NUCLEAR INSTALLATION, ETC. v. Nuclear Services

• Decision Date: 11 April 1979
• Docket Number: Civ. A. No. 78-4230.
• Citation: 468 F. Supp. 1187
• Parties: NUCLEAR INSTALLATION SERVICES COMPANY v. NUCLEAR SERVICES CORPORATION.
• Court: U.S. District Court — Eastern District of Pennsylvania

468 F. Supp. 1187

NUCLEAR INSTALLATION SERVICES COMPANY v. NUCLEAR SERVICES CORPORATION.

Civ. A. No. 78-4230.

United States District Court, E. D. Pennsylvania.

April 11, 1979.

Bruce W. Ficken, Philadelphia, Pa., for petitioner.

John E. Flaherty, Jr., Philadelphia, Pa., for respondent.

MEMORANDUM AND ORDER

BECHTLE, District Judge.

Presently before the Court is the petition of Nuclear Installation Services Company ("NISCO"), pursuant to the Federal Arbitration Act ("the Arbitration Act"), 9 U.S.C. § 1, et seq., to compel the respondent Nuclear Services Corporation ("NSC") to proceed, if at all, in arbitration with any claims that it may wish to assert against NISCO arising out of the construction of the Susquehanna Steam Electric Station at Berwick, Pennsylvania, and to enjoin NSC from proceeding with legal action in any forum that is inconsistent with the order to arbitrate. Upon consideration of the petition and response, the various supplemental memoranda, as well as the argument of counsel at a hearing on the matter, the Court finds: (1) that it has jurisdiction over the subject matter of the petition; (2) that the subcontract between NISCO and NSC is in writing and evidences a transaction in interstate commerce; (3) that NSC's claims against NISCO are within a mandatory arbitration agreement; (4) that there is no dispute as to the making of the agreement to arbitrate; and, (5) that there is no dispute as to NSC's breach of such agreement. Accordingly, the petition to compel arbitration of NSC's claims against NISCO will be granted. However, because litigation instituted by NSC in the Superior Court of California has been stayed by that court¹ pending disposition of this petition, and because there is no allegation that NSC will institute any further proceedings, the petition to enjoin NSC from proceeding in any other forum will be denied on the present record, without prejudice to any future motion by NISCO. See Network Cinema Corp. v. Glassburn, 357 F.Supp. 169, 172 (S.D.N.Y.1973); Necchi Sewing Machine Sales Corp. v. Carl, 260 F.Supp. 665, 669 (S.D.N.Y.1966); 28 U.S.C. § 2283.

The factual context of the instant dispute is as follows: NISCO, a corporation organized under the laws of the State of Delaware having its principal place of business in Westmont, New Jersey, entered into a contract with the Bechtel Power Corporation pursuant to which NISCO was to perform certain design, engineering and installation services in connection with the construction of a nuclear power plant at Berwick, Pennsylvania. On or about July 22, 1976, NISCO awarded certain engineering work on the project to NSC, a corporation organized under the laws of the State of California and having its principal place of business in California, with the negotiation of a formal contract to be undertaken at a later date. NSC began work on the project and on or about December 10, 1976, under circumstances in dispute, a comprehensive and facially valid agreement ("the subcontract") was executed between NISCO and NSC. In addition to containing numerous provisions pertaining to specifications and other technical matters, the subcontract contained a mandatory arbitration section covering "any controversy . . . with respect to any matter or thing involved in this Subcontract or construction project." Subcontract § 46.

In June or July of 1977, while work was in progress pursuant to the subcontract, a dispute arose as to the quality of the work being performed by NSC and NISCO's resulting refusal to pay for the allegedly faulty work. On or about December 16, 1977, NSC filed suit in the Superior Court of California, County of Santa Clara, demanding money damages in the amount of the reasonable value of the engineering services performed by NSC on the Berwick project and naming NISCO as a defendant. After unsuccessfully attacking the personal jurisdiction of the California court and failing in an attempt to assert its arbitration rights under the California Rules of Civil Procedure, NISCO filed an answer and a counterclaim.

