439 F.2d 1268 (2nd Cir. 1971), 316, In re Reed & Martin, Inc.

Docket Nº:316, 34677.
Citation:439 F.2d 1268
Party Name:In the matter of the arbitration between REED & MARTIN, INC., d/b/a International Constructors, Appellant-Respondent, and WESTINGHOUSE ELECTRIC CORPORATION, Appellee-Petitioner.
Case Date:March 12, 1971
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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439 F.2d 1268 (2nd Cir. 1971)

In the matter of the arbitration between REED & MARTIN, INC., d/b/a International Constructors, Appellant-Respondent, and WESTINGHOUSE ELECTRIC CORPORATION, Appellee-Petitioner.

Nos. 316, 34677.

United States Court of Appeals, Second Circuit.

March 12, 1971

Argued Dec. 9, 1970.

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[Copyrighted Material Omitted]

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Donald McL. Davidson, Seattle, Wash. (Ferguson & Burdell, William B. Moore, Seattle, Wash. on the brief), for appellant-respondent.

William Sondericker, New York City (Olwine, Connelly, Chase, O'Donnell & Weyher, Francis H. Dunne, New York City on the brief), for appellee-petitioner.

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Before LUMBARD, Chief Judge, FEINBERG, Circuit Judge, and CLARIE, District Judge. [a1]

CLARIE, District Judge:

This is an appeal from a decision and order of the Southern District of New York, 310 F.Supp. 653, confirming an arbitration award in favor of Westinghouse Electric Corporation (Westinghouse), against the appellant, Reed & Martin, Inc. (Reed & Martin), which judgment we affirm.


In July of 1963, Reed & Martin, an Alaskan corporation with its principal place of business in Hawaii, entered into a contract with Westinghouse, a Pennsylvania corporation having its home office in Pittsburgh, with an export division office in New York City. Westinghouse contracted to manufacture and deliver to Reed & Martin certain electrical equipment. The latter was under a prime contract with Ryukyu Electric Power Corporation to construct a power plant in Okinawa. Their agreement contained an arbitration clause which incorporated the Rules of the American Arbitration Association. 1 Article XVI(A) of said contract also contained the provision: 'The rights and obligations of the parties under this contract shall be governed in all respects by the laws of the State of Washington, U.S.A.'

At the conclusion of the job, a dispute arose between the parties when Reed & Martin had refused to make the final contract payment of $81,457.53. The latter claimed that Westinghouse had not made timely delivery of certain materials and as a result of the delays, it had suffered damages. These issues were first raised by Reed & Martin in a third party action in the United States District Court of Hawaii wherein it was then being sued by the General Electric Corporation. Westinghouse moved for a dismissal, because the contract specifically provided that all such disputes (except one involving a nuclear incident), should be decided by arbitration and the Court granted the motion.

In September, 1967, Westinghouse formally requested arbitration pursuant to the contract and asked that the hearings be held in New York City. At the outset of the matter, the record reflects a proposal by Reed & Martin that it be consolidated with another arbitration case which was already pending in New York City with the Babcock and Wilcox Company, arising out of the same work project. However, such a consolidation could not be carried out except with the consent of all parties; and in letters dated March 5 and March 29, 1968, the

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Association notified the litigants that New York City would be the hearing locale. Prior to said notice and at all times subsequent thereto, Reed & Martin objected to the New York site in numerous communications to the tribunal administrator, not only because it was inconvenient, but also because it had been improperly designated.

Westinghouse selected as its arbitrator, McDonald Flinn, of the New York law firm of White & Case and Reed & Martin selected George W. Martin, a Seattle, Washington attorney, as its representative. The chairman of the panel, Thomas S. Duff, Jr., was ultimately selected by the arbitration tribunal itself, after the parties' nominees failed to make a selection from the second submitted list. § 14 AAA Rules. Reed & Martin objected to the selection process used in the naming of the third arbitrator (Duff), because his name was drawn from a list consisting exclusively of New York City area residents and it continued to resist that location as the hearing situs.

A pre-trial hearing was held by the panel of arbitrators in New York City on October 4, 1958, to acquaint them with the nature of the dispute and establish rules governing the procedures and issues on which the evidentiary hearing would go forward. These issues of law and fact were determined at this meeting and a ruling issued accordingly. The controversial Ruling No. 2 provided:

'The July 16, 1963 agreement between the parties precludes recovery of damages by Reed & Martin for delay in delivery of the insulators or any other equipment covered by that agreement unless Reed & Martin can prove as required by Article IV-E that such delay was inexcusable and directly resulted in delay in the completion of the plant and that Reed & Martin made corresponding liquidated damage payments to the owner, in which event the damages shall be assessed subject to the limitations set forth in Article IV' (App. 140). Reed & Martin objected to the aforesaid ruling as eliminating any practical need for any hearing and making the costs of attending such a hearing exceed any possible recovery for Reed & Martin on the remaining issues.

The hearing was held in New York City on February 25, 1969; but the arbitrator designated by Reed & Martin chose not to attend because of other pressing court matters and the appellant offered no evidence. The reasons advanced for this inaction were the pretrial ruling of October 4, 1968 and the location of the hearing.

The hearing site had in fact been administratively determined by the Arbitration Association's Executive Vice-President, after the parties had failed to agree upon the selection of the impartial arbitrator. His decision was subsequently confirmed by the chairman of the Panel and then ratified by the joint action of two panel members. A transcript copy of the evidentiary hearing was provided for the arbitrator chosen by Reed & Martin and their attorneys and before a decision was reached they were given an opportunity to review it. On May 13, 1969, the Panel awarded Westinghouse $79,819.59 with interest from September 1, 1965, plus administrative costs in the amount of $1,214.27. A dissenting opinion was filed by Reed & Martin's appointee.

After the arbitration panel's work had been concluded, Reed & Martin moved on June 3, 1969, in the State Superior Court of Washington, to set aside the arbitration award under the laws of that State, on the ground that the parties had agreed that the law of the State of Washington would govern the contract. Three days later Westinghouse moved in the United States District Court for the Southern District of New York to confirm the award. Non-resident service of the federal action was effected on respondent in Hawaii on June 10, 1969, giving notice of the court hearing on the motion to be held in New York City on June 24, 1969. On June 13, 1969, Reed s& Martin requested a temporary restraining

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order in the State Court of Washington and an order to show cause why Westinghouse should not be enjoined from proceeding in New York. A temporary restraining order issued on June 19, 1969, and the New York proceedings were continued until July 1, 1969. On June...

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