Document: 388 U.S. 395 87 S.Ct. 1801 18 L.Ed.2d 1270 PRIMA PAINT CORPORATION, Petitioner,v.FLOOD & CONKLIN MFG. CO. No. 343. Argued March 16, 1967. Decided June 12, Robert P. Herzog, New York City, for petitioner. Martin A. Coleman, respondent. Gerald Aksen, the American Arbitration Assn., as amicus curiae. Mr. Justice FORTAS delivered opinion of Court. 1 This case presents question whether federal court or an arbitrator is to resolve a claim 'fraud in inducement,' under contract governed by United States Act 1925,1 where there no evidence that contracting parties intended withhold issue from arbitration. 2 The arises following set facts. On October 7, 1964, respondent, Flood Conklin Manufacturing Company, Jersey corporation, entered into what was styled 'Consulting Agreement,' with petitioner, Prima Paint Corporation, Maryland corporation. agreement followed less than three weeks execution pursuant which purchased F C's paint business. consulting provided six-year period C furnish advice and consultation 'in connection formulae, manufacturing operations, sales servicing Trade Sales accounts.' These services were be performed personally chairman, Jerome K. Jelin, 'except event his death disability.' bound itself duration contractual make 'Trade Sales' products its existing territory current customers. To appended lists customers, whose patronage taken over Paint. In return these lists, covenant not compete, agreed pay certain percentages receipts listed customers all others, such payments exceed $225,000 life agreement. took account possibility might encounter financial difficulties, including bankruptcy, but corresponding reference made possible problems encountered C. stated it 'embodies entire understanding on subject matter.' Finally, broad arbitration clause, read part: 3 'Any controversy arising out relating this Agreement, breach thereof, shall settled City York, accordance rules then obtaining Association * *.' 4 first payment due September 1, 1965. None date. Seventeen days later, did appropriate amount, escrow. It notified attorneys various enumerated respects their client had broken both earlier purchase Paint's principal contention, so far presently relevant, fraudulently represented solvent able perform obligations, fact insolvent file petition Chapter XI Bankruptcy Act, 52 Stat. 905, 11 U.S.C. § 701 et seq., shortly after noted filed 14, one week been signed. response, 25, serve 'notice intention arbitrate.' November before expiration time answer 'notice,' suit District Court Southern seeking rescission basis alleged fraudulent inducement.2 complaint asserted diversity jurisdiction. 5 Contemporaneously filing complaint, petitioned order enjoining proceeding cross-moved stay action pending contended presented—whether fraud inducement agreement—was arbitrators Cross-affidavits merits. behalf Paint, charges reiterated. Affiants attacked sufficiency allegations fraud, denied misrepresentations during negotiations, relied exclusively upon delivery promise availability Jelin. They availed considerations nearly year without claiming 'fraud,' noting position ignorance bankruptcy since participated therein February added revested assets 6 Court, 262 F.Supp. 605, granted motion arbitration, holding charge containing clause court. For proposition Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (C.A.2d Cir. 1959), cert. granted, 362 909, 80 682, 618, dismissed Rule 60, 364 801 (1960). Appeals Second Circuit appeal, Cir., 360 315. held evidenced transaction involving interstate commerce; controlling decision generally—as opposed itself—is courts; rule—one 'national substantive law'—governs even face contrary state rule.3 We agree, albeit somewhat different reasons, we affirm below. 7 key statutory provisions are §§ 2, 3, 1925. Section provides written provision any maritime evidencing commerce valid, irrevocable, enforceable, save grounds exist at law equity revocation contract.'4 requires has brought 'upon referable writing arbitration' once satisfied arbitrable remedy party 'aggrieved failure, neglect, refusal another arbitrate arbitration,' directs honored.5 8 Bernhardt Polygraphic Co., 350 198, 76 273, 100 L.Ed. 199 (1956), invoked here respondent C, apply only two kinds contracts specified namely those admiralty transactions 'commerce.' Our question, then, between contract. agree is. acquired business serving least 175 wholesale clients number States, secured assistance arranging transfer selling operations Maryland.6 inextricably tied continuing wholesaling There could clearer commerce.7 9 Having determined within coverage turn central case: resolved court, matter referred arbitrators. courts appeals have differed approach question. view Circuit, expressed others,8 that—except otherwise intend—arbitration clauses 'separable' they