Matter of Ferrara S. p. A.

• Decision Date: 02 December 1977
• Docket Number: No. 77 Civ. 3549 (MEF) and 77 Civ. 3550 (MEF).,77 Civ. 3549 (MEF) and 77 Civ. 3550 (MEF).
• Citation: 441 F. Supp. 778
• Parties: In the Matter of FERRARA S. p. A., Petitioner, for a judgment staying the arbitration commenced by UNITED GRAIN GROWERS, LTD., Respondent. In the Matter of FRATELLI MORETTI CEREALI, S. p. A., Petitioner, for a judgment staying the arbitration commenced by UNITED GRAIN GROWERS, LTD., Respondent.
• Court: U.S. District Court — Southern District of New York

441 F. Supp. 778

In the Matter of FERRARA S. p. A., Petitioner, for a judgment staying the arbitration commenced by UNITED GRAIN GROWERS, LTD., Respondent In the Matter of FRATELLI MORETTI CEREALI, S. p. A., Petitioner, for a judgment staying the arbitration commenced by UNITED GRAIN GROWERS, LTD., Respondent.

Nos. 77 Civ. 3549 (MEF) and 77 Civ. 3550 (MEF).

United States District Court, S. D. New York.

December 2, 1977.

Hamburger, Weinschenk, Molnar & Busch, New York City, for petitioners; Benjamin Busch, New York City, of counsel.

Hill, Rivkins, Carey, Loesberg & O'Brien, New York City, for respondent United Grain Growers, Ltd.; Robert J. Ryniker, New York City, of counsel.

OPINION

FRANKEL, District Judge.

There are before the court competing applications to stay or to compel arbitration of disputes arising from two contracts for the sale of wheat by United Grain Growers, Ltd. ("UGG"), a Canadian corporation, to Fratelli Moretti Cereali, S. p. A. ("Moretti"), and Ferrara S. p. A. ("Ferrara"), both of Italy. Arbitration will be ordered.

I.

The agreements between the parties provided for the sale of 20,000 tons of Canadian wheat to each buyer, f. o. b. St. Lawrence Port, with payment against presentation of documents in New York. Each was memorialized on a standard form North American Export Grain Association No. 2 ("NAEGA 2") contract, which consists of a single page with printing on both sides.¹ On the front of this document, beneath the space for entry of the buyer's name, it is recited that the sale is made "ON THE CONDITIONS AND RULES INCORPORATED HEREIN." At the bottom of the same page, just below the signature lines, appears the legend: "(SEE CONDITIONS AND RULES ON OTHER SIDE)." The reverse side contains eleven printed clauses under the boldface caption, "CONDITIONS AND RULES," including the following:

"3. ARBITRATION. Buyer and seller agree that any controversy or claim arising out of, in connection with or relating to this contract, or the interpretation, performance or breach thereof, shall be settled by arbitration in the City of New York before the American Arbitration Association or its successors, pursuant to the Grain Arbitration Rules of the American Arbitration Association, as the same may be in effect at the time of such arbitration proceeding, which rules are hereby deemed incorporated herein and made a part hereof, and under the laws of the State of New York. The arbitration award shall be final and binding on both parties and judgment upon such arbitration award may be entered in the Supreme Court of the State of New York or any other Court having Jurisdiction thereof. Buyer and seller hereby recognize and expressly consent to the jurisdiction over each of them of the American Arbitration Association or its successors, and of all the Courts in the State of New York. Buyer and seller agree that this contract shall be deemed to have been made in New York State and be deemed to be performed there, any reference herein or elsewhere to the contrary notwithstanding."

It is not disputed that both buyers failed to perform their obligations under the contracts. UGG served separate demands for arbitration, and proceedings commenced before the American Arbitration Association with respect to the UGG-Ferrara controversy. On June 24, 1977, Moretti filed a petition to stay arbitration in the Supreme Court of the State of New York. Ferrara commenced a similar proceeding in state court on July 12, and obtained a temporary stay ex parte. UGG removed both cases here on July 22, 1977, and has cross-petitioned for orders compelling arbitration.

II.

Moretti and Ferrara resist arbitration primarily on the theory that they did not enter into enforceable agreements to arbitrate. It appears that the contracts were negotiated for the buyers by Italian grain brokers. The buyers claim that there was no discussion of, or express assent to, arbitration during the negotiations, and that the arbitration clause in NAEGA 2 was not mentioned. Relying primarily on New York and federal law, they contend that the quoted language on the face of NAEGA 2 referring to the provisions on the reverse side is insufficient to bind them to the arbitration term. Messrs. Remo Moretti, Director of Moretti, and Riccardo Ferrara, Counsellor of the Administrative Council of Ferrara, have averred in virtually identical affidavits that they neither knew nor had reason to know of the arbitration clauses; each states he is familiar with Italian law, under which arbitration agreements are allegedly unenforceable unless they appear above the signatures of both parties, and each claims he therefore saw no reason to examine the reverse side of NAEGA 2, which is unsigned. As will appear, the court may assume arguendo, with whatever strain, that these identical accounts are true. Alternatively, the buyers contend that the contracts are governed by Italian law, and that the arbitration clauses are invalid pursuant to the rule mentioned above.

