the

prospective litigant effectively may vindicate its statutory cause of

action in the arbitral forum, [and] the statute will continue to serve

both its remedial and deterrent function." Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637. In other words, an

arbitration agreement cannot operate to waive substantive rights pro-

vided by statute. Id. at 628 ("By agreeing to arbitrate a statutory

claim, a party does not forgo the substantive rights afforded by the

statute; it only submits to their resolution in an arbitral, rather than a

judicial, forum."). In this respect, "the arbitrability of [federal statu-

tory claims] rests on the assumption that the arbitration clause permits

relief equivalent to court remedies." Paladino v. Avnet Computer

Techs., Inc., 134 F.3d 1054, 1062 (11th Cir. 1998). Although the

Supreme Court has never ruled directly on whether an arbitration

clause that does not permit relief equivalent to court remedies might

nevertheless be enforceable, it has indicated a willingness to strike

down arbitration agreements that have the effect of depriving litigants

of remedies prescribed by the antitrust statutes. In Mitsubishi, the

Court noted that in the event that an arbitration agreement’s choice-

of-forum and choice-of-law provisions operated, in effect, as "a pro-

spective waiver of a party’s right to pursue statutory remedies for

antitrust violations, [the Court] would have little hesitation in con-

demning the agreement as against public policy." Id. at 637 n.19.

Applying these principles, our sister circuits have consistently

invalidated arbitration agreements that proscribe the arbitral award of

damages guaranteed by statute. See, e.g., Hadnot v. Bay, Ltd., 344

F.3d 474, 478 & n.14 (5th Cir. 2003) (noting that an arbitration clause

that bans punitive damages is unenforceable in the context of a Title

VII claim because Title VII provides for statutory punitive damages);

Paladino, 134 F.3d at 1062 (11th Cir. 1998) (holding an arbitration

agreement unenforceable because it proscribed an arbitral award of

Title VII damages). The First Circuit recently relied on Mitsubishi’s

condemnation of arbitration agreements that effect a prospective

waiver of plaintiff’s right to pursue statutory remedies, as well as the

mandatory language in the Clayton Act provision providing for treble

damages, 15 U.S.C. § 15(a), to conclude that "the award of treble

damages under the federal antitrust statutes cannot be waived." Kris-

In Re: COTTON YARN ANTITRUST LITIGATION 41

tian v. Comcast Corp., 446 F.3d 25, 48 (1st Cir. 2006) (holding

invalid an arbitration clause that purported to waive the availability

of treble damages under the federal antitrust statutes).3 The issue in

this case differs somewhat from that confronted by the Kristian court

in that enforcement of the arbitration agreement’s limitations provi-

sion would not proscribe the award of a particular type of damages,

but it would instead affect the amount of the award. The practical

effect of the provision, however, is the same. If the contractual limita-

tions provision is enforced, the plaintiffs will not be permitted to

recover treble damages for the injury sustained over the course of the

statutory four-year period. See 15 U.S.C. § 15(a) (providing that a

party "shall recover threefold the damages by him sustained").

I would hold that the enforcement of the arbitration clause, which

facially operates to strip the plaintiffs of seventy-five percent of the

damages to which they would otherwise be entitled under the antitrust

statutes, would defeat the statute’s remedial and deterrent purposes.

Paladino, 134 F.3d at 1062 ("When an arbitration clause has provi-

sions that defeat the remedial purpose of the statute, . . . the arbitra-

tion clause is not enforceable.") The dramatic reduction in damages

would likely fall short of fully compensating the plaintiffs and allow

the defendants the benefit of at least a portion of their alleged illegal

activity.4

3

In Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006), the plain-

tiffs argued that a one-year limitations provision in an arbitration clause

was invalid as applied to their antitrust claims "on the basis of [the]

direct conflict" between the contractual provision and the four year limi-

tations period provided by the Clayton Act. Id. at 43. The First Circuit

concluded that, under its precedent, a dispute over a statute of limitations

was "the sort of procedural prerequisite that is presumed to be for the

arbitrator," not the court. Id. (internal quotation marks omitted). In the

case before us, the specific language of the arbitration agreements pro-

vides that a court, not an arbitrator, must decide statute of limitations

issues. The agreements provide that "‘[a]ll issues relating to Statute of

Limitations barring or preventing the commencement of proceedings are

not arbitrable and shall be determined by the Court and not the arbitrators

who shall have no power or jurisdiction to determine such issues.’" In re

Cotton Yarn Antitrust Litig., 406 F. Supp. 2d 585, 603 (M.D.N.C. 2005).

4

I decline to address whether the doctrine of fraudulent concealment

would have any effect on my analysis of this issue because the parties

arguably did not raise this issue, it has certainly not been developed by

the parties in this appeal, and it was not considered at the district court

level.

42 In Re: COTTON YARN ANTITRUST LITIGATION

IV.

As noted in the majority opinion, the court must consider two rem-

edies after finding an unenforceable term in an arbitration agreement:

severance of the offending term and invalidation of the entire arbitra-

tion agreement. The limitations period, while of great importance to

the defendants, is but one part of the arbitration agreement; it cannot

be viewed as integral to or the primary object of the arbitration agree-

ment. In my view then, the court should sever the offending limita-

tions provisions from the otherwise enforceable arbitration

agreements. See Hadnot, 344 F.3d at 478 ("The purpose of the arbi-

tration provision is to settle any and all disputes arising out of the

employment relationship in an arbitral forum rather than a court of

law. Even with its unlawful limitation on the types or permissible

damage awards lifted, so that the decision maker is free to address

punitive damages, the arbitration clause remains capable of achieving

this goal. In fact, the lifting of that illegal restriction enhances the

ability of the arbitration provision to function fully and adequately

under the law."). I believe that the limitations provisions can and

should be severed from the arbitration agreements, and the case

should be remanded to the district court with directions to send it to

arbitration. Immediate severance of this single provision of the overall

arbitration agreement is a purely legal matter which will allow the

parties to avoid further time and resource-intensive litigation of these

threshold matters, and allow them to move toward a resolution of the

substantive issues of these cases.

I therefore respectfully dissent from Parts II(B)(2) and II(B)(3) of

the majority opinion.