United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                      ___________

                                      No. 99-1260
                                      ___________

PCS Nitrogen Fertilizer, L.P.,       *
f/k/a Arcadian Fertilizer, L.P.,     *
                                     *
            Appellee,                *
                                     *    Appeal from the United States
     v.                              *    District Court for the
                                     *    District of Nebraska
The Christy Refractories, L.L.C.,    *
                                     *
            Appellant.               *
                               _________________

                               Submitted: December 15, 1999

                                     Filed: September 15, 2000
                                   _________________

Before McMILLIAN, JOHN R. GIBSON, and MAGILL, Circuit Judges.
                        _________________

McMILLIAN, Circuit Judge.
      The Christy Refractories, L.L.C. (Christy), appeals from an interlocutory order
entered in the United States District Court1 for the District of Nebraska holding that the
underlying dispute between Christy and PCS Nitrogen Fertilizer, L.P. (PCS), is not
subject to mandatory arbitration. See PCS Nitrogen Fertilizer, L.P. v. Christy
Refractories, L.L.C., No. 8:98CV390 (D. Neb. Dec. 28, 1998) (hereinafter "slip op.").


      1
       The Honorable William G. Cambridge, then Chief Judge, United States District
Court for the District of Nebraska.
For reversal, Christy argues that the district court erred in interpreting the pertinent
contract documents because (1) Christy's customer acknowledgment was a "definite
and seasonable expression of acceptance" and thus bound PCS to its terms, which
included a mandatory arbitration clause; (2) the added arbitration term became part of
the contract because the clause did not materially alter the contract or, alternatively,
because PCS assented to it; (3) Christy's customer acknowledgment was a counter-
offer accepted by PCS; or (4) the arbitration clause became part of the contract as a
result of the parties' course of dealing. For the reasons discussed below, we affirm the
order of the district court.

                                     Jurisdiction

       Jurisdiction in the district court was proper based upon 28 U.S.C. § 1332.
Jurisdiction in the court of appeals is proper based upon 9 U.S.C. § 16(a)(1) and 28
U.S.C. § 1292(a)(1). The notice of appeal was timely filed pursuant to Fed. R. App.
P. 4(a).

                                     Background

        The following statement of facts is drawn from the district court order and the
record on appeal. PCS, a manufacturer of ammonia fertilizers, is a Delaware limited
partnership authorized to do business in Nebraska. PCS has a buying office in
LaPlatte, Nebraska, among its several offices nationwide. Christy is a Missouri limited
liability company also authorized to conduct business in Nebraska.

       On February 4, 1997, through its LaPlatte office, PCS submitted a purchase
order to Christy for a certain quantity of a catalyst support medium (hereinafter “the
goods”) for use in PCS’s manufacturing process. See Appellant's Appendix
(hereinafter "App.") at 33-36 (PCS purchase order). PCS's purchase order contained
no term regarding the arbitration of disputes. See 

on February 7, 1997,

                                          -2-
Christy sent a customer acknowledgment form. See 

(Christy customer
acknowledgment). The face of Christy's form contained the statement: "THIS
CONTRACT CONSISTS OF THE TERMS AND CONDITIONS ON THE FACE
AND REVERSE HEREOF. THIS CONTRACT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES."

(set forth in capital letters in original). The terms and conditions of sale were
set forth on the reverse side of the form and included the following initial term:

      1. Offer and Acceptance . . . . Seller's acceptance of any offer by
      Purchaser to purchase the Products is expressly conditional upon the
      Purchaser's assent to all the terms and conditions herein, including any
      terms additional to or different from those contained in the offer to
      purchase. Seller hereby objects to any different or additional terms or
      conditions contained in any acceptance by Purchaser of any offer made
      by Seller or in any other document submitted by Purchaser. No
      modification, addition, deletion, rescission or waiver by Seller of any term
      or condition set forth herein or of any of Seller's rights or remedies
      hereunder shall be binding upon Seller unless agreed to in a writing signed
      by Seller. Purchaser shall be deemed to have assented to these terms and
      conditions unless Seller receives written notice of any objection within 10
      days after Purchaser's receipt of this form and in all events prior to
      delivery or other performance by Seller.

