Petition for Writ of Certiorari — Sun Drilling Products Corp. v. Rayborn

Supreme Court. U.S.

FILED

()

97- 971993 JUN 10.19%

Supreme Court of the Gnited States

OCTOBER TERM, 1997

SUN DRILLING PRODUCTS CORPORATION, HELLER,

HICKOX, DIMELING, SCHREIBER AND PARK,

DOUGLAS P. HELLER, GEORGE K. HICKOX, JR.,

WILLIAM R. DIMELING, RICHARD R. SCHREIBER,

STEVEN J. PARK, JOHN C. TUTEN, HYPPOLETE

ASTUGUE AND SUSAN REESE

Petitioners,

Vv.

JERRY J. RAYBORN, SR.

Respondent,

On Petition For A Writ Of Certiorari To

The Court Of Appeal Fourth Circuit State Of Louisiana

PETITION FOR A WRIT OF CERTIORARI

DOUGLAS Y. CHRISTIAN*

ELAINE T. PETROSSIAN

REED SMITH SHAW & McCCLaAy LLP

2500 One Liberty Place

Philadelphia, Pa 19103

(215) 851-8256

*Counsel of Record _ Attorneys For Petitioners

a LEI ROR eTE epee

i

QUESTIONS PRESENTED FOR REVIEW

1. Whether this Court’s holding in Prima Paint, that an

arbitration clause in a contract governed by the Federal

Arbitration Act is not vitiated by general allegations that the

entire contract was fraudulently induced, was overruled by

this Court’s subsequent decision in Doctor’s Associates,

which did not address the key issues in Prima Paint and

made no mention of Prima Paint whatsoever.

2. Whether, in direct contravention of this Court’s

holding in Prima Paint, the Louisiana Fourth Circuit Court

of Appeal erred by refusing to enforce a mandatory

arbitration clause in an agreement it acknowledged was

governed by the Federal Arbitration Act, where respondent

sought to avoid his agreement to arbitrate simply by making

general allegations of fraud in the inducement of the contract

as a whole.

il

PARTIES TO THE PROCEEDING

Sun Drilling Products Corporation has no parent

companies. Sun Drilling Products Corporation partially

owns Sun Drilling Products de Venezuela, C.A.

ili

TABLE OF CONTENTS

Pe I EE cas caniensssanceonancyarteocvecenscsesecosns Vv

cg | Gt it at tbe SISA aD Calc aa 2

P| EL ELE ASS Rs ede es ee 2

STATUTORY PROVISIONS INVOLVED............cccccccscceeees 3

SEM TEOMEIOT OF THE CASE en biciiccsi ccs cscccdeccctececeseveceseesese 4

REASONS FOR GRANTING THE WRIT .........cccccsceeececeeees 7

I. Doctor’s ASSOCIATES DiD NOT OVERRULE PRIMA

Bee hypaces ole ate ft TORRS LOEUES E aeRTR 9

II. THE COURT OF APPEAL’S DECISION CONTRAVENES

THE LETTER AND SpiriT OF THE FEDERAL

ARBITRATION ACT AND PRIMA PAINT AND ITs

.

TE sn SER TR SSL ah hI a 15

5 ER RS 19

REARS Pcl la

LOUISIANA SUPREME COURT ORDER ON

APPLICATION FOR SUPERVISORY AND/OR

EET pane a ee la

iv

LOUISIANA TRIAL COURT - JUDGMENT ..............cccceeeeeeee 13a

EXCERPTS OF AGREEMENT BY AND AMONG

JERRY J. RAYBORN, SR., JERRY J. RAYBORN, JR.,

JEFFREY RAYBORN, JOEL RAYBORN, SUN

DRILLING PRODUCTS CORPORATION, A

LOUISIANA CORPORATION, HELLER, HICKOX,

DIMELING, SCHREIBER & PARK AND SUN

ACQUISITION CORPORATION ........:sssesccecesssccecesssessceseesees 17a

Vv

TABLE OF AUTHORITIES

Cases:

Allied - Bruce Terminix Companies, Inc. v. Dobson,

PER ats MOINES POT sincansceriaraceranincassecccssaonieier Ne Uy 1G 02

Budinich v. Becton Dickinson and Co., 486 U.S. 196

sRGB ere OES 8 8 Red sae ROA ACEC TT aL eh eG 10

Carro Rivera v. Parade of Toys, Inc., 950 F. Supp.

449 (D. Puerto Rico, Dec. 23, 1996)........ccccccescececesceceees 14

Cular v. Metropolitan Life Insurance Company, et al.,

961 F. Supp. 550 (S.D.N.Y. Mar. 27, 1997) ......cccceccseseees 14

Doctor's Associates, Inc. v. Casarotto, 517 U.S.

ee Ct nits ctnwsnicedelinaaiitinntabiisicsabint iiak's hae passim

Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438

Be” Lae TE, | SR a ee APNE Ril, Ree NO Ee Meo 11,14

Gregory v. Electro-Mechanical Corp., 83 F.3d

cSt Gs Ve, Reem ne ee Oe ee ae 14

Latifi v. Sousa, 1996 WL 735260 (N.D. Ala.,

SR | Me eed oe eet IR MIE Te 14

Maye v. Smith Barney, Inc., 897 F. Supp. 100, 106

RR 0s, BP iecccniinicsceiagheailiscaseacxia ae eee 1]

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware,

sind A UG | > j) Renner ems t: Se Cemene gee Ramer oe 10

vi

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614, 625-26 (1985).......cseceeceeseeeeeseeeees 10, 17

Moses H. Cone Memorial Hospital v. Mercury

Construction Corp., 460 U.S. 1, 24 (1983)............0... 10, 16

Palm Harbor Homes, Inc. v. McCoy, 944 S.W.2d

716 (Tex. App. - Fort Worth, Apr. 10, 1997)........... telnet 14

Perry v. Thomas, 482 U.S. 483, 489 (1987) ............ 10, 16, 17

Prima Paint Corp. v. Flood and Conklin Mfg. Co.,

SES U.S. TIS, GIS, FOUL G OT estiviiscketsernniscevevsseeseess passim

Rainbow Investments, Inc. v. Super 8 Motels, Inc.,

O73 F Sepp. 1SG7 CDA. TSF F) cesccacserscvessssvsossccsvcesies 15

Rodriguez De Quijas v. Shearson/American Express,

Inc., 490 U.S. 477, 109 S.Ct. 1917 (1989)... eee 13

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ............ 10

Shearson/American Express, Inc. v. McMahon,

662 UB TIO CAFE ish cient eliebineon 13

Southland Corp. v. Keating, 465 U.S. 1

(SFG) os cissiscsicsecrsvinsdascciedabincnniaiaaedeh 10, 13, 16, 17

Stewart Organization, Inc. v. Ricoh Corp., 487

OS. Ze CR so ssisiuiccsctoriaiiiesen A otic es 10

Sun Drilling Products Corp. v. Rayborn, 703 So.2d

SIS Cm; CO. Rapp. 1997) sssieccsssccesssicbstabeiatahcdstedecttiictvases 2,9

Vii

Three Valleys Municipal Water District v. E.F. Hutton

Co., Inc., 925 F.2d 1136 (9th Cir. 1991) .....ccccccceccsseceees 1]

Towe Hester & Erwin, Inc. v. Kansas City Fire & Marine

Ins. Co., 1997 WL 656991 (Okla. Civ. App. Div.,

TO Bi Ra aie aa i oe seccameeenees 14

Vial, Inc. v. Weber Scientific, 966 F. Supp. 1108

CRA: PM A IPI hs icc icc ccesccseces 14

Volt Information Sciences, Inc. v. Board of Trustees

of Leland Stanford Junior University,

OF A Fies Oe PI ails hha ed didiindescssteocbssoceieskes. 10, 13,17

Wilharm v. M.J. Const. Co., 1997 WL 72138

(Ohio App. 8 Dist., Feb. 20, 1997).......c.ccccccccecessesseseeceeees 14

Windham Foods, Inc. v. Fleming Companies, Inc., 1997

WL 269387 (Ohio App. 11 Dist., May 2, 1997).............. 14

Statutes:

MRM ca ceiiinicecd eesicbcibcaicinsnsanscnscbddssdndatdchcaceccosdstcwan 2

PUSS. 8 t-15 A ci aR NS Menten 3

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

No. 98-

SUN DRILLING PRODUCTS CORPORATION,

HELLER, HICKOX, DIMELING, SCHREIBER

AND PARK, DOUGLAS P. HELLER, GEORGE K.

