The U.S. Court of Appeals for the Fifth Circuit is refusing to let a plaintiff business slip out of an arbitration decision, rejecting its $40 million breach-of-contract claim against the makers of WD-40, the popular household lubricant packaged in blue and yellow aerosol cans.

The background to the court's recent decision in IQ Products v. WD-40 is as follows. WD-40 produces a lubricant concentrate and develops specifications for their products but uses independent contractors to manufacture its WD-40-branded products. In 1992, IQ Products began serving as a contract packager for WD-40 products.

In 1996, WD-40 began developing a new formula for its products that used carbon dioxide for its can's propellant rather than propane/butane. IQ had concerns about the engineering challenges associated with the propellant change, so the parties met that year and signed a manufacturing and license agreement limiting it to the propane/butane formula. That 1996 signed agreement also contained a clause providing that any claim or controversy between the parties would be settled in arbitration.