Source: https://law.justia.com/cases/federal/appellate-courts/F2/392/368/27727/
Timestamp: 2020-08-06 13:48:33
Document Index: 139175927

Matched Legal Cases: ['§ 278', '§ 1432', '§ 3201', '§ 354', '§ 1292', '§ 2', '§ 1']

Hilti, Inc., Defendant, Appellant, v. John Oldach, Plaintiff, Appellee, 392 F.2d 368 (1st Cir. 1968) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › First Circuit › 1968 › Hilti, Inc., Defendant, Appellant, v. John Oldach, Plaintiff, Appellee
Hilti, Inc., Defendant, Appellant, v. John Oldach, Plaintiff, Appellee, 392 F.2d 368 (1st Cir. 1968)
US Court of Appeals for the First Circuit - 392 F.2d 368 (1st Cir. 1968) Heard February 8, 1968
Decided March 28, 1968
On this record the district court found both that defendant had waived its rights to arbitration because it had answered the complaint on the merits and "entered into litigation", and that defendant had "delayed nearly two years to demand arbitration" and thus had not proceeded with diligence.5 Assuming, as did the court, the continuing validity of the arbitration clause in the September 5, 1958 contract, we do not think that the evidence of inconsistent action or delay is strong enough to justify findings of waiver or default in the light of the vigorous policy favoring arbitration. Galt v. Libbey-Owens-Ford Glass Co., 376 F.2d 711, 714 (7th Cir. 1967); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 410 (2d Cir. 1959), cert. granted, 362 U.S. 909, 80 S. Ct. 682, 4 L. Ed. 2d 618, dismissed under Rule 60, 364 U.S. 801, 81 S. Ct. 27, 5 L.Ed 2d 37 (1960).6
We start with the fact that defendant's answer, in its special defense, served notice on plaintiff of the arbitration defense. Given this, the burden is heavy on one who would prove waiver. Robert Lawrence Co. v. Devonshire Fabrics, Inc., supra; Almacenes Fernandez, S. A. v. Golodetz, 148 F.2d 625 (2d Cir. 1945). Nor did defendant here irrevocably lock litigious horns by filing a counterclaim, as in American Locomotive Co. v. Chemical Research Corp., 171 F.2d 115 (6th Cir. 1948), cert. denied, 336 U.S. 909, 69 S. Ct. 515, 93 L. Ed. 1074 (1949) or Radiator Specialty Co. v. Cannon Mills, Inc., 97 F.2d 318 (4th Cir. 1938).
It had, however, two large size problems. To begin with, it was put on notice that plaintiff was challenging the continued existence of the contract containing the arbitration clause. On January 7, 1966, plaintiff's attorney filed an affidavit averring that the contract of September 5, 1958 was never relied upon by the parties and that it was "abandoned almost immediately". A month later another affidavit stated that the contract was "abandoned * * * at its very inception [and] has been and is a nullity * * *." Four months later the plaintiff swore that the contract was "mutually abandoned at its inception". We now have the recent guidance from the Supreme Court that "* * * a federal court may consider only issues relating to the making and performance of the agreement to arbitrate", Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, 87 S. Ct. 1801, 1806, 18 L. Ed. 2d 1270 (1967). Arguably this might imply that a court ought not to attempt in the first instance to resolve the question whether a contract which once existed has since been abandoned. But we cannot say, pre-Prima, that this kind of attack on the continued existence of an agreement was not reasonably to be considered as posing an issue for the court. See Tepper Realty Co. v. Mosaic Tile Co., 259 F. Supp. 688 (S.D.N.Y. 1966). Thus, discovery addressed to this issue could not be said to be inconsistent with continued assertion of the right to arbitration. In fact, both sets of defendant's interrogatories sought details on the times and circumstances of the alleged abandonment.