HICKOX, JR., WILL1AM R. DIMELING,

RICHARD R. SCHREIBER, STEVEN J. PARK,

JOHN C. TUTEN, HYPPOLETE ASTUGUE

AND SUSAN REESE

PETITIONERS,

VS.

JERRY J. RAYBORN, SR.

RESPONDENT,

Petition For A Writ Of Certiorari

To The Court Of Appeal!

Fourth Circuit State Of Louisiana

Sun Drilling Products Corporation, Heller, Hickox,

Dimeling, Schreiber and Park, Douglas P. Heller, George K.

Hickox, Jr., William R. Dimeling, Richard R. Schreiber,

Steven J. Park, John C. Tuten, Hyppolete Astugue and Susan

Reese respectfully petition for a writ of certiorari to review

2

the judgment of the Court of Appeal Fourth Circuit State of

Louisiana in this case.

OPINIONS BELOW

The opinion of the Court of Appeal Fourth Circuit State

of Louisiana (App., infra, 3a) is reported at Sun Drilling

Products Corp. v. Rayborn, 703 So.2d 818 (La. Ct. App.

1997). The judgment of the trial court (App., infra, 13a) is

unreported. The order of the Louisiana Supreme Court

denying discretionary review (App., infra, 1a) is unreported.

JURISDICTION

a) On March 13, 1998, the Supreme Court of Louisiana

declined to review the order dated December 3, 1997 of the

Court of Appeal Fourth Circuit State of Louisiana.

b) The jurisdiction of this Court is invoked under 28

U.S.C. § 1257(a).

c) On June 10, 1997, Petitioners, by means of filing

objections to the trial court’s subject matter jurisdiction,

invoked their rights under the Federal Arbitration Act to

compel arbitration of Rayborn’s claims. On August 21,

1997, the trial court overruled Petitioners’ objections.

Petitioners timely appealed this decision to the Court of

Appeal Fourth Circuit State of Louisiana. The Court of

Appeal affirmed the trial court’s decision. Petitioners’

timely application for rehearing before the Court of Appeal

was refused without comment on December 30, 1997.

Finally, Petitioner sought discretionary review from the

Louisiana Supreme Court. On March 13, 1998, Petitioners’

application for review was denied, with two Justices voting

to grant the application.

3

STATUTORY PROVISIONS INVOLVED

The Federal Arbitration Act provides, in pertinent part, 9

U.S.C. § 1-14 (1998):

9 U.S.C. § 1: “Maritime transactions” and

“commerce” defined; exceptions to operation

of title.

“Maritime transactions”, as herein defined,

means charter parties, bills of lading of water

Carriers, agreements relating to wharfage,

supplies furnished vessels or repairs to vessels,

collisions, or any other matters in foreign

commerce which, if the subject of controversy,

would be embraced within admiralty

jurisdiction; “commerce”, as herein defined,

means commerce among the several States or

with foreign nations, or in any Territory of the

United Sates or in the District of Columbia, or

between any such Territory and another, or

between any such Territory and any State or

foreign nation, or between the District of

Columbia and any State or Territory or foreign

nation, but nothing herein contained shall apply

to contracts of employment of seamen, railroad

employees, or any other class of workers

engaged in foreign or interstate commerce.

4

9 U.S.C. § 2: Validity, irrevocability and

enforcement of agreements to arbitrate.

A written provision in any maritime

transaction or a contract evidencing a

transaction involving commerce to settle by

arbitration a controversy thereafter arising out of

such contract or transaction, or the refusal to

perform the whole or any part thereof, or an

agreement in writing to submit to arbitration an

existing controversy arising out of such a

contract, transaction, or refusal, shall be valid,

irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the

revocation of any contract.

STATEMENT OF THE CASE

Until 1995, Jerry J. Rayborn, Sr. (hereinafter “Rayborn”)

and his three children owned all of the shares of stock of Sun

Drilling Products Corporation (hereinafter “Sun”). In 1995,

Rayborn and his family sold 75% of Sun’s stock to, inter

alia, the partners of Heller, Hickox, Dimeling, Schreiber and

Park (hereinafter “HHDS&P”) for $9.5 million, notes in the

amount of $2.8 million, and debt forgiveness of several

million dollars. The terms of the sale were set forth in a

December 8, 1994 contract known as the “Merger

Agreement” between Rayborn and his family and the

partners of HHDS&P. The Merger Agreement contained a

mandatory arbitration clause. (App., infra, 20a).

After the sale of Sun, Rayborn was a 25% minority

shareholder and a member of Sun’s board. Sun and Rayborn

entered into an employment agreement (“the Employment

Agreement”) which provided for Sun to employ Rayborn at a

5

salary of $120,000 per year, plus future royalty payments

under certain circumstances. Among other things, the

Employment Agreement required Rayborn to devote his best

efforts to the performance of his duties in furtherance of

Sun’s interests. The Employment Agreement did not contain

an arbitration clause.

On March 17, 1997, Sun terminated Rayborn’s

employment because he breached his Employment

Agreement, breached his fiduciary duties to Sun as a director

and shareholder, and engaged in schemes to Sun’s detriment.

Concurrent with his firing, Sun filed an action in Louisiana

state court seeking damages and a declaratory judgment that

Rayborn had breached the Employment Agreement.

Sun neither requested relief under the Merger Agreement

nor alleged that the Merger Agreement was implicated in any

manner. Sun based its action against Rayborn on the

Employment Agreement, not the Merger Agreement.

On May 1, 1997, Rayborn filed his Answer to Sun’s

action. In his Answer, Rayborn included a claim seeking

rescission of the Merger Agreement, alleging fraud in the

inducement. Rayborn also purported to assert other claims

against HHDS&P and other parties arising from the Merger

Agreement. Rayborn and certain parties previously had

agreed to submit all disputes arising in connection with the

Merger Agreement to binding arbitration.

Rayborn sought to escape the mandatory arbitration

provision of the Merger Agreement by alleging that the

Merger Agreement as a whole was fraudulently induced.

Rayborn has argued that, notwithstanding the arbitration

clause, Louisiana law prohibits arbitration of such a claim.

The arbitration clause in the Merger Agreement, however, is

6

controlled by the Federal Arbitration Act, which does not

permit a party to avoid its promise to arbitrate simply by

alleging fraud in the inducement of a contract as a whole.

Petitioners objected to Rayborn’s claims on the grounds

that the trial court lacked subject matter jurisdiction and

sought to compel arbitration proceedings pursuant to the

Merger Agreement and the Federal Arbitration Act. On

August 21, 1997, the trial court overruled Petitioners’

objection based on the Federal Arbitration Act and stayed

any arbitration of the dispute. The trial court incorrectly held

that the Federal Arbitration Act did not govern the arbitration

clause at issue and found that Louisiana law prohibited the

arbitration of Rayborn’s claim of fraud in the inducement.

