AERONAVES de MEX., SA v. Triangle Aviation Serv., Inc.

• Decision Date: 16 September 1974
• Docket Number: No. 74 Civ. 2691.,74 Civ. 2691.
• Citation: 389 F. Supp. 1388
• Parties: AERONAVES de MEXICO, S.A., Plaintiff, v. TRIANGLE AVIATION SERVICES, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

389 F. Supp. 1388

AERONAVES de MEXICO, S.A., Plaintiff, v. TRIANGLE AVIATION SERVICES, INC., Defendant.

No. 74 Civ. 2691.

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

September 16, 1974.

Skadden, Arps, Slate, Meagher & Flom, New York City, for plaintiff.

Miller & Seeger, New York City, for defendant.

MEMORANDUM DECISION

BRIEANT, District Judge.

Plaintiff, Aeronaves de Mexico, S. A., ("Aeronaves"), has moved to stay arbitration pending the determination of this action for a declaratory judgment that the matters in controversy are not within the scope of its agreement to arbitrate. Defendant Triangle Aviation Services, Inc. ("Triangle"), opposes, and has moved for an order pursuant to Rule 12(b)(6), F.R.Civ.P., dismissing the complaint for failure to state a claim.

On November 16, 1973, Triangle and Aeronaves entered into a written agreement (the "Agreement") under which, for a period certain, Triangle was to provide ground services in New York at John F. Kennedy International Airport ("JFK") for Aeronaves' aircraft. In Article VII of the Agreement, the parties agreed that "any and all controversies in connection with and/or arising out of this Agreement or the breach thereof shall be exclusively settled by arbitration. . . ."

The Agreement provided that Aeronaves would submit to Triangle "the flight patterns and operational characteristics" of its flight schedule. Agreement, ¶¶ 2-3 and 2-4. At that time, Aeronaves' fleet of aircraft at Kennedy Airport included DC 8/50 and DC 8/63 series aircraft. Charges for services were predicated upon varying manpower and equipment requirements for servicing the particular models. The Agreement further provided ¶ 3-3, that if the volume of flights, aircraft types, arrival/departure times, or cargo load factors changed, Triangle would determine what, if any, additional manpower and equipment would be required and "an increase in the charges will be negotiated to the satisfaction of both parties."

Some time prior to May 2, 1974, Aeronaves notified Triangle that it intended to operate DC-10 aircraft to and from JFK, and requested that Triangle quote charges. Triangle submitted a price quotation on May 2, 1974. This quotation was rejected by Aeronaves, and thereafter, no agreement was reached with respect to increased charges as a result of Aeronaves' shift to DC-10 aircraft. Aeronaves hired others to service these flights.

On June 5, 1974, Aeronaves was served with a demand for arbitration. Triangle is seeking an award from the arbitrator holding that (Exhibit F, Affidavit of Mr. Constantino Trejo, sworn to June 20, 1974):

1. The Agreement binds the parties until December 31, 1975, regardless of the aircraft type which Aeronaves elects to use.

2. All changes in price authorized by the contract, if not agreed to, must be arbitrated in accordance with the terms thereof, inclusive of price changes occasioned by changes in aircraft types.

3. Triangle's price quotations for the servicing of Aeronaves' DC-10 flights are fair and justified.

4. Triangle is entitled to recover all damages suffered by Aeronaves' breach of the Agreement, including lost fees, costs and disbursements, administrative fees, and legal fees, together with interest.

On June 24, 1974, Aeronaves commenced this action. Plaintiff's motion for a stay invokes the equity powers of the Court rather than a specific remedy under the Federal Arbitration Act. In determining whether an issue is arbitrable, the "court's function . . . is limited to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract to arbitrate." Hamilton Life Insurance Company of New York v. Republic National Life Insurance Company, 408 F.2d 606, 609 (2d Cir. 1969). The instant Agreement contemplated the possibility of a change in aircraft types and provided for the negotiation of new charges. Its arbitration clause, previously quoted, is about as broad in scope as our language permits.

Aeronaves contends that the issues in controversy are beyond the scope of the arbitration clause. The case of Necchi S.p.A. v. Necchi Sewing Machine Sales Corp., 348 F.2d 693 (2d Cir. 1965), cert. denied, 383 U.S. 909, 86 S.Ct. 892, 15 L. Ed.2d 664 (1966), holds that the failure to negotiate an extension of an exclusive dealership agreement did not create an arbitrable issue, since an arbitrator could not be expected to write a renewal contract for the parties. The Agreement in this case does not call for such an undertaking by the arbitrator. In American Home Assurance Company v. American Fidelity and Casualty Company, 356 F.2d 690 (2d Cir. 1966), an arbitrable issue was found where the addendum to a reinsurance contract reduced the rate of premium and an accompanying letter provided that in the event that the final loss ratio during the stated years exceeded 65% of the gross premium "there shall be an adequate amendment of the premium . . . on a basis to be mutually arranged." Id. at 691.

What is at issue here is the renegotiation of a price for future services upon the happening of a commercial contingency previously contemplated. In American Home Assurance, supra, the Court recognized that (p. 393 of 356 F. 2d),

"it is precisely such questions in specialized commercial dealings of this sort that are especially adapted to resolution by commercial men as arbitrators. Having chosen in advance such a tribunal, appellant may not enlist the aid of the courts to delay or defeat its proper functioning."

Although paragraph 3-3 of the Agreement does not indicate specifically the procedure to be followed if an increase in charges cannot be negotiated to the satisfaction of both parties, I find such failure to agree would give rise to an arbitrable controversy under the instant arbitration clause. At...