Since this court's jurisdiction over these actions is conferred by Chapter 2 of the Federal Arbitration Act, 9 U.S.C. §§ 201-208, as added P.L. 91-368, 84 Stat. 692 (1970), it would seem that the enforceability of the arbitration clause at issue must be determined in accordance with federal law, i. e., generally accepted principles of contract law, see Fisser v. International Bank, 282 F.2d 231 (2d Cir. 1960); Avila Group, Inc. v. Norma J. of California, 426 F.Supp. 537 (S.D.N.Y.1977); Starkman v. Seroussi, 377 F.Supp. 518 (S.D.N.Y.1974).² In the instant cases, however, it is unnecessary to decide precisely which body of law governs the enforceability of arbitration agreements in actions in federal courts falling under the United Nations Convention implemented in Chapter 2, see n. 2, supra. Whether the applicable law is the federal law developed under Chapter 1 of the Arbitration Act; a uniform body of international law embodied in the Convention, see Scherk v. Alberto-Culver Co., 417 U.S. 506, 520-21 n. 15, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974); or — by virtue of the parties' contractual choice of law provision and their designation of New York as the place for arbitration, see Matter of I. S. Joseph Co. (Toufic Aris & Fils), 54 A.D.2d 665, 388 N.Y.S.2d 1 (1st Dep't. 1976); In re Electronic & Missile Facilities, Inc., 38 Misc.2d 423, 236 N.Y.S.2d 594 (Sup.Ct.1962); Restatement (Second) of Conflicts of Laws § 218 (1971) — the law of New York State, the result is the same, and the alleged rule of Italian law on which the buyers rely does not apply. The purported Italian law rule appears to be a special requirement governing agreements to arbitrate, but inapplicable to other contractual terms and conditions. Federal courts have consistently refused to apply such rules in cases arising under Chapter 1 of the Arbitration Act. N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722 (8th Cir. 1977); Medical Development Corp. v. Industrial Molding Corp., 479 F.2d 345 (10th Cir. 1973); Avila Group v. Norma J. of California, supra. Similarly, the Supreme Court has noted that "the delegates to the Convention voiced frequent concern that courts of signatory countries in which an agreement to arbitrate is sought to be enforced should not be permitted to decline enforcement of such agreements on the basis of parochial views of their desirability or in a manner that would diminish the mutually binding nature of the agreements." Scherk v. Alberto-Culver Co., supra, 417 U.S. at 520-521 n. 15, 94 S.Ct. at 2458. This concern would seem to be equally compelling whether the "parochial view" is that of the forum or of another state with an alleged interest in the controversy.

The buyers do not deny that NAEGA 2 contracts embodying the essential terms of the actual agreements between the parties were duly executed by authorized agents of the respective companies. Since there is no allegation of fraud or duress in the signing or inducement of the contracts, and the cases do not involve parties of substantially unequal bargaining power or sophistication, the buyers' contentions are insufficient to bring them within any exception to the general rule that a person of ordinary understanding and competence is bound by the provisions of a contract he signs whether or not he has read them. N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722 (8th Cir. 1977); Southeastern Enameling Corp. v. General Bronze Corp., 434 F.2d 330 (5th Cir. 1970); Avila Group, Inc. v. Norma J. of California, supra, 426 F.Supp. at 540, and authorities cited therein; Matter of Level Export Corp. (Wolz, Aiken & Co.), 305 N.Y. 82, 111 N.E.2d 218 (1953). In these circumstances, the question of a "subjective" agreement to arbitrate is irrelevant. Avila Group, Inc. v. Norma J. of California, supra; Bigge Crane & Rigging Co. v. Docutel Corp., 371 F.Supp. 240 (E.D.N.Y.1973). There is no doubt that the quoted legends on the face of NAEGA 2 are sufficient to give notice to a reasonably prudent person of the arbitration provision and other things appearing on the back. Medical Development Corp. v. Industrial Molding Corp., 479 F.2d 345 (10th Cir. 1973); Avila Group, Inc. v. Norma J. of California, supra; cf. Midland Tar Distillers, Inc. v. M/T Lotos, 362 F.Supp. 1311 (S.D.N.Y.1973); Matter of Goodman & Theise, Inc. (Zala), 133 Misc. 473, 233 N.Y.S. 46, aff'd 224 App.Div. 838, 231 N.Y.S. 760 (1st Dep't. 1928). The buyers are therefore bound by these arbitration clauses, and there is no issue of fact requiring a trial. Joseph Muller Corp. Zurich v. Commonwealth Petrochemicals, Inc., 334 F.Supp. 1013 (S.D.N.Y.1971); cf. Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673 (2d Cir. 1972).

In light of this finding, it is unnecessary to rule on the buyers' claim that the grain sale contracts themselves are unenforceable because they allegedly fail to comply with certain Italian Foreign Currency Control Regulations. Given the parties'...