Coastal Steel Corp. v. Tilghman Wheelabrator Ltd.

• Decision Date: 17 May 1983
• Docket Number: No. 82-5391,WHEELABRATOR-FRY,INC,82-5391
• Citation: 709 F.2d 190
• Parties: 8 Collier Bankr.Cas.2d 678, 10 Bankr.Ct.Dec. 1129, Bankr. L. Rep. P 69,249 COASTAL STEEL CORPORATION, a Corporation of the State of New Jersey v. TILGHMAN WHEELABRATOR LTD. and Wheelabrator-Frye, Inc. Appeal ofand Tilghman Wheelabrator Limited.
• Court: U.S. Court of Appeals — Third Circuit

Page 190

709 F.2d 190

8 Collier Bankr.Cas.2d 678, 10 Bankr.Ct.Dec. 1129,

Bankr. L. Rep. P 69,249

COASTAL STEEL CORPORATION, a Corporation of the State of New Jersey v. TILGHMAN WHEELABRATOR LTD. and Wheelabrator-Frye, Inc Appeal of WHEELABRATOR-FRYE, INC. and Tilghman Wheelabrator Limited.

No. 82-5391.

United States Court of Appeals Third Circuit.

Argued Feb. 14, 1983.

Decided May 17, 1983.

Riker, Danzig, Scherer & Hyland, Newark, N.J., for appellants; Douglas S. Eakeley (argued), Newark, N.J., of counsel.

Ravin & Kesselhaut, West Orange, N.J., for appellee; David N. Ravin, Peter R. Sarasohn (argued), Bernard Schenkler, West Orange, N.J., on brief.

Before GIBBONS, HUNTER and ROSENN, Circuit Judges.

OPINION OF THE COURT

GIBBONS, Circuit Judge.

Wheelabrator-Frye, Inc. (Wheelabrator) and Tilghman Wheelabrator Limited (Tilghman) seek appellate review of orders of the district court in a proceeding under 28 U.S.C. Sec. 1334(b) (Supp. V 1981), which is in effect during the transition period under the Bankruptcy Code. Pub.L. No. 95-598, tit. IV, Sec. 405, 92 Stat. 2686 (printed in note preceding 28 U.S.C. Sec. 1471 (Supp. V 1981). Wheelabrator seeks review of an order denying it leave to appeal from an order of the bankruptcy court. Tilghman seeks review of an order affirming the order of the bankruptcy court, which denied its motion to dismiss a civil proceeding against it related to a case under Title 11. See 28 U.S.C. Sec. 1471(b) (Supp. V 1981), which is in effect during the transition period under the Bankruptcy Code. Pub.L. No. 95-598, tit. IV, Sec. 405, 92 Stat. 2686 (printed in note preceding 28 U.S.C. Sec. 1471 (Supp. V 1981) ). Tilghman's motion asserted (1) that the contract on which its liability, if any, is predicated contains a forum selection clause which should be enforced, and (2) that the bankruptcy court is an inconvenient forum. The plaintiff in the Section 1471(b) action is the debtor, Coastal Steel Corporation (Coastal). It contends that we lack jurisdiction to review either order, but should such jurisdiction exist, both orders should be affirmed. Assuming we have jurisdiction to review either order under any of the statutory provisions defining our reviewing authority, we must also consider whether in light of the decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., --- U.S. ----, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), there is subject matter jurisdiction over the dispute in any federal court.

I.

On November 9, 1976 Coastal, a steel fabricator with its principal place of business in New Jersey, contracted with Sir James Farmer Norton & Co., Ltd. (Farmer Norton), a British corporation, for an in-line steel working plant in turn-key condition ready for commercial production of cold-drawn steel bar in accordance with contract specifications. The Coastal-Farmer Norton contract contained a provision that any dispute between the parties would be settled by arbitration "where the property in contest is located." The plant was to be erected in New Jersey.

One component of the plant was a bar cleaning machine or blast unit. The contract did not specify the supplier of the blast unit, but prior to the execution of the agreement Coastal had suggested to Farmer Norton that it investigate such a unit manufactured by a British firm called St. Georges Engineers, Ltd. (St. Georges). In June of 1976 St. Georges submitted to Farmer Norton a quotation on a blast unit. Shortly after St. Georges submitted the quotation, it was acquired by Tilghman, a British corporation and a subsidiary of Wheelabrator-Frye, Inc. On November 26, 1976, several weeks after the execution of the Coastal-Farmer Norton contract, Tilghman informed Farmer Norton that St. Georges had seriously miscalculated the cost of the blast unit on which it quoted. Tilghman and Farmer Norton then contracted for a Tilghman blast unit at a price of $176,000, which was higher than St. Georges' original quotation but lower than Tilghman's revised cost estimate. The Tilghman-Farmer Norton contract provided that the blast unit would be built in England and delivered there to Farmer Norton. It also provided 15. These conditions shall be construed in accordance with English law. In the event of any dispute arising the same shall be determined by the English Courts of Law.