Another term on the reverse side of Christy’s form provided for arbitration
of contractual disputes between PCS and Christy as follows:

      26. Arbitration. If any dispute occurs between Purchaser and Seller
      arising out of or related to this Contract, Seller, in its sole discretion, may
      require that such dispute be settled by arbitration under the then current
      rules of the American Arbitration Association. If Seller elects to submit
      any such dispute to arbitration, the decision and award of the arbitrator
      shall be firm and binding and the award may be entered in any court
      having jurisdiction. Any arbitration shall be held and the award shall be
      deemed to be made in St. Louis, Missouri.


                                           -3-


last sentence on the terms and conditions page of the form stated that
"THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES." 

in capital letters
in original).

       On or about May 1, 1997, Christy delivered the goods to PCS's LaPlatte office.
See 

(affidavit of Gary Altman) (Sept. 25, 1998). PCS alleges that, following
use in its manufacturing process, the goods failed to function as warranted. See 

(Amended Complaint, ¶ 10). PCS subsequently commenced this action against
Christy in the United States District Court for the District of Nebraska and claimed
damages of $940,876.36 for the cost of the goods, lost production, and the clean-up
and repair costs associated with the damage that the goods allegedly caused to PCS's
manufacturing equipment.

       On September 4, 1998, Christy filed a Demand for Arbitration with the American
Arbitration Association ("AAA") and attached a copy of PCS's purchase order and
Christy's customer acknowledgment form. See 

On September 25, 1998,
PCS formally objected to Christy's demand for arbitration and requested a stay of
arbitration. See 

On the same day, PCS asked the district court to decide
whether PCS was required to arbitrate its claims against Christy and to enjoin
arbitration pending the district court's arbitrability determination. See 

(Motion to Enjoin Arbitration), 19-20 (Motion for Determination of Arbitrability).

       The district court granted PCS's motion to enjoin arbitration, see PCS Nitrogen
Fertilizer, L.P. v. Christy Refractories, L.L.C., No. 8:98CV390 (D. Neb. Nov. 24,
1998), and later granted PCS's motion to determine arbitrability, concluding that the
arbitration provision was not an enforceable part of the parties' agreement. See slip op.




                                          -4-
at 1. Applying Article 2 of the Uniform Commercial Code (UCC),2 the district court
held that, because Christy's acceptance was expressly conditional upon PCS's assent
to additional terms (including the arbitration clause), no contract was formed under
UCC § 2-207(1). See 

The district court alternatively determined that, even
if Christy's customer acknowledgment was a valid acceptance under § 2-207(1), the
provisions of § 2-207(2) prevented incorporation of Christy's added terms because the
arbitration clause was a material alteration of the contract. See 

Finally, the
district court held that the additional arbitration terms could not qualify as a
supplemental term under § 2-207(3) given the parties' limited course of dealing. See

This appeal followed.

                                       Discussion

         A party who has not agreed to arbitrate a dispute cannot be forced to do so. See
AT&T Techs., Inc. v. Communication Workers of Am., 

, 648 (1986).
Accordingly, the court must determine "whether there is an agreement between those
parties which commits the subject matter of the dispute to arbitration." ITT Hartford
Life & Annuity Ins. Co. v. Amerishare Investors, Inc., 

, 668 (8th Cir.
1998). Where the arbitrability of the dispute depends on contract interpretation, we
review the district court's decision de novo. See Keymer v. Management Recruiters
Int'l, Inc., 

, 504 (8th Cir.1999). To the extent that the district court's order
concerning arbitrability is based on factual findings, we review those findings for clear
error. See 

district court noted that, although the parties agreed that UCC § 2-207
governed, neither side had addressed whether Nebraska or Missouri law should apply.
See slip op. at 3. The district court reasoned that "[t]he exercise likely would be
academic, however, as the Nebraska and Missouri versions of UCC § 2-207 are
essentially the same." 

