Monte v. Southern Delaware County Authority

• Decision Date: 26 August 1963
• Docket Number: No. 14366,14367.,14366
• Citation: 321 F.2d 870
• Parties: John MONTE and Robert Monte, trading as John Monte Company, v. SOUTHERN DELAWARE COUNTY AUTHORITY, Appellant. SOUTHERN DELAWARE COUNTY AUTHORITY, Appellant, v. John MONTE and Robert Monte, trading as John Monte Company.
• Court: U.S. Court of Appeals — Third Circuit

321 F.2d 870 (1963)

John MONTE and Robert Monte, trading as John Monte Company, v. SOUTHERN DELAWARE COUNTY AUTHORITY, Appellant.

SOUTHERN DELAWARE COUNTY AUTHORITY, Appellant, v. John MONTE and Robert Monte, trading as John Monte Company.

Nos. 14366, 14367.

United States Court of Appeals Third Circuit.

Argued June 20, 1963.

Decided August 26, 1963.

W. Bradley Ward, Philadelphia, Pa. (Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., de Furia, Larkin, de Furia, Chester, Pa., Samuel D. Slade, Bancroft D. Haviland, Philadelphia, Pa., on the brief), for appellant.

Otis W. Erisman, Philadelphia, Pa., Truscott, Kline, O'Neill & Howson, Philadelphia, Pa., Cramp & D'Iorio, Media, Pa., Frank F. Truscott, Philadelphia, Pa., John F. Cramp, Media, Pa., on the brief), for appellees.

Before BIGGS, Chief Judge, and STALEY, Circuit Judge, and STEEL, District Judge.

STALEY, Circuit Judge.

The narrow question presented by this appeal is whether the district court is precluded from reviewing an arbitrators' award because the parties have contractually agreed that such review would be limited to the common pleas courts of Pennsylvania. The district court concluded that the award was properly before it,¹ but certified the case for immediate appeal pursuant to the Interlocutory Decisions Appeals Act, 28 U.S. C.A. § 1292(b). We granted Southern Delaware County Authority's application for permission to appeal.

In 1958 John Monte Company, a Michigan partnership, entered into a contract with the Authority covering the construction and installation of certain portions of a sanitary sewer system in Delaware County, Pennsylvania. While the contract was being performed, disputes arose, and in May 1960 Monte filed suit in the Court of Common Pleas of Delaware County, seeking a declaratory judgment that it was not to be surcharged for tardy completion of the contract, and requesting money damages for certain payments alleged to have been wrongfully withheld under the contract. When the Authority filed a motion for stay pending arbitration, Monte served notice of its demand for arbitration in accordance with the contract. The Authority did likewise, and the declaratory judgment action was apparently abandoned.

Following hearings before the selected arbitrators, an award was made on behalf of Monte on August 31, 1962. On September 4, 1962, the Authority filed a motion in the Court of Common Pleas of Delaware County to modify, correct, or vacate the award. On that very day Monte, basing jurisdiction on diversity of citizenship, jurisdictional amount, and the United States Arbitration Act, 9 U.S.C.A. §§ 1-14, filed a motion in the District Court for the Eastern District of Pennsylvania to confirm the award, and subsequently removed the Authority's state court motion to that court. The Authority then filed a motion in the district court to dismiss Monte's motion to confirm as well as a motion to dismiss or remand the removal of the Authority's state court motion. It is from the denial of these latter motions that this appeal was taken.

The Authority's challenge to the decision of the district court is premised on its view that the Pennsylvania Arbitration Act, Chapter 4, 5 Purdon's Pa. Stat. Ann. §§ 161-181, including that Act's court review and enforcement provisions, is an integral part of the contract, and further, that the contract as so construed precludes review in the district court. The state Act is said to be incorporated in the contract both as a matter of law and by the express agreement of the parties. Additionally, the Authority urges that the contract is not one "evidencing a transaction involving commerce" as required by § 2 of the United States Arbitration Act, 9 U.S.C.A. § 2.

Since it goes to the question of federal jurisdiction, we must first decide whether this contract evidences a transaction involving commerce.² The Authority argues that it does not, because the construction project was within the confines of the state of Pennsylvania. But such a narrow interpretation of this remedial Act finds no support in the cases. Indeed, in holding that the contract before it did not involve commerce, the Supreme Court in Bernhardt v. Polygraphic Co., 350 U.S. 198, 200-201, 76 S.Ct. 273, 275, 100 L.Ed. 199 (1956), articulated the standard to be applied in the following words:

"* * * Nor does this contract evidence `a transaction involving commerce\' within the meaning of § 2 of the Act. There is no showing that petitioner while performing his duties under the employment contract was working `in\' commerce, was producing goods for commerce, or was engaging in activity that affected commerce, within the meaning of our decisions."

In Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382 (C.A.2, 1961), the facts of which are strikingly similar to those of the instant case, the court held that the presence of many interstate elements in the performance of the contract satisfied the jurisdictional prerequisite. Here the district court fully set forth the facts upon which it based its conclusion that this contract evidenced a transaction involving interstate commerce. 212 F.Supp. at 610-611. We need not again recite them, but need only say that they amply support its conclusion.

As the district court pointed out, the parties concede that they followed the state Act throughout the arbitration hearings. Moreover, the district court properly held that the Authority is a corporate agency of the state, In re Municipal Authority of Twp. of Upper St. Clair, 408 Pa. 464, 184 A.2d 695 (1962), and that, as such, the provisions of the Pennsylvania Arbitration Act apply to this contract.³ The relevant portion of § 178 of that Act, 5 Purdon's Pa.Stat. Ann. § 178, provides:

"Except as otherwise specifically indicated, all references in this act to the courts are to be construed to mean the common pleas courts of the county having jurisdiction of the parties or the subject matter. If prior to the award, any court of common pleas shall have entertained any motion in respect to said arbitration, such court shall retain jurisdiction, and all subsequent proceedings shall be filed in said court. * * *" (Emphasis supplied.)

In rejecting the Authority's contention that this section precluded review by it,⁴ the district court held:

"* * * This is indeed a tortured construction of the Act. The Federal Arbitration Act is coextensive with the Pennsylvania Arbitration Act. If the jurisdictional requirements are met, then the Federal Act controls because the parties never specified in the contract which court would be proper for such proceedings. * * *"

We think that the district court's conclusion was based on a misconception of the agreement to arbitrate. As the court acknowledged, the Pennsylvania Arbitration Act must be applied to the contract. Moreover, the parties expressly recognized this requirement by agreeing in paragraph 28 of the contract that:

"Each and every provision of law and clause required by law to be inserted in this Contract shall be deemed to be inserted herein and this Contract shall be read and enforced as though it were included herein, and, if through mere mistake or otherwise any such provision is not inserted, or is not correctly inserted, then upon the application of either party hereto, the Contract shall forthwith be physically amended to make such insertion."

Thus, the entire Pennsylvania Arbitration Act was incorporated in this contract and formed an integral, essential part of its terms.

Monte does not dispute the applicability of the Pennsylvania Act. It seeks solace in § 9 of the United States Arbitration Act. 9 U.S.C.A. § 9, which provides that if no court is specified in the agreement for confirmation of the award, application may be made to the United States court in and for the district within which the award was made. Reference is then made to paragraph 26(c) of the contract concerning court review, and it is emphasized that this clause merely refers to "appropriate courts," "a court," and "a court of competent jurisdiction." Monte urges that since no court is specified in the contract, review may be had in the federal district courts pursuant to the United States Arbitration Act. It should be noted that the following clause of the contract, paragraph 26(d), provides in relevant part, "Except as otherwise provided, the arbitration shall proceed under and pursuant to the rules of the State of Pennsylvania, the parties hereby certifying and agreeing that they have read and are familiar with said rules." Monte says that this refers only to the procedure before the arbitrators, and has nothing to do with court review.

We find it unnecessary to construe the language of paragraph 26, for we think that Monte's argument misses the mark. Whatever ambiguity there may be respecting court review in that clause, there is none in § 178 of the Pennsylvania Arbitration Act. That section defines with particularity all references to courts to mean, except as otherwise specifically indicated, "the common pleas courts of the county having jurisdiction of the parties or the subject matter."

It is urged that the Pennsylvania legislature has no power to compel the parties to an arbitration proceeding to have the award reviewed only in the state courts. But the review of this award turns not upon the power of the state legislature to limit the jurisdiction of the federal courts, but upon the agreement of the parties that such review shall be had in the state common pleas courts. It is both confusing and erroneous to view this as an attempt by the state to oust federal jurisdiction by legislative flat merely because the Authority, as an arm of the state, is a party to this agreement. The situation is no different than if two private parties entered into a contract which included a provision for arbitration in the very words of the Pennsylvania Arbitration Act. Surely, in these circumstances, it could not...