Great American Trading Corp. v. I.C.P. Cocoa, Inc.

• Decision Date: 23 September 1980
• Docket Number: Nos. 79-2489,79-2490,s. 79-2489
• Citation: 629 F.2d 1282
• Parties: GREAT AMERICAN TRADING CORPORATION, Plaintiff-Appellant, v. I.C.P. COCOA, INC.; ABC Food Ingredients, Inc.; and Milford Bonner, Defendants-Appellees. I.C.P. COCOA, INC., Plaintiff-Appellee, v. GREAT AMERICAN TRADING CORPORATION, Defendant-Appellant, American Beverage And Supply Corporation et al., Garnishees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1282

629 F.2d 1282

GREAT AMERICAN TRADING CORPORATION, Plaintiff-Appellant, v. I.C.P. COCOA, INC.; ABC Food Ingredients, Inc.; and Milford

Bonner, Defendants-Appellees.

I.C.P. COCOA, INC., Plaintiff-Appellee, v. GREAT AMERICAN TRADING CORPORATION, Defendant-Appellant,

American Beverage And Supply Corporation et al., Garnishees.

Nos. 79-2489, 79-2490.

United States Court of Appeals, Seventh Circuit.

Argued June 10, 1980.

Decided Sept. 23, 1980.

Richard Brown, Indianapolis, Ind., for Great American Trading Corp.

Norman Rowe, Indianapolis, Ind., for I.C.P. Cocoa, Inc.

Before CUMMINGS and BAUER, Circuit Judges, and CROWLEY, District Judge. ^*

BAUER, Circuit Judge.

These consolidated appeals arise from a contractual dispute between Great American Trading Corporation (GATC) and I.C.P. Cocoa, Inc. (ICP), concerning the sale of cocoa powder to GATC by ICP. In Appeal No. 79-2489, GATC, as plaintiff-appellant, appeals from the December 4, 1979 order of the district court directing that final judgment under Rule 54(b) of the Federal Rules of Civil Procedure be entered in favor of ICP and against GATC on the issue of the arbitrability of the dispute. In Appeal No. 79-2490, GATC, as defendant-appellant appeals from the November 5, 1979 order of the district court denying its motion for relief from judgment under Rule 60(b) of the Federal Rules of Civil Procedure and declaring that the judgment in question was valid and enforceable. The jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1291. The sole issue presented for review is whether the district court was required, under the provisions of the United States Arbitration Act of 1925 (USAA), 9 U.S.C. § 1 et seq., to hold a trial prior to ordering the parties to arbitration on the issue of the making of an agreement to arbitrate. We conclude that the district court erred in failing to conduct the trial contemplated under 9 U.S.C. § 4, and accordingly reverse the order appealed from in No. 79-2490 for the reason set forth below. We also conclude that the district court erred in directing entry of the judgment appealed from in No. 79-2489 and accordingly dismiss that appeal for the reasons set forth below.

I

On August 10, 1977, a contract was entered into between the parties, the terms of which provided for the sale by ICP to GATC of 660,000 pounds of 10/12% natural cocoa powder at a price stated therein as being a ratio of 1.90 multiplied by the May 1978 bean option price. The agreement further provided for delivery F.O.B. Camden, New Jersey or Toronto, Canada during the period of March 1978 through June 1978, with the product to be shipped in fifty-pound bags and payment due net cash ten days. The ICP standard form contract also stated:

Any dispute arising in connection with this contract shall be settled by arbitration in New York, in accordance with the rules and regulations of the Cocoa Merchants Association of America, Inc.

Contract dated August 20, 1977.

Subsequent to the execution of this contract, the parties entered into various oral and written negotiations concerning proposed modifications of the terms of the agreement. On April 17, 1978, ICP advised GATC that the delivery periods would be rescheduled, apparently at the request of GATC, and that the price ratios and concomitant bean option prices would be changed as follows:

165,000 lbs. June/July at 1.95 X July, 1978

165,000 lbs. August/September at 1.99 X September, 1978

165,000 lbs. October/December at 2.07 X December, 1978

165,000 lbs. January/March at 2.14 X March, 1979.

ICP letter to GATC dated April 17, 1978. During this period of negotiations GATC commenced an investigation regarding certain alleged irregularities in the purchase of cocoa contracts by its former purchasing agent from cocoa manufacturers and traders, including ICP.

