Peabody Coalsales Co. v. Tampa Elec. Co., 94-3144

Decision Date20 December 1994
Docket NumberNo. 94-3144,94-3144
Citation36 F.3d 46
PartiesPEABODY COALSALES COMPANY, Appellant, v. TAMPA ELECTRIC COMPANY, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

Michael O'Keefe, St. Louis, MO, argued (W. Stanley Walch and Mary M. Bonacorsi, on the brief), for appellant.

Mark Arnold, St. Louis, MO, argued, for appellee.

Before WOLLMAN, BEAM, and HANSEN, Circuit Judges.

BEAM, Circuit Judge.

Peabody Coalsales Company appeals from an order denying its request for an injunction in aid of arbitration. Relying on this court's decision in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286 (8th Cir.1984), the district court ordered the parties to arbitrate their contract dispute but refused to order continued performance under the contract pending arbitration. Because we believe the district court improperly applied Hovey, we reverse.

I. BACKGROUND

Since 1989, Peabody has supplied coal to Tampa Electric Company under a fifteen-year "Coal Supply Agreement" (Agreement) which provides for arbitration of disputes. 1 The present dispute arose when Peabody supplied only part of the coal scheduled for delivery in June 1994. As a result, Tampa Electric requested assurances from Peabody that Peabody would be able to supply coal as agreed. Unsatisfied with Peabody's response, Tampa Electric attempted to cancel the Agreement and refused to accept future coal shipments. Peabody responded by obtaining an ex parte temporary restraining order (TRO) in state court. The TRO ordered Tampa Electric to accept coal shipments. Tampa Electric removed the case to federal court.

In the district court, both parties moved for an order compelling arbitration. Peabody also moved for an injunction requiring the parties to continue performance under the Agreement pending resolution of the dispute in arbitration. After a hearing, the district court compelled arbitration and stayed all court proceedings until the disposition of arbitration. The court also found that the Agreement "contemplates continued performance during the pendency of arbitration" but "does not authorize an injunction to compel continued performance." Peabody Coalsales Co. v. Tampa Electric Co., No. 4:94-CV-1616, mem. op. at 3 (E.D.Mo. Aug. 25, 1994). Based on its reading of Hovey, the court denied Peabody's motion because the Agreement does not specifically authorize an injunction. Peabody appeals this denial of injunctive relief.

II. DISCUSSION

Resolution of this appeal involves an examination of the role of the courts in disputes governed by the Federal Arbitration Act (FAA), 9 U.S.C. Secs. 1-16. We have held that this role is a very limited one. 2 In Hovey, this court held that "where the [FAA] is applicable and no qualifying contractual language has been alleged, the district court errs in granting injunctive relief." 726 F.2d at 1292. We found this approach consistent with the plain meaning of the statute and the " 'unmistakably clear congressional purpose that the arbitration procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts.' " Id. (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, 87 S.Ct. 1801, 1806, 18 L.Ed.2d 1270 (1967)). "[T]he judicial inquiry requisite to determine the propriety of injunctive relief necessarily would inject the court into the merits of issues more appropriately left to the arbitrator." Id. However, Hovey does not require that an injunction be specifically authorized in the contract between the parties. Hovey did not decide whether injunctive relief could be granted if the contract contains "qualifying language."

The contract in this case does contain such language. 3 Section 13.6 of the Agreement between Peabody and Tampa Electric provides, "Unless otherwise agreed in writing by Buyer and Seller, performance of their respective obligations under this Agreement shall be continued in full by the parties during the dispute resolution process...." Appellant's Appendix at 73. Based on this provision, 4 we hold that the district court erred in refusing to order the parties to continue performance pending arbitration.

As in Hovey, our decision is guided by the plain language of the FAA and the "unmistakably clear congressional purpose" to avoid delay in the courts. Hovey, 726 F.2d at 1292. When a court determines that the making of the arbitration agreement is not at issue, the FAA requires the court to "make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. Sec. 4 (emphasis added). See also Volt Info. Sciences, Inc. v. Leland Stanford Jr. Univ., 489 U.S. 468, 474-75, 109 S.Ct. 1248, 1253, 103 L.Ed.2d 488 (1989) ("[Section 4] confers only the right to obtain an order directing that 'arbitration proceed in the manner provided for in [the parties'] agreement.' "). In this case, the bargained-for terms of the Agreement require continued performance as part of the dispute resolution process. Thus, an order compelling arbitration "in accordance with the terms of the agreement" must necessarily include an order requiring continued performance.

This result is consistent with the congressional purpose to avoid court delays. Where, as here, the contract clearly requires continued performance during the arbitration process, the judicial inquiry is limited and arbitration under the contract terms will not be delayed. The court need only read the contract and order arbitration according to its provisions. Such an inquiry does not implicate Hovey 's concern with becoming entangled in the merits of the underlying dispute. 5 Because we do not reach the merits, our decision will not impact the ultimate resolution of the underlying dispute. The arbitration panel, in accordance with its determination on the merits, may modify the relief granted by this court. In addition, the arbitrators are free to adjust the ultimate award, if necessary, to take into account the fact that Tampa Electric continued performance during arbitration.

In light of the above, we disagree with Tampa Electric's assertion that a showing of irreparable harm is necessary to support an order requiring performance pending arbitration. Though some other circuits have required such a showing, 6 they did so under circumstances not implicating this court's heightened concern with avoiding the merits of the underlying dispute. It would be inconsistent with Hovey to delay the arbitration proceedings by requiring an evidentiary hearing in district court on the existence of irreparable harm or the other standard criteria for the grant of a preliminary injunction. 7 Where the language of the contract is clear, the FAA requires that the court honor the agreement of the parties and order them to arbitration.

III. CONCLUSION

For the foregoing reasons, we reverse the district court's denial of Peabody's motion for an order requiring continued performance. We remand with directions to enter an order compelling arbitration in accordance with the terms of the Agreement and specifically ordering the parties to continue to perform under the Agreement pending resolution of their dispute in arbitration. We again emphasize that the arbitrators are authorized to modify the order of the district court in accordance with their resolution of the underlying dispute. 8

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