Petitioners appealed and sought to compel arbitration of

Rayborn’s claims. Petitioners also asked that further

proceedings on Rayborn’s claims be stayed pending the

outcome of the appeal.

By opinion dated December 3, 1997, the Louisiana

Fourth Circuit Court of Appeal (“Court of Appeal”) affirmed

the trial court’s decision. (App., infra, 8a). The Court of

Appeal correctly determined that the Federal Arbitration Act

governed the arbitration clause. (App., infra, 5a). However,

the Court of Appeal held that this Court’s 1996 decision in

Doctor’s Associates allowed generally applicable state law

contract defenses, such as fraud, duress or unconscionability,

to invalidate an arbitration clause without contravening the

Federal Arbitration Act. (App., infra, 5a). Thus, the Court

of Appeal erroneously ruled that the Federal Arbitration Act

permits parties to avoid arbitration simply by alleging fraud

in the inducement of the contract.

7

On December 12, 1997, Petitioners asked for rehearing.

Rehearing was refused without comment on December 30,

1997. (App., infra, 12a).

On January 29, 1998, Petitioners sought discretionary

review from the Louisiana Supreme Court. Again,

Petitioners sought a stay of Rayborn’s claims under the

Merger Agreement. On March 13, 1998, the Supreme Court

of Louisiana, with two Justices dissenting, denied

Petitioners’ application for review and stay. (App., infra,

la). Accordingly, Petitioners seek a Writ of Certiorari from

this Court.1

REASONS FOR GRANTING THE WRIT

The Federal Arbitration Act mandates rigorous

enforcement of arbitration clauses in contracts affecting

interstate commerce.

In Prima Paint Corp. v. Flood and Conklin Mfg. Co., 388

U.S. 395, 403, 404 (1967), this Court held that a party to a

contract containing an arbitration clause may not avoid

arbitration simply by claiming that the entire contract is

invalid. Accordingly, Prima Paint sets the legal standard --

now well established -- that an arbitration clause must be

enforced unless the clause itself specifically is found to be

invalid.

1 Contemporaneously with this petition, Petitioners have applied

for a stay of Rayborn’s claims pending final action on this petition and/or

review of the Court of Appeal’s decision.

8

In Doctor’s Associates, this Court held that no state may

treat an arbitration clause differently from any other

contractual obligation. Doctor’s Associates, Inc. v.

Casarotto, 517 U.S. 681 (1996). Consistent with the policies

underlying the Federal Arbitration Act, as well as Prima

Paint, Doctor's Associates stands for the proposition that

states may not impose additional enforceability requirements

on arbitration clauses to make them easier to avoid.

The majority opinion below read Doctor’s Associates as

overruling Prima Paint and 30 years of United States

Supreme Court precedent. Prima Paint remains as viable

today as when it was decided in 1967. Moreover, this

Court’s decision in Prima Paint is dispositive of this dispute.

The Court of Appeal should have applied Prima Paint and

reversed the trial court’s refusal to enforce the arbitration

clause.

Rayborn’s claims center around the sale of Sun pursuant

to the Merger Agreement. Specifically, Rayborn seeks:

e rescission of the Merger Agreement and related

agreements,

e damages for breach of, and conspiracy to breach, the

Merger Agreement and related contracts,

e damages for alleged violation of, and conspiracy to

violate, Louisiana’s Unfair Trade Practices and

Consumer Protection Law in accordance with

performance of the Merger Agreement and related

agreements,

e damages for breach of, and conspiracy to breach, the

Merger Agreement and related contracts, and

e damages for allegedly tortiously interfering, and

conspiring to tortiously interfere, with the Merger

Agreement.

9

The Merger Agreement, however, states unambiguously

that all disputes arising in connection with it must be

submitted to binding arbitration:

All disputes arising in connection with this

agreement shall be finally settled under the rules

and regulations of the American Arbitration

Association ....

See Merger Agreement, Article XV, 918.2 (App., infra, 20a).

Thus, Rayborn’s claims “arise in connection with” the

Merger Agreement and, according to the clear holding Prima

Paint, must be resolved by arbitration, not judicial process.

I. Doctor’s Associates Did Not Overrule Prima

Paint Sub Silentio.

In its majority opinion, the Court of Appeal held that the

Federal Arbitration Act governed the arbitration clause at

issue. Sun Drilling Products Corp. v. Rayborn, 703 So.2d

818, 818 (La. Ct. App. 1997). Inexplicably, however, the

Court of Appeal failed to apply (or even mention) Prima

Paint, the seminal, dispositive, and still oft-cited case on the

issue. Instead, the Court of Appeal misapplied Doctor's

Associates, in a way fatally inconsistent with Prima Paint.

According to the Court of Appeal, this Court held in

Doctor's Associates that the Act permits a party to escape the

operation of an arbitration clause merely by asserting

generally applicable contract defenses -- such as fraud in the

inducement. (App., infra, at 5a). This was not the holding

of Doctor’s Associates, a decision that by its own terms does

not apply to this case. Thus, the Court of Appeal erred by

applying Doctor ’s Associates to this case and interpreting it

as having overruled Prima Paint.

10

In Prima Paint, this Court held that, under the Federal

Arbitration Act, a binding arbitration clause, such as that

found in the Merger Agreement, must be enforced unless the

arbitration clause itself specifically is found to be invalid.

Thus, a party may not avoid an arbitration provision merely

by claiming that the entire agreement is invalid. Prima

Paint, 388 U.S. at 406. Rather, a party seeking to avoid

arbitration must contend (and ultimately prove) that the

specific arbitration provision itself was coerced, obtained

fraudulently, or is otherwise void ab initio. Id. This Court

analyzed the split in the circuits on the issue. The United

States Court of Appeals for the Second Circuit, which was

affirmed by the Court, held that “a broad arbitration clause

will be held to encompass arbitration of the claim that the

contract itself was induced by fraud.” Jd. at 402.

The decision in Prima Paint is good iaw today. No

subsequent decision of this Court has disturbed the viability

of Prima Paint. A Sheppards analysis establishes that Prima

Paint has been cited more than 900 times. Cited ten times by

this Court,2 Prima Paint has never been overruled,

2 Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265

(1995); Volt Information Sciences, Inc. v. Board of Trustees of Leland

Stanford Junior University, 489 U.S. 468 (1989); Stewart Organization,

Inc. v. Ricoh Corp., 487 U.S. 22 (1988); Budinich v. Becton Dickinson

and Co., 486 U.S. 196 (1988); Perry v. Thomas, 482 U.S. 483 (1987);

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614

(1985); Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79

L.Ed.2d 1 (1984); Moses H. Cone Memorial Hosp. v. Mercury Const.

Corp., 460 U.S. 1 (1983); Scherk v. Alberto-Culver Co., 417 U.S. 506

(1974); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S.

117 (1973).

1]

criticized, or questioned in any way. Prima Paint has never

been criticized by any of the federal courts that have relied

upon it.3

Doctor’s Associates does not alter this conclusion. In

Doctor’s Associates, this Court did not even mention Prima

Paint -- much less overrule it. There, the issue was whether

a state law may treat an arbitration clause differently than

any other contract. More specifically, Doctor ’s Associates

involved “whether Montana’s law [invalidating arbitration

clauses unless they are typed in underlined capitalized letters

on the first page of the contract] is compatible with the

federal [arbitration] Act.” 517 U.S. at 683. This Court held

that because Montana’s first page requirement applied only

to arbitration agreements and not contracts generally, it

conflicted with the Federal Arbitration Act and was therefore

invalid. /d.

