287 F.2d 382 (2nd Cir. 1961), 48, Metro Industrial Painting Corp. v. Terminal Const. Co.

Docket Nº:48, 26178.
Citation:287 F.2d 382
Party Name:METRO INDUSTRIAL PAINTING CORP. and Max Gerben, Joan Gerben and Leo Gerben, doing business as gerben Contracting Company, Petitioners-Appellees, v. TERMINAL CONSTRUCTION CO., Inc., and Frouge Construction Co., Inc., Respondents-Appellants.
Case Date:February 16, 1961
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 382

287 F.2d 382 (2nd Cir. 1961)

METRO INDUSTRIAL PAINTING CORP. and Max Gerben, Joan Gerben and Leo Gerben, doing business as gerben Contracting Company, Petitioners-Appellees,


TERMINAL CONSTRUCTION CO., Inc., and Frouge Construction Co., Inc., Respondents-Appellants.

Nos. 48, 26178.

United States Court of Appeals, Second Circuit.

February 16, 1961

Submitted Dec. 12, 1960.

Page 383

M. Carl Levine, Morgulas & Foreman, New York City (David Morgulas and Jerrold Morgulas, of Counsel), New York City, for petitioners-appellees.

Raphael, Searles, Levin & Vischi, New York City (Sidney O. Raphael and Leo M. Drachsler, New York City, of Counsel), for respondents-appellants.

Before LUMBARD, Chief Judge, and SWAN and MOORE, Circuit Judges.

LEONARD P. MOORE, Circuit Judge.

This is an appeal from an order granting petitioners-appellees' motion to compel arbitration pursuant to Section 4 of the United States, Arbitration Act, 9 U.S.C. § 4 (the Act), and denying respondents-appellants' cross-motion to stay arbitration and to dismiss the petition.

Prior to May 26, 1958, respondents Frouge Construction Co., Inc. (Frouge), a Connecticut corporation, and Terminal Construction Corp. (Terminal), a New Jersey corporation, both authorized to do business within the State of New York, and both doing business under the joint venture name of Terminal-Frouge, entered into a contract with the United States of America for the construction of a housing project at the Homestead Air Force Base, Homestead, Florida. On May 26, 1958, Terminal-Frouge entered into a subcontract in New York City with petitioners Metro Industrial Planning Corp. (Metro), a New York corporation, and Max Gerben, Joan Gerben and Leo Gerben, a co-partnership doing business under the name of Gerben Contracting Company, all of whose members are citizens and residents of New York. Under this subcontract petitioners were to perform certain painting work at the Homestead construction site. Included in the agreement was the arbitration clause in issue. 1

Page 384

Petitioners allege that they fully performed all terms and conditions of the agreement but that they were required to incur expenses in excess of $200, 000 because of respondents' delay in providing the number of units to be painted and because they were compelled to do certain painting work in addition to that required by the contract. Respondents refused to arbitrate these claims. Petitioners thereupon moved relief under Section 4 of the Act.

On appeal from the order compelling arbitration, respondents argue that the court below erred in holding (1) that there was diversity of citizenship between petitioners and Frouge; (2) that the contract between the parties 'evidenced a transaction involving commerce'; (3) that federal law was controlling on the issue of arbitrability; and (4) that the disputes over delays and extras were arbitrable under the contract.

(1) As the court below correctly recognized, the federal courts do not have jurisdiction under Section 4 of the Act unless there exists, apart from the Act, an independent basis of federal jurisdiction. See Krauss Bros. Lumber Co. v. Louis Bossert & Sons, Inc., 2 Cir., 1933, 62 F.2d 1004; Robert Lawrence Co. v. Devonshire Fabrics, Inc., 2 Cir., 1959, 271 F.2d 402, certiorari granted, 362 U.S. 909, 80 S.Ct. 682, 4 L.Ed.2d 618, certiorari dismissed pursuant to stipulation, 1960, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37. Respondents contend that the court below erred in finding the requisite diversity of citizenship since petitioners are all New York citizens and respondent Frouge, although a Connecticut corporation, has its principal place of business in New York, and is therefore, by virtue of 28 U.S.C. § 1332(c), deemed to be a citizen of New York. We find sufficient evidence, however, to support the finding below that petitioners met their burden of establishing that Frouge's principal place of business was Connecticut and not New York. The affidavits filed by the parties establish, inter alia, that Frouge owned a two-story building in Connecticut; that clerical, bookkeeping and administrative work was done in Connecticut; and that Frouge's own letterhead referred to the Connecticut building as its 'main office.'

(2) Respondents correctly assert that diversity of citizenship alone was not enough to empower the court below to compel arbitration under Section 4 of the Act, and that, in addition, the contract in which the arbitration clause is included must be one 'evidencing a transaction involving commerce' within the meaning of Sections 1 and 2 of the Act. Robert Lawrence Co. v. Devonshire Fabrice Inc., supra; see Bernhardt v. polygraphic Co. of America, 1956, 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199. Irrespective of whether Congress intended the coverage of the Act to be as broad as the constitutional dimensions of the commerce power, the facts found by the judge below are sufficient to support a finding that the transaction evidence by the contract was within the statutory requirements of the Arbitration Act. It is true that the actual painting work was to be done within the confines of one state (Florida). However, as the trial judge correctly found, many other interstate elements were involved in the performance of this contract. For example, twenty per cent of Metro's work force at the Florida site, as well as a substantial number of supervisory personnel, were transported from New York City to Florida; and materials used by Metro's employees were purchased from other states, as...

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