Batson Y. & FM Gr., Inc. v. Saurer-Allma GmbH-Allgauer M.

• Decision Date: 27 March 1970
• Docket Number: Civ. A. No. 69-865.
• Citation: 311 F. Supp. 68
• Court: U.S. District Court — District of South Carolina
• Parties: BATSON YARN AND FABRICS MACHINERY GROUP, INC., Plaintiff, v. SAURER-ALLMA GmbH-ALLGAUER MASCHINENBAU, a corporation, Defendant.

311 F. Supp. 68

BATSON YARN AND FABRICS MACHINERY GROUP, INC., Plaintiff, v. SAURER-ALLMA GmbH-ALLGAUER MASCHINENBAU, a corporation, Defendant.

Civ. A. No. 69-865.

United States District Court, D. South Carolina, Greenville Division.

March 27, 1970.

Donald L. Ferguson (Haynsworth, Perry, Bryant, Marion & Johnstone), Greenville, S. C., for plaintiff.

Robert F. Plaxco (Leatherwood, Walker, Todd & Mann), Greenville, S. C., for defendant.

OPINION and ORDER

DONALD RUSSELL, District Judge.

By contract dated November 1, 1966, plaintiff, a corporation of South Carolina, became the exclusive United States distributor of machinery manufactured by the defendant, a corporation of West Germany, at its Germany plant. Plaintiff alleges that such contract was not terminable prior to January 1, 1968, and then only after six months' prior notice by registered mail. The defendant, it appears from its demand for arbitration, contends both that no prior six months' notice was required for termination of the contract on January 1, 1968, and that, by reason of certain violations of the contract by the plaintiff, it had a right in any event to terminate the contract. Whatever the reason and warrant for such termination, it is undisputed that the defendant did, without giving six months' notice by registered mail, terminate its relationship with the plaintiff on December 31, 1967, and the plaintiff, by this action, seeks recovery of damages in excess of the jurisdictional amount for the alleged breach of the contract as a result of such termination.

The defendant, within due time and on January 19, 1970, entered an appearance and moved to dismiss the action for failure of the plaintiff to submit its claim to arbitration or, failing in that, "for an order staying the above-styled action and all proceedings until an arbitration shall be had in accordance with the terms of the contract" between the parties. Attached to such motion were copies of both the contract between the parties and of defendant's demand upon the plaintiff for arbitration of the dispute by the International Chamber of Commerce, Paris, France. The plaintiff concedes the authenticity of the contract and demand for arbitration as attached to defendant's motion.

The arbitration provision in the contract is as follows:

"All disputes arising in connection with the present contact (contract) shall be finally settled by arbitration.

Arbitration to be held outside the United States of America shall be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce, unless by written agreement of the parties, they adopt the Rules of the American Arbitration Association. Arbitration to be held in the United States of America shall be conducted in accordance with the Rules of the American Arbitration Association, unless by written agreement of the parties, they adopt the rules of Arbitration of the International Chamber of Commerce.

"Judgment upon the award rendered may be entered in any Court having jurisdiction or application may be made to such Court for a judicial acceptance of the award and an order of enforcement, as the case may be."

On January 23, 1970, plaintiff filed certain Requests for Admission by the defendant and on February 5, 1970, directed Interrogatories to the defendant. On February 6, 1970, the defendant noticed the plaintiff of a motion to stay such Requests for Admission and answers to the Interrogatories "on the ground that the defendant is entitled, under its pending motion, and consistent with the United States Arbitration Act, 9 U.S.C.A., § 3" to have the dispute between the parties arbitrated and proceedings in this Court stayed in the meantime. The plaintiff, at that stage, filed on February 10, 1970, its own motion to enjoin the arbitration proceedings commenced by the defendant before the International Chamber of Commerce, Paris, France, and to grant, instead, arbitration "within the State of South Carolina or at such other place within the United States as the court deems proper in accordance with the rules of the American Arbitration Association".

The motion of the defendant under Section 3, Federal Arbitration Act, 9 U.S.C., to stay the proceedings until arbitration of the dispute between the parties can be had before the International Chamber of Commerce and the counter-motion of the plaintiff for a stay of such arbitration and for arbitration under Section 4, Federal Arbitration Act, 9 U.S.C., in the United States by the American Arbitration Association, are now before me for determination.

