SIAM FEATHER, ETC. v. Midwest Feather Co.

• Decision Date: 22 December 1980
• Docket Number: Civ. No. C-1-79-624.
• Citation: 503 F. Supp. 239
• Court: U.S. District Court — Southern District of Ohio
• Parties: SIAM FEATHER & FOREST PRODUCTS COMPANY, INC., Plaintiff, v. MIDWEST FEATHER COMPANY, INC., Defendant.

503 F. Supp. 239

SIAM FEATHER & FOREST PRODUCTS COMPANY, INC., Plaintiff, v. MIDWEST FEATHER COMPANY, INC., Defendant.

Civ. No. C-1-79-624.

United States District Court, S. D. Ohio, W. D.

December 22, 1980.

William R. Hardy, Cincinnati, Ohio, for plaintiff.

Leon L. Wolf, Cincinnati, Ohio, for defendant.

ORDER

CARL B. RUBIN, Chief Judge.

The Siam Forest and Feather Products Company, LTD (Siam) filed an action in this Court seeking damages for breach of contract and a permanent injunction against the defendant, Midwest Feather Company, Inc. (Midwest), enjoining it from proceeding with arbitration to resolve disputes which have arisen between the parties. Siam invoked the Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332. Midwest responded to the plaintiff's complaint by filing a motion for a stay of this action and for an order compelling arbitration. The Court's power to stay proceedings and refer a dispute to arbitration is governed by 9 U.S.C. § 3 which reads as follows:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

This matter is now before the Court upon Midwest's motion for a stay and to compel arbitration. The parties have filed extensive memoranda, affidavits, and supporting documents. This dispute arose over contracts between the parties for the supplying of down by Siam to Midwest. Shipments under the contracts began in August, 1976, and continued through the fall of 1977. The particulars of each sale were negotiated between the parties and all of the contracts were governed by a standard printed form entitled "Terms and Conditions".

One of the background disputes is Midwest's assertion that Siam breached the contract by delivering down that did not meet contract quality specifications. Siam maintains that Midwest's assertion was merely a subterfuge and an attempt by Midwest to escape a contract that was no longer financially advantageous because of a change in the feather and down market conditions. Siam's breach of contract allegations in the complaint were based upon Midwest's failure to accept shipments of down under the contract, and its refusal to pay for certain shipments already received.

Siam has also asserted that the parties achieved settlement and accord of their dispute which Midwest later repudiated. Siam claims that Midwest waived any right to arbitration by entering into a settlement and accord and by participating in this action.

Siam further maintains that Midwest's failure to comply with Paragraph Six of the "Terms and Conditions" precludes any breach of contract claim and any reference to arbitration in accordance with Paragraph Eight. Paragraph Six reads in pertinent part as follows:

On sales of goods from any place outside of the United States, whether to be shipped or afloat, any claim must be made within twenty (20) days from landing of goods on dock.... In the event of any dispute, 10% of the original unopened packages must be available and in default of the production of such percentage, no claim shall be made or allowed.

Prior to addressing any of the claims on the merits, the Court must determine whether or not arbitration is mandated under the contract.

I. ARBITRABILITY

A. Threshold Review

The question of whether a controversy is arbitrable under the contract is a question for the Court to decide upon an examination of the contract. International Union v. Benton Harbor Malleable Industries, 242 F.2d 536 (6th Cir. 1957) cert. denied, 355 U.S. 814, 78 S.Ct. 15, 2 L.Ed.2d 31 (1957); Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8 L.Ed.2d 462 (1962); Local 205, IUE v. General Electric Co., 233 F.2d 85, 101 (1st Cir. 1956), aff'd 353 U.S. 547, 77 S.Ct. 921, 1 L.Ed.2d 1028 (1957); International Brotherhood of Teamsters, Local 249 v. Western Pennsylvania Motor Carriers Ass'n, 574 F.2d 783, 787 (3d Cir. 1978), cert. denied, 439 U.S. 828, 99 S.Ct. 102, 58 L.Ed.2d 122 (1978).

The arbitration clause in the contracts between Siam and Midwest is found in Paragraph Eight of the "Terms and Conditions" and reads as follows:

(8) Any controversy or claim arising out of or relating to this contract or the breach thereof shall be settled by arbitration in New York, New York in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. This agreement is made under, and shall be construed in accordance with, the laws of the State of New York.

In examining any arbitration clause, the Court must bear in mind the strong presumption in favor of arbitrability set forth in the Steelworkers Trilogy. United Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). Arbitrability "should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." United Steelworkers v. Warrior & Gulf Navigation Co., supra, 363 U.S. at 581, 80 S.Ct. at 1352; American Radiator & Standard Sanitary Corp. v. Local 7, International Brotherhood of Operative Potters, AFL-CIO, 358 F.2d 455 (6th Cir. 1966). The "federal policy in favor of arbitration ... is true in the realm of commercial transactions as well as labor relations." Georgia Power Co. v. Cimarron Coal Corp., 526 F.2d 101 (6th Cir. 1975), cert. denied 425 U.S. 952, 96 S.Ct. 1727, 48 L.Ed.2d 195 (1976).

B. Prerequisites to Arbitration

The Court's responsibility is to determine whether the parties have a duty to arbitrate their dispute under the terms of their agreement. Once arbitration is selected as the proper forum, the arbitrator determines all issues of procedural arbitrability, i. e. whether the party demanding arbitration has complied with all precedent conditions set forth in the agreement itself. See John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). The Wiley court determined that where questions of compliance with the procedural prerequisites to arbitration are inexorably tied to the substantive aspects of the dispute, the arbitrator should decide both the "procedural" and "substantive" matters. This has been the policy of the United States Court of Appeals for the Sixth Circuit. Western Automatic Machine Screw Co. v. International Union, UAA and AIW, 335 F.2d 103 (6th Cir. 1964); Local No. 824, United Brotherhood of Carpenters and Joiners v. Brunswick, 342 F.2d 792 (6th Cir. 1965).

Siam claims that compliance with paragraph six of the "Terms and Conditions" of the contracts is a prerequisite to arbitration. This argument raises questions of procedural arbitrability concerning the merits of the dispute and therefore it must be decided by the arbitrator. The most favorable construction of Siam's argument views compliance with paragraph six as a prerequisite to the duty to arbitrate. However, an examination of the "Terms and Conditions" of these contracts does not support such a construction. The "Terms and Conditions" are all independent provisions and the arbitration clause in paragraph eight is not conditional or tied to any other provision in the contract. Nor is there any indication that any of the contract's provisions are exempted from the broad arbitration clause. See Georgia Power Co. v. Cimarron Coal Corp., supra at 106.

II. WAIVER OF ARBITRATION

A party may waive any of its...