John Thallon & Co., Inc. v. M & N MEAT COMPANY

• Decision Date: 27 June 1975
• Docket Number: No. 74 C 1832.,74 C 1832.
• Citation: 396 F. Supp. 1239
• Parties: In the Matter of the Arbitration between JOHN THALLON & CO., INC., Petitioner, and M & N MEAT COMPANY, Respondent.
• Court: U.S. District Court — Eastern District of New York

396 F. Supp. 1239

In the Matter of the Arbitration between JOHN THALLON & CO., INC., Petitioner and M & N MEAT COMPANY, Respondent.

No. 74 C 1832.

United States District Court, E. D. New York.

June 27, 1975.

Kommel, Rogers, Lorber & Shenkman, New York City, for petitioner.

Kaufman & Kaufman, New York City, for respondent.

OPINION

PLATT, District Judge.

By motion dated March 11, 1975, M & N Meat Company (hereinafter "Respondent") seeks to dismiss a petition to compel arbitration of John Thallon & Co., Inc. (hereinafter "Petitioner") on the grounds of (1) forum non conveniens, (2) improper party respondent, and (3) that respondent never agreed to arbitrate its disputes with petitioner or, in the alternative, to transfer the hearing on the petition to the United States District Court for the Western District of Pennsylvania pursuant to 28 U.S.C. § 1404. Petitioner cross-moves for an order pursuant to 9 U.S.C. § 4 compelling the parties to arbitrate their disputes before the American Arbitration Association in New York City.

FACTS

Petitioner, a New York corporation with offices in Rockville Centre, New York, is engaged in the business of importing and exporting foreign and domestic frozen meat and has done so in the New York City and metropolitan area for a number of years.

Respondent, a Pennsylvania corporation, is a meat broker with offices at 201 Penn Center Boulevard, Pittsburgh, Pennsylvania. M & N Trading Company, also a Pennsylvania corporation located at the same address, is a subsidiary of respondent which buys and resells meat to respondent for resale to others.

On January 28, 1974, as set forth in respondent's affidavit, M & N Trading Company contracted by telephone through Hess-Stephenson Co., a meat broker located in Chicago, Illinois, to purchase from the petitioner one load (approximately 15 tons) of frozen Australian cow meat.

Hess-Stephenson sent a document entitled Confirmation, dated January 28, 1974, to both parties stating the terms of the sale as follows:

Sold to— M & N Meat Company Bought From— John Thallon & Company, Inc 15 Long Tons Frozen Boneless Australian Cow Crops Steiger Production 60# Even Weight Cartons 85% Lean by Chemical Analysis Price—89½¢ × Dock SS Act III Philadelphia, Pa.

On January 28, 1974, petitioner sent to respondent a document described as a "contract of sale", although not so entitled, setting forth essentially the terms above but with additional terms on the reverse side which will be hereinafter discussed. On January 29, 1974, M & N Trading Co., (not respondent) sent a "Purchase Order" directly to petitioner setting forth the terms of the agreement as 1 Load Steiger (sic) Crops, price 3.3950 X D, ship via Act III with the request that the purchase be invoiced to M & N Trading Company.

On the reverse side of petitioner's "Contract of Sale" are 12 additional terms which the respondent claims it never agreed to. The pertinent provisions are as follows:

"1) This contract shall not bind the Seller until signed and returned to Seller and unless returned within 10 days of the date hereof.

* * * * * *

3) This contract contains no guarantees, warranties or representations except as expressly set forth herein and can be modified or rescinded only by a writing signed by both parties.

* * * * * *

8) This contract and the rights of the parties hereunder shall be governed by the laws of New York.

9) In the event of dispute, Seller shall have the option of submitting same to arbitration in the City of New York, same to be conducted under the commercial rules of the American Arbitration Association and any determination made by such Arbitrator shall be final and binding, not subject to review and a judgment may be entered pursuant thereto; or Seller may pursue any other remedy including litigation. Buyer consents to the jurisdiction of the courts of the State of New York and consents that any process issuing out of such court may be served upon it by registered or certified mail sent to it at the address on the reverse side of this contract and such service shall by sic sufficient to confer personal jurisdiction on such court. The cost of arbitration or litigation including attorneys' fees of 15% of amount in dispute shall be paid by the party against whom the dispute is resolved.