Fashions, Inc. v. DHJ Indus., Inc., 

(8th Cir. 1976), for proposition that it is unnecessary to resolve a choice-of-law issue
where the states involved adopted UCC § 2-207 without modification).

                                            -5-
UCC § 2-207(1)

       Christy initially argues that its customer acknowledgment form was a definite
and seasonable expression of acceptance within the spirit of UCC § 2-207(1) despite
its “expressly conditional” language and thus the district court erred in determining that
PCS was not required to arbitrate its claim. UCC § 2-207(1) states that

      a definite and seasonable expression of acceptance or a written
      confirmation which is sent within a reasonable time operates as an
      acceptance even though it states terms additional to or different from
      those offered or agreed upon, unless acceptance is expressly made
      conditional on assent to the additional or different terms.

Christy acknowledges that its customer acknowledgment form
tracked the language of § 2-207(1). See App. at 38 (Christy customer acknowledgment
form) (“Seller’s acceptance of any offer by Purchaser to purchase the Products is
expressly conditional upon the Purchaser’s assent to all terms and conditions herein,
including any terms additional to or different from those contained in the offer to
purchase.”) (emphasis added).

       Nonetheless, Christy urges that this “mechanical” language within its form
should not foreclose a valid acceptance, because “often the parties do no impart such
significance to the terms on the printed forms as to have them prevent a contract from
being consummated.” Brief for Appellant at 9; see also Dorton v. Collins & Aikman
Corp., 

, 1166 (6th Cir. 1972) (Dorton) (noting that, “[w]hereas under
common law the disparity between the fineprint terms in the parties’ forms would have
prevented the consummation of a contract when these forms are exchanged, Section
2-207 recognizes that in many, but not all, cases the parties do not impart such
significance to the terms on the printed forms.”). Instead, Christy contends that the
district court should have looked beyond the acknowledgment form’s language and
focused on the parties’ intent as determined by the factual circumstances surrounding

                                           -6-
the agreement, to determine whether the acceptance was in fact expressly conditional
on PCS’s assent. See Brief for Appellant at 12-13 (citing John E. Murray, Section
2-207 of the Uniform Commercial Code: Another Word About Incipient
Unconscionability, 39 U. Pitt. L. Rev. 597 (1978)). But see C. Itoh & Co. (America)
v. Jordan Int’l Co., 

, 1235-36 (7th Cir. 1977) (Itoh) (holding that written
confirmation was not valid acceptance under § 2-207(1) where it contained language
matching § 2-207(1)’s “expressly conditional” proviso). Christy argues that, based on
the facts and circumstances, its customer acknowledgment form was intended as an
acceptance and was treated as such by PCS, given that PCS expressly required such
an acknowledgment to make the offer binding, see App. at 34 (PCS purchase order)
(“This order shall not be binding upon Buyer until Seller’s acknowledgment of this
order has been received at Buyer’s issuing office.”), and that PCS failed to object in
writing within ten days to Christy’s acknowledgment form. See 

(Christy
customer acknowledgment form) (“Purchaser shall be deemed to have assented to these
terms and conditions unless Seller receives written notice of any objection within 10
days after Purchaser's receipt of this form and in all events prior to delivery or other
performance by Seller.”).

       We disagree. Although an acceptance containing additional or different terms
(such as an arbitration clause) will typically not preclude § 2-207(1) contract formation,
the creation of a contract is prevented where “acceptance is expressly made conditional
on assent to the additional or different terms.” White Consol. Indus., Inc. v. McGill
Mfg. Co., 

, 1191-92 (8th Cir. 1999) (White). While an acceptance need
not match the exact language of § 2-207(1) to be considered “expressly conditional,”
see 

(“To require the exact language of the UCC would be too formalistic
and inconsistent with the UCC’s requirement that its provisions be liberally
construed.”), an acceptance which precisely follows § 2-207(1) clearly forestalls
contract formation. See 

