Bigge Crane and Rigging Co. v. Docutel Corporation

Decision Date26 April 1973
Docket NumberNo. 72-C-1541.,72-C-1541.
PartiesBIGGE CRANE AND RIGGING CO., a division of Bigge Drayage Co., Plaintiff, v. DOCUTEL CORPORATION et al., Defendants.
CourtU.S. District Court — Eastern District of New York

Havens, Wandless, Stitt & Tighe, New York City, by Paul M. Brown, Philip Gitlen, New York City, of counsel, for plaintiff.

Aranow, Brodsky, Bohlinger, Benetar, Einhorn & Dann, New York City, by Anthony L. Tersigni, Richard N. Gray, New York City, of counsel, for defendant Docutel Corp.

MEMORANDUM AND ORDER

JUDD, District Judge.

In this diversity contract action, defendant Docutel Corporation has moved for an order directing plaintiff to submit its claim to arbitration, and staying the action pending such arbitration. The parties have stipulated to adjourn the taking of depositions and the production of documents until after the decision on this motion.

Facts

Plaintiff entered into an agreement dated September 9, 1971 with defendant Winston-Donovan, a joint venture acting as agent for defendant Docutel Corporation, to do certain work on the installation of Docutel's Telecar Outbound Baggage Handling System at the expanded terminal building of defendant Pan American World Airways, Inc. (Pan Am) in the John F. Kennedy International Airport. The agreed compensation was to be $671,000.

Docutel had made a General Contract with Pan Am in June 1970 for the manufacture, delivery and installation of the baggage handling system. Thereafter in January 1971, defendants Winston Bros. Company and Donovan Construction Company of Minnesota entered into a joint venture named Winston-Donovan, which agreed to assist Docutel in the planning and installation of the baggage handling system and the coordination of the subcontractors' work.

The General Contract between Docutel and Pan Am included an arbitration clause among its General Conditions. Article XVIII headed Insurance and Liabilities contains the arbitration clause in question:

H. Arbitration
All disputes or controversies arising under, out of, in connection with, or in relation to this Agreement which cannot be resolved between the parties direct shall be finally settled by arbitration, to be held at New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. . . .

In the September 9, 1971 contract between plaintiff and Winston-Donovan, designated Subcontract No. 4, plaintiff is designated as the Subcontractor. The Subcontract, signed by plaintiff and Winston-Donovan and approved in writing by Pan Am and Docutel, states on the very first page:

Whereas, Subcontractor acknowledges that it is familiar with the terms and conditions of the General Contract and that the General Contract as hereinabove defined is a part hereof and is incorporated as a part of this Subcontract as though set forth in full herein; and
Whereas, the parties are desirous of entering into a Subcontract whereby Subcontractor shall undertake the performance of a part of the work to be done under the General Contract. . . . (Emphasis added).

A second agreement between plaintiff and Winston-Donovan dated May 5, 1972, and designated Subcontract No. 5, contained the same language. The agreed compensation was to be $16,241.25.

The complaint sets forth that on or about August 1, 1972 plaintiff had completed 99 percent of its work under Subcontract 4, 100 percent of its work under Subcontract 5, and all agreed upon extra work, but that defendants failed to make payments of the money remaining due. A supporting affidavit asserts that Winston-Donovan and Docutel were progressively in arrears of payment from the spring of 1972, that in August 1972 plaintiff could not get a schedule from defendants for the completion of the insignificant amount of remaining work, and that plaintiff was forced to leave the job-site in November 1972 because of defendants' breaches of contract.

Plaintiff's executive vice-president asserts that no mention was made of the arbitration clause prior to the filing of the complaint in November 1972 and that he was not informed about it until January 1973, just before Docutel served the pending motion.

The complaint in its first count asks for $70,000 balance due under the contracts, $120,000 for extra work, and $50,000 for damages, a total of $240,000. Other counts ask for the same amount as quantum meruit, for $50,000 from Pan Am and Docutel for damages for negligent failures on defendants' part, and for $190,000 from Pan Am and Docutel as unjust enrichment.

