Source: https://caselaw.findlaw.com/us-supreme-court/293/449.html
Timestamp: 2019-04-23 19:37:22+00:00

Document:
SHANFEROKE C. & S. CORP. v. WESTCHESTER SERVICE CORP.
Messrs. Alfred B. Nathan and George C. Levin, both of New York City, for petitioner.
This action was brought by the Shanferoke Coal & Supply Corporation, a citizen of Delaware, in the federal court for Southern New York against the Westchester Service Corporation, a citizen of the latter state. The declaration alleged that the defendant had by a contract in writing agreed to purchase from the plaintiff a large quantity of coal to be taken in installments throughout a period of years, and that the defendant had, after accepting part of the coal, repudiated the contract. The defendant set up in its answer, as a special defense, that prior to the commencement of the action a dispute had arisen concerning the construction of the contract, the rights and duties of the respective parties thereunder, and its performance, that the contract contained an arbitration clause, and that prior to the commencement of the action the defendant had notified the plaintiff of its readiness and willingness to submit the dispute to arbitration and ever since had been ready and willing to do so, but that the plaintiff had refused to proceed with the arbitration. The defendant then moved that the action, and all proceedings therein, be stayted until an arbitration should be had in accordance with the terms of the contract sued on. The motion was heard on affidavits and counter affidavits.
The District Court interpreted the clause as making the arbitration enforceable only in state courts of New York; and on that ground denied the stay. On an appeal from the order of denial, the Court of Appeals held that, even if the clause should be so interpreted, section 3 of the United States Arbitration Act (9 USCA 3) authorized the stay. 1 It therefore reversed the order and directed the District Court to grant the stay, with leave to that court 'to vacate it at any time, should it appear that the defendant is in default in proceeding with the arbitration.' 70 F.(2d) 297, 299. This Court granted certiorari 293 U.S. 541 , 55 S.Ct. 95, 79 L.Ed. --.
First. The order of the District Court denying the stay was not a final judgment appealable under section 128 of the Judicial Code, as amended (28 USCA 225). Being an interlocutory order, it was appealable to the Circuit Court of Appeals under section 129, as amended (28 USCA 227), only if the denial of the stay should be deemed the denial of an injunction. Compare General Electric Co. v. Marvel Co., 287 U.S. 430, 432 , 53 S.Ct. 202. That question we must first determine, although it was not raised below or by counsel here. See Mansfield, etc., Ry. Co. v. Swan, 111 U.S. 379 , [293 U.S. 449, 452] 382, 4 S.Ct. 510. For the reasons stated in Enelow v. New York Life Insurance Co., 293 U.S. 379 , 55 S.Ct. 310, decided this day, an order granting or denying a stay based on an equitable defense or cross-bill interposed in an action at law under section 274b ( 28 USCA 398) is appealable under section 129, as amended (28 USCA 227). We are of the opinion that the special defense setting up the arbitration agreement is an equitable defense or cross-bill within the meaning of section 274b, and that the motion for a stay is an application for an interlocutory injunction based on the special defense. Compare Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 121 , 44 S.Ct. 274. As bearing on this question of jurisdiction on appeal it is immaterial whether or not the terms of the contract sued on would preclude entry in a federal court of a decree for specific performance of the arbitration. Since the appeal here in question was taken within thirty days from the entry of the order denying the stay, the Court of Appeals had jurisdiction under section 129, as amended (28 USCA 227).
Third. The plaintiff also contends that the defendant was not entitled to a stay because its answer raised no arbitrable issues, and because, on the facts developed by the affidavits, the defendant appears to have waived its rights under the arbitration clause by unreasonable delay [293 U.S. 449, 454] in demanding arbitration. The reasons why these contentions are without merit are sufficiently stated in the opinion of the Court of Appeals.
[ Footnote 2 ] In the lower federal courts there has been some difference of opinion as the whether a stay should be granted when the court is not in a position to compel arbitration. Compare Danielsen v. Entre Rios Rys. Co. ( D.C.) 22 F.(2d) 326, 328, with The Silverbrook (D.C.) 18 F.(2d) 144. See, too, The Beechwood (D.C.) 35 F.(2d) 41; The Volsinio (D.C.) 32 F.(2d) 357, 358; Ex parte De Simone (C.C.A.) 36 F.(2d) 773; The Fredensbro (D.C.) 18 F.( 2d) 983. Interpretations of the English arbitration statutes are in accord with the view adopted here. See Law v. Garrett, L.R. 8 Ch.Div. 26 (c.A.); Austrain Lloyd S.S. Co. v. Gresham Life Assurance Society, (1903) 1 K.B. 249; Kirchner & Co. v. Bruban, (1909) 1 Ch.Div. 413; The Cap Blanco, (1913) Pro. Div. 130.

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