Société Générale de Surveillance S.A. v. Raytheon European Management & Sys. Co.

In 1975 Raytheon European Management & Sys. Co. (REMSCO) (defendant), a Massachusetts company, and Société Générale de Surveillance S.A (SGS) (plaintiff), a French company, entered into a contract (the basic contract) under which SGS agreed to provide transportation services for NATO Hawk missiles. The basic contract was written on a REMSCO purchase-order form. However, the basic contract stated that the terms on the reverse side of the form were deleted. Among the deleted terms was a clause requiring arbitration in Massachusetts. The basic contract, in turn, specifically called for all disputes to be resolved by arbitration in Switzerland and stated that French law controlled. The basic contract also specified that any future changes must be in writing. The parties subsequently entered into a series of change orders, which were typically written on a REMSCO purchase-order form but which always referenced the basic contract on the front page. When change order 7 was entered, the parties attached a memorandum reciting terms that were to form the basis of a future formal contract. When change order 8 was entered, which called for the performance of testing missiles, the parties recited that the terms and conditions remained the same. A dispute arose regarding the performance of change order 8. REMSCO sought to commence arbitration in Switzerland. However, SGS opposed, explaining in a letter to REMSCO that the terms of the basic contract did not apply to change order 8 because the change order called for totally new services (testing instead of transport). REMSCO then sought arbitration in Boston based on the arbitration clause on the back of the purchase order used for change order 8. SGS filed an action seeking to enjoin the Boston arbitration, arguing that if arbitration were to be held at all, it should be held in Switzerland. The district court temporarily enjoined the Boston arbitration and denied REMSCO’s multiple motions to dissolve the injunction. In the meantime, REMSCO formally commenced arbitration in Switzerland, and SGS submitted to the Swiss arbitration. REMSCO appealed the district court’s refusal to dissolve the order enjoining the Boston arbitration, arguing among other things that change order 7 constituted an entirely new contract between the parties, so that the terms of the basic contract did not apply to change order 8 and, therefore, the arbitration clause on the back of the purchase order calling for arbitration in Massachusetts controlled.