3 Of the 640 federal decisions that have cited Prima Paint, only

one federal district court opinion arguably has questioned the Prima

Paint decision, and one opinion has purported to limit the Prima Paint

decision. Maye v. Smith Barney, Inc., 897 F. Supp. 100, 106 (S.D.N.Y.

1995) questioned the Prima Paint distinction between attacks on the

arbitration agreement itself and the attack on the contract as a whole, but

subsequent opinions of the United States Court of Appeals for the

Second Circuit continue to apply the holding of Prima Paint. See

Doctor’s Assocs., Inc. v. Distajo, 66 F.3d 438 (2nd Cir. 1995) and

Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126 (2nd Cir. 1997). Three

Valleys Municipal Water District v. E.F. Hutton Co., Inc., 925 F.2d 1136

(9th Cir. 1991), which purports to limit Prima Paint, is distinguishable.

In Three Valleys, the issue was whether a signatory to a contract that

provided for binding arbitration had the authority to bind the named

party. No such “authority” issue is presented here.

12

For instance, this Court noted its previous decisions on

the issue:

States may regulate contracts, including

arbitration clauses, under general contract law

principles and they may invalidate an arbitration

clause “upon such grounds as exist at law or in

equity for the revocation of any contract.” 9

U.S.C. § 2. What States may not do is decide

that a contract is fair enough to enforce all its

basic terms (price, service, credit), but not fair

enough to enforce its arbitration clause. The

Act makes any such state policy unlawful, for

that kind of policy would place arbitration

clauses on an unequal ‘footing,’ directly

contrary to the Act’s language and Congress’s

intent.

Doctor’s Associates, 517 U.S. at 686. (citations omitted).4

This Court neither held nor intimated that a claim of fraud in

4 Thus, consistent with Prima Paint, this Court in Doctor’s

Associates distinguished invalidation of an arbitration clause,

specifically, due to fraud, from a claim that the entire contract is void ab

initio due to fraud. This Court noted that “generally applicable contract

defenses, such as fraud, duress or unconscionability, may be applied to

invalidate arbitration agreements without violating” the Federal

Arbitration Act. Doctor’s Associates, 517 U.S. at 687. This Court’s use

of the term “agreement” did not nullify Prima Paint, which mandates

that general claims of fraud of the whole contract will not vitiate an

arbitration clause.

Moreover, the cases relied upon in Doctor’s Associates do not

address the question presented by Sun and HHDS&P. In Allied-Bruce,

Continued on following page

13

the inducement of a contract must be tried rather than

arbitrated.

Thus, the Court held in Doctor's Associates that “[c]ourts

may not... invalidate arbitration agreements under state

laws applicable only to arbitration provisions.” 517 U.S. at

687. This Court did not overrule or modify its time-tested

Prima Paint decision.

Continued from previous page

this Court held that the wording of the Federal Arbitration Act did not

restrict the Act’s application and thereby allow a state to apply its

arbitration law or policy to contracts affecting interstate commerce. 513

U.S. 265. In Volt, 489 U.S. 468, this Court held that the Act did not

preempt California law which permits courts to stay arbitration pending

resoiution of related litigation involving third parties not bound by the

arbitration agreement where the parties agreed in the contract to abide by

state rules of arbitration. In Rodriguez De Quijas v. Shearson/American

Express, Inc., 490 U.S. 477, 109 S.Ct. 1917 (1989) and

Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987), this

Court simply held that predispute agreements to arbitrate claims were

enforceable. Not only do these cases not apply to our situation, but they

also all upheld the enforceability of contractual arbitration clauses.

Finally, another case cited by this Court in Doctor's Associates

is Southland, 465 U.S. 1. Southland stands for the proposition that in

enacting the Federal Arbitration Act, Congress intended to foreclose state

legislative attempts to undercut the enforceability of arbitration

agreements. Jd. Southland does not deal with the issue of whether an

arbitration clause is vitiated by a claim of fraud in the inducement of the

contract, rather than of the arbitration provision. /d.

2 None of the briefs in Doctor's Associates focused on Prima

Paint or the issues decided therein. No one in Doctor’s Associates urged

Continued on following page

14

After Doctor ’s Associates, many courts have affirmed the

viability of Prima Paint. None of these several dozen cases

has suggested that Doctor's Associates is inconsistent with

Prima Paint or affects its holding in any way.2 Accordingly,

Continued from previous page

this Court to overrule or limit the validity of Prima Paint. See 1996 WL

71823 (Successful Petitioner’s Brief, in which Prima Paint and the issue

raised therein are nowhere mentioned); 1996 WL 115790 (Respondent’s

Brief); 1996 WL 157351 (Reply Brief); 1996 WL 115782, 75703,

75698, 78299 (Amicus Curiae Briefs).

& See,e. g., Cular v. Metropolitan Life Insurance Company, et al.,

961 F. Supp. 550 (S.D.N.Y. Mar. 27, 1997); Latifi v. Sousa, 1996 WL

735260 (N.D. Ala., Dec. 23, 1996); Capitol Vial, Inc. v. Weber Scientific,

966 F. Supp. 1108 (M.D. Ala., June 4, 1997); Carro Rivera v. Parade of

Toys, Inc., 950 F. Supp. 449 (D. Puerto Rico, Dec. 23, 1996); Gregory v.

Electro-Mechanical Corp., 83 F.3d 382 (llth Cir. 1996); Doctor’s

Assocs., Inc. v. Distajo, 66 F.3d 438, 457 (2nd Cir. 1995) and Doctor's

Assocs., Inc. v. Distajo, 107 F.3d 126 (2nd Cir. 1997); Freeman v.

Minolta Business Systems, Inc., 699 So.2d 1182 (La. App. 2 Cir., Sept.

24, 1997); Matter of Teleserve Systems, Inc., 659 N.Y.S.2d 659

(N.Y.A.D. 4 Dept., May 30,1997); Windham Foods, Inc. v. Fleming

Companies, Inc., 1997 WL 269387 (Ohio App. 11 Dist., May 2, 1997);

Palm Harbor Homes, Inc. v. McCoy, 944 S.W.2d 716 (Tex. App. - Fort

Worth, Apr. 10, 1997); Towe Hester & Erwin, Inc. v. Kansas City Fire &

Marine Ins. Co., 1997 WL 656991 (Okla. Civ. App. Div., Apr. 1, 1997);

Wilharm v. M.J. Const. Co., 1997 WL 72138 (Ohio App. 8 Dist., Feb.

20, 1997); and Smith v. Cumberland Group, Ltd., 687 A.2d 1167 (Pa.

Super., Jan. 21, 1997.

2 That Doctor’s Associates was not seen by the lower federal

courts as affecting Prima Paint was explicitly illustrated by Rainbow

Investments, Inc. v. Super 8 Motels, Inc., 973 F.Supp. 1387 (M.D.Ala.

Continued on following page

15

Prima Paint governs this case and should have been applied

by the Court of Appeal.

II. The Court Of Appeal’s Decision Contravenes

The Letter And Spirit Of The Federal Arbitration

Act And Prima Paint And Its Progeny.

The Federal Arbitration Act provides a means to enforce

mandatory arbitration clauses in contracts which affect

interstate commerce. Southland Corp., 465 U.S. 1. The

substantive rights afforded by the Act must be enforced by

Continued from previous page

1997). There, the district court rejected precisely the argument Rayborn

has argued.