* * * * * *

11) In the event buyer claims imported meat covered by this contract is less than 85% chemical lean, seller has right to arrange independent chemical testing.

Should the product test less than 85% chemical lean, seller will allow for excess fat content at invoice price and buyer will accept such as full settlement."

Respondent's affidavit states that (page 4) respondent rejected the meat for having a fat content in excess of the 15% limitation. An independent testing laboratory conducted tests and found the fat content of the meat in question to be 17.07%. Petitioner was forced to sell the rejected meat in the open market for a loss.

On March 6, 1974, and prior to respondent's rejection of the January 28, 1974 shipment, respondent placed a telephone order with petitioner for a second shipment of meat. This was arranged without the aid of a broker and petitioner sent its "usual contract of sale" to respondent on the above date with respondent's "purchase order" apparently being sent on the same date.

Petitioner's "contract of sale" contains the following terms: Approx. 15 Tons, Frozen Australian Shank Meat, MFG grade 85% Chemical Lean, at 93 cents per pound, Ex Dock Philadelphia, to be shipped via Australia Endurance. In addition, a provision stating "Subject to Steamer delay" appears on the face of the contract under the word Delivery as well as the same conditions on the reverse side as the prior "contract of sale."

Respondent's "purchase order" contains only the following terms: 1 Load Meat Tex Production — Australian Shank Meat, 93XD Philadelphia, Ship Via Austral Endurance, to arrive 4/26/74. Respondent refused to accept the meat claiming that delivery was not timely. Upon such refusal, petitioner again was forced to resell in the open market sustaining a market loss.

Pursuant to item #9 of petitioner's "contract of sale", separate demands for arbitration were served on respondent on June 19, 1974. Both claims have been consolidated. Respondent has refused to acknowledge the existence of the contracts of sale and has refused to arbitrate the disputes to date.

ARBITRATION CLAUSE

Petitioner's major contention is that under the Uniform Commercial Code, N.Y. § 2-207 (hereinafter § 2-207), its "contracts of sale" were definite and seasonable acceptances of respondent's oral purchase orders and that the arbitration clauses contained therein were additional terms which should be construed as having become part of the contracts. Respondent simply contends that the arbitration provisions were never agreed to, are material alterations of the agreement and as such do not become part of the contract.

Section 2-207 provides:

"(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional term are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract of sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act."

In the case at bar, the exchange of forms and other actions by the parties discussed herein clearly establish the existence of a contract under § 2-207 and that the arbitration clause contained in petitioner's "contract of sale" was an additional term therein. Just Born v. Stein, 59 Pa.D & C 407 (13 UCC Rep. 431) (1971).

The Uniform Commercial Code, Comment 2 to § 2-207, provides:

"2. Under this Article a proposed deal which in commercial understanding has in fact been closed is recognized as a contract. Therefore, any additional matter contained either in the writing intended to close the deal or in a later confirmation falls within subsection (2) and must be regarded as a proposal for an added term unless the acceptance is made conditional on the acceptance of the additional terms."

There is no language in petitioner's "contract of sale" expressly conditioning its acceptance. In addition, the actions of the parties in arranging for shipping, delivery and inspection of the goods manifested a commercial understanding that a contract existed. Just Born v. Stein, supra.

The pleadings indicating the parties are merchants under § 2-104(a), the arbitration clause becomes a part of the contract unless it violates one of the subsections of § 2-207(2).

Subsections (2)(a) and (2)(c) of § 2-207 do not prevent the inclusion of the arbitration clause. There is no provision in respondent's order form which expressly limits the acceptance to the terms of the offer to purchase to invoke § 2-207(2)(a). Likewise, respondent made no objection to the additional clause as prescribed by subsection 2-207(2)(c). Just Born v. Stein, supra.

The central issue to be determined by this Court is whether the arbitration clause is a "material alteration" of the contract within the terms of subsection 2-207(2)(b).

Respondent does not mention § 2-207 of the Uniform...