Standard Magnesium Corporation v. Fuchs

• Decision Date: 16 December 1957
• Docket Number: No. 5654.,5654.
• Parties: STANDARD MAGNESIUM CORPORATION, whose principal office is at Tulsa, Oklahoma, Appellant, v. Otto FUCHS, K. G. Metallwerke, whose principal office is at Meinerzhagen (Westfalen) Germany, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

251 F.2d 455 (1957)

STANDARD MAGNESIUM CORPORATION, whose principal office is at Tulsa, Oklahoma, Appellant, v. Otto FUCHS, K. G. Metallwerke, whose principal office is at Meinerzhagen (Westfalen) Germany, Appellee.

No. 5654.

United States Court of Appeals Tenth Circuit.

December 16, 1957.

Harry M. Crowe, Jr., Tulsa, Okl., for appellant.

Louis May, Oklahoma City, Okl., for appellee.

Before PHILLIPS, MURRAH and BREITENSTEIN, Circuit Judges.

PHILLIPS, Circuit Judge.

By written contract entered into in 1954, Standard Magnesium Corporation,¹ a Kansas corporation, sold to Otto Fuchs,² K. G., Metallwerke, whose principal office is at Meinerzhagen (Westfalen), Germany, approximately 100 metric tons of raw magnesium.

The contract contained the following provision:

"* * * all disputes arising in connection with the present contract shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the rules."

The Rules of Conciliation and Arbitration of the International Chamber of Commerce in part provide:

"1. When the parties have already agreed to submit their case to arbitration under these Rules, the defendant shall be bound to submit to arbitration.

"2. Should the defendant refuse or fail to submit to arbitration, the Court of Arbitration shall order that the arbitration be proceeded with, such refusal or absence notwithstanding.

* * * * *

"1. A form of submission shall be sent to the parties for their signature.

"2. If any party having previously agreed to refer a matter to arbitration of the International Chamber refuses or neglects to sign the form of submission, the Court of Arbitration may order that arbitration proceed notwithstanding."

After receiving the goods, a dispute arose as to whether they conformed to the contract and Fuchs invoked the arbitration clause of the contract. The International Chamber of Commerce, in accordance with its rules, prepared and submitted to the parties a "Form of Submission." It was signed by Fuchs, but Standard refused to sign it and refused to arbitrate.

The Court of Arbitration, on December 15, 1954, appointed an arbitrator, designated Oslo, Norway, as the place of arbitration and directed that the arbitration proceed. The arbitration proceeded ex parte and the arbitrator made an award of $12,371.28.

Since the contract of sale evidenced a transaction involving foreign commerce, the agreement to arbitrate is covered by the United States Arbitration Act,³ 61 Stat. 669, 9 U.S.C.A. §§ 1 to 14, inclusive.

Section 2 of the Act reads in part as follows:

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, * * * shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

Section 4 of the Act in part provides:

"A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any court of the United States which, save for such agreement, would have jurisdiction under the judicial code at law, in equity, or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. * * *"

Section 4 prescribes the procedure to be followed in a proceeding for an enforcement order and further provides that if there is a finding "that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof."

Following the award, Fuchs brought a common law action in the court below, seeking a judgment upon the award. In that action Standard asserted, among other defenses, that when it refused to arbitrate, an order under § 4 of the Act directing the parties to proceed with the arbitration in accordance with the terms of the agreement was a prerequisite to the power of the arbitrator to proceed with the arbitration and make a valid award. The trial court concluded that such defense was not well taken, on authority of Kentucky River Mills v. Jackson, 6 Cir., 206 F.2d 111, 47 A.L.R.2d 1331, certiorari denied 346 U.S. 887, 74 S.Ct. 144, 98 L.Ed. 392, and gave judgment on the award for $12,371.28, with interest at six per cent from October 21, 1955, for $600, the costs of arbitration, and for costs in the instant action. Standard has appealed.

The sole question here presented is whether an order that the arbitration proceed, made under § 4 of the Act, was a prerequisite to a valid award.

At common law executory agreements to arbitrate were revocable at will by either party.⁴ Under the common law an agreement to arbitrate did not oust the courts of jurisdiction. While damages were recoverable for a wrongful breach of a contract to arbitrate, unwilling arbitrations were not favored and a party might withdraw from the arbitration at any time prior to the award.⁵ A provision in an agreement to arbitrate that the arbitration may proceed ex parte if either party neglects or refuses to appear did not make the agreement irrevocable at common law.⁶

The existing law, prior to its change by legislative enactments was well summarized in Petition of Pahlberg, D.C. S.D.N.Y., 43 F.Supp. 761, 762, as follows:

"Prior to 1925 there was no federal legislation on the subject of arbitration and it is an historical fact that our courts, generally speaking, had not looked with favor upon arbitration agreements. They had never denied that an agreement to arbitrate created a right but public policy was thought to forbid specific performance."⁷

Standard contends that the Act is wholly remedial and does not alter substantive rights.

We think it clear, however, that Congress intended by § 2 of the Act to abrogate the common law rule that agreements to arbitrate are revocable by either party at any time before an award has been made and to place arbitration agreements on the same footing as other contracts.

The House Report on H.R. 646, 68th Congress, 1st Session in part reads:

"Arbitration agreements are purely matters of contract, and the effect of the bill is simply to make the contracting party live up to his agreement. He can no longer refuse to perform his contract when it becomes disadvantageous to him. An arbitration agreement is placed upon the same footing as other contracts, where it belongs."

We conclude that...