offer and acceptance in formation of contract

In 1966 Essex Group, Inc., a manufacturer of electrical wire products, decided to expand its aluminum wire production and began negotiations with Aluminum Company of America (ALCOA) for a long-term supply of aluminum. By December 26, 1967, the parties entered into the Molten Metal Agreement under which Essex would supply alumina to ALCOA, which would smelt it into molten aluminum at its Warrick, Indiana facility for Essex to pick up. The agreement was to run until the end of 1983, with Essex having an option to extend it to 1988. Essex also entered into a separate Alumina Purchase Agreement with Alcoa of Australia Proprietary Ltd. for the supply of alumina. The price under the Molten Metal Agreement was calculated using a formula with three components. A demand charge was indexed to the Engineering News Record Construction Cost Index. A non-labor production cost component was indexed to the Wholesale Price Index-Industrial Commodities (WPI-IC). A labor production cost component was indexed to ALCOA's average hourly labor costs at Warrick. The initial price was fifteen cents per pound, subject to an overall cap at sixty-five percent of a specified market price for aluminum. ALCOA consulted economist Alan Greenspan in developing the indexing system, and both parties examined the historical performance of the indices before agreeing to them. The parties also executed a Side Letter Agreement addressing concerns under the Robinson-Patman Act, providing that if the agreement were construed as a sale of goods, either party could terminate it. From 1968 through the early 1970s, the price formula produced returns to ALCOA within the expected range of one to seven cents per pound net. Beginning in 1973, following actions by OPEC to increase oil prices and unanticipated pollution control costs, ALCOA's electricity costs at Warrick rose much more rapidly than the WPI-IC. As a result, ALCOA began incurring substantial out-of-pocket losses on the contract, projected to exceed sixty million dollars over the remaining term if unchanged. In June 1979, ALCOA notified Essex that it would reduce deliveries by fifteen percent, and Essex disputed ALCOA's authority to do so under the contract terms. On July 21, 1975, representatives of ALCOA and Essex, including Krome George and Paul O'Malley, met and discussed possible revision of the pricing formula, but the parties dispute whether an oral agreement to modify the contract was reached. In 1977 and 1978, electrical generating plant failures and a coal strike caused interruptions in ALCOA's smelting operations, leading to reduced deliveries to Essex that ALCOA attributed to causes beyond its control. ALCOA filed this action in the United States District Court for the Western District of Pennsylvania seeking reformation of the contract, a declaratory judgment regarding an alleged oral modification and termination rights, while Essex counterclaimed for damages and specific enforcement of the original delivery obligations. The case proceeded to a non-jury trial on liability issues, during which evidence was presented including tables showing the divergence between the WPI-IC and ALCOA's actual non-labor costs, testimony from company officials, and records of contract negotiations and performance. Jurisdiction is based on diversity of citizenship with the amount in controversy exceeding the jurisdictional threshold, and the parties agreed that Indiana law governs the contract.

Petitioner Granite Rock Company is a concrete and building materials company that has operated in California since 1900 and employs approximately 800 employees under labor contracts with several unions, including respondent International Brotherhood of Teamsters, Local 287. Granite Rock and Local were parties to a 1999 collective-bargaining agreement that expired in April 2004. After negotiations reached an impasse, Local members initiated a strike on June 9, 2004, in support of their contract demands. The strike continued until July 2, 2004, when the parties reached agreement on the terms of a new collective-bargaining agreement containing a no-strike clause and an arbitration clause. At the end of that negotiating session, Local's business representative approached Granite Rock about executing a separate back-to-work agreement that would hold union members harmless for damages incurred during the June 2004 strike, but no such agreement was executed and Local voted to ratify the new agreement on July 2 without it. Respondent IBT, which had advised Local throughout the negotiations and supported the June strike, opposed Local's decision to return to work without a hold-harmless agreement and instructed Local's members not to honor their agreement to return to work on July 5. On July 6, 2004, Local's representative demanded a hold-harmless agreement, but Granite Rock refused and informed Local that continued strike activity would violate the new agreement's no-strike clause. IBT and Local responded by announcing a companywide strike involving numerous facilities and hundreds of workers, including members of other IBT locals. IBT provided pay and benefits to members who refused to return to work, directed Local's negotiations, supported Local with a $1.2 million loan, and represented that it had unilateral authority to end the work stoppage in exchange for a hold-harmless agreement. On July 9, 2004, Granite Rock sued IBT and Local in the District Court, invoking federal jurisdiction under LMRA § 301(a), seeking strike-related damages for breach of contract, and requesting an injunction against the ongoing strike on the ground that the hold-harmless dispute was an arbitrable grievance. The unions conceded § 301(a) jurisdiction but asserted that the new agreement was never validly ratified on July 2. After a Local member testified that the new agreement had been put to a ratification vote on July 2 and unanimously approved, Granite Rock moved for a new trial. On August 22, while that motion was pending, Local conducted a second successful ratification vote, and on September 13 the unions called off the strike. The District Court granted Granite Rock a new trial on its damages claims, denied Local's motion to send the ratification-date dispute to arbitration, and submitted the question to a jury, which unanimously found that Local ratified the agreement on July 2, 2004. The District Court entered the verdict and ordered arbitration on Granite Rock's breach-of-contract claims. Granite Rock amended its complaint to add federal tortious-interference claims against IBT, which the District Court dismissed on the ground that § 301(a) supports a federal cause of action only for breach of contract. The Ninth Circuit affirmed the dismissal of the tortious-interference claims but reversed the arbitration order, holding that the ratification-date dispute was a matter for an arbitrator to resolve under the agreement's arbitration clause. The Supreme Court granted certiorari.

Mary Armendariz and Dolores Olague-Rodgers were hired by Foundation Health Psychcare Services, Inc. in July and August of 1995 for positions in the Provider Relations Group and were later promoted to supervisory roles with annual salaries of $38,000. As a condition of their employment, the employees signed application forms and separate arbitration agreements that required binding arbitration of any dispute arising from termination of employment. The arbitration clause provided that the employees' exclusive remedies would be limited to back wages from the date of discharge until the arbitration award and expressly excluded other remedies such as reinstatement and injunctive relief. On June 20, 1996, the employees were informed that their positions were being eliminated and that they were terminated. During their employment, they alleged that supervisors and coworkers engaged in sexually based harassment and discrimination, and they claimed the termination occurred because of their perceived or actual sexual orientation. The employees filed a complaint against the employer and its parent company alleging a cause of action for violation of the FEHA as well as tort and contract claims for wrongful termination, seeking general damages, punitive damages, injunctive relief, and attorney fees and costs. The employer filed a motion to compel arbitration under Code of Civil Procedure section 1281.2, supported by declarations. The trial court denied the motion, concluding that the arbitration agreement was an adhesion contract containing provisions so one-sided as to shock the conscience, including the requirement that only employees arbitrate claims and the limitation of damages to backpay. The Court of Appeal reversed the trial court's order, holding that the damages provision was unconscionable but that the remainder of the agreement should be enforced after severance. The Supreme Court granted review of the case.