American Locomotive Co. v. Gyro Process Co.

• Decision Date: 24 November 1950
• Docket Number: No. 11137.,11137.
• Citation: 185 F.2d 316
• Parties: AMERICAN LOCOMOTIVE CO. v. GYRO PROCESS CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

185 F.2d 316 (1950)

AMERICAN LOCOMOTIVE CO. v. GYRO PROCESS CO. et al.

No. 11137.

United States Court of Appeals Sixth Circuit.

November 24, 1950.

Frank D. Eaman and Walter Meek, Detroit, Mich. (Charles H. Tuttle, Tyler M. Bartow, New York City, and Walter M. Meek, Detroit, Mich., on the brief; Dyer, Angell, Meek & Batten, Detroit, Mich., of counsel), for appellant.

Howell Van Auken, Detroit, Mich. (Howell Van Auken and Lawrence Rothenberg, Detroit, Mich., on the brief), for appellees.

Before HICKS, Chief Judge, and McALLISTER and MILLER, Circuit Judges.

MILLER, Circuit Judge.

The appellant filed this action in the District Court to require the appellees, Gyro Process Company and Chemical Research Corporation, to proceed with arbitration of claims made by them against the appellant by reason of an alleged breach of contract in accordance with the provisions of Section 4 of the United States Arbitration Act. 9 U.S.C.A. § 4. Appellant has appealed from an order denying arbitration.

This Court has heretofore considered another phase of the same controversy between the parties. The underlying facts are given in detail in the opinion of the Court in American Locomotive Company v. Chemical Research Corp., 6 Cir., 171 F.2d 115. A brief summary is sufficient for this appeal.

On June 19, 1940, Chemical Research Corporation (hereinafter called Chemical) filed suit in the State Court of Michigan against the appellant American Locomotive Company (hereinafter called Locomotive). On August 30, 1940, Gyro Process Company (hereinafter called Gyro), filed suit in the State Court of Michigan against the appellant Locomotive and others. The actions were removed to the U. S. District Court and later consolidated for trial. Both suits involve the same question, and as we did in our former opinion, we will refer to the proceedings in the Gyro suit. The actions arose out of contracts of June 16, 1932, between the parties. Paragraphs 4 and 9 of the contract provided for arbitration of certain disputes arising under the contract. On February 8, 1941, Locomotive filed an answer and counter-claim which denied the material allegations of the complaint and set up six special defenses The fourth of these special defenses referred to the arbitration provisions of the contract, pleaded that no such arbitration had been had or demanded by Gyro and that accordingly it was not entitled to bring the action. Locomotive did not at that time move for a stay of proceedings pending arbitration. After numerous motions and proceedings, set out in detail in our former opinion, Locomotive, on March 22, 1948, moved for an order staying further proceedings pending arbitration, in accordance with the provisions of Section 3 of the Arbitration Act, 9 U.S.C.A. § 3. The stay was denied by the District Court, and that ruling was affirmed by this Court on appeal on December 8, 1948. American Locomotive Co. v. Chemical Research Corp., 6 Cir., 171 F.2d 115. Section 3 of the Arbitration Act provided for a stay only in case the applicant was not in default in proceeding with the arbitration. In our opinion, the delay of over seven years on the part of Locomotive in moving for a stay was unreasonable and constituted "default" on its part in proceeding with the arbitration. Certiorari was denied February 7, 1949, 336 U.S. 909, 69 S.Ct. 515, 93 L.Ed. 1074.

Thereafter on February 10, 1949, Locomotive filed the present action in the District Court against Gyro and Chemical, proceeding in this action under Section 4 of the Arbitration Act, 9 U.S.C.A. § 4. The complaint set out the contracts of June 16, 1932, the arbitration provisions contained in Paragraphs 4 and 9 thereof, alleged willingness and desire to have the claims heard and determined by arbitration, and stated that both Gyro and Chemical instituted and were proceeding with their suits without resorting or offering to resort to arbitration. The complaint prayed that as provided by Section 4 of the Arbitration Act, the Court order Gyro and Chemical to proceed with arbitration of the claims made by them against Locomotive in the consolidated suit and join with Locomotive in the appointment of the board of arbitrators as provided in Paragraph 9 of the contract. Gyro and Chemical pleaded among other defenses that Locomotive had never prior to March 22, 1948 shown any desire for arbitration, but had set forth the matter of arbitration solely as a bar to the maintenance of the two suits in the District Court, and by its conduct had waived any right to seek arbitration. The District Judge, in an opinion which carefully reviewed and analyzed the foregoing proceedings, was of the opinion that Locomotive had waived its contract right of arbitration and entered an order denying the prayers of the petition. This appeal followed.