On or about December 18, 1978, NISCO filed the instant petition to compel NSC to arbitrate its claims against NISCO, alleging diversity of citizenship and an amount in controversy in excess of $10,000, exclusive of costs and interest. NISCO contends that there is no dispute as to the making of the agreement to arbitrate or as to NSC's breach of that agreement and that, therefore, this Court should order the parties to proceed to arbitration of NSC's claims against NISCO. In response, NSC argues: (1) that its claims against NISCO are not within the coverage of the arbitration section relied upon by NISCO; (2) that NISCO waived its arbitration rights by its participation in the California litigation, or, is guilty of laches because it waited so long before asserting its federal arbitration rights; and, (3) that there is a dispute as to the making of the agreement to arbitrate because of allegations by NSC that there was not a valid "acceptance" of its "offer," vitiating the formation of the subcontract as a whole. On the basis of these allegations, NSC argues that the Court should proceed to trial on the issue of the formation of the contract.

The Arbitration Act provides that:

a written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. A party seeking to compel arbitration or aggrieved by a refusal to arbitrate "may petition any United States district court, which save for such arbitration agreement, would have jurisdiction under Title 28." Id., at § 4. The Arbitration Act further provides that, upon the filing of such a petition:

the court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed.

Id. If the Court finds that there is a dispute as to the making of the agreement to arbitrate or as to a breach of that agreement, it must proceed to trial on the disputed issue. Id.

I. Jurisdiction

Under the terms of the Arbitration Act, this Court has jurisdiction over the subject matter of petitions to compel arbitration, if it would otherwise be vested with jurisdiction under Title 28. John Ashe Assoc., Inc. v. Envirogenics Co., 425 F.Supp. 238, 240 (E.D.Pa.1977). The Court finds that NISCO is a Delaware corporation having its principal place of business in New Jersey and that NSC is a California corporation having its principal place of business in California. We also find that the amount in controversy is in excess of $10,000. Accordingly, this Court has jurisdiction pursuant to 28 U.S.C. § 1332. See Burger Chef Systems, Inc. v. Baldwin, Inc., 365 F.Supp. 1229, 1232 (S.D.N.Y.1973).

The Court finds that the written subcontract evidences a transaction in interstate commerce. 9 U.S.C. §§ 1, 2. An examination of the record and affidavits submitted by the parties conclusively shows that the contract was negotiated between a New Jersey office and a California office for the performance of services in California, New Jersey and Pennsylvania as part of a large, integrated construction project in Pennsylvania. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); Stateside Machinery Co. v. Alperin, 591 F.2d 234, 239 n.9 (3d Cir. 1979).

II. Arbitrability

NISCO seeks to rely upon § 46 of the subcontract which states:

If at any time any controversy should arise between the Company and the Subcontractor with respect to any matter or thing involved in this Subcontract or construction project, which controversy is not controlled or determined by Section 6 above or other provisions of the Subcontract, then the decision of the Company shall be followed by the Subcontractor, and said controversy shall be decided as follows: (1) The Subcontractor shall conclusively be bound by and abide by the Company's decision, unless the Subcontractor shall commence arbitration proceedings as hereinafter provided within thirty (30) days following such decision; (2) If the Subcontractor decides to appeal from the decision of the Company, then the controverys sic shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) sic may be entered in any Court having jurisdiction thereof, and the arbitration decision shall be final and binding on both parties. Said arbitration proceedings shall be filed in the Philadelphia Regional Office of the American Arbitration Association; (3) No dispute shall interfere with the progress of the general construction, and Subcontractor shall proceed with its work; (4) If arbitration is conducted by Owner and the Company concerning any dispute between the Company and Subcontractor, then Subcontractor agrees to a joint arbitration with Owner. Contractor and Subcontractor, as well as with any other parties thereto before one arbitration board which shall determine all of said disputes.

(Emphasis added.) While NSC does not contend that its claims against NISCO do not arise out of the Berwick construction project, it does argue that these claims are not covered by § 46 for other reasons. First, NSC...