embedded, directed itself, will encompass induced fraud.9 First other hand, 'severability' law, State regards inseparable must decided Lummus Commonwealth Oil Ref. 280 915, 923—924 (C.A.1st Cir.), denied, 911, 81 274, 15 225 (1960).10 10 With respect cases 'commerce,' think Congress explicit answer. That found comel compliance Under 4, jurisdiction existence instructed proceed 'the making failure comply (with agreement) issue.'11 Accordingly, if goes 'making' arbitrate—the may adjudicate it.12 But language does permit consider claims generally. expressly relate situations like present sought proceed. inconceivable rule differ depending invokes hold, therefore, passing application while arbitrate, issues performance arbitrate. concluding, honor plain meaning statute also unmistakably clear congressional purpose procedure, when selected contract, speedy delay obstruction courts. remains constitutionally permissible. point that, whatever nature involved here, solely reason citizenship, Erie R. Tompkins, 304 64, 58 817, 82 1188 (1938), follow matters 'substantive' rather 'procedural,' 'outcome determinative.' Guaranty Trust 326 99, 65 1464, 89 2079 (1945). case, however, fashion govern questions simple cases. See supra, 202, concurring opinion, 208, 275 279. Rather, prescribe how conduct themselves plainly power legislate. can affirmative. And beyond dispute based confined incontestable foundations 'control admiralty.' H.R.Rep.No.96, 68th Cong., 1st Sess., (1924); S.Rep.No.536, (1924).13 12 advanced enter '(a)ny thereof.' easily enough acceleration procured fraud. Indeed, ever inteded 'legal' excluded entirely free Federal enacted matters—here, commerce—over legislative power. requested preliminarily allowing granting stay. below dismissing appeal affirmed. 13 Affirmed. HARLAN: 14 joining Court's I desire note would judgment 4L. Ed.2d 801, 27, 37 BLACK, whom DOUGLAS STEWART join, dissenting. 16 holds 1—14, compels carry 'arbitration agreement' though might, fair trial, hold contract—including agreement—void because inducement. holds, me fantastic, legal contract's voidness persons designated factual controversies valid parties. who validity need lawyers, probability nonlawyers, wholly unqualified decide issues, qualified do so. am means sure thus forcing person forgo opportunity try where, unlike situation he jury trial right denial process law. satisfied, impose procedures Act. fully reasonable reading Act's history shows framers great pains emphasize nonlawyers adjust trespass courts' prerogative exists base I. 17 compete contained providing Agreement York.' contending failed sent 'Notice Intention Arbitrate' Act.1 Invoking jurisdiction, district rescind ground allegedly consisted misrepresentation made, agreement, completely insolvent. misrepresentation. simply never meeting minds moved Prima's lawsuit raised Prima. lower courts, relying Circuit's 402, dismissed, 37, law,' rest go general, particular, arbitrator, today affirms none supported First, supplement separate assets, 'contract commerce,' used describe designed cover. light indicates limited merchants shipment goods,2 express use applicable 'affect normally uses wishes exercise full powers commerce,3 Second, 'explicit answer' contained. merely 'satisfied issue.' language, considered alone, answer,' poses further kind put issue. Since assumed general allegation puts (considered contract),4 necessarily determines approves fashioning separability overrides contrary. provide procedural interfere authorizes valid. accepted principles law—a indeed elevates above provisions. As recognizes, result clearly Congress. summarily disposes problem 1188, recognized serious constitutional 199, insufficiently assertions 'clear dispute' regulate '(i)f on' create cases, reliance 'was supplementary.' II. 19 Let us look briefly passed it. '(a) settle thereafter contract.' (Emphasis added.) being until *.'5 sections not, think, raise doubts about except someone anxious find doubts. mean this: enforced unless finds 'at Fraud, course, most common revoking If defrauded elects it, absolutely nothing arbitrated. Sections assume enforcement exists. protect against having submit arbitrator. makes clear. Senator Walsh Montana, hearings bill 1923, observed, 'The got hear determine undoubtedly, open defese s, equitable legal, existed *.'6 Piatt, Bar drafted more explicit: 'I operate something injunction process, attack fraud.'7 replied: 'If should whole thing. presume (is) possibly up misled mistake *.'8 evident referring called Bernheimer, chambers favor bill, assured Senate subcommittee '(t)he adequately safeguarded' Act.9 Cohen, Association's draftsman members impair deprives voluntarily validly waived agreeing disputes arbitration.10 scope revealed acute awareness problem. several occasions opposition