Commercial Metals Co. v. Balfour, Guthrie, & Co., Ltd., No. 76-3569

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtBefore THORNBERRY, RONEY and HILL; JAMES C. HILL
Citation577 F.2d 264
PartiesCOMMERCIAL METALS COMPANY, Plaintiff-Appellant, v. BALFOUR, GUTHRIE, AND COMPANY, LIMITED, Defendant-Appellee.
Decision Date27 July 1978
Docket NumberNo. 76-3569

Page 264

577 F.2d 264
COMMERCIAL METALS COMPANY, Plaintiff-Appellant,
v.
BALFOUR, GUTHRIE, AND COMPANY, LIMITED, Defendant-Appellee.
No. 76-3569.
United States Court of Appeals,
Fifth Circuit.
July 27, 1978.

Page 265

Lawrence R. Maxwell, Jr., Richard Gary Thomas, Dallas, Tex., for plaintiff-appellant.

H. Robert Powell, Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before THORNBERRY, RONEY and HILL, Circuit Judges.

JAMES C. HILL, Circuit Judge:

Plaintiff-appellant, Commercial Metals Company, appeals from the District Court's dismissal of its amended complaint against defendant-appellee, Balfour, Guthrie & Company, Limited. We affirm.

The instant dispute arises out of three contracts between the parties, whereby plaintiff sold to the defendant a certain quantity of Korean steel of certain specifications. Each contract contained the following arbitration clause:

11. ARBITRATION: Any controversy arising under or in connection with the contract shall be submitted to arbitration in Dallas, Texas, in accordance with the rules of the American Arbitration Association; judgment on any award may be entered in any court having jurisdiction; the parties hereto submit to the jurisdiction of the Federal and State courts in Dallas, Texas, and notice of process in connection with the arbitral or judicial proceedings may be served upon the parties by registered or certified mail, with the same effect as if personally served.

After contracting with plaintiff, defendant Balfour, in turn, contracted to sell the Korean steel to one of its customers located in the State of Washington.

Upon delivery of the steel to Balfour's customer, a dispute arose between Balfour and its customer as to whether or not the steel complied with the contract specifications. Balfour thereupon informed the plaintiff that a claim would be pursued if the steel was not in conformity with the contract.

On February 20, 1976, the plaintiff, alleging diversity of citizenship, filed, in the District Court for the Northern District of Texas, a petition to compel defendant to submit its claim against plaintiff to arbitration.

Shortly thereafter, defendant filed suit in a Washington State Superior Court seeking damages against the plaintiff or the collection of its account from its customer.

Page 266

Shortly after filing its petition in the District Court, plaintiff became aware that diversity jurisdiction was lacking since both the plaintiff and defendant corporation had citizenship in Delaware. Plaintiff then amended its complaint.

In its amended complaint, plaintiff sought a declaratory judgment, pursuant to 28 U.S.C. § 2201, that the contractual arbitration provisions were valid and enforceable, as provided by Section 2 of the Federal Arbitration Act, 9 U.S.C. § 2, and that the Federal Arbitration Act superseded, by operation of the Supremacy Clause of the Constitution, any inconsistent Texas statutes concerning arbitration.

The defendant moved to dismiss the amended complaint on the ground that the District Court lacked subject matter jurisdiction over the dispute. The District Court granted defendant's motion and dismissed the case without prejudice. In its memorandum opinion, the District Court correctly noted that the Declaratory Judgment Act grants to trial courts a measure of discretion in determining whether or not to entertain a suit for declaratory relief even though jurisdiction is present. Brillhart v. Excess Insurance Co., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942); PPG Industries, Inc. v. Continental Oil Co., 478 F.2d 674, 680 n. 8 (5th Cir. 1973). The trial judge chose, in his discretion, to dismiss the complaint.

In exercising his discretion, the trial judge was influenced by a number of factors. Of principal importance to the trial judge was the question of whether or not the complaint alleged the existence of a federal question, thereby conferring jurisdiction upon the trial court. 28 U.S.C. § 1331.

The District Court expressed a grave doubt whether federal question jurisdiction was present. His doubt was well-justified. We hold that the District Court lacked subject matter jurisdiction over the complaint and affirm the District Court's dismissal of the complaint.

We do not think plaintiff's suit to compel arbitration is one arising under the laws, treaties or Constitution of the United States, as interpreted by Supreme Court and other authorities.

