Shanferoke Coal & Supply Corp. v. Westchester S. Corp.

• Decision Date: 16 April 1934
• Docket Number: No. 370.,370.
• Citation: 70 F.2d 297
• Parties: SHANFEROKE COAL & SUPPLY CORPORATION OF DELAWARE v. WESTCHESTER SERVICE CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

70 F.2d 297 (1934)

SHANFEROKE COAL & SUPPLY CORPORATION OF DELAWARE v. WESTCHESTER SERVICE CORPORATION.

No. 370.

Circuit Court of Appeals, Second Circuit.

April 16, 1934.

Ehrich, Royall, Wheeler & Walter, of New York City (Ernest E. Wheeler, of New York City, of counsel), for appellant.

Moos, Nathan, Imbrey & Levine, of New York City (Alfred B. Nathan and Benjamin Lewis, both of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

The plaintiff, a citizen of Delaware, sued the defendant, a citizen of New York, in the District Court, alleging that the plaintiff was the sole selling agent for the Hudson Coal Company; and that in January, 1931, the defendant promised to buy, and the plaintiff to sell, 75,000 tons of Hudson Company coal spread over five years "in as nearly equal monthly installments as practicable." That since December 1, 1931, the defendant had refused to order 1,250 tons a month, had taken in all up to March 1, 1933, only 16,173 tons, had notified the plaintiff that it would not "order, accept or pay for coal as provided in the agreement," and had thereby repudiated it. That there remained for delivery 52,309 tons, the commissions upon the sale of which the plaintiff had lost and now claimed in the action. The defendant answered, denying a number of the allegations and setting up as a defence a clause in the contract which provided for arbitration "in case any dispute should arise between the Buyer and the Seller as to the performance of any of the terms of this agreement. * * * In case for any reason any such arbitration shall fail to proceed to a final award, either party may apply to the Supreme Court of the State of New York for an order compelling the specific performance of this arbitration agreement in accordance with the arbitration laws of the State of New York." Thereupon the defendant moved to stay the action under section 3 of the United States Arbitration Act, title 9, § 3, U. S. Code (9 USCA § 3). In its affidavits it alleged that it had always been willing to arbitrate the dispute but that the plaintiff had refused to accept an order for coal, and had without cause declared the contract at an end. The plaintiff in its answering affidavits alleged that it had repeatedly tried to compel the defendant to live up to the contract, but that it had refused on the ground that it could get cheaper coal elsewhere. That the plaintiff had been willing to accept the last order on condition that its acceptance should not affect its rights, but the defendant was unwilling to agree to this, demanding a reduction in the price; that therefore there was no genuine dispute between the parties and nothing to arbitrate. The judge denied the motion; he thought that the arbitration clause confined the parties to an arbitration in the Supreme Court of New York, and that a stay would involve superintendence over such a proceeding, which the District Court was unfitted to undertake.

We do not find it necessary to decide whether the arbitration clause at bar was limited to a proceeding in the state court. While it is certainly possible to read the language only as an addition, redundant because already provided by law, and as not intended to prevent arbitration elsewhere, we are content to treat it as exclusive, as the judge did. The District Court could not in that event enforce the clause specifically. California Prune & Apricot Growers' Association v. Catz American Co., 60 F.(2d) 788, 85 A. L. R. 1117 (C. C. A. 9). Without the United States Arbitration Act we may assume that it could not even stay the action until arbitration was had in the state court, The Atlanten, 252 U. S. 313, 40 S. Ct. 332, 64 L. Ed. 586; though Pacific Indemnity Co. v. Insurance Co. of North America, 25 F. (2d) 930 (C. C. A. 9), may be read to the contrary. However, section 3 now specifically provides for a stay, and we have only to decide whether it covers the situation; that is, whether the arbitration must be in a federal court. The decisions in the District Courts are divided. The Silverbrook (D. C.) 18 F.(2d) 144, The Fredensbro (D. C.) 18 F.(2d) 983, and The Beechwood (D. C.) 35 F.(2d) 41, take the view of the judge below; Danielsen v. Entre Rios Rys. Co. (D. C.) 22 F.(2d) 326, and The Volsinio (D. C.) 32 F. (2d) 357 (semble), are contra. So too is In re Inter-Ocean Food Products, Inc., v. York Mercantile Co., 206 App. Div. 426, 201 N. Y. S. 536. Under a very similar act in England, it is established law that an agreement to submit to a foreign court justifies the stay of an action brought on the contract elsewhere. Law v. Garrett, L. R. 8 Ch. Div. 26 (C. A.); Austrian, etc., Co. v. Gresham, etc., Society, L. R. (1903) 1 K. B. 249; Kirchner v. Graban (1909), 1 Ch. Div. 413; The Cap Blanco (1913), Pr. Div. 130. California Prune & Apricot Growers' Association v. Catz American Co., supra (60 F.(2d) 788, 85 A. L. R. 1117), merely decided, as we have said, that a federal District Court would not specifically enforce an arbitration clause under a local state statute. In Lappe v. Wilcox (D. C.) 14 F.(2d) 861, a stay was denied under the New York act (Consol. Laws, c. 72), in the case of a contract made before the federal act was passed. We can see no reason for a limited construction, and conclude that section 3 authorizes a stay even though the arbitration must take place beyond the jurisdiction of the court. In The Volsinio, supra, (D. C.) 32 F.(2d) 357, the actual ruling was that although this was true, the section was inapplicable, unless the contract was itself "maritime," or "involved commerce," as defined by section 1 of the act (9 USCA § 1). We are not clear that this is true; section 2 defines those contracts which it makes "valid, irrevocable and enforceable," and no doubt such alone are within section 4. Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 62 F.(2d) 1004 (C. C. A. 2). But it does not follow that section 3 is so circumscribed; the language is: "If any suit * * * be brought * * * upon any issue referable to arbitration under an agreement * * * for such arbitration." "Such arbitration" may very well refer back to "any issue referable to arbitration," and not to section 2. The change in language from section 5 of the New York Arbitration Act, from which, in general, section 3 of the federal act was copied, was plainly deliberate. In the New York act the clause had read, "under a contract * * * described in section two," and section 2 of that act was the analogue of section 2 of the federal act (9 USCA § 2). "Such arbitration" was very awkward as an equivalent for all that is comprised in section 2 of the federal act, and suggests a broader intent. It is not necessary, however, to decide the point here, because the contract "involved commerce" as defined by section 1. The seller, the plaintiff, was to ship the coal on cars f.o.b. Pennsylvania, consigned at the buyer's directions, and, since the buyer's place of business was Yonkers, the "commerce" concerned was between the states.

Again, we scarcely think sufficient the objection, which the judge thought vital; that is, that a stay may involve some supervision over the arbitration. This was raised only to be overruled in Law v. Garrett, supra, L. R. 8 Ch. Div. 26, with which we agree. The...