In this regard, Rainbow Investments is entirely mistaken

when it states that “[Allied-Bruce] reserved the right to the

Court to invalidate contracts containing arbitration clauses

‘upon such grounds as exist at law or in equity for the

revocation of any contract.” In fact, as the Supreme Court

reiterated in Doctor's Assocs., Inc. v. Casarotto . . . Allied-

Bruce restated what earlier Court decisions had established:

that States may regulate contracts, including arbitration

clauses, under general contract law principles and they may

invalidate an arbitration clause ‘upon such grounds as exist

at law or in equity for the revocation of any contract.’ In

other words, these later Court decisions are entirely in

accord with the Prima Paint distinction between a challenge

to a whole contract, and a challenge to an arbitration clause

within a contract.

Id. at 1390 (emphasis added) (citations and quotations omitted).

16

both federal and state courts. Jd. at 12. The Court of Appeal

specifically held that the Act governed the arbitration clause

in the Merger Agreement.8

The Act “is a congressional declaration of a liberal

federal policy favoring arbitration agreements,

notwithstanding any state substantive or procedural policies

to the contrary.” Moses H. Cone, 460 U.S. at 24. The Act

has created “a body of federal substantive law of

arbitrability, applicable to any Arbitration Agreement within

the coverage of the Act.” Jd. at 24. See also Perry, 482 U.S.

at 489; Allied-Bruce, 513 U.S. 265.

Indeed, the Court of Appeal faced exactly the issue

presented to this Court in Prima Paint: “Having determined

that the contract in question is within the coverage of the

[Federal] Arbitration Act, we turn to the central issue in this

case: whether a claim of fraud in the inducement of the entire

contract is to be resolved by the federal court, or whether the

matter is to be referred to the arbitrators.” Prima Paint, 388

U.S. at 402.

In its disregard of Prima Paint, the Court of Appeal’s

decision smacks of the “old common law hostility toward

8 The Louisiana trial court relied upon the Louisiana Supreme

Court’s decision in George Engine Co., Inc. v. Southern Shipbuilding

Corp., 350 So.2d 881 (La. 1977), in deciding that claims alleging fraud

in the inducement of the Merger Agreement were not arbitrable. The

Louisiana Court of Appeal did not rely upon George Engine, however,

because: 1) George Engine interpreted the Louisiana Arbitration Act;

and 2) George Engine was decided prior to case law which established

that the Act applied in state, as well as, federal courts.

Se earn eee en mee ny Sa ad DPS a

Leavy aed AT CARI CEG

REE TA MSS RRS MO ESTE AP

17

arbitration” that the Federal Arbitration Act was intended to

overcome. Southland, 465 U.S. at 14. As this Court has

observed, “we are well past the time when judicial suspicion

of the desirability of arbitration and of the competence of

arbitral tribunals should inhibit enforcement of the Act.”

McMahon, 482 U.S. at 226 (quotations and citations

omitted).

This Court has vigilantly protected the nights of

contracting parties who have agreed to settle disputes

through arbitration. See Perry, 482 U.S. at 490-91;

McMahon, 482 U.S. at 226; Mitsubishi Motors, 473 U.S. at

625-26. Indeed, Congress intended the Federal Arbitration

Act to overcome certain courts’ refusals to enforce

agreements to arbitrate. See Allied-Bruce, 513 U.S. at 270

and Volt, 489 U.S. at 474. By enacting the Federal

Arbitration Act, Congress declared a national policy favoring

arbitration and curtailed state power to mandate a judicial

forum for the resolution of claims which the contracting

parties agreed to resolve by arbitration. Southland, 465 U.S.

at 10.

Contractual arbitration provisions have been used with

increasing frequency in recent years. Parties find these

provisions to be a useful means of contractually allocating

certain risks and avoiding litigation over the proper forum for

a dispute. Although a party may see the wisdom of an

arbitration clause at the time of contracting, when a dispute

arises that same party may be much more interested in

litigating in the forum that is most favorable to that party’s

claim. Consequently, it is not surprising that many parties

may seek to avoid contractual provisions that require

arbitration.

18

Undoubtedly, parties will construe the Court of Appeal’s

panel decision in this case as presenting a broad path to

circumvent an arbitration clause. Through the simple

expedient of pleading a general claim of fraud in the

inducement against the other contracting party, parties will

drag their adversary and the court through an expensive trial,

notwithstanding a contractual provision requiring arbitration.

This case illustrates how arbitration clauses can be

circumvented if the Court of Appeal’s decision is not

corrected. In this fashion, Rayborn has sidestepped the

arbitration clause and obtained a judicial proceeding for his

claims, although he expressly agreed to resolve claims

relating to the Merger Agreement through arbitration. This

Court should not tolerate this blatant attempt to avoid a

party’s promise to submit disputes to arbitration. The Court

should grant the writ of certiorari and clarify that arbitration

clauses may not be circumvented in this manner.

-

‘3

i.

S

=

ba

=

-

3

19

CONCLUSION

For the foregoing reasons, the writ of certiorari should be

granted.

Respectfully submitted,

Douglas Y. Christian

Elaine T. Petrossian

REED SMITH SHAW & MCCLAY LLP

2500 One Liberty Place

Philadelphia, PA 19103

(215) 851-8256/8298

Attorneys For Petitioners

4

:

=

APPENDIX

SUN DRILLING

PRODUCTS CORPORATION

VS. NO. 98-CC-0278

JERRY J. RAYBORN, SR.

IN RE: Sun Drilling Products Corp.; Heller, Hickox,

Dimeling et al; Astugue, Hyppolete; Reese, Susan; Heller,

Douglas, P.; Hickox, George, J.; Tuten, John C.; - Plaintiff

(s); Applying for Supervisory and/or Remedial Writs; to the

Court of Appeal, Fourth Circuit, Number 97CW-2112; Parish

of Plaquemines 25th Judicial District Court Div. “B” Number

41-857

March 13, 1998

Denied.

JPV

PFC

CDK

BJJ

JTK

Marcus, J. would grant the writ.

Lemmon, J. would grant the writ.

2a

Traylor, J. not on panel.

Supreme Court of Louisiana

March 13, 1998

/s/

Clerk of Court

For the Court

3a

SUN DRILLING PRODUCTS NO. 97-C-2122

CORPORATION

COURT OF APPEAL

VERSUS

FOURTH CIRCUIT

JERRY J. RAYBORN, SR.

STATE OF LOUISIANA

ON SUPERVISORY WRIT FROM THE

25th JUDICIAL DISTRICT COURT, PLAQUEMINES

PARISH NO. 41-857, DIVISION “B”

HONORABLE WILLIAM A. ROE, JUDGE

*eEEREHE*E *

~~ WILLIAM H. BYRNES, III

JUDGE

*eEERE*E * *

(Court composed of Judge_Robert J. Klees and Judge

William H. Byrnes, III and Judge Steven R. Plotkin)

PLOTKIN, J.. CONCURS WITH REASONS

GEORGE PIVACH, II

Pivach & Pivach, L.L.C.

Belle Chasse, Louisiana

-and-

DOUGLAS Y. CHRISTIAN

ROBERT A. KAUFFMAN

MICHAEL P. WALSH

Reed Smith Shaw & McClay

2500 One Liberty Place

Philadelphia, PA

-and-

4a

EDWARD D. WEGMANN

Jones, Walker, Waechter, Poitevent, Carrere & Denegre,

L.L.P.

New Orleans, Louisiana

Attorneys for Relators

PETER J. BUTLER

PETER J. BUTLER, JR.

RICHARD G. PASSLER

Breazeale, Sachse & Wilson, L.L.P.

New Orleans, Louisiana

-and-

PHILIP F. COSSICH, JR.

Cossich, Martin & Sumich, L.L.C.

Belle Chasse, Louisiana

~~ Attorneys for Jerry J. Rayborn, Sr.

