Aluminum Products Distributors, Inc. v. Aaacon Auto Transport, Inc., 76-1053

• Decision Date: 09 March 1977
• Docket Number: No. 76-1053,76-1053
• Citation: 549 F.2d 1381
• Parties: ALUMINUM PRODUCTS DISTRIBUTORS, INC., Plaintiff-Appellee, v. AAACON AUTO TRANSPORT, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1381

549 F.2d 1381

ALUMINUM PRODUCTS DISTRIBUTORS, INC., Plaintiff-Appellee, v. AAACON AUTO TRANSPORT, INC., Defendant-Appellant.

No. 76-1053.

United States Court of Appeals Tenth Circuit.

Argued and Submitted Nov. 18, 1976.

Decided March 4, 1977.

Rehearing Denied March 9, 1977.

Ronald R. Hudson, Oklahoma City, Okl. (Rhodes, Hieronymus, Holloway & Wilson, Oklahoma City, Okl., on the brief), for plaintiff-appellee.

Ralph J. Zola, New York City (Michael G. Ames, Zola & Zola, New York City, and Paul F. Fernald, Keller & Fernald, Oklahoma City, Okl., on the brief), for defendant-appellant.

Before LEWIS, Chief Judge, and McWILLIAMS and BARRETT, Circuit Judges.

McWILLIAMS, Circuit Judge.

The main issue presented in this appeal concerns the validity of an arbitration clause contained in a contract between a shipper and a carrier in interstate commerce. Aluminum Products Distributors, Inc., the shipper, entered into a contract with Aaacon Auto Transport, Inc., the carrier, whereby Aaacon agreed to drive Aluminum's 1973 Lincoln Continental automobile from Linden, New Jersey to Palm Springs, California. En route to California, Aaacon's driver drove the vehicle off the road in Oklahoma and totally demolished the automobile.

Aluminum brought suit against Aaacon in the District Court of Oklahoma County for the State of Oklahoma alleging that its Lincoln Continental had been totally destroyed because of the negligence of Aaacon's driver and sought damages in the sum of $7,648.25 and costs. Aaacon caused the action to be removed to the United States District Court for the Western District of Oklahoma on the ground that such court had original jurisdiction of the controversy under 28 U.S.C. § 1337.

Thereafter, in federal district court, Aaacon filed its answer which, among other things, affirmatively pleaded an arbitration clause contained in the contract between Aluminum and Aaacon. The arbitration clause contained in Aaacon's bill of lading reads as follows:

Any claim or controversy, whether founded in contract or tort, arising out of or relating to this agreement or performance or breach thereof shall be settled by arbitration in New York City. Upon said arbitration, the arbitrator's jurisdiction shall be limited to enforcement and application, without exception, of the provisions of this agreement and, at the request of any party, of the rules and laws of evidence applicable to a court trial. Should the arbitrator vary or fail to apply and enforce, strictly, any provision of this agreement, or said rules and laws of evidence, for any reason whatsoever, said arbitrator shall be ousted of jurisdiction, and any award made by said arbitrator shall be null and void, and thereafter arbitration shall be recommenced in accordance herewith. (Emphasis added.)

After Aluminum had instituted its action in the Oklahoma state court, but before the case had been removed by Aaacon to the federal court, Aaacon filed a proceeding in a New York state court to compel submission of the controversy to arbitration. Aluminum appeared in the New York proceeding and filed a cross application for a stay of arbitration. The New York court granted Aaacon's motion to compel arbitration, and denied Aluminum's request to stay arbitration, ruling that the action brought by Aluminum in Oklahoma "may not be maintained at this time."

Armed with the aforementioned order from the New York state court, Aaacon requested the federal district court to stay further proceedings. The district court, however, refused to stay proceedings. On trial of the matter to the court, sitting without a jury, the trial judge ruled that the arbitration clause was invalid, and entered judgment in favor of Aluminum against Aaacon in the sum of $7,548.25 and costs. Aaacon now appeals. We affirm.

Aaacon initially argues that the district court erred in refusing to stay further proceedings and that in so doing the district court did not give full faith and credit to the order of the New York state court that the parties arbitrate and that Aluminum should not further "maintain" its action against Aaacon in Oklahoma. The argument that a state court could in effect enjoin a person from proceeding further in an action previously instituted in a federal court where the federal court admittedly has jurisdiction of both subject matter and the parties is a bit startling and finds no sanction in the law. In our view, Donovan v. City of Dallas, 377 U.S. 408, 84 S.Ct. 1579, 12 L.Ed.2d 409 (1964) is the complete answer to the proposition that because of the order of the New York state court the federal district court should have stayed its hand.

In Donovan a class action was brought in state court against the City of Dallas to enjoin certain construction work at Love Field. Summary judgment was entered in favor of Dallas and on appeal was affirmed.

Thereafter certain of the individual plaintiffs in the state proceedings, along with others who were not so involved, instituted proceedings in a federal district court in Texas seeking similar relief. Dallas responded in the federal court proceeding by filing a motion to dismiss and an answer, and at the same time it also applied to the Texas Court of Civil Appeals for a writ of prohibition to bar the plaintiffs from further prosecuting their case in the federal court. The Texas Court of Civil Appeals denied relief, but, on appeal, the Supreme Court of Texas held that a writ of mandamus would lie. Acting on direction, the Texas Court of Appeals then promptly issued a writ prohibiting the plaintiffs in the federal court case from proceeding further. The Supreme Court of the United States thereafter granted certiorari to review the judgment of the Supreme Court of Texas, which, as indicated, directed the Texas Court of Civil Appeals to enjoin the plaintiffs from further prosecuting their cause of action in the federal district court. It was in this factual setting that the Supreme Court held that the state court could not enjoin the plaintiffs from prosecuting the in personam action then pending in the federal court, which court had jurisdiction of both the parties and the subject matter. The Supreme Court noted that the prohibition issued by the state court was addressed to the parties, and not the federal court itself, but stated that such "does not matter."

In Donovan the Supreme Court recognized that though the proceedings in the federal court could not be enjoined by order from the state court, nevertheless the City of Dallas in defending against the federal claim might well defend on a plea of res judicata, i.e., the first suit in the state court, and the final judgment ultimately entered in connection therewith, barred the issues from being relitigated in the subsequent federal proceeding. As to whether a plea of res judicata would indeed bar the second proceeding, the Supreme Court, however, expressed no opinion.

In Donovan the Texas state court actually enjoined the plaintiffs from proceeding further in their federal court proceeding. In the instant case the New York state court did not go quite that far, only ordering Aluminum and Aaacon to proceed to arbitration and declaring that the action previously instituted by Aluminum in the Oklahoma state court, and thereafter removed to the federal court, "may not be maintained at this time." But even if the New York state court had purported to enjoin Aluminum from further prosecuting its action in Oklahoma, such order under Donovan would be of no effect. It is on this basis that we conclude that the district court in the...