On June 20, 1978, ICP confirmed in a letter to GATC an agreement to reschedule the delivery period to assist GATC in resolving its internal requirements for cocoa powder. Noting that ICP had been "somewhat generous in renegotiating" the August 20, 1977 contract, the letter recited the following terms as the basis for a new revised contract: (1) the quantity of cocoa purchased remained the same at 660,000 pounds; (2) the delivery period as revised in the April 17 letter was further revised to the period of January through June, 1979; (3) the price for the cocoa powder, as revised in the April 17 letter, was further revised to a ratio of 2.0 multiplied by the March 1979 bean option prices for 330,000 pounds and to a ratio of 2.0 multiplied by the May 1979 bean futures for the remaining 330,000 pounds of powder; and (4) the description of the product was changed from 10/12% natural cocoa powder as stated in the original contract to one-half of the total quantity as natural low fat cocoa powder and as 10/12% Red Dutch cocoa powder for the other half of the total quantity ordered. The letter concluded with the statement of ICP's Vice President for Sales: "I look forward to having your confirmation that this is acceptable and then we can draw up a new revised contract." ICP letter to GATC dated June 20, 1977.

Additional conversations and correspondence were exchanged between the parties and on August 15, 1978, counsel for GATC wrote to counsel for ICP that, subject to ICP's representation that it was not involved in any way in the apparent irregularities discovered by GATC regarding the cocoa transactions of GATC's former agent, GATC confirmed the terms of the proposed revisions to the contract as expressed in ICP's letter of June 20, 1978. On September 6, 1978, ICP wrote to GATC that it was pleased that the problems concerning the August 20, 1977 contract had been resolved and enclosed a new contract for approval by GATC. The new contract, dated September 6, 1978, was signed by ICP and contained the revisions set forth in ICP's June 20 letter as well as the standard form arbitration clause noted above. This contract was never executed by GATC.

In January 1979, GATC refused to schedule delivery and in response to ICP's demand for arbitration filed a complaint on February 1, 1979 in the Superior Court for Marion County, Indiana, seeking a declaratory judgment that the original contract of August 10, 1977 was void. ICP removed the action to the United States District Court for the Southern District of Indiana.

On March 7, 1979, ICP filed a motion to stay proceedings and to compel arbitration, in which it asserted that the alleged agreement was subject to the United States Arbitration Act. On March 12, 1979, GATC filed its answer to the motion and an amended complaint in which it alleged that the documents forming the agreement between the parties did not provide for arbitration and that the agreement relied on by ICP was null and void. On March 19, 1979, the district court granted ICP's motion and issued an order staying further proceedings and directing GATC to proceed with arbitration in New York. On May 14, 1979, prior to the scheduled arbitration, this Court denied GATC's application for a stay pending appeal, noting the probable absence of jurisdiction because the order sought to be stayed was interlocutory and non-appealable.

The arbitration proceedings went forward, but GATC notified the arbitration board on May 15, 1979 that it had elected not to participate on the ground that no valid arbitration agreement existed and that the arbitration board accordingly lacked jurisdiction over GATC. An award was rendered in ICP's favor on May 25, 1979. On June 14, 1979, ICP sought confirmation of the award in United States District Court for the Southern District of New York. On July 5, 1979, this Court granted ICP's motion to dismiss GATC's appeal from the order compelling arbitration for lack of jurisdiction. On August 2, 1979, the New York district court entered judgment against GATC confirming the arbitration award.

After the time for appealing the New York judgment had expired, on September 19, 1979, ICP registered the judgment in the United States District Court for the Southern District of Indiana pursuant to 28 U.S.C. § 1963, and commenced a separate action in the district court to collect on the judgment. On October 11, 1979, GATC filed a motion for relief from the judgment under Rule 60(b) of the Federal Rules of Civil Procedure, asserting that the district court had violated GATC's right to due process by denying its request for an evidentiary hearing under 9 U.S.C. § 4.

On November 5, 1979, the district court entered an order denying GATC's motion and concluded that the New York judgment was valid and enforceable. On December 3, 1979, GATC filed a notice of appeal seeking review in this Court of the November 5 order. On December 4, 1979, the district court, at the request of GATC and over the objection of ICP, entered an order finding for ICP and against GATC on the issue of arbitrability of the parties' disagreement and directing that final judgment be entered in favor of ICP and against GATC under Rule 54(b) of the Federal Rules of Civil Procedure. Appeal No. 79-2489 is before this Court from the final judgment entered on the December 4, 1979 order of the district court, and Appeal No. 79-2490 is before this Court from the final judgment entered on the November 5, 1979 order of the district court.

II

In Appeal No. 79-2489, GATC seeks reversal of the district court order granting final judgment in favor of ICP on the issue of arbitrability, contending that the district court order of March 19, 1979 directing the parties to arbitration in New York was void because it was entered without affording GATC an evidentiary trial on the issue of arbitrability as provided for under 9 U.S.C. § 4 and, irrespective of the failure to hold a trial, because such order exceeded the statutory authority granted to the district court under 9 U.S.C. § 4, which requires that the arbitration proceedings be conducted in the district in which the petition for...