Balfour, Guthrie & Co., Ltd. v. Commercial Metals Co., 46338

• Decision Date: 13 March 1980
• Docket Number: No. 46338,46338
• Citation: 93 Wn.2d 199,607 P.2d 856
• Court: Washington Supreme Court
• Parties: BALFOUR, GUTHRIE & COMPANY, LIMITED, a Delaware Corporation, Respondent, v. COMMERCIAL METALS COMPANY, a Delaware Corporation, Appellant, and Coeur d'Alenes Company, an Idaho Corporation, Defendant.

Page 199

93 Wn.2d 199

607 P.2d 856

BALFOUR, GUTHRIE & COMPANY, LIMITED, a Delaware Corporation Respondent, v. COMMERCIAL METALS COMPANY, a Delaware Corporation, Appellant and Coeur d'Alenes Company, an Idaho Corporation, Defendant.

No. 46338.

Supreme Court of Washington, En Banc.

March 13, 1980.

Hay & Epstein, John L. Hay, Seattle, for appellant.

Blair, Schaefer, Hutchinson, Wynne, Potter, Horton & Johnson, Hugh J. Potter, Vancouver, Fredrickson, Weisensee & Cox, Lloyd W. Weisensee, John R. Dudrey, Portland, Or., for respondent.

BRACHTENBACH, Justice.

This litigation involves two arbitration issues not before decided in Washington. First, may a court order consolidated multi-party arbitration, in a location other than that to which the parties have agreed, in contravention of the terms of the parties' contractual provisions? Second, may a court order discovery proceedings on the merits of the controversies after finding that the parties are bound by arbitration clauses in their respective contracts? We answer both questions in the negative and reverse.

This case stems from multi-party transactions. Commercial Metals Company, headquartered in Dallas, Texas, sold When the ultimate purchaser, Coeur d'Alenes Company, rejected the steel as not conforming to contract specifications, the intermediary, Balfour, likewise claimed that the steel did not meet the contract specifications of its contract with the original seller, Commercial Metals Company.

steel products to Balfour, Guthrie and Company, headquartered in San Francisco, California. Those products were imported from Korea through the port at Vancouver, Washington. Balfour in turn sold the identical products under identical specifications to Coeur d'Alenes Company. All agreements were in writing.

Commercial Metals filed a demand for arbitration under its contract with Balfour, demanding arbitration in Dallas. Suit was filed in federal court to compel arbitration. Ultimately, dismissal of that demand was sustained. Commercial Metals Co. v. Balfour, Guthrie & Co., Ltd., 577 F.2d 264 (5th Cir. 1978). Balfour filed suit in Clark County, Washington, and joined Coeur d'Alenes Company.

The first issue is generated from the contractual language relating to arbitration. The initial contract, Commercial-Balfour, provides for arbitration in Dallas. The second contract, Balfour-Coeur d'Alenes, provides for arbitration in San Francisco. The provisions are quoted in the appendix. The question is whether the Clark County Superior Court had authority to order consolidation of the arbitration proceedings among all the parties and to order that such arbitration take place in Clark County. Commercial Metals objects and insists upon arbitration in Dallas as to its controversy with Balfour.

The trial court found (1) that these multiple disputes involve like issues of fact and law, and (2) that consolidation would prevent a multiplicity of proceedings, avoid possible inconsistent decisions, provide convenience for witnesses, and reduce time and expense to the parties.

It is likely that the above circumstances found by the trial court would make consolidated arbitration proceedings more economical and efficient. That, however, is not the Our rationale for denying authority to order consolidation is that arbitration stems from a contractual, consensual relationship. RCW 7.04; Thorgaard Plumbing & Heating Co. v. County of King, 71 Wash.2d 126, 426 P.2d 828 (1967).

question. The inquiry rather is whether the court had such authority. We hold that it did not.

Here Commercial Metals and Balfour agreed to arbitration in Texas, and to be bound by the laws of that state. Balfour and Coeur d'Alenes agreed to arbitrate in California and to be bound by the laws thereof. The court should not meddle with those contractual provisions even though we might fashion a more expedient, efficient and economical remedy. "(A) person can be compelled to arbitrate a dispute only . . . in the manner in which, he has agreed so to do." Marsala v. Valve Corp. of America, 157 Conn. 362, 365, 254 A.2d 469, 470 (1969).

Relying upon the rationale stated above, our Court of Appeals recently denied consolidation in a multi-party dispute. S. K. Barnes, Inc. v. Valiquette, 23 Wash.App. 702, 597 P.2d 941 (1979). The court noted the division among state courts which have considered the question. See also Annot. State Court's Power to Consolidate Arbitration Proceedings, 64 A.L.R.3d 528 (1975).

We are impressed with the analysis of the Alaska Supreme Court in Consolidated Pac. Eng'r, Inc. v. Greater Anchorage Area Borough, 563 P.2d 252 (Alaska 1977). That case denied consolidation. The court pointed out that the contracts before it were silent on consolidation, as they are here. Further the arbitration, as here, was to be in accordance with the rules of the American Arbitration Association. The court noted at page 255 that

the courts may not alter the arbitration terms the parties have inserted in their contract. Here, nothing is said in the contract with reference to consolidiation. The court is thus confronted with a question of contract interpretation. In interpreting the contract, we look to the reasonable expectations of the parties. . . .

It appears that the Arbitration Association has had a long-established policy of not approving consolidation without the written consent of all parties. We believe that one entering into a contract such as the one at issue here would reasonably expect that consolidation could only take place with such written consents. . . . If the parties wish to provide for the possibility of consolidated arbitration in their contracts, the courts will, of course, give effect to their decision. If the parties to separate contracts all consented to consolidated arbitration, the arbitral award would be subject to judicial confirmation and enforcement. But however sound they may consider consolidated arbitration to be as a matter of policy, courts are not empowered to direct parties to...