At common law, agreement in contracts to submit disputes arising therefrom to arbitration, for various reasons, were not specifically enforced by the courts. See Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction § 3569. Accordingly, in passing the United States Arbitration Act of 1925, Congress insured the survival of contractual arbitration clauses by declaring:

A written provision in any maritime transaction or 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, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, 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.

In this light, it is seen that the effect of Section 2 of the Arbitration Act is simply to remove the previously viable defenses of the party opposing arbitration.

It must be emphasized that the question of whether or not a dispute arising out of a contract will be subject to the arbitration process is left solely to the agreement of the parties to the contract. If the contract does not so provide, then no federal law requires arbitration. If the agreement does provide for arbitration, then Section 2 of the Act removes the previous impediments to enforcement of the clause.

Thus, in seeking to compel arbitration, the plaintiff's complaint does not rest upon Section 2 of the Act. Instead, the basis of the plaintiff's complaint is the contractual agreement of the parties to arbitrate.

The landmark case of Gully v. First Nat. Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70

Page 267

(1936), controls the disposition of the instant...

To continue reading

Request your trial
56 practice notes
  • Moses Cone Memorial Hospital v. Mercury Construction Corporation, No. 81-1203
    • United States
    • United States Supreme Court
    • February 23, 1983
    ...some other independent basis for federal jurisdiction before the order can issue. E.g., Commercial Metals Co. v. Balfour, Guthrie, & Co., 577 F.2d 264, 268-269 (CA5 1978), and cases cited. Section 3 likewise limits the federal courts to the extent that a federal court cannot stay a suit pen......
  • Ex parte Alabama Oxygen Co., Inc., BORG-WARNER
    • United States
    • Supreme Court of Alabama
    • May 13, 1983
    ...agreements to arbitrate pursuant to the requirements of the federal act. In Commercial Metals Co. v. Balfour, Guthrie, and Co., Ltd., 577 F.2d 264 (5th Cir.1978), the Circuit Court "It must be emphasized that the question of whether or not a dispute arising out of a contract will be subject......
  • Mercury Const. Corp., In re, Nos. 81-1009
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • June 1, 1981
    ...under the Federal Arbitration Act must be decided by State courts when called upon. Commercial Metals Co. v. Balfour, Guthrie & Co., Ltd., 577 F.2d 264 (5th Cir. 1978); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert. dismissed, 364 U.S. 801, 81 S.Ct. 27, ......
  • Community State Bank v. Strong, No. 06-11582.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • April 27, 2007
    ...bank plainly is a party to the arbitration agreement included in the loan contract. See Commercial Metals Co. v. Balfour, Guthrie, & Co., 577 F.2d 264, 266 (5th Cir.1978) (the right to compel arbitration derives from the parties' agreement to arbitrate). As we have explained in Part II.B, s......
  • Request a trial to view additional results
56 cases
  • Moses Cone Memorial Hospital v. Mercury Construction Corporation, No. 81-1203
    • United States
    • United States Supreme Court
    • February 23, 1983
    ...some other independent basis for federal jurisdiction before the order can issue. E.g., Commercial Metals Co. v. Balfour, Guthrie, & Co., 577 F.2d 264, 268-269 (CA5 1978), and cases cited. Section 3 likewise limits the federal courts to the extent that a federal court cannot stay a suit pen......
  • Ex parte Alabama Oxygen Co., Inc., BORG-WARNER
    • United States
    • Supreme Court of Alabama
    • May 13, 1983
    ...agreements to arbitrate pursuant to the requirements of the federal act. In Commercial Metals Co. v. Balfour, Guthrie, and Co., Ltd., 577 F.2d 264 (5th Cir.1978), the Circuit Court "It must be emphasized that the question of whether or not a dispute arising out of a contract will be subject......
  • Mercury Const. Corp., In re, Nos. 81-1009
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • June 1, 1981
    ...under the Federal Arbitration Act must be decided by State courts when called upon. Commercial Metals Co. v. Balfour, Guthrie & Co., Ltd., 577 F.2d 264 (5th Cir. 1978); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert. dismissed, 364 U.S. 801, 81 S.Ct. 27, ......
  • Jordaan v. Hall, No. CIV.A. 3:03-CV-0706-G.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas
    • August 7, 2003
    ...Underwriters, Inc. v. Pitts Farms, Inc., 276 F.3d 683, 685 (5th Cir.2001); Commercial Metals Company v. Balfour, Guthrie, and Company, 577 F.2d 264, 268-69 Page 790 Cir.1978); see also Whiteside v. Teltech Corporation, 940 F.2d 99, 102 (4th Cir. 1991); Robert Lawrence Company v. Devonshire ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT