AMF INC. v. Brunswick Corp.
| Decision Date | 04 November 1985 |
| Docket Number | No. CV-85-2743.,CV-85-2743. |
| Citation | 621 F. Supp. 456 |
| Parties | AMF INCORPORATED, Plaintiff, v. BRUNSWICK CORPORATION, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Bergson, Borkland, Margolis & Adler, Washington, D.C. by Hugh Latimer, Bruce M. Bettigole, for plaintiff.
Blodnick, Schultz & Abramowitz, P.C., Lake Success, N.Y. by Frederick Newman, for defendant.
In this case of first impression, AMF Incorporated seeks to compel Brunswick Corporation to comply with their agreement to obtain a non-binding advisory opinion in a dispute over the propriety of advertising claims. For reasons indicated below, the agreement to utilize an alternative dispute resolution mechanism must be enforced.
AMF and Brunswick compete nationally in the manufacture of electronic and automatic machinery used for bowling centers. In earlier litigation before this court, AMF alleged that Brunswick had advertised certain automatic scoring devices in a false and deceptive manner. Brunswick responded with counterclaims regarding advertisements for AMF's pinspotter, bowling pins and automatic scorer. In 1983 the parties ended the litigation with a settlement agreement filed with the court. Any future dispute involving an advertised claim of "data based comparative superiority" of any bowling product would be submitted to an advisory third party, the National Advertising Division ("NAD") of the Council of Better Business Bureaus, to determine whether there was experimental support for the claim.
Paragraph 9 of the agreement reads as follows:
NAD was created in 1971 by the American Advertising Federation, American Association of Advertising Agencies, Association of National Advertisers, and the Council of Better Business Bureaus "to help sustain high standards of truth and accuracy in national advertising." It monitors television, radio, and print advertising, and responds to complaints from individual consumers, consumer groups, local Better Business Bureaus, competitors, professional and trade associations, and state and federal agencies. If NAD finds that the advertising claims are unsupported, and the advertiser refuses to modify or discontinue the advertising, the organization will complain to the appropriate governmental authority. See Statement of Organization and Procedures of the National Advertising Review Board, at ¶ 2.1A. Voluntary compliance with NAD's decisions has been universal. Reportedly no advertiser who has participated in the complete process of a NAD investigation and NARB appeal has declined to abide by the decision.
In March and April 1985, Brunswick advertised its product, Armor Plate 3000, in a trade periodical called Bowler's Journal. Armor Plate is a synthetic laminated material used to make bowling lanes. It competes with the wood lanes produced by AMF. claims the advertisement, under a sketch of a horse and buggy. It goes on to detail the advantages of Armor Plate; and, as indicated in the footnote to the advertisement, strongly suggests that research supports the claim of durability as compared to wood lanes.
* Continuing independent research projects that Armor Plate 3000 will now last over twenty years before the possible need arises to replace a small lane area much like replacing a broken board in a wood lane.
AMF, disputing the content of the advertisement, sought from Brunswick the underlying research data referred to in the footnote. Brunswick replied that having undertaken the expense of research it would not make the results available to AMF. Thereupon AMF informed Brunswick that it was invoking Paragraph 9 of the settlement agreement and requested that Brunswick provide substantiation to an independent third party. Brunswick responded that its advertisement did not fall within the terms of the agreement. AMF now brings this action to compel Brunswick to submit its data to the NAD for nonbinding arbitration.
The agreement on its face covers the dispute. It provides, in relevant part, that:
If either party shall 1 hereafter publish or disseminate any claim by advertisement or promotional materials of any kind or nature, which 2 expressly or impliedly refers to a comparative superiority of a bowling product manufactured, sold or distributed by either of them, as compared to a similar product manufactured, sold or distributed by the other, 3 which claim shall expressly or impliedly be based on data, studies or tests (hereafter "data based comparative superiority") 4 such claims shall be subject to the provisions of this paragraph. ...
(Emphasis supplied.) The advertisement (1), was published after the agreement of June 30, 1983. It (2), impliedly refers to comparative superiority of a Brunswick bowling product over one of AMF. It is (3), impliedly based on data and tests. Thus (4), the dispute is subject to the agreement.
The agreement also provides for a method of substantiation of the claim without resort to litigation. It reads:
The agreement specifies NAD as the appropriate third party. It states:
The parties agree that the National Advertising Division of the Council of Better Business is agreeable to each as the advisory third party. Should NAD not agree to undertake any such advisory opinion, the parties undertake to mutually agree upon other procedures for the review of advertising claims.
NAD has agreed to undertake to examine the data and render an opinion.
AMF characterizes the settlement agreement as one subject to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The Act provides for enforcement of agreements to "settle" disputes arising after the agreement was entered into. In relevant part it reads:
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2 (1982) (emphasis supplied). The issue posed is whether "a controversy" would be "settled" by the process set forth in the agreement.
Brunswick argues that the parties did not contemplate the kind of arbitration envisaged by the Act because the opinion of the third party is not binding on AMF and Brunswick and the agreement cannot settle the controversy. Arbitration, Brunswick argues, must present an alternative to litigation; that is, it must provide "a final settlement of the controversy between the parties."
Arbitration is a term that eludes easy definition. One commentator has pointed out that "difficulty with terminology seems to have persisted throughout the entire development of arbitration." G. Taylor, Preface to E. Witte, Historical Survey of Labor Arbitration vi (1952). He suggests that arbitration has become "synonymous with `mediation' and `conciliation.'" Id. Case law has done little to sharpen the definition. See, e.g., City of Omaha v. Omaha Water Co., 218 U.S. 180, 194, 30 S.Ct. 615, 616, 54 L.Ed. 991 (1910) ().
The Federal Arbitration Act, adopted in 1925, made agreements to arbitrate enforceable without defining what they were. Contemporary cases provide a broad description of arbitration: "a form of procedure whereby differences may be settled." Pacific Indemnity Co. v. Insurance Co. of North America, 25 F.2d 930, 931 (9th Cir. 1928); Berkovitz v. Arbib & Houlberg, 230 N.Y. 261, 130 N.E. 288, 290 (1921). At no time have the courts insisted on a rigid or formalistic approach to a definition of arbitration.
Case law following the passage of the Act reflects unequivocal support...
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