Defendants obtained extensions of time to respond to the complaint until February 1, 1973. Meanwhile, plaintiff served a notice to depose six officers or employees of Docutel and to obtain inspection of contracts, correspondence, memoranda, job records, audit reports, and other documents. A stipulation suspending discovery was signed on January 22, 1973 and the motion papers were served on February 1, 1973.

Plaintiff asserts that it has been given no explanation by Docutel of the reason it has not been paid for the work it performed and that other subcontractors of Docutel and Winston-Donovan have not been paid, and implies that the purpose of the demand for arbitration is primarily to delay the day when Docutel will have to pay its bills. Docutel in its papers in support of its motion for a stay has failed to disclose any defenses which it may have to plaintiff's claim for payment for the work it has done.

Pan Am filed an answer on March 19, 1973, with a cross-claim against Winston-Donovan and its constituent companies.

Discussion

Docutel's motion presents two issues: first, the duty to arbitrate; and second, the right to discovery in aid of arbitration.

Arbitration

Federal law supports the duty to arbitrate when a contract provides for arbitration. The statute (9 U.S.C. § 3) provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

The motion to compel arbitration requires only a determination (1) whether there is an agreement to arbitrate, (2) whether there are arbitrable claims, and (3) whether there has been a waiver of the right to arbitration.

1. Whether there is an agreement to arbitrate is a matter governed by federal law, including the interpretation and construction of the contract. Coenen v. R. W. Pressprich & Co., 453 F.2d 1209 (2d Cir. 1972); Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382, 385 (2d Cir. 1961). Diversity jurisdiction alone is not sufficient to make federal law applicable without an interstate commerce aspect to the transaction; but a contract between a California plaintiff and a Texas-based corporation to do construction work at a major airport in New York has a sufficient interstate aspect. Cf. Metro Industrial Painting Corp. v. Terminal Construction Co., supra, 287 F.2d at 384.

The federal policy as illustrated by the cited cases, is to construe arbitration clauses liberally, to find that they cover disputes reasonably contemplated by the language, and to resolve doubts in favor of arbitration.

Plaintiff contends that the arbitration clause was "buried" in the contract and that there was no meeting of the minds on this clause. But plaintiff cannot maintain that it is an unsophisticated party or that the agreement was entered into under fraud or duress or other than at arm's length.

The focus of this court is not on whether there was subjective agreement to all clauses in the underlying contract but whether there was agreement to the contract embodying the clause in question. An agreement in writing sufficient for enforcement as an agreement to arbitrate disputes does not have to be signed or subscribed by the parties. Fisser v. International Bank, 282 F.2d 231 (2d Cir. 1960); see Ocean Industries, Inc. v. Soros Associates International, Inc., 328 F.Supp. 944, 947 (S.D.N.Y.1971). It is of no avail to plaintiff that the arbitration clause was originally part of the contract signed only by defendants Docutel and Pan Am. The clause was incorporated explicitly along with all other general conditions and the subcontract making specific reference to the incorporation was signed by plaintiff. There is a valid arbitration clause. Universal Oil Products Co. v. S. C. M. Corp., 313 F.Supp. 905 (D. Conn.1970); Howard Hill, Inc. v. George A. Fuller Co., Inc., 473 F.2d 217 (5th Cir. 1973).

2. A dispute has arisen between the plaintiff and Docutel concerning completion of performance, payment for extra work as well as for work done pursuant to the underlying contract, and negligent actions on the part of the defendants. Under such circumstances there is a controversy or claim "arising under, out of, in connection with, or relating to" Subcontracts Nos. 4 and 5 and which the parties have agreed to submit to arbitration. See Universal Oil Products Co. v. S. C. M. Corp., supra, 313 F. Supp. at 906 and cases cited therein. The duty to arbitrate is not diminished by the fact that the claim of one of the parties may be lacking in merit. Warren Brothers Co. v. Cardi Corp., 471 F. 2d 1304 (1st Cir. 1973); J. S. & H. Construction Co. v. Richmond County Hospital Authority, 473 F.2d 212 (5th Cir. 1973).

3. Plaintiff's claim of waiver is based only on delay in calling for arbitration. Much more was shown in cases where a defense of waiver was sustained by the courts. Demsey & Associates v. S. S. Sea Star, 461 F.2d 1009 (2d Cir. 1972) (answer on the merits, motion for cross-claim,...

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