. The pertinent language on Christy’s
acknowledgment form reads: “Seller’s acceptance of any offer by Purchaser to
purchase the Products is expressly conditional upon the Purchaser’s assent to all the

                                           -7-
terms and conditions herein, including any terms additional to or different from those
contained in the offer to purchase.” App. at 38 (Christy customer acknowledgment
form). By its very construction, Christy’s acceptance is expressly conditional on PCS’s
assent to all the terms, including the arbitration provision (an additional and different
term), contained within the acknowledgment form. Thus, even under a narrower
interpretation of § 2-207(1), Christy's acknowledgment cannot be a valid acceptance
under § 2-207(1) and, accordingly, no contract was created by the exchange of forms.
See 

(“In order to fall within this [§ 2-207(1)] proviso, it is
not enough that an acceptance is expressly conditional on additional or different terms;
rather, an acceptance must be expressly conditional on the offeror’s assent to those
terms.”).

       Christy argues that, if its customer acknowledgment form was not a valid
acceptance of PCS's offer, then the acknowledgment form was converted into a non-
binding counter-offer to which PCS in turn assented through its acceptance of and
payment for the goods. See Brief of Appellant at 27-31; see also Construction
Aggregates Corp. v. Hewitt-Robins, Inc., 

(7th Cir. 1968) (Construction
Aggregates) (holding that, although seller's acknowledgment was not valid acceptance
of buyer's offer under § 2-207(1), buyer's subsequent acceptance of and payment for
goods along with buyer's objection to a particular term within counter-offer constituted
assent to remaining terms of counter-offer), cert. denied, 

(1969); John E.
Murray, Jr., The Chaos of the "Battle of the Forms": Solutions, 39 Vand. L. Rev. 1307,
1335 (1986) (proposing that, "if a counter-offer clearly reveals that the seller-offeree
is shipping the goods on his own terms, and the buyer has reason to know that clear
intention, the buyer's acceptance of the goods should manifest a conduct acceptance of
the counter-offer").

        We agree that, if Christy's acknowledgment form was not a valid acceptance,
then it stands as a non-binding counter-offer. See JOM, Inc. v. Adell Plastics, Inc., 

, 53 (1st Cir. 1999) (en banc) (JOM) ("[I]f a seller does make its acceptance

                                          -8-
'expressly conditional' on the buyer's assent to any additional or divergent terms in the
seller's invoice, the invoice is merely a counteroffer, and a contract is formed only when
the buyer expresses its affirmative acceptance of the seller's counteroffer."); Mead
Corp. v. McNally-Pittsburg Mfg., 

, 1206 (6th Cir. 1981); 

. Moreover, if PCS had in fact assented to this counter-offer, the parties would
have created a contract, such that the additional terms in Christy's acknowledgment
(including the arbitration clause) would have become part of the contract. See
Diamond Fruit Growers, Inc. v. Krack Corp., 

, 1443 (9th Cir. 1986)
(Diamond) (citing J. White & R. Summers, Handbook of the Law Under the Uniform
Commercial Code, § 1-2, at 32-33 (2d ed. 1980)).

       However, mere acceptance of and payment for goods does not constitute
acceptance of all the terms in the seller's counter-offer. See Ralph Shrader, Inc. v.
Diamond Int'l Corp., 

, 1215 (6th Cir.1987) (rejecting argument that
buyer implicitly assented to counter-offer, given buyer's acceptance of and payment for
goods); 

(refusing to equate assent with the acceptance
of goods and payment for them, because this would in effect reinstate the common law
rule that § 2-207 was designed to abolish); 

n.8 (adopting view
that, with no other actions by the parties, mere acceptance and payment does not
establish assent). Instead, specific and affirmative assent to the seller's counter-offer
is necessary to create a contract. See 

(requiring "affirmative
acceptance of the seller's counteroffer" for § 2-207(1) contract formation); 

(rejecting seller's argument that acceptance of goods and payment for
them is equivalent to assent and mandating "specific and unequivocal assent" to terms
of counter-offer); 

