James Julian, Inc. v. Raytheon Service Co.

• Decision Date: 09 December 1980
• Citation: 424 A.2d 665
• Parties: 1980-81 Trade Cases P 63,865 JAMES JULIAN, INC., a Corporation of the State of Delaware, Plaintiff, v. RAYTHEON SERVICE COMPANY, a Corporation of the State of Delaware, Defendant.
• Court: Court of Chancery of Delaware

Page 665

424 A.2d 665

1980-81 Trade Cases P 63,865

JAMES JULIAN, INC., a Corporation of the State of Delaware, Plaintiff, v. RAYTHEON SERVICE COMPANY, a Corporation of the State of Delaware, Defendant.

Court of Chancery of Delaware, Kent County.

Submitted Sept. 24, 1980.

Decided Dec. 9, 1980.

On plaintiff's application to compel arbitration: denied; on defendant's motion to dismiss this action: denied; on defendant's motion to stay this action: granted.

John Van Brunt, Jr., Wilmington, and Edward J. O'Malley, of Pelino & Lentz, Philadelphia, Pa., for plaintiff.

Edmund N. Carpenter, II, and Richard J. Abrams, of Richards, Layton & Finger, Wilmington, for defendant.

HARTNETT, Vice Chancellor.

Pursuant to 10 Del.C., Ch. 57 (the Uniform Arbitration Act), plaintiff, James Julian, Inc. ("Julian"), filed this suit to compel defendant, Raytheon Service Company ("Raytheon Service"), to arbitrate disputes arising out of an agreement between the parties relating to the construction of a solid waste processing and recovery plant. Raytheon Service then moved to have this action dismissed or in the alternative stayed. For the reasons stated, I find that the dispute is arbitrable but the arbitration proceedings must be stayed pending the disposition of an antitrust action filed by Julian against Raytheon Service and others in the U.S. District Court.

I

Under an agreement with the Delaware Solid Waste Authority, dated August 10, 1979, Raytheon Service became the prime contractor for the design and construction of a solid waste processing and recovery plant at Pigeon Point, Delaware. Subsequently pursuant to a subcontract with Raytheon Service Julian became the prime subcontractor. Under the contracts, Raytheon Service was to perform design work for both the sludge and solid waste processing modules and Julian was to perform major portions of the construction work on the solid waste processing module. The Subcontract provides for arbitration of any controversy or claim arising out of or relating to the Subcontract.

Following commencement of the work by Julian, labor picketing and violence led to interruption, delays, and damages at the module construction site. Although there is a conflict as to the extent of each party's fulfillment of its contractual obligations, in December of 1979 Raytheon Service notified Julian that the Subcontract between them was terminated pursuant to Article 10(B) of the Subcontract which provides for termination in the case of a default.

In response to this notification of termination, Julian, on January 4, 1980, filed a Demand For Arbitration against Raytheon Service with the American Arbitration Association alleging an improper termination of the Subcontract and seeking certain payments purportedly due under the Subcontract. Raytheon Service took the position with the American Arbitration Association that this dispute was not arbitrable and no arbitration took place.

On January 18, 1980, Julian filed a complaint in the U.S. District Court for the District of Delaware against Raytheon Service and others alleging violations of the federal antitrust statute and seeking damages for the wrongful termination of the Subcontract between Julian and Raytheon Service.

On February 26, 1980, Julian filed this suit seeking to compel Raytheon Service to proceed to arbitration in accordance with the arbitration clause of the Subcontract. In response, Raytheon Service claims that the dispute is not subject to arbitration and that in any case the filing of the federal antitrust action by Julian acted as a waiver or stay of any right to arbitration.

II

First to be considered is Raytheon Service's contention that the termination was at the convenience of Raytheon Service in accordance with Article 10(A) of the Subcontract and therefore there is no issue relating to termination to be arbitrated. Article 10(A) states, in part:

"A. Termination for Convenience

(This clause applies to all terminations not made pursuant to the clause herein entitled Termination for Default).

1. The performance of work under this Contract may be terminated by the Company in accordance with this clause in whole, or from time to time in part, whenever the Company shall determine that such termination is in the best interest of the Company. Any termination shall be effected by delivery to the Contractor of a Notice of Termination notifying the extent to which performance of work under this Contract is terminated, and the date upon which such termination becomes effective."

The notice of termination, however, stated that it was for cause pursuant to Article 10(B) of the Subcontract. Raytheon Service contends, in the alternative, that if the termination is held to be without justifiable cause it would then be a termination for convenience pursuant to Article 10(A) and that if the termination was for convenience there would be no issue relating to termination to be arbitrated. It is clear, however, that a dispute exists whether the Subcontract was terminated pursuant to Article 10(A) which purports to grant Raytheon Service the right to terminate the contract at its convenience or whether it was terminated pursuant to Article 10(B) which provides for termination for cause. There is also a dispute as to the legal meaning of the language set forth in brackets in Article 10(A) of the Subcontract, quoted above, since that language is ambiguous. And there is a dispute as to the amount of money owed to Julian regardless of the reason for the termination.

As previously noted, the Subcontract included a broad arbitration provision which stated, in part: "any controversy or claim ... arising out of or relating to this Contract ... shall be settled by arbitration ...". The scope of an arbitration agreement is ordinarily determined by the Arbitrator and not by a Court. Warren Bros. Co. v. Cardi Corp., 1st Cir., 471 F.2d 1304 (1973); Lodge No. 12, Dist. No. 37, Int'l Ass'n of Machinists v. Cameron Iron Works, Inc., 5th Cir., 292 F.2d 112, 118-119 (1961); Youmans v. Dist. Ct. in & for County of Denver, Colo.Supr., 589 P.2d 487 (1979). All doubts as to the arbitrability of an issue must be resolved in favor of arbitration. McCandliss v. Ward W. Ross, Inc., Mich.Ct.App., 45 Mich.App. 342, 206 N.W.2d 455 (1973); Intern. Bro. of Team. Local 959 v. King, Alaska Supr., 572 P.2d 1168 (1977); Sewer v. Paragon Homes, Inc., D.C.V.I., 351 F.Supp. 596 (1972).

The disputed issues arising out of the termination of the Subcontract, therefore, should be submitted to arbitration if there has been no waiver of the right to arbitration or if there is no reason for a stay of the arbitration.

III

Raytheon Service next contends that Julian has waived any right to arbitration by its initiation of a lawsuit in the U.S. District Court which alleged federal antitrust violations and included breach of contract issues and therefore encompasses the same issues as would be before the Arbitrator.

Both parties recognize that claims arising under the federal antitrust laws are of a character which are not appropriate for enforcement by arbitration. Am. Safety Equip. Corp. v. J. P. Maguire & Co., 2nd Cir., 391 F.2d 821, 825-827 (1968); Applied Digital Tech., Inc. v. Continental Cas. Co., 7th Cir., 576 F.2d 116, 117 (1978); Cobb v. Lewis, 5th Cir., 488 F.2d 41 (1974). Both parties, therefore, concede that the antitrust issues must be decided only in a Federal Court. Julian argues, however, that the antitrust issues are different from the breach of contract issues and therefore both the arbitration and the federal district court suit may proceed simultaneously as to the different issues. Whether the issues which are before the District Court and the issues which would be before the Arbitrator are the same is difficult to determine at this preliminary stage. Nevertheless, it is clear that a binding waiver of the right to arbitration has not occurred. There is a strong public policy favoring arbitration and, therefore, waiver is not to be lightly...