enforce unequal bargaining cited insurance, employment, construction, shipping routinely offered take-it-or-leave-it captive employees.11 He 'are really (sic) things all' 'there man sign it; surrenders tried *.'12 emphatically supporters cover significant thing thinking terms parts contracts, regard why to. him why, context circumstances parties, made. precisely raises: executed representations obtained 'voluntary' insured's employee's superior 20 bill's sponsors' function special values arbitration: (1) expertise day-to-day obligations,13 (2) speed contrasted litigation, mitigate damages allow continue contracts.14 serves neither functions rescinded resolving arbitrators.15 seeks true, arbitrator's wrong resumption summary little advantage submitting Their compensation corresponds volume perform. void them raises compensation. Tumey Ohio, 273 510, 47 437, 71 749. III. 21 history, well wonder surprising departure statement excepts 'such Credit creation rationalization justify mutilation apparently Circuit' supra. Judge Medina undertook avoided inapplicable intrastate years prior applied adi versity require across street enforce. Bernhardt's determinative,' U.S., 203, S.Ct., 276, recognition unconstitutional discrimination enforceable id., 204, posed choice alternatives Medina. rested Congress' power, widely 1925 negated Erie, compelled Bernhardt.16 enact governing commerce, Erie-Bernhardt saved. 22 difficulty choosing neither, quite position, history.17 first, contracts,18 severely limit impact. second alternative, primarily Over again drafters Congress: establishes procedure *. rests authorized establish control inferior So acts power.'19 again: primary enforcible agreements duties courts.'20 One cannot concluding legislate area 'principal basis' Act.21 Also frequent statements source law.'22 Congressman Graham explained House: 23 'It involve new principle method give creates legislation, grants rights, commercial contracts.' Cong.Rec. 1931 (1924). 24 indications courts23 independent federal-question apart jurisdiction.24 absence effects—which legislation law—seems militate creating body 25 Suffice say chose alternative construing avoid emasculation Bernhardt. content stop agreements. Lawrence, based, enforces same 'separable.' not: would, clause. went enforceable: 'body law' 'encompasses interpretation construction validity, revocability enforceability affecting affairs.' 409. 26 Thus, 35 passage rewrote formulation, now 'save enforcing turned task formulation necessary purpose,' F.2d, 409, formulated adopts—not looked notion 'liberal policy promoting arbitration.' 410.25 27 Today, saying so, Lawrence. do: legally existent gives inconsistent means. Even rights convinced intend sweeping take away interpret own citizens territory. 28 First. law.26 Courts breach, ut refuse specifically them. mind: 'a formerly him.'27 'Arbitration (statute) remedy.'28 'creates *.'29 very 29 'A infringement each laws. wherein made.' Committee Commerce, Commercial Law, Law Its Application, A.B.A.J. 153, 154. 30 'Neither true statute, declaring 31 'So declares recognizing encroach province individual States.' Cohen Dayton, Va.L.Rev. 265, 276—277. 32 All inquiry judges 33 Second. avowed place footing contracts.'30 applies equality always thought attacks seek whole, tidbits, given option denying some affirming others. Here Would separable, directly rely solvent? financially services. Bethlehem Steel Corp., 315 289, 298, 62 581, 587, 86 855: 34 'Whether promises constitute (and non-separable) inquiring 'whether assented single bargain whatever, struck out." test, part one, 36 Third. identical litigated act, required nonseparability applies. today, Medina,31 created A effect—which seems leave air—would flout Act.32 Yet today—that supplies remey doctrines agreement—failure rise 'forum shopping' eliminate. greatly reduced limited, be, proper scope: mere IV. treatment my views length. more: wanted said challenged fragments. anything sum total force unenforceable final determinations effective review highest land. do. thinks promote unable version creator practically admitted judicial legislation. foresee subsequent events, 38 reverse case. 1—14. Although letter breaches purchasing agreements, both, refer alleging 'fraudulently accelerate closing date (consulting) herein, 21, 1964 1964. *' Whether obtain resolution Compare Exercycle Corp. Maratta, N.Y.2d 329, 334, 214 N.Y.S.2d 353, 174 N.E.2d 463, 465 (1961), Amerotron Maxwell Shapiro Woolen A.D.2d 899, 162 (1957), aff'd, 722, 148 319 (1958), Fabrex Winard Misc.2d 26, 200 278 our disposition status 'maritime transaction' 'commerce' forth See, infra, 403-404. conclusion amply affidavit submitted president, contemplated orderly defendant plaintiff, consult, advise, assist help plaintiff insure smooth transition Jersey, together customer accounts retention customers.' affidavit's references 'transfer assets' fairly 'expertise know-how compete,' arue d counsel suggested dissent despite indicating, construe 'contracts goods.' Not nor warrant amend persuasive authoritative intent. e.g., House Report proclaims (one bases legislation) reaches actual physical goods commerce.' note, too, dissent's curious narrowing correct, necessity amended exclude employment contracts. 