Although delivery was made to Farmer Norton in England, Tilghman undertook to supervise the commissioning of the blast unit after its installation in Coastal's New Jersey plant. Tilghman arranged for its American parent company, Wheelabrator of Mishawaku, Indiana, to supervise the commissioning. In late 1979 Tilghman also sent a representative to New Jersey to make modifications on the blast unit.

On April 11, 1980, Coastal filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. In July of 1980 the debtor filed in the bankruptcy court a complaint against Farmer Norton, Tilghman, Wheelabrator, and Charterhouse Japhet Export Finance Company (Charterhouse), an English firm which financed Coastal's purchase from Farmer Norton. Farmer Norton never appeared and has gone bankrupt. Coastal settled with and dismissed its complaint against Charterhouse. Against Tilghman and Wheelabrator its complaint seeks recovery of over $4 million in consequential damages resulting from alleged defects in the Tilghman supplied blast unit.

Tilghman and Wheelabrator appeared and filed answers denying the material allegations of the complaint. They also moved to dismiss. The bankruptcy court denied the motion to dismiss without prejudice to its renewal after further discovery. After fairly extensive discovery, including depositions initiated by Coastal of various witnesses in England, Tilghman again moved to dismiss, relying both on the forum selection clause in the Tilghman-Farmer Norton contract and on the forum non conveniens doctrine. Wheelabrator joined in the motion in a reply brief. The bankruptcy court denied the Tilghman motion by an order dated November 9, 1981.

Both Tilghman and Wheelabrator applied to the district court, pursuant to 28 U.S.C. Sec. 1334(b), for leave to appeal. The court granted such leave on January 27, 1982, but only as to Tilghman. On May 27, 1982 the district court granted Coastal's motion to dismiss Wheelabrator as an appellant and affirmed the order denying Tilghman's motions, for reasons which we address in Part IV.B infra. Tilghman and Wheelabrator moved the district court to certify, pursuant to 28 U.S.C. Sec. 1292(b) (1976), that its order involved a controlling question of law as to which there is a substantial ground for a difference of opinion and that an immediate appeal might materially advance the ultimate termination of the litigation. The district court denied that motion. Tilghman and Wheelabrator have both appealed.

II.

Tilghman and Wheelabrator originally relied for appellate jurisdiction, on 28 U.S.C. Sec. 1291. The parties and this court recognized, however, that the less than clear provisions of Pub.L. No. 95-598, Secs. 236-41, 405, 92 Stat. 2667-71, 2685 (1978), respecting appealability of orders in civil proceedings related to cases under Title 11, require this court to consider all possible sources of its authority to review the orders in question. Coastal contends that they are entirely unreviewable, while Tilghman and Wheelabrator urge that Congress could not have intended to foreclose review of orders denying enforcement of forum selection clauses or compelling litigation in inconvenient forums. The Northern Pipeline decision presents a further complication, for it is now clear that the bankruptcy court, the order of which the district court affirmed, does not have jurisdiction over Coastal's action against Tilghman and Wheelabrator. If the district court has such jurisdiction, as Local Rule 47(C)(3) of the District Court for the District of New Jersey appears to assume, we must consider whether our jurisdiction under 28 U.S.C. Secs. 1651, 1291 or 1292 applies, or whether 28 U.S.C. Sec. 1293 or 28 U.S.C. Sec. 1471(d) governs. The problem is not a simple one.

A.

If the case had been before the district court as a section 1331 federal question or a section 1332 diversity case, we would have jurisdiction under section 1292(a)(1). A motion to dismiss an action in order to give effect to a forum selection clause is in practical effect an application for specific performance of that contractual provision. It is analytically indistinguishable from a motion to stay an action at law pending arbitration. Grants or denials of such orders are reviewable under section 1292(a)(1). Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583 (1935); Gavlik Construction Co. v. H.F. Campbell Co., 526 F.2d 777 (3d Cir.1975); Merritt-Chapman & Scott Corp. v. Pennsylvania Turnpike Comm., 387 F.2d 768 (3d Cir.1967). Deferrals to non-arbitral tribunals have been treated similarly. In re Unterweser Reederei G.M.B.H., 428 F.2d 888 (5th Cir.1970), aff'd en banc, 446 F.2d 907 (5th Cir.1971), vacated on other grounds sub nom. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); Alberto-Culver Company v. Scherk, 484 F.2d 611 (7th Cir.1973), rev'd on other grounds, Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). The Bremen and Scherk are the Supreme Court's definitive modern pronouncements on the enforceability of contractual forum selection clauses. In each case the Supreme Court's appellate jurisdiction was, under 28 U.S.C. Sec. 1254, derivative of the jurisdiction of the court of appeals, and in each case that jurisdiction was predicated on section 1292(a)(1).

Coastal contends that because some of the relief requested was equitable rather than legal, the Enelow-Ettelson ¹ rule does not apply. We note that in The Bremen the underlying suit was in admiralty and that in Scherk both legal and equitable relief was...