MATTER OF MARCY LEE MANUFACTURING COMPANY
| Decision Date | 17 November 1965 |
| Docket Number | Docket 29777.,No. 67,67 |
| Citation | 354 F.2d 42 |
| Parties | In the Matter of the Arbitration between MARCY LEE MANUFACTURING COMPANY, Petitioner-Appellee, and CORTLEY FABRICS CO., Inc., Respondent-Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
John Nielsen, New York City, (Perrell, Nielsen & Stephens, New York City, Thomas O. Perrell, New York City, of counsel), for respondent-appellant.
Erwin Feldman, New York City, for petitioner-appellee.
Before WATERMAN, MOORE and FRIENDLY, Circuit Judges.
This is still another case, see Chatham Shipping Co. v. Fertex Steamship Corp., 352 F.2d 291 (2 Cir. 1965), where a party who has cheerfully entered into an agreement for arbitration repents once the other party seeks to invoke that remedy.
Marcy Lee Manufacturing Company, organized and having its principal place of business in Texas, brought this action in the District Court for the Southern District of New York under the Federal Arbitration Act, 9 U.S.C. § 4, to compel Cortley Fabrics Company, a corporation organized and having its principal place of business in New York, to arbitrate liability for the interstate sale of fabric alleged to be highly flammable. Marcy Lee made the fabric into a dress, which was subsequently sold to Dorothy McDermott. While she was wearing the dress, it caught fire; the flames burned rapidly and could not be extinguished. Miss McDermott claimed she was seriously burned as a result, and brought an action against Marcy Lee. After settling with her, Marcy Lee unsuccessfully demanded that Cortley arbitrate its claim for indemnity. The District Court directed arbitration.
We can add nothing to Judge Wyatt's well-reasoned opinion save as regards one of Cortley's points, on which an additional word may be useful. Cortley insists that the conventional allegation in the complaint that "The matter in controversy exceeds, exclusive of interest and costs, the sum of $10,000," is negated by the conceded facts. Marcy Lee settled with Miss McDermott for $4,500 and incurred $3,878.94 in legal and other expenses, which leaves it somewhat short of the required amount. Although Marcy Lee also seeks $2,000 for legal and other expenses incurred by reason of Cortley's refusal voluntarily to submit to arbitration, Cortley challenges the inclusion of this on the ground that there can be no recovery of amounts spent in establishing a right to indemnity. See Doyle v. Allstate Ins. Co., 1 N.Y.2d 439, 444, 154 N.Y.S.2d 10, 14, 136 N.E.2d 484 (1956); Paliaga v. Luckenbach S. S. Co., 301 F.2d 403, 409 n. 1 (2 Cir. 1962); Calderone v. Naviera Vacuba, 328 F.2d 578 (2 Cir. 1964).
The test here, however, is not what Marcy Lee might collect in an action but what it might obtain from the arbitration it seeks to compel. Even if New York law were applicable, as the parties have assumed, the New York Court of Appeals has stated...
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