Jurisdiction is clear. The contract is one "evidencing a transaction involving commerce" within the meaning of Section 2 of the Federal Arbitration Act, 9 U.S.C. (see Necchi Sewing Machine Sales Corp. v. Carl (D.C.N.Y. 1966) 260 F.Supp. 665, 667; Hilti, Inc. v. Oldach (1st Cir. 1968) 392 F.2d 368, 370); the controversy is one between a corporation of one of the States of the United States and a corporation of a foreign State (see Section 1332(a) (2), 28 U.S.C.); and the amount in controversy exceeds $10,000. See, El Hoss Engineering & Transport Co. v. American Independent Oil Co. (2d Cir. 1961) 289 F.2d 346, 347, cert. den. 368 U.S. 837, 82 S.Ct. 51, 7 L.Ed.2d 38. Under these circumstances, federal substantive law, as set forth in the Federal Arbitration Act (9 U.S.C., secs. 1-14), is controlling on the rights of the parties. Prima Paint Corp. v. Flood & Conklin (1967) 388 U.S. 395, 400, 87 S.Ct. 1801, 18 L.Ed.2d 1270.

Prior to pressing its own motion for arbitration, the plaintiff has raised two preliminary objections to defendant's motion for a stay. It asserts, relying on the annotation in 5 A.L.R.3d 1008, that arbitrability of a dispute under a contract providing for arbitration requires demand for arbitration during the term of the contract and a demand made after expiration is ineffectual. The annotation, analyzed case by case, does not support the position taken by the plaintiff. Indeed, the very case, to which the annotation is added, holds to the contrary. Thus, in Swift-Chaplin Productions, Inc. v. Love (1963) 219 Cal.App.2d 110, 32 Cal.Rptr. 758, 761, 5 A.L.R.3d 1001, 1006, it was expressly held that the issue whether the contract required that demand for arbitration be "made during the term of the contract, * * should have been left to the arbitrator". Not one of the cases cited in the annotation supports a ruling that, absent such an express provision in the contract itself, a demand for arbitration prior to termination of the contract is a condition of arbitrability. In most of the cases cited, the contract in question fixed a specific time within which arbitration was required to be demanded and the demand was made after the expiration of such time limit. See, Broadway-Fortieth Street Corp. v. President and Directors of Manhattan Co. (1947) 296 N.Y. 165, 71 N.E.2d 451; Dickens v. Pennsylvania Turnpike Comm. (1945) 351 Pa. 252, 40 A.2d 421; Application of Trimount Clothing Co. (Sup.1952) 112 N.Y.S.2d 814; Publicists Local, etc. v. National Screen Service Corp. (1960) 183 Cal.App.2d 491, 7 Cal.Rptr. 238. The first case discussed in the annotation involved a dispute over a transaction that did not "took (take) place before the expiration of the contract" but concerned a dispute that arose over a transaction that occurred after the contract had terminated when the parties were operating under "some sort of informal arrangement". The Court merely held that there was no basis for concluding that the old contract's terms, including its arbitration clause, continued over and controlled the later relationship of the parties under their "informal arrangement". Korody Marine Corp. v. Minerals & Chemicals Philipp Corp. (2nd Cir. 1962) 300 F.2d 124, 125. Plaintiff specially cites and relies for this argument on Austin Mailers Union, etc. v. Newspapers, Inc. (D.C.Tex.1963) 226 F.Supp. 600, aff. (5th Cir.) 329 F.2d 312, cert. denied 377 U.S. 985, 84 S.Ct. 1894, 12 L.Ed.2d 753, which is discussed in the annotation. As the Court of Appeals, disposing of this case on appeal stated, this case was similar in nature, and was decided on the same grounds as, Boston Printing Pressmen's Union v. Potter Press (D.C.Mass.1956) 141 F. Supp. 553, aff. (1st Cir.) 241 F.2d 787, cert. denied 355 U.S. 817, 78 S.Ct. 21, 2 L.Ed.2d 34. In both cases, a labor union was seeking to use an arbitration clause in an expiring labor contract to fix the terms of a new labor contract. It involved, to use Judge Wyzanski's language in the Potter Press Case, a demand that the Court "direct what may conveniently be described as a prospective or quasi-legislative arbitration establishing future labor conditions" (italics in opinion, 141 F.Supp. 554) in a new contract then being negotiated by the parties. It concerned not the power to require arbitration of a past dispute under an expired contract but the power to make a "prospective award" in a new contract. (p. 557) As Judge Wyzanski convincingly demonstrated, the power to "enforce a quasi-legislative arbitration provision" by making a "prospective award" was not within the purview of the Federal Arbitration Act. (p. 556) In short, this line of cases is unique to the area of labor negotiations and does not involve the arbitrability of a past dispute under an expired contract where the demand for arbitration was subsequent to the contract's expiration.

On the other hand, there are innumerable cases in which the right to arbitration of a past dispute under an expired contract was sustained even though the demand was made after the contract's expiration. See, for instance, Necchi v. Necchi Sewing Machine Sales Corp. (2d Cir. 1965) 348 F.2d 693, cert. den. 383 U.S. 909, 86 S.Ct. 892, 15 L.Ed.2d 664 (demand 1 to 3 months after contract's expiration); Necchi Sewing Machine Sales Corp. v. Carl (D.C.N.Y.1966) 260 F.Supp. 665 (demand almost 5 years after termination); World Brilliance Corp. v....