(noting that buyer "never expressly assented
to the challenged arbitration term"). Thus, Christy's reliance on Construction
Aggregates is misplaced, because in that case "there had been additional actions by the
negotiating parties[,] namely, buyer had objected to only some of the terms in seller's
writing which indicated that buyer had in fact accepted the disputed terms in seller's
counter-offer." 

n.8. No such "additional actions" or evidence

                                           -9-
of affirmative assent are present here. Thus, we cannot say that PCS affirmatively
accepted Christy's counter-offer and created a contract under § 2-207(1) that included
the added arbitration provision. However, to the extent that the parties’ actions may
nevertheless have created a contract, such factual circumstances may be taken into
consideration under § 2-207(3).3 See 

(“[W]hen no contract
is recognized under Subsection 2-207(1) . . . the entire transaction aborts at this point.
If, however, the subsequent conduct of the parties - particularly, performance by both
parties under what they apparently believe to be a contract - recognizes the existence
of a contract, under Subsection 2-207(3) such conduct by both parties is sufficient to
establish a contract, notwithstanding the fact that no contract would have been
recognized on the basis of their writings alone.”).

UCC § 2-207(3)



       3
         Notably, if a contract had in fact been formed between Christy and PCS under
§ 2-207(1), we would have applied § 2-207(2) to determine the contract’s terms, as the
district court did in the alternative. See slip op. at 5-7 (holding that, even if the parties
had formed a contract under § 2-207(1), the arbitration clause materially altered the
contract and therefore did not become part of the parties’ agreement); see also C. Itoh
& Co. (America) v. Jordan Int’l Co., 

, 1236 n. 7 (7th Cir. 1977) (Itoh)
(noting that § 2-207(2) analysis necessary if contract formed under § 2-207(1)).
Section 2-207(2) provides:

       [t]he additional terms are to be construed as proposals for addition to the
       contract. Between merchants such terms become part of the contract
       unless: (a) the offer expressly limits acceptance to the terms of the offer;
       (b) they materially alter it; or (c) notification of objection to them has
       already been given or is given within a reasonable time after notice of
       them is received.

However, because the parties did not form a contract under § 2-207(1), we need not
address Christy’s arguments as to the applicability of § 2-207(2).

                                            -10-
      Christy alternatively argues that, if the parties failed to create a contract under
§ 2-207(1), the parties' conduct after the exchange of forms was nonetheless sufficient
under § 2-207(3) to establish a contract that included the supplementary arbitration
term. Section 2-207(3) states that:

      [c]onduct by both parties which recognizes the existence of a contract is
      sufficient to establish a contract for sale although the writings of the
      parties do not otherwise establish a contract. In such case the terms of the
      particular contract consist of those terms on which the writings of the
      parties agree, together with any supplementary terms incorporated under
      any other provisions of this Act.

Christy contends that § 2-207(3)'s reference to "supplementary terms incorporated
under any other provisions of this Act" encompasses those terms arrived at through the
course of performance, course of dealing, or usage of trade, as well as the UCC's
standard "gap-fillers." See Brief for Appellant at 32-33 (citing Dresser Indus., Inc. v.
Gradall Co., 

, 1451 (7th Cir. 1992), and Daitom, Inc. v. Pennwalt Corp.,

, 1579 (10th Cir. 1984)). Christy further argues that the arbitration
clause here should be included as a supplementary term of the contract, given the
course of dealing between the parties. See 

(citing UCC § 1-205 (defining
"course of dealing" as "a sequence of previous conduct between the parties to a
particular transaction which is fairly to be regarded as establishing a common basis of
understanding for interpreting their expressions and other conduct.")). According to
Christy, the parties' course of dealing included Christy's mailing of multiple customer
acknowledgment forms to PCS, the review of and lack of objection to these forms by
PCS, as well as delivery and acceptance of the goods. On these facts, Christy asserts
that the parties' sequence of previous conduct established a "common basis of
understanding" that disputes would be resolved through arbitration.

