Pullman, Inc. v. Phoenix Steel Corp.

• Decision Date: 09 February 1973
• Citation: 304 A.2d 334
• Parties: PULLMAN, INCORPORATED, Plaintiff, v. PHOENIX STEEL CORPORATION, Defendant.
• Court: Delaware Superior Court

Page 334

304 A.2d 334

PULLMAN, INCORPORATED, Plaintiff, v. PHOENIX STEEL CORPORATION, Defendant.

Superior Court of Delaware, New Castle County.

Feb. 9, 1973.

Charles S. Crompton, Jr., Potter, Anderson & Corroon, Wilmington, for plaintiff.

Richard J. Abrams, Richards, Layton & Finger, Wilmington, for defendant.

OPINION

WRIGHT, Judge.

Defendant, Phoenix Steel Corporation, a Delaware corporation (Phoenix), has moved for summary judgment in this action for declaratory judgment brought by Pullman, Incorporated, also a Delaware corporation (Pullman). The issue is whether or not a State court must apply the United States Arbitration Act, 9 U.S.C. §§ 1--14 (1970), in cases before it involving contracts which touch or concern interstate or foreign commerce.

Summary judgment may be granted only where, considering the facts in a light most favorable to the non-moving party, there is no material issue of fact and the moving party is entitled to judgment as a matter of law. Matas v. Green, 3 Storey 473, 171 A.2d 916 (Del.Super.1961); Superior Court Rules, Civil, R. 56(c), Del.C.Ann.

The essential facts of the case are as follows: In August, 1967, Pullman, through one of its divisions, Swindell-Dressler Co., entered into a written contract with Phoenix by which Pullman was to 'design, engineer, furnish and erect' an electric furnace melt shop to be used in the production of steel at Phoenix's Claymont, Delaware plant. Incorporated by reference into the contract was a separate Technical Proposal previously prepared by Pullman and approved by Phoenix which set forth detailed plans, designs and specifications for the project. As work on the melt shop neared completion, Phoenix, anxious to place the $18.2 million facility into operation as soon as possible, asked for and received Pullman's permission to start up some of the new equipment. This action by the parties contravened the express terms of the contract, which provided that the melt shop would be turned over to Phoenix after Pullman had finished it. It was during this initial period and afterward that Phoenix claims it discovered many deficiencies in the facility which prevented it from attaining its expected production standards. Pullman and Phoenix attempted to correct the problems that arose in the operation of the complex facility, but Phoenix continued to express dissatisfaction with the work.

As provided for in the contract, the parties entered into negotiations to iron out their differences. These discussions began in about January, 1969 and continued until August, 1971 without success. Finally, on August 5, 1971, Phoenix notified Pullman in writing that it was invoking the arbitration provisions of the contract, demanded that the dispute be submitted to binding arbitration and named its arbitrator. In response to requests by Pullman, defendant three times granted extensions of time to permit continued negotiations. Finally, on November 12, 1971, the date the third and last extension granted by defendant expired, Pullman filed suit in the Court of Chancery to enjoin Phoenix from proceeding with arbitration. That Court granted a stay pending a determination in the Superior Court whether an executory agreement to arbitrate is valid and enforceable under Delaware law.

The same day it filed the above suit in the Court of Chancery, Pullman brought this action for declaratory relief under the provisions of 10 Del.C. §§ 6501--03 and Rule 57, Superior Court Rules, Civil, seeking judgment (1) declaring that Pullman is not liable to defendant with respect to any matter arising out of the design and construction of the melt shop; (2) declaring that defendant may not demand arbitration; and (3) staying arbitration proceedings. Phoenix in its answer counterclaimed contending that the arbitration provisions of the contract are valid and enforceable or, in the alternative, that Pullman is liable in damages for breach of the arbitration agreement.

The arbitration provisions of the contract provide:

(1) Any difference or dispute concerning any matter or thing done or omitted to be done by either party shall be given fair consideration by both parties and an earnest effort shall be made by them to reach an equitable settlement.

(2) If such effort, after a reasonable time not exceeding one (1) month, shall fail, then the difference or dispute shall be submitted to an arbitrator acceptable to both parties, who shall be a citizen of the United States residing and doing business in the United States and reasonably familiar professionally with the general field to which this agreement relates. His decision shall be binding on both parties and no appeal shall be taken therefrom.

(3) If within thirty (30) days after either party requests arbitration the parties are unable to agree on a single arbitrator, or at the option of either party on notice to the other, each party shall within fifteen (15) days thereof appoint one (1) arbitrator, and the two (2) arbitrators so selected shall select a third one, qualified as in the next preceding paragraph. If the two (2) arbitrators chosen by the parties do not within thirty (30) days agree upon the choice of the third arbitrator, he shall be named as (sic) the request of the more diligent party by the American Arbitration Association and shall be qualified as provided in the next preceding paragraph. If either party should fail to appoint its arbitrator within the time limited, the arbitration shall proceed before the one (1) chosen, with the same force, effect, and finality as if there were three (3).

The two remaining paragraphs of the arbitration article relate to the vote required to make an award by the arbitrators and the allocation of the costs of arbitration between the two parties.

It seems clear that the defendant's letter of August 5, 1971 was sufficient notice of its intent to invoke arbitration. Preliminarily, plaintiff asserts that summary judgment cannot be granted because there exists a material issue of fact whether Phoenix waived its right to invoke arbitration by waiting more than 18 months in the face of an express provision that arbitration shall be invoked 'after a reasonable time not exceeding one (1) month'. This case is distinguishable from Ferguson v. Berbusse, 216 A.2d 876 (Del.Super.1966), where it was held that a delay of 9 and one-half months in asserting a right to arbitration after the defendant filed its answer constituted a waiver by defendant of its right to invoke arbitration; here, defendant demanded arbitration prior to commencement of suit by plaintiff. Whether defendant here waived its right to invoke the arbitration provisions of the contract is a question to be decided by the trier of fact. Nathan Miller, Inc. v. Northern Ins. Co. of New York, 3 Terry 523, 39 A.2d 23 (Del.Super.1944); G.M.S. Realty Corp. v. Girard Fire & Marine Ins. Co., 8 Terry 216, 89 A.2d 857 (Del.Super.1952).

Assuming, without deciding, that defendant did not waive its rights to arbitration under the contract, the Court now turns to the question of whether the United States Arbitration Act is applicable in actions before State courts. The movement toward adoption of statutes to reverse the traditional hostility of judges and courts to arbitration agreements arose out of the desire of commercial interests for a relatively speedy and certain means of resolving disputes. Too often, it was felt, the judicial process was too slow and cumbersome to keep pace with the businessman's need for quick resolution of differences and the size and technical complexity of many commercial transactions were sometimes exceedingly burdensome to courts and juries, alike. In answer to this demand, Congress in 1925 enacted the United States Arbitration Act.

Section 2 of the...