Galt v. Libbey-Owens-Ford Glass Company

• Decision Date: 26 April 1967
• Docket Number: No. 16024.,16024.
• Citation: 376 F.2d 711
• Parties: Arthur T. GALT and Maywood Park Trotting Association, Inc., an Illinois corporation, Plaintiffs, v. LIBBEY-OWENS-FORD GLASS COMPANY, an Ohio corporation, and F. H. Sparks Co., Inc., a New York corporation, Defendants. The GEORGE SOLLITT CONSTRUCTION COMPANY, an Illinois corporation, Intervening Plaintiff-Appellee, v. F. H. SPARKS CO., Inc., a New York corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

376 F.2d 711 (1967)

Arthur T. GALT and Maywood Park Trotting Association, Inc., an Illinois corporation, Plaintiffs, v. LIBBEY-OWENS-FORD GLASS COMPANY, an Ohio corporation, and F. H. Sparks Co., Inc., a New York corporation, Defendants.

The GEORGE SOLLITT CONSTRUCTION COMPANY, an Illinois corporation, Intervening Plaintiff-Appellee, v. F. H. SPARKS CO., Inc., a New York corporation, Defendant-Appellant.

No. 16024.

United States Court of Appeals Seventh Circuit.

April 26, 1967.

Francis X. Conway, New York City, for F. H. Sparks Co.; Wm. Bruce Hoff, Jr., George V. Bobrinskoy, Jr., Chicago, Ill., Mayer, Friedlich, Spiess, Tierney, Brown & Platt, Chicago, Ill., Epstein & Conway, New York City, of counsel.

Edward H. Hatton, Robert L. Bombaugh, Jonathan T. Howe, Chicago, Ill., Raymond, Mayer, Jenner & Block, Chicago, Ill., of counsel, for intervening plaintiff-appellee.

Before HASTINGS, Chief Judge, and SWYGERT and CUMMINGS, Circuit Judges.

CUMMINGS, Circuit Judge.

In this diversity action, the plaintiffs sued to recover for damages occasioned by massive glass breakage at the Maywood Park racetrack in Maywood, Illinois. In 1964, plaintiffs decided to construct a new spectator building for viewing harness racing. The south side of the building was to be enclosed with glass. The plaintiffs created the Arthur T. Galt Building Trust ("Building Trust") to arrange for the construction of the new building, and Lionel K. Levy, a New York, N. Y., architect, was engaged to draw the plans. The George K. Sollitt Construction Company ("Sollitt") of Chicago was chosen as the general contractor.

Defendant F. H. Sparks Co., Inc., ("Sparks") of New York was licensed by Glasbau Heinrich Hahn in the "suspended glazing" method of hanging curtain walls of glass without the usual metal framing supports. Plaintiffs authorized Levy to use the Sparks suspended glazing method at Maywood Park. Sollitt thereupon entered into a subcontract with Sparks for suspended glazing with glass manufactured by Libbey-Owens-Ford Glass Company ("LOF"). Article 21 of the subcontract provided that Sollitt and Sparks would be bound by the American Institute of Architects' provisions for arbitration of disputes. In pertinent part, those provisions are:

"All disputes, claims or questions subject to arbitration under the Contract shall be submitted to arbitration in accordance with the provisions, then obtaining, of the Standard Form of Arbitration Procedure of The American Institute of Architects,¹ and the Agreement shall be specifically enforceable under the prevailing arbitration law, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. It is mutually agreed that the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other."

According to the complaint, the suspended glazing installed by Sparks was unsatisfactory, with much of the glass cracking and breaking. Another company was employed by plaintiffs to remove the suspended glazing and install conventional glazing.

On May 31, 1966, Sparks commenced arbitration proceedings against Sollitt to recover $246,856, allegedly representing the unpaid balance on the subcontract and for extra work performed thereunder. Sparks and Sollitt each designated an arbitrator, and a third arbitrator was selected from a panel submitted by the American Arbitration Association. By stipulation, Sparks and Sollitt fixed the compensation of the third arbitrator. So far, Sparks has expended $1,943.71 in arbitration costs. Sollitt filed an answer in the arbitration proceedings, and its attorneys were permitted to examine Sparks' records in New York in order to expedite the arbitration hearings which were scheduled to commence in Chicago on October 18, 1966.

In July 1966, Sollitt was considering the possibility of bringing the Building Trust into the arbitration proceedings, and Sparks suggested that "this be done immediately" if at all. However, neither the Building Trust nor plaintiffs have participated in the arbitration, even though Sollitt's counsel admitted at the oral argument that Sollitt could have "impleaded" at least the Building Trust.