Section 3 of the Arbitration Act, which was involved in the other appeal, provides for a stay of the trial of an action pending in the district court until arbitration has been had in accordance with the terms of an arbitration agreement. Section 4 of the Arbitration Act, which is involved in this appeal, provides that a party aggrieved by the refusal of another to arbitrate under a written agreement for arbitration may petition "for an order directing that such arbitration proceed in the manner provided for in such agreement." A refusal to stay proceedings under Section 3 of the Act is not a bar to a later action to compel specific performance of an agreement to arbitrate under Section 4 of the Act. Shanferoke Co. v. Westchester Co., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583; In re Pahlberg Petition, 2 Cir., 131 F.2d 968. In American Locomotive Co. v. Chemical Research Corp., supra, we denied a stay under Section 3 of the Act, but did not pass upon appellant's rights under Section 4 of the Act. We stated that the right of arbitration provided by contract could be waived by the parties, but found it unnecessary to decide whether Locomotive had waived such right. Accordingly, that ruling is not a bar to Locomotive's present proceeding under Section 4 of the Act. The issue presently before us is whether Locomotive has by its actions in the pending district court cases waived its contract right of arbitration of which it is now seeking specific performance.

Appellant first contends that Section 4 of the Arbitration Act does not permit the court to adjudge a waiver of the contract right of arbitration, contending that the statute limits the action of the court to ascertaining that the making of the agreement for arbitration and the failure to comply therewith are not in issue.¹ It is argued that if the Court finds that neither of those facts is in issue the statute requires the court automatically to make the order directing the parties to proceed to arbitration. We do not agree. We stated on the former appeal that the contract right of arbitration could be waived, and we adhere to that conclusion. Galion Iron Works v. Adams, 7 Cir., 128 F.2d 411, 413; American Sugar Refining Co. v. The Anaconda, 5 Cir., 138 F.2d 765, affirmed 322 U.S. 42, 64 S.Ct. 863, 88 L.Ed. 1117; Matter of Zimmerman v. Cohen, 236 N.Y. 15, 19, 139 N.E. 764. Section 4 of the Act merely provides the procedure for enforcing the right provided by the contract. If that right, although originally existing, has been lost so that it no longer exists, there is nothing for Section 4 to enforce.

Appellant's chief contention is that its actions in the district court litigation did not constitute a waiver of its contract right of arbitration. It accepts the generally recognized definition that a waiver is an intentional relinquishment of a known right. It points out that it asserted its contract right of arbitration on February 8, 1941, when it filed its answer and counter-claim to the complaint in the Gyro suit; that it at no time withdrew that defense or receded from that position; that its actions thereafter were consistent with that position; and that following a long delayed filing of an amended and supplemental complaint on December 19, 1947, at which time it was first able to be completely advised of the full extent of Gyro's claims, it sought enforcement of its contract right of arbitration by asking for a stay of proceedings under Section 3 of the Arbitration Act on March 22, 1948. This contention was carefully considered and answered by the District Judge in his opinion which is reported in 87 F.Supp. 754, 763. That opinion, after reviewing and analyzing the proceedings in detail, concludes with the statement — "From the four corners of a voluminous record I am led to the inescapable conclusion that the petitioner waived its contract right of arbitration." In our opinion, the proceedings in the District Court, as reviewed by the District Judge, fully sustain the conclusion reached by him and the entry of the order denying the petition.

The following summary is sufficient to give the underlying basic facts supporting that ruling. Gyro instituted its...