O'MEARA v. Texas Gas Transmission Corp.

• Decision Date: 18 June 1964
• Docket Number: No. 64 C 398.,64 C 398.
• Parties: Robert W. O'MEARA, Plaintiff, v. TEXAS GAS TRANSMISSION CORP., Defendant.
• Court: U.S. District Court — Northern District of Illinois

230 F. Supp. 788

Robert W. O'MEARA, Plaintiff, v. TEXAS GAS TRANSMISSION CORP., Defendant.

No. 64 C 398.

United States District Court N. D. Illinois, E. D.

June 18, 1964.

David S. Chesrow, Barney L. Hollowick, Chicago, Ill., for plaintiff.

Patrick W. O'Brien, Mayer, Friedlich, Spiess, Tierney, Brown & Platt, Chicago, Ill., Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for defendant.

MAROVITZ, District Judge.

Motion of defendant to stay proceedings pending arbitration.

This action arises out of a contract, in which the plaintiff allegedly agreed to produce, furnish, sell and deliver to defendant natural gas from plaintiff's Louisiana well. Defendant allegedly agreed to buy a minimum supply of 70 per cent of two million cubic feet per day of natural gas during the term of the contract. Plaintiff asserts that defendant has breached said contract, and seeks recovery of $89,317.94, plus interest, allegedly due and owing for gas delivered.

Defendant has filed a motion to stay all proceedings in this action pending arbitration. The contract at issue contains an executory provision reciting that all disputes without limitation must be submitted to arbitration. The motion is brought pursuant to Section 3, Title 9, U.S.C., the Federal Arbitration Act, and Rule 12 of the Federal Rules of Civil Procedure.

The contract sued upon was signed first by plaintiff in Louisiana, and then by defendant in Texas. The gas well is located in Louisiana. Plaintiff contends under Illinois law, that since the last act necessary to make the contract complete occurred in Texas, its validity must therefore be determined by the law of that state. Frankel v. Allied Mills, 369 Ill. 578, 17 N.E.2d 570 (1938); Harris v. American Surety Co. of N. Y., 372 Ill. 361, 24 N.E.2d 42 (1939); Rohrer v. Rohrer, 29 Ill.App.2d 362, 173 N.E.2d 589 (1961). Applying Texas law, plaintiff asserts it is readily apparent that such an all-inclusive arbitration clause is against public policy, in that it tends to oust the courts of jurisdiction. Huntington Corp. v. Inwood Const. Co., Tex.Civ.App., 348 S.W.2d 442.

Plaintiff further contends that since the gas wells are located in Louisiana, and defendant transports said gas to its chemical plant in Louisiana, where certain chemicals are extracted, interstate commerce is not involved, and therefore Texas law and not the Federal Arbitration Act applies.

Both contentions must fail. This Court, basing its jurisdiction on diversity of citizenship, Sec. 1332, Title 28 U.S.C., must apply the conflict of laws rules prevailing in the forum state of Illinois. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Plaintiff's argument that this case does not apply is entirely fallacious. The Supreme Court's language is clear:

"The conflict of laws rules to be applied by the federal court in Delaware must conform to those prevailing in Delaware's State courts."

The phrase quoted by plaintiff, deals only with the substance of Delaware conflicts law, not with whether said rules should be applied.

In Oakes v. Chicago Fire Brick Co., 388 Ill. 474, 58 N.E.2d 460, the Illinois Supreme Court explicitly stated that when a contract is executed in one state with the intention that it is to be performed in another,

"the law of the place where the contract is to be performed will control as to its validity and will prevail over the law where the contract was entered into and it will be enforced under the law of the place of performance." (388 Ill., at pp. 477-478, 58 N.E.2d at p. 462) (Emphasis added.)

In Frankel and Harris, supra, cited by plaintiff, the place where the contracts were made and the place of performance were identical. The Rohrer case, supra, may also be distinguished, for in that case, the contract involved performance in several states. Application of the Oakes rule to that situation would result in a hopeless triangle. Accordingly, in the absence of interstate commerce, Louisiana law must be applied. Under Louisiana arbitration law, such arbitration contracts are valid, irrevocable, and enforceable. See LSA-R.S. 9:4201, 9:4202 (1951); Livingston v. Shreveport-Texas League Baseball Corp. (W.D.La., 1955), 128 F. Supp. 191, 200, affd. 5 Cir., 228 F.2d 623.

Secondly, the Court must turn to Sec. 2 of the Federal Arbitration Act which provides that an arbitration clause in any transaction involving interstate commerce, "shall be valid, irrevocable, and enforceable." This...