WRIT GRANTED; RELIEF DENIED

We grant writs in order to review the trial court’s

judgment that fraud in the inducement of a contract

containing a mandatory arbitration clause is a matter to be

decided by the courts of this State rather than by the

arbitrator, even where the contract is subject to the Federal

Arbitration Act.

This case involves a contract containing a mandatory

arbitration clause. Respondent, Jerry J. Rayborn, Sr.,

attacked the contract in state court and among other things

alleged fraud in the inducement. The trial court denied

relators’! Exception of Lack of Subject Matter Jurisdiction

1 Relators are: Sun Drilling Products Corporation, Heller,

Hickox, Dimeling, Schreiber & Park; Douglas P. Heller; George K.

Continued on following page

Sa

regarding arbitration and stayed the arbitration proceedings

finding that the question of fraud in the inducement is not

arbitrable.

Under the Federal Arbitration Act generally applicable

state law contract defenses, such as fraud, duress or

unconscionability, may be applied to invalidate arbitration

agreements without contravening Section 2 of the Act.

Doctor's Associates, Inc. v. Casarotto, 116 S.Ct. 1652, 1655,

134 L. Ed.2d 902 (1996).

Fraud in the inducement is a generally applicable

contract defense in Louisiana as distinguished from one

applicable only to arbitration situations.

Arbitrations are favored. It is difficult to reconcile the

decision of this Court today and the judgment of the trial

court with the question raised by the trial judge:

[What is to stop anyone from making the

allegation of fraud or invalidity of the contract

to avoid an [arbitration] provision in the

contract[?]

In spite of this concern, the trial court ruled that the

question of fraud in the inducement is not arbitrable. We

share the concern of the trial judge, but like the trial judge are

compelled to reach the same result in face of the position

Continued from previous page

Hickox; William R. Dimeling; Richard R. Schreiber; Steven J. Park;

John C. Luten; Hyppolete J. Astugue; and Susan Reese.

6a

taken by the U.S. Supreme Court in Doctors Associates, Inc.,

supra.

The result reached by this Court is also consistent with

the reasoning of the Louisiana Supreme Court in George

Engine, Co., Inc. v. Southern Shipbuilding Corp., 350 So.2d

881 (La. 1977). However, George Engine did not involve the

Federal Arbitration Act.

Moreover, this Court in dicta in Mt. Airy Refining Co. v.

Clark Acquisition, Inc., 470 So.2d 890, 892 (La. App. 4 Cir.),

writ denied 476 So.2d 351 (La. 1985) noted that in Louisiana

under George Engine the appellant, Clark Acquisition, Inc.,

“could have filed in court a motion to stay the arbitration

proceeding along with a petition to rescind the contract for

fraudulent inducement.”

George Engine was followed most recently in Ackel v.

Ackel, 97-70 p. 5 (La. App. 5 Cir. 5/28/97); 696 So.2d 140,

143.

As the policy resolving the question of fraud in the

inducement in court rather than through arbitration as

originally declared by George Engine appears to continue to

be the policy of this state; and as Doctors Associates permits

the application of this policy; therefore, we are constrained to

affirm the actions of the trial court regardless of our concerns

about the potential havoc this policy could play with

arbitration clauses in Louisiana. In that regard we take some

comfort in the fact that George Engine was decided twenty

years ago, and if the paucity of cases in our jurisprudent is

any indication, the potential for abuse of the arbitration

process noted by the trial judge has never been realized.

However, as the use of alternative dispute resolution

methods, including arbitration, is assuming ever increasing

Ta

prominence in Louisiana and elsewhere, the Louisiana

Supreme Court may wish to revisit George Engine at this

time. The George Engine court referred to “a natural

reluctance to surrender the historical jurisdiction of courts,” a

reluctance that no longer exists. We also wish to call to the

attention of the Supreme Court the apparent conflict between

the above cited Fifth Circuit Ackel decision and F; reeman vy.

Minolta, 29655 p. 13 (La. Ap. 2 Cir. 9/24/97); 699 So.2d

1182, 1189, where the Second Circuit stated:

Federal jurisprudence holds that if the claim is

fraud in the inducement of the arbitration clause

itself, an issue as to the “making” of the

agreement to arbitrate, the federal court may

proceed to adjudicate it. However, the statutory

language does not permit the federal court to

consider claims in the inducement of the

contract generally.

Ackel took the contrary position Stating that:

The presence of an arbitration clause in a

contract does not divest the district court of

jurisdiction to determine the underlying

contract’s validity.

Ackel, p.6, 696 So.2d at 143-144.

We admit to some skepticism at the attempt by the

Second Circuit in Freeman to draw a distinction between

fraud in the inducement of the arbitration clause and fraud in

the inducement of the contract generally. Although it is a

distinction that is not original to Freeman as may be seen by

referrence [sic] to the authorities cited therein, it strikes this

court as being an overly fine distinction. As the Louisiana

Supreme Court stated in George Engine, the enforcement of

the right to arbitration “presupposes the existence of a valid

contract as a basis for invoking arbitration.” If arbitration is

the desired outcome, it would be better to face the issue head-

on and hold outright that the question of arbitration is

arbitrable because public policy today so favors arbitration

and the alternative is open to so much abuse, than to draw

what seems to be a distinction without a difference or a sound

basis in reason. In response to Freeman a clever lawyer

should not find it too difficult to frame his pleadings in terms

of fraudulent inducement in the arbitration clause rather than

fraudulent inducement in the contract as a whole.

For the foregoing reasons the judgment of the trial court

denying relator’s Exception of Lack of subject Matter

Jurisdiction and granting respondent’s Motion to Stay

Arbitration is affirmed.

WRIT GRANTED; RELIEF DENIED

SUN DRILLING PRODUCTS * NO. 97-C-2122

CORPORATION

* COURT OF APPEAL

VERSUS

* FOURTH CIRCUIT

JERRY J. RAYBORN, SR.

* STATE OF LOUISIANA

ee ££ * &

PLOTKIN, J. CONCURRING WITH WRITTEN

REASONS:

I respectfully concur in the majority’s decision holding

that the issue of fraud in inducement of a contract containing

a mandatory arbitration clause may be decided by a Louisiana

state court. Under the most recent jurisprudence from the

United States Supreme Court and from Louisiana courts, the

issue of fraud in the inducement of the contract is not subject

to the mandatory arbitration requirement.

The Federal Arbitration Act, which applies to the contract

at issue in the instant case because the contract affects

interstate commerce, provides, in pertinent part, as follows:

A written provision in . . . a contract

evidencing a transaction involving commerce to

settle by arbitration a controversy thereafter

arising out of such contract or transaction, or the

refusal to perform the whole or any party

thereof, . . . shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at

law or in equity for the revocation of any

contract.”

10a

9 U.S.C. § 2. In the most recent United States Supreme

Court case on this issue, the court interpreted the above

provision as follows:

In Southland [Corp. v. Keating, 465 U.S. 1, 104

S.Ct. 852, 79 L.Ed.2d 1 (1984)], we held that §

2 of the FAA applies in state as well as federal

courts, see 465 I/S/. at 12, 104 S. Ct., at 859,

and “withdr[aws] the power of the states to

require a judicial form for the resolution of

claims which the contracting parties agreed to

resolve by arbitration.” id. at 10, 104 S.Ct., at

858. We noted int [sic] he [sic] pathmarking

Southland decision that the FAA established a

“broad principle of enforceability,” id, at 11,

104 S.Ct., at 858, and that § 2 of the federal Act

provided for revocation of arbitration

agreements only upon “grounds as exist at law

or in equity for the revocation of any contract.”

In Perry [v. Thomas, 482 U.S. 483, 107 S.Ct.