      We agree that the parties' conduct established a contract for sale between PCS
and Christy under § 2-207(3). The parties clearly behaved in a manner that recognized


                                          -11-
the existence of a contract, as demonstrated by Christy's delivery of the goods and
PCS's acceptance of, payment for, and attempted use of the goods. Under § 2-207(3),
the contract integrates "those terms on which the writings of the parties agree," which
necessarily excludes the disputed arbitration term added in Christy's customer
acknowledgment form. Accordingly, if the arbitration clause is to become part of the
§ 2-207(3) contract between PCS and Christy, it must be a supplementary term
"incorporated under any other provisions" of the UCC.

       Assuming arguendo that supplementary terms include terms arrived at through
a course of dealing,4 we hold that the parties' conduct did not constitute a course of
dealing sufficient to integrate the arbitration provision into the parties' contract. As
noted by the district court, of the 16 customer acknowledgment forms Christy sent to
PCS between mid-1996 and mid-1997, only nine of those forms went to PCS's LaPlatte
office,5 with eight relating to the same purchase order, namely the order of goods at
issue here. Thus, PCS's LaPlatte office received only one customer acknowledgment
form prior to the events giving rise to the instant litigation. This in and of itself hardly


       4
        Courts and commentators have read § 2-207(3)'s reference to "supplementary
terms" differently. Compare Dresser Indus., Inc. v. Gradall Co., 

, 1451
(7th Cir. 1992) (holding that "all of the U.C.C.'s provisions should be used in discerning
the terms of a contract under § 2-207(3), including those provisions that allow us to
examine the parties' performance."); 2 W. Hawkland, Uniform Commercial Code Series
§ 2-207:04, at 109-10 (1990) (arguing that parties' course of conduct should be
considered under § 2-207(3)), with 

(limiting "supplementary
terms" to those supplied by the stock "gap-filler" provision of Article Two); 1 J. White
& R. Summers, Uniform Commercial Code, § 1-3 at 45 (3d ed. 1988) (asserting that
"supplementary terms" should be limited to UCC's explicit "gap-fillers").
       5
        PCS's buying offices (located in Clinton, Iowa, and Augusta, Georgia, as well
as LaPlatte) purportedly operate autonomously with respect to purchases. Accordingly,
PCS claims that the information and documentation supporting each purchase is
generated separately and independently by the various buying offices. See Appellant's
Appendix (hereinafter "App.") at 127-28 (affidavit of Gary Altman) (Nov. 2, 1998).

                                           -12-
establishes a prior course of dealing sufficient to allow Christy to unilaterally include
the arbitration provision in the contract. Moreover, the fact that Christy repeatedly sent
its customer acknowledgment form to PCS does not establish a course of dealing; the
multiple forms merely demonstrated Christy's desire to include the arbitration clause
as a term of the contract. See In re CFLC, Inc., 

, 1017 (9th Cir. 1999)
("Course of dealing analysis is not proper in an instance where the only action taken
has been the repeated delivery of a particular form by one of the parties."); Step-Saver
Data Sys., Inc. v. Wyse Tech., 

, 104 (3d Cir. 1991) (holding that "the
repeated sending of a writing which contains certain standard terms, without any action
with respect to the issues addressed by those terms, cannot constitute a course of
dealing which would incorporate a term of the writing otherwise excluded under §
2-207" because "the repeated exchange of forms by the parties only tells [buyer] that
[seller] desires certain terms. Given [seller's] failure to obtain [buyer's] express assent
to these terms before it will ship the program, [buyer] can reasonably believe that,
while [seller] desires certain terms, it has agreed to do business on other terms--those
terms expressly agreed upon by the parties.").

                                       Conclusion

       We hold that Christy's customer acknowledgment form was not a valid
acceptance under UCC § 2-207(1), that the parties nonetheless created a contract under
UCC § 2-207(3) through their subsequent conduct, but that this contract between PCS
and Christy did not include the disputed arbitration term. Accordingly, the judgment
of the district court is affirmed.

      A true copy.

             Attest:

                     U.S. COURT OF APPEALS, EIGHTH CIRCUIT.


                                           -13-