United States v. Bregman Construction Corp., 12262.

• Decision Date: 20 June 1958
• Docket Number: No. 12262.,12262.
• Citation: 256 F.2d 851
• Parties: UNITED STATES of America for the use and benefit of FRANK A. TRUCCO AND SONS COMPANY, Plaintiff-Appellee, v. BREGMAN CONSTRUCTION CORP., and New Amsterdam Casualty Company, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

256 F.2d 851 (1958)

UNITED STATES of America for the use and benefit of FRANK A. TRUCCO AND SONS COMPANY, Plaintiff-Appellee, v. BREGMAN CONSTRUCTION CORP., and New Amsterdam Casualty Company, Defendants-Appellants.

No. 12262.

United States Court of Appeals Seventh Circuit.

June 20, 1958.

Cecil E. Magid, Chicago, Ill., Edmund A. Schroer, Hammond, Ind., Harry Okin, Chicago, Ill. (Weissenbach, Hartman, Craig, Okin & Magid, Chicago, Ill., Lawyer, Friedrich, Petrie & Tweedle, Hammond, Ind., of counsel), for appellant.

Walter C. Healy and Daniel M. Healy, Chicago, Ill. (Healy, Newby, Barrett & Healy, Chicago, Ill., and Galvin, Galvin & Leeney, Hammond, Ind., of counsel), for plaintiff-appellee.

Before DUFFY, Chief Judge, and HASTINGS and PARKINSON, Circuit Judges.

HASTINGS, Circuit Judge.

An action was brought in the name of the United States of America, by use-plaintiff, Frank A. Trucco and Sons Company (Trucco), under the Miller Act, 40 U.S.C.A. §§ 270a-270d, against defendants, Bregman Construction Corp. (Bregman), as principal contractor, and its surety, New Amsterdam Casualty Company, for an alleged balance of $17,056.35 due from Bregman for materials furnished and work performed by Trucco as Bregman's sub-contractor in the construction of certain facilities for the United States at Tremont, Indiana. By their answer, defendants sought a stay of the proceedings pending arbitration of the dispute between the parties as required by a written contract dated September 24, 1956, between Bregman, as principal contractor, and Trucco, as subcontractor.

After a hearing on use-plaintiff's motion and an affidavit filed in support, the district court entered an order in which it found that defendants had waived their rights to arbitration under the contract of September 24, 1956, due to the filing by defendant, Bregman, of an action in the State of New York against use-plaintiff's surety, Standard Accident Insurance Company, for damages resulting from an alleged breach of the contract by use-plaintiff. The order of the district court enjoined defendants from proceeding with the arbitration previously commenced by defendant Bregman; declared all acts and proceedings of the American Arbitration Association in such arbitration null and void; and ordered that the allegations in Bregman's answer relating to defendants' right to arbitrate under the contract be stricken. This appeal is from that order.

In entering the order denying arbitration, the district court had before it the complaint and answer together with use-plaintiff's motion and the affidavit of its president, Frank A. Trucco. Neither party offered oral testimony. From these papers the following pertinent facts appear.

About September 20, 1956, defendant Bregman contracted with the United States of America (Department of the Army) to construct certain facilities, and on September 24, 1956 entered into a sub-contract with Trucco to furnish materials and perform work in the amount of $87,000 covered by its prime contract. Both parties commenced and performed work under their contract and sub-contract, respectively.

Bregman furnished a payment bond to the United States of America in the penal sum of $1,087,950 by the terms of which it bound itself for the payment of all labor and materials used in the construction of the project covered by the contract. Trucco provided a contract bond with Standard Accident Insurance Company as surety by which it bound itself for the faithful performance of the sub-contract.

In the contract of September 24, 1956 between Bregman and Trucco provision was made for arbitration as follows:

"(O). Any controversy or claim arising out of, or relating to, this sub-contract or the breach thereof shall be settled by arbitration, in accordance with the Rules of the American Arbitration Association * * *."

Prior to the instant action, Bregman had filed its suit in the Supreme Court of New York County, State of New York, against Trucco's Surety, Standard Accident Insurance Company, to recover damages against Trucco for alleged breach of its sub-contract of September 24, 1956. This case was later transferred to the United States District Court for the Southern District of New York. Trucco was not made a party defendant to this New York action.

Subsequently, the present action was commenced by Trucco in the United States District Court for the Northern District of Indiana. Thereafter, Bregman filed a demand for arbitration with the American Arbitration Association. The American Arbitration Association then advised the attorneys for Trucco that it must proceed with the administration of the arbitration as provided by its rules, and that Trucco's attorneys would either have to choose arbitrators on or before a specified date from a list submitted to them or such arbitrators would be chosen by the Association and the arbitration would proceed as a default matter and the rights of the parties, which are the subject matter of this instant suit, would be determined by the Association. This, then, gave rise to plaintiff's motion and the resulting order of the district court.

The ultimate issue is whether or not the filing of the action for damages in New York by defendant Bregman against use-plaintiff's surety constituted waiver on the part of Bregman of its right to arbitration under the contract of September 24, 1956 between Bregman, as principal contractor, and Trucco, as sub-contractor.

Bregman invokes the Arbitration Act, 9 U.S.C.A. § 3, which provides in part as follows:

"If any suit or proceeding be brought in any of the courts of the United States

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