2520, 96 L.Ed.2d 426 (1987)], we reiterated:

“[S]tate law, whether of legislative or judicial

origin, is applicable if that law arose to govern

issues concerning the validity, revocability, and

enforceability of contracts generally.

Doctor’s Associates Inc. v. Casarotto, 116 S.Ct. 1652, 1655

(1996). Thus, under the rule enunciated by the Doctor's

Associates case, state courts may decide allegations that a

contract is invalid, revocable, or unenforceable under state

law; such issues are not required to be submitted to

arbitration.

As the majority notes, the rule enunciated in Doctor's

Associates is consistent with the Louisiana Supreme Court’s

™~

™~,

lla

most recent case on this issue, George Engine, Co. v.

Southern Shipbuilding Corp., 350 So. 2d 881 (La. 1977),

which allowed a party to sue to rescind a contract containing

an arbitration clause on the grounds that the contract was

void ab initio in a court of competent jurisdiction. That rule

was also followed in Ackel v. Ackel, 97-70 (La. App. 4 Cir.

5/28/97), 696 So. 2d 140, 143. See also Mt. Airy Refining

Co. v. Clark Acquisition, Inc., 470 So. 2d 890, 892 (La. App.

4th Cir.), writ denied, 476 So. 2d 351 (La. 1985).

The relator in the instant case argues for the application

of a federal rule which distinguishes between a claim of fraud

in the inducement of an arbitration clause itself and fraud in

the inducement of the contract, allowing a federal court to

hear a claim alleging fraud in the inducement of an

arbitration clause, but requiring a claim alleging fraud in the

inducement of the contract itself to be decided by an

arbitrator. That rule was followed in Freeman v. Minolta

Business Systems, 618, 29, 655 (La. App. 2 Cir. 9/24/97), 699

So. 2d 1182, 1189, which in turn relied on a 1967 United

States Supreme Court case, Prima Paint Corp. v. Flood &

Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801, 18

L.Ed.2d 1270 (1967). However, under the more recent

United States Supreme Court decision, as well as the most

recent Louisiana Supreme Court decision, state law, as

opposed to federal law, may be applied to this case. Thus, I

agree with the majority’s decisions to distinguish the

Freeman case.

12a

COURT OF APPEAL, FOURTH CIRCUIT

STATE OF LOUISIANA

Clerk’s Office, New Orleans,

DEAR SIR:

REHEARING WAS THIS DAY REFUSED IN THE CASE

ENTITLED

SUN DRILLING PRODUCTS CORP. v. RAYBORN, SR.

No. __97-C-2112

Very Truly yours,

DANIELLE A. SCHOTT

CLERK OF COURT

13a

25TH JUDICIAL DISTRICT COURT PARISH OF

PLAQUEMINES

STATE OF LOUISIANA

NO. 41-857 DIVISION “B”

SUN DRILLING PRODUCTS CORPORATION

VERSUS

JERRY J. RAYBORN, SR.

FILED: _AUG 22 1997 /s/ BETTINA K. PHILLIPS

DEPUTY CLERK

JUDGMENT

On August 21, 1997, this matter came on for hearing on

the following:

1. Exception of Lack of Subject Matter Jurisdiction filed

by Sun Drilling Products Corporation; Heller, Hickox,

Dimeling, Schreiber & Park; Douglas B. Heller; George K.

Hickox; William R. Dimeling; Richard R. Schreiber; Stephen

G. Park; John C. Tuten; Hyppolete J. Astugue and Susan

Reese.

2. Exception of No Cause of Action filed by Sun

Drilling Products Corporation; Heller, Hickox, Dimeling,

Schreiber & Park; Douglas B. Heller; George K. Hickox;

William R. Dimeling; Richard R. Schreiber; Stephen G. Park;

John C. Tuten; Hyppolete J. Astugue and Susan Reese.

3. Exception of Failure to Join Indispensable Party filed

by Sun Drilling Products Corporation; Heller, Hickox,

Dimeling, Schreiber & Park; Douglas B. Heller; George K.

l4a

Hickox; William R. Dimeling; Richard R. Schreiber; Stephen

G. Park; John C. Tuten; Hyppolete J. Astugue and Susan

Reese.

4. Motion to Stay Arbitration filed by Jerry J. Rayborn,

Sr.

5. Motion to Compel Discovery Responses and for

Sanctions (first set of discovery) filed by Jerry J. Rayborn,

Sr.

6. Motion to Compel Discovery (second set of

discovery) filed by Jerry J. Rayborn, Sr.

7. Motion for Protective Order and Amended Motion for

Protective Order filed by Sun Drilling Products Corporation;

Heller, Hickox, Dimeling, Schreiber & Park; Douglas B.

Heller; George K. Hickox; William R. Dimeling; Richard R.

Schreiber; Stephen G. Park; John C. Tuten; Hyppolete J.

Astugue and Susan Reese.

Present were:

Peter J. Butler, Richard G. Passler, Philip F. Cossich,

Jr., and Les A. Martin, counsel for Jerry J. Rayborn,

Sr.

Robert Kaufman [sic], Douglas Y. Christian and

George Pivach, II, counsel for Sun Drilling Products

Corporation, Heller, Hickox, Dimeling, Schreiber &

Park; Douglas B. Heller; George K. Hickox; William

R. Dimeling; Richard R. Schreiber; Stephen G. Park;

John C. Tuten; Hyppolete J. Astugue and Susan

Reese.

Edward D. Wegmann, co-counsel for Hyppolete J.

Astugue and Susan Reese.

Considering the pleadings, memorandum, the arguments

of counsel and the entire record of this proceeding, for the

reasons orally assigned:

15a

IT IS ORDERED that the Exception of Lack of Subject

Matter Jurisdiction filed by Sun Drilling Products

Corporation; Heller, Hickox, Dimeling, Schreiber & Park;

Douglas B. Heller; George K. Hickox; William R. Dimeling;

Richard R. Schreiber; Stephen G. Park; John C. Tuten;

Hyppolete J. Astugue and Susan Reese, be and is hereby

OVERRULED;

IT IS FURTHER ORDERED that the Exception of No

Cause of Action filed by Sun Drilling Products Corporation;

Heller, Hickox, Dimeling, Schreiber & Park; Douglas B.

Heller; George K. Hickox; William R. Dimeling; Richard R.

Schreiber; Stephen G. Park; John C. Tuten and Hyppoieie J.

Astugue, be and is hereby OVERRULED;

IT IS FURTHER ORDERED that the Exception of No

Cause of Action filed by Susan Reese is hereby GRANTED,

and Jerry j. Rayborn, Sr. is given fifteen (15) days to amend

his Reconventional Demand against Susan Reese.

IT IS FURTHER ORDERED that the Exception of

Failure to Join and Indispensable Party is hereby GRANTED,

and Jerry J. Rayborn, Sr. shall have fifteen (15) days to join

Jerry J. Rayborn, Jr., Jeffrey Rayborn, and Joel Rayborn to

this lawsuit.

IT IS FURTHER ORDERED that the Motion to Stay

Arbitration filed by Jerry J. Rayborn, Sr. be and the same is

hereby GRANTED and Arbitration No. 14 180 00245 97 V/J

entitled “Sun Drilling Products Corporation and Heller,

Hickox, Dimeling, Schreiber & Park and Jerry J. Rayborn,

Sr., Jerry J. Rayborn, Jr., Jeffrey Rayborn and Joel Rayborn”

pending before the American Arbitration Association in

Philadelphia, Pennsylvania be and is hereby STAYED

pending further orders of this Court and the parties thereto be

and are hereby precluded from taking any action or otherwise

participating in any manner in said arbitration pending further

orders of this Court;

IT IS FURTHER ORDERED that the Motion to Compel

Discovery Responses and for Sanctions (first set of

16a

discovery) filed by Jerry j}. Rayborn, Sr. and the Motion to

Compel Discovery (second set of discovery) filed by Jerry j.

