Donahue v. Susquehanna Collieries Co.

• Decision Date: 01 September 1943
• Docket Number: No. 8352.,8352.
• Citation: 138 F.2d 3
• Parties: DONAHUE v. SUSQUEHANNA COLLIERIES CO.
• Court: U.S. Court of Appeals — Third Circuit

138 F.2d 3 (1943)

DONAHUE v. SUSQUEHANNA COLLIERIES CO.

No. 8352.

Circuit Court of Appeals, Third Circuit.

Argued July 15, 1943.

Decided September 1, 1943.

Rehearing Denied October 19, 1943.

Charles B. Waller and Ben R. Jones, Jr., both of Wilkes-Barre, Pa. (McLanahan, Merritt, Ingraham & Christy, of New York City, and Bedford, Waller, Jones & Darling, of Wilkes-Barre, Pa., on the brief), for appellant.

Charles L. Casper, Fahey & Casper, and Albert H. Aston, all of Wilkes-Barre, Pa. (William J. Fahey, and Albert H. Aston, both of Wilkes-Barre, Pa., of counsel), for appellee.

Before GOODRICH and McLAUGHLIN, Circuit Judges and KIRKPATRICK, District Judge.

GOODRICH, Circuit Judge.

The plaintiff brought an action in the District Court for the Middle District of Pennsylvania, suing for himself and other employees of the defendant, to recover amounts alleged to be due them for overtime work, which they alleged they had not been paid and were entitled to by virtue of the Fair Labor Standards Act of June 25, 1938, 29 U.S.C.A. § 201 et seq. The contracts under which the complaining employees were employed contained a provision for arbitration of "any difficulty or disagreement * * * growing out of the relations of employers and employed".¹ The defendant filed its application praying the court to stay the trial of the action until arbitration had been had in accordance with the terms of the agreement. The basis of this prayer was the United States Arbitration Act of Feb. 12, 1925, 9 U.S. C.A. § 1 et seq. The District Court denied the application and the defendant appealed to this court. The denial of the application is an appealable order. Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 1935, 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583.

The plaintiff says the District Court was right for three reasons. The first concerns the time at which the order staying proceedings may be granted. The second has to do with whether the Act is limited to certain definitely defined types of contracts. The third raises the question whether the statute is applicable to claims under the Fair Labor Standards Act.

I.

The plaintiff says that defendant has been too eager about asking for its stay order pending arbitration proceedings and has demanded it before this litigation has reached the stage where the statute authorizes a court to enter a stay order. The defendant has not answered. All we have giving the statement of the main case is the plaintiff's complaint. Section 3 of the statute, set out in full later, authorizes a court to stay the trial where the suit is brought in a federal court "upon any issue referable to arbitration," etc. The plaintiff pertinently asks how anyone can know whether the case presents any issue referable to arbitration before the defendant, by answering, has shown of what the dispute between the parties consists. Clear it is that we cannot know what points will be fought out between the litigants in this lawsuit until we have some sort of a statement of position by the defendant. It is open to him to make no denial of any of the plaintiff's statements and set up a counterclaim as his only defense.

The answer to this point depends, obviously, upon what Congress meant by the term "issue referable to arbitration" in § 3. If it meant what the term means in pleading, the controversy must be sharpened to a certain and material point, affirmed by one party and denied by the other — at least so says a law dictionary. But "issue" has many meanings, even as used in the law, and more as used in common speech. We have no reason to think that Congress was using it in this Act as the language of pleading. We think it more reasonable to interpret the term in the Act to mean "claim", or that which one party demands from the other. In this case the plaintiff demanded money alleged to be due him on a contract, and that contract itself contained an arbitration clause. We think this demand constituted an "issue referable to arbitration" within the meaning of the statute. The defendant's application was not, therefore, premature.

II.

The second question is whether § 3 of the Act, which provides for a stay of proceedings in a lawsuit until arbitration proceedings have been had, is limited to the contracts and transactions described in § 2. This is the question on which the parties have expended the bulk of their ammunition. The title and the first three sections of the statute are set out in the note for clearer understanding of this narrow but important point.²

The title of the Act suggests, though of course it does not compel, the conclusion that the provisions of the statute are applicable to three kinds of things: (1) Contracts, (2) maritime transactions and (3) commerce, interstate and foreign. The first section defines maritime transactions and commerce. Then the second section proceeds to lay down a rule of substantive law regarding the validity of an agreement for arbitration in case of any maritime transaction or a contract evidencing a transaction involving commerce. Congress was here making a rule concerning subject matter within its own constitutional legislative authority. It was not seeking to confer validity to arbitration agreements generally, a matter outside the scope of federal powers. Instead it picked out two important classes of transactions within the federal legislative domain and declared the effect of arbitration clauses in agreements concerned therewith.

Then in § 3 the statute deals with the conduct of suits in federal courts, again a subject matter of congressional power. The language becomes general: "any suit or proceeding", upon "any issue referable to arbitration under an agreement in writing for such arbitration" are the words. Congress is not limited, in legislating as to law suits in federal courts, to those suits involving matters where the substantive rights of the parties may be controlled by federal legislation. The generality of the language used in the statute does not suggest any self-imposed limitation. Nor do we think that the "congressional approval of arbitration"³ should be so limited by implication, by a grudging type of construction carried down from the days of judicial hostility to all arbitration agreements.⁴ We think it clear that the provisions of § 3 are not to be limited to the specific instances dealt with in § 2.

This view finds support in the discussion by Judge Learned Hand in Shanferoke Coal & Supply Corporation of Delaware v. Westchester Service Corporation, 2 Cir., 1934, 70 F.2d 297, 298, affirmed, 1935, 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583. We find no evidence that the dictum is weakened by subsequent decisions in other questions arising under the Act in the Second Circuit.⁵ Indeed it seems to us to be strengthened by the holding that the instances where a stay may be granted under § 3 are not limited to those situations where arbitration may be compelled under § 4. On the other side, there is a dictum supporting the limitation in a decision upon a motion to dismiss a petition for the appointment of arbitrators in the Western District of Pennsylvania,⁶ language of like effect in the Middle District,⁷ and a considered discussion supporting the limitation by Judge Nields in the District of Delaware.⁸ As indicated above, we think the Act is entitled to a construction which will accomplish its purpose, and should not be hedged about with imagined limitations, as has been done in some instances.⁹

III.

The last point is whether the arbitration clause is or can be applicable where the plaintiff's claim is one to recover damages under the Fair Labor Standards Act. We do not think it significant that the present arbitration clause in the contract between the parties may have had its origin in dealings years before the statute was thought of. A claim for unpaid overtime wages seems clearly one "growing out of the relations of employers and employed," and squarely within the language of the arbitration provision of the contract. Whenever the language originated, it still states the existing agreement of the parties and should govern the situations which come within it.

Is there anything about the Fair Labor Standards Act which removes claims under its terms from the arbitration clause? We may concede that Congress could have done so had it wished. It could have provided that any claim under the Act was to be enforced by lawsuit only, notwithstanding any agreement between parties for any other method of settlement. There is no such express language. The plaintiff points to a sentence in the section on "Penalties; civil and criminal liability." which he contends has the effect just described.¹⁰ "Action to recover such liability may be maintained in any court of competent jurisdiction * * *" is the language used. We think the effect of this provision is to...