1. event, anomaly urged manifested remarkable facilitation re-establishment operation not. addition see re Kinoshita 287 951 1961). inducement, similar analysis. Metro Industrial Painting Terminal Constr. 382 1961) (dispute performance); El Hoss Engineer. Transport Ind. 289 346 (where, intent sumbit arbitration). careful reserve resolution. categories characteristically reach others discussed recent Note, Courts, Vand.L.Rev. 607, 622 625 (1967). reads therewith issue, directing consistent Moseley Electronic Missile Facilities, 374 167, 171, 172, 83 1815, 1817, 1818, 818 (1963), scheme. 'saving clause' indicates, immunize challenge elevate forms contract—a clause.' t end regime Swift Tyson, Pet. 865 (1842), enactment believe still 'general cases—at least, absent 'oft-challenged' 69, 818, supplementary powers, formed Graham, sponsor House, told colleagues 'only affects subjects similarly indicated '(relates) foreign Non-congressional sponsors agreed. Charles L. chairman Chamber subcommittee, proposed 'follows lines applying fields Hearing S. 4213 4214, Subcommittee Judiciary, 67th 4th (1923). joint hearings, Bernheimer answered 'Yes; entirely,' Sterling, 'What you mind relates Joint Hearings 1005 H.R. 646 Subcommittees Committees Julius Henry sponsor's goals were: '(F)irst get Foreign admiralty, and, third, treaty countries.' Hearings, (emphasis added). 27—28 (statement Alexander Rose). brief urging jurisdictional broader 37—38, indication invitation accepted, testimony much narrower tack. N.Y.Civ.Prac. 7503 (1963) served notice 'unless ten service precluded objecting support came trade associations dealing groceries perishables mercantile groups major trading centers. 50 A.B.A.Rep. 357 (1925). Practically testified 1923 people produced, shipped, bought, sold commodities. 4214 9, 1924 hearings. When Sterling suggested, chief exponent entirely. farmer sell carload potatoes, Wyoming, dealer instance.' o n Con., 7. 27. Acts defines include 'affects' commerce. Employers' Liability 65, amended, 45 51; National Labor Relations 49 450, 152(7). instances chosen restrictive language. Fair Standards 1938, 1062, 6, 206. Prior assure intended, expanded contracted. example carefully covers 'involving nowhere suggestion meant extend 'affecting narrow declaration national interest nationwide comprehensive scheme regulation created, suggests exert n. And, points out, But, produce result, deems immaterial throughout section, already moves lawsuit. finding 'not expressly' applicable, almost ignores proviso section 'define field legislating.' 201, 275. Hearing, 5. Ibid. 2. jury. waive that. advance. Ah, depends your signature paper, yu signature, paper wheter properly. on.' 17. challenging 9—11. 15. 9. 'Not ought peculiarly suited ordinary quantity, quality, delivery, payment, excuses non-performance, like. determination simpler law—the arise daily relations title, warranties, complementary just mentioned.' 281 (1926). 3. (arbitration) particular experience better left skilled background established systems law.' 281. Frankfurter Bernhardt, 279, pre-Erie Shanferoke Coal Supply Delaware Westchester Service 293 449, 55 313, 79 583, differently outcome-determinative, analysis alternatives, generally, Symposium, Nw.U.L.Rev. 466 (1963); 69 Yale L.J. 847 accompanying stated: litigation courts.' H.R.Rep. 96, (1924) colleague, commenting passage, explained: whenever Judicial Code wold Where $3000 suits 267. 156; Ill.L.Rev. 111 originally Association, 51—52 (1924), introduced 646, Sess. 11081—11082 '(t)hat citizenship hereunder notwithstanding amount unascertained Though deleted Senate, omission substantially alter 66 3004 A.B.A.J., 38. Congress, 'questions connection,' 38, interstate-commerce Congress,' 37. testified, clearer: done (in York) machinery. done. form government gentlemen confer theory tell proceed.' Id., recites assertion principally consists mainly certainly true. supplying enforceability. 276. 277; 155, 156. Rose, representing Society America, beneficial effect encouraging 28, 'Nor *, infringe provinces prerogatives States. (T)he remedies changed therefore bludgeon unwilling submission rbitration enforcement.' 39—40. implicit 3's 'court pending' 4's ordered 'any which, Title civil parties.' inconsistency State's embodied copied. 271. 'This equally 407. 23,

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