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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1998
- **Citation:** 525 U.S. 1000

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_1680%3A1. Public record. Not legal advice.