Rayborn, Sr. be and are hereby GRANTED and Sun Drilling

Productions [sic] Corporation; Heller, Hickox, Dimeling,

Schreiber & Park; Douglas B. Heller; George K. Hickox;

William R. Dimeling: Richard R. Schreiber: Stephen G. Park;

John C. Tuten; Hyppolete J. Astugue and Susan Reese be and

are hereby required to fully and completely respond to all of

the discovery at issue in said Motions, within thirty (30) days

and for all documents which a privilege is claimed, a

privilege log shall be provided which shall include the

authors(s), recipient(s), sender(s) and dates(s) [sic], a

description of the nature and subject matter of the document;

and the basis for the claim of privilege;

IT IS FURTHER ORDERED that the Motion for

Protective Order and Amended Motion for Protective Order

is DENIED.

Judgment rendered this 21st day of August, 1997.

Judgment signed this day of Aug 22 1997, 1997,

Point-a-la-Hache, Louisiana

/s/

JUDGE

A TRUE COPY

/s/

Dy. clerk of Court

Parish of Plaquemines, La.

17a

AGREEMENT

By and Among

JERRY J. RAYBORN, SR.. JERRY J. RAYBORN. JR...

JEFFREY RAYBORN, JOEL RAYBORN,

SUN DRILLING PRODUCTS CORPORATION, A

LOUISIANA CORPORATION,

HELLER, HICKOX, DIMELING, SCHREIBER & PARK

And

SUN ACQUISITION CORPORATION

December 8, 1994

18a

AGREEMENT

THIS AGREEMENT, made this 8th day of December,

1994, by and among JERRY J. RAYBORN, SR., JERRY J.

RAYBORN, JR., JEFFREY RAYBORN, JOEL RAYBORN

(Jerry J, J. Rayborn, Sr., Jerry j. Rayborn, Jr., Jeffrey

Rayborn, Joel Rayborn collectively referred to as the

“Company Shareholders”; Jerry }. Rayborn, Sr. sometimes

individually referred to herein as “Exchange Agent”), SUN

DRILLING PRODUCTS CORPORATION, a Louisiana

corporation (“Company”), HELLER, HICKOX, DIMELING,

SCHREIBER & PARK, a Pennsylvania general partnership

(““HHDS&P”), and SUN ACQUISITION CORPORATION,

a Louisiana corporation (“Sun Acquisition”; HHDS&P and

Sun Acquisition are collectively referred to herein as

“Buyer’).

WITNESSETH:

WHEREAS, the partners of HHDS&P or their affiliates

own 100% of the issued and outstanding stock of Sun

Acquisition; and

WHEREAS, the respective Shareholders and Boards of

Directors of Sun Acquisition and Company have each

approved the merger of Sun Acquisition with and into

Company, with Company as the surviving corporation, upon

the terms and conditions set forth herein and in the Plan of

Merger attached hereto as Exhibit A (the “Plan of Merger”),

and have approved this Agreement (the “Agreement”) and

the Plan of Merger; and

WHEREAS, in accordance with the terms of the Plan of

Merger, it is proposed that Sun Acquisition be merged with

and into Company and that the presently issued and

outstanding shares of capital stock, par value $10.00 per

share of Company be converted into cash; and

WHEREAS, Company and Buyer desire to enter into and

carry out the transactions contemplated by this Agreement in

19a

accordance with the terms hereof, the Plan of merger and the

provisions of the Louisiana Business Corporation Law.

NOW, THEREFORE, for and in consideration of the

premises and the mutual covenants and agreements set forth

in this Agreement and other good and valuable consideration,

the receipt and sufficiency of which are hereby

acknowledged, and intending to be legally bound hereby, the

parties hereto agree as follows:

ARTICLE I

The Merger

1.1 The merger of Sun Acquisition into Company.

Subject to the terms and upon the conditions set forth herein,

on or

ke * *

Each party to this Agreement agrees to cooperate fully

with the other parties hereto and their counsel and

accountants and other representatives, will use best efforts to

cause satisfaction of the conditions to consummation of the

Merger as promptly as possible, and will refrain from a

course of action inconsistent with this Agreement of the Plan

of Merger. Each party shall, upon request of any of the other

parties hereto, at any time and from time to time execute,

acknowledge, deliver and perform all such further acts,

deeds, assignments, transfers, conveyances, powers of

attorney and instruments of further assurances as may be

reasonably necessary or appropriate to carry out the

provisions and intent of this Agreement or the Plan of

Merger.

20a

ARTICLE XVIII

Miscellaneous

18.1 Dispute Resolution.

(a) This Agreement shall be governed by the laws of the

Commonwealth of Pennsylvania without regard to any

jurisdiction’s conflicts of laws provisions.

(b) All disputes arising in connection with this

Agreement shall be finally settled under the rules and

regulations of the American Arbitration Association and

judgment upon any award rendered by the arbitration panel

may be entered in any court having jurisdiction thereof. The

arbitration panel shall be composed of one arbitrator chosen

by Buyer, one arbitrator chosen by Jerry J. Rayborn, Sr., and

an umpire chosen by the two arbitrators. The arbitration will

be conducted in Philadelphia, Pennsylvania. If either party

fails to select an arbitrator (a “defaulting party”) within 30

days of receipt of written notice of a dispute from the other

party including a demand that the party select an arbitrator,

the defaulting party shall be deemed to have agreed with the

non-defaulting party’s interpretation of the dispute.

18.2 Counterparts/Use of Facsimiles. This Agreement

may be executed in one or more counterparts, each of which

shall be deemed an original, but all of which together shall

constitute a single agreement. The reproduction of signatures

by means of a telecopying device shall be treated as though

such reproductions are executed originals and each party

hereto covenants and agrees to provide the other parties with

a copy of this Agreement bearing original signatures within

five days following transmittal by facsimile.

18.3 Entire Agreement. This Agreement constitutes the

entire agreement of the parties hereto respecting its subject

matter and supersedes all negotiations, preliminary

agreements and prior or contemporaneous discussions and

understandings of the parties hereto in connection with the

subject matter hereof.

2la

ke * *

IN WITNESS WHEREOF, each of the parties has

executed or caused this Agreement to be executed where

applicable by its duly authorized officer and has caused its

corporate seal or stamp to be affixed hereto and attested by its

Secretary or Assistant Secretary or other authorized person,

as of the date first above written.

WITNESS:

/s/ David N. Corken /s/ Jerry J. Rayborn. Sr.

JERRY J. RAYBORN, SR.

WITNESS:

/s/ David N. Corken /s/ Jerry J. Rayborn, Jr.

JERRY J. RAYBORN, JR.*

WITNESS:

/s/ David N. Corken /s/ Jeffrey Rayborn

JEFFREY RAYBORN*

WITNESS:

/s/ David N. Corken /s/ Joel Rayborn

JOEL RAYBORN?*

ATTEST: SUN DRILLING

PRODUCTS

CORPORATION, a

Louisiana corporation

22a

/s/ H. Astugue By /s/ Jerry J. Rayborn, Sr.

President

WITNESS: HELLER, HICKOX,

DIMELING, SCHREIBER &

PARK

/s/ Jerry J. Rayborn, Sr.

* By Jerry J. Rayborn, Sr., agent and

attorney-in-fact

/s/ Lisa Ciandra By_/s/ D P. Heller

General Partner

ATTEST: Sun Acquisition Corporation,

a Louisiana corporation

/s/ G. K. Hickox By__/s/ D. P. Heller

President