On September 29, 1966, plaintiffs filed their complaint against LOF and Sparks. The first six counts sounded in tort. The seventh count sought to enjoin the arbitration proceedings brought by Sparks against Sollitt. On December 8, 1966, the District Court denied plaintiffs' motion for a temporary injunction to halt the arbitration proceedings. The primary ground for the District Court's ruling was that Sollitt was not a party to the lawsuit. The District Court also ruled that plaintiffs could intervene in the arbitration proceedings to protect their interests.

Two weeks later, under Rule 24(b) of the Federal Rules of Civil Procedure, Sollitt moved to intervene in the lawsuit as a party plaintiff, seeking a declaratory judgment that it was not indebted to Sparks and seeking a preliminary injunction restraining Sparks from proceeding with the arbitration proceedings, which had been adjourned to January 9, 1967. The District Court granted Sollitt permissive intervention and also enjoined the arbitration proceedings. The order permitting Sollitt to intervene is not appealable (4 Moore's Federal Practice (2d ed.) 1966 Cum.Supp. p. 40); therefore, this appeal questions only the propriety of the injunction.

Applicability of Federal Arbitration Act

As seen, the contract between Sparks and Sollitt provides that it "shall be specifically enforceable under the prevailing arbitration law, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction". It is noteworthy that the contract does not refer to any specific arbitration statute. However, Section 2 of the Federal Arbitration Act (9 U.S.C. § 1 et seq.) is sufficiently broad to apply; it provides:

"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 turn, the Act defines commerce as including "commerce among the several States" (9 U.S.C. § 1). Unquestionably, this contract evidencs "a transaction involving commerce" within the meaning of the statute, for Sparks was a New York contractor and came to Illinois to perform the work with glass manufactured by LOF in Toledo, Ohio.² Therefore, we proceed to the case law interpreting the Federal Arbitration Act to determine whether the injunction against arbitration was erroneous. If the Federal Arbitration Act were not involved, we would have to look at the Illinois Uniform Arbitration Act as interpreted by the Illinois courts. Butler Products Co. v. Unistrut Corporation, 367 F.2d 733, 735 (7th Cir. 1966).

Under the Federal Arbitration Act, the courts have been assigned the limited role of "ascertaining whether the party seeking arbitration is making a claim which on its face is one governed by the agreement". International Telephone and Telegraph Corporation v. Local 400, 286 F.2d 329, 330-331 (3rd Cir. 1961). As Judge Frank put it in Reconstruction Finance Corporation v. Harrisons & Crosfield, 204 F.2d 366, 368, 37 A.L.R.2d 1117 (2d Cir. 1953), certiorari denied, 346 U.S. 854, 74 S.Ct. 69, 98 L. Ed. 368:

"the provisions of that Federal Arbitration Act — 9 U.S.C. § 4 — * * * make it clear that a federal court, in a suit asking it to compel arbitration, should (except as noted below in discussing laches) deal with no issues except (1) the making of an agreement to arbitrate, and (2) the failure, neglect or refusal of the other party to perform that agreement."

The policy of the Federal Arbitration Act is to promote arbitration to accord with the intention of the parties and to ease court congestion. Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F.2d 402, 410 (2d Cir. 1959), certiorari dismissed, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37. All doubts are to be resolved in favor of arbitration. Metro Industrial Painting Corp. v. Terminal Construction, 287 F.2d 382, 385 (2d Cir. 1961). Whenever possible, the courts will use the Federal Arbitration Act to enforce agreements to arbitrate. See Monte v. Southern Delaware County Authority, 321 F.2d 870, 874 (3d Cir. 1963).

Here the subcontract between Sollitt and Sparks contained their promise to arbitrate. As in Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 62 F.2d 1004, 1006 (2d Cir. 1933), Sollitt's motion to enjoin the arbitration proceedings was a repudiation of its own promise to arbitrate, giving Sparks an election to put an end to the arbitration clause or to insist upon its performance. Here Sparks has insisted upon performance, and its election must be honored, as Judge Learned Hand ruled in the Krauss case.³

In addition to the Lawrence and Lummus cases (supra, p. 714 and infra, p. 716), Prima Paint Corporation v. Flood & Conklin Mfg. Co., 360 F.2d 315 (2d Cir. 1966), certiorari granted, 385 U.S. 897, 87 S.Ct. 202, 17 L.Ed.2d 130, holds that court proceedings should be stayed to permit arbitration. These decisions of course militate against the ruling below that arbitration should be stayed to permit subsequent court proceedings to continue. Furthermore, having participated in the arbitration proceedings, Sollitt may have waived any right to stay them. In re Hellenic Lines, Ltd. (Louis Dreyfus Corporation), 372 F.2d 753, 758 (2d Cir. 1967).

In an effort to support the preliminary injunction, Sollitt has cited two cases under the Federal...