The questions of waiver and default aside, appellee argues that the arbitration agreement is inapplicable to Puerto Rican Act No. 75, 10 L.P.R.A. §§ 278-278(d) (Supp.1966), upon which the sixth cause of action is based, for the reason that the Puerto Rico statute, enacted some six years after the effective date of the contract, could not have been contemplated by the parties and hence falls outside the intended scope of the arbitration clause. The short answer is that the portion of the arbitration clause which reads "Any controversy or claim arising out of or relating to the breach thereof shall be settled by arbitration * * *" cannot be construed so narrowly. Whether the alleged failure to renew plaintiff's dealership was for "just cause" necessarily turns on the nature of the relationship between the parties, created by mutual agreement and evidenced by the September 8, 1958 contract. It matters not that the statute sued on was yet to be enacted. The broad language of the arbitration clause forces us to conclude that the parties intended to arbitrate all disputes arising thereunder irrespective of whether they were foreseeable at the time of agreement. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., supra, 388 U.S. at 406, 87 S. Ct. 1801, and cases collected therein.
Finally, appellee argues that because it compels arbitration in Connecticut the arbitration agreement is contrary to the public policy of Puerto Rico, and hence invalid. We see no substance in this argument. First, the cases cited to us in support of it, Volkswagen Interamericana, S. A. v. Rohlsen, 360 F.2d 437 (1st Cir.), cert. denied, 385 U.S. 919, 87 S. Ct. 230, 17 L. Ed. 2d 143 (1966) and La Electronica, Inc. v. Electric Storage Battery Co., 260 F. Supp. 915 (D.P.R. 1966), are clearly inapposite for they involve contractual limitations of jurisdiction to maintain suit. The parties here are not preoccupied with a jurisdictional dispute. The district court in Puerto Rico long ago asserted jurisdiction over the subject matter in this case and is now asked simply to stay its proceedings pending arbitration. See generally 6A Corbin, Contracts § 1432 (1962) and footnote 69. Second, the assertion that arbitration proceedings cannot be held outside Puerto Rico conflicts with section 3 of the Federal Arbitration Act which speaks of arbitration "in accordance with the terms of the agreement". Third, the parties have chosen Connecticut law to control the arbitration process and it is not apparent to us, given Puerto Rico's own stated interest in encouraging the arbitration of disputes, 32 L.P.R.A. §§ 3201-29 (1956), that such a designation offends fundamental Commonwealth policy. Restatement (Second) of Conflict of Laws §§ 354h, 332a (Tent. Draft No. 6, 1960). In so saying we do not suggest the extent, if any, that such policy could countermand the Federal Arbitration Act, or venue provisions agreed to by the parties.
Appellee has filed a motion to dismiss for lack of appellate jurisdiction, contending that the order is not such an interlocutory order granting an injunction as is appealable under 28 U.S.C. § 1292 (a) (1). We are satisfied, however, as a matter of law if not of logic, that where, as here, the causes of action for which stay was sought are traditional common law actions seeking money damages and the purpose of the stay is the prior determination of an equitable defense such as an arbitration agreement, the order denying stay is appealable. Shanferoke Coal & Supply Corp. of Delaware v. Westchester Service Corp., 293 U.S. 449, 55 S. Ct. 313, 79 L. Ed. 583 (1935); Standard Chlorine of Del., Inc. v. Leonard, 384 F.2d 304 (2d Cir. 1967). Cf. Baltimore Contrs., Inc. v. Bodinger, 348 U.S. 176, 75 S. Ct. 249, 99 L. Ed. 233 (1955)
There is no question but that the contract, involving as it does dealer representation of goods manufactured in Connecticut by a New York corporation and to be sold in Puerto Rico, clearly evidences "a transaction involving commerce", 9 U.S.C. § 2; see Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967). Accordingly, the Federal Arbitration Act, 9 U.S.C. §§ 1-14, and not Puerto Rico or Connecticut law, necessarily controls the disposition of appellant's motion. Prima Paint, id. at 404-405, 87 S. Ct. 1801
The cases demonstrate with marked consistency the reluctance of courts to find default despite substantial delay and intervening proceedings. Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert. granted, 362 U.S. 909, 80 S. Ct. 682, 4 L. Ed. 2d 618, dismissed under Rule 60, 364 U.S. 801, 81 S. Ct. 27, 5 L. Ed. 2d 37 (1960) (9 month delay; interim settlement discussions; disputed goods tested;held: no default); Almacenes Fernandez, S.A. v. Golodetz, 148 F.2d 625 (2d Cir. 1945) (6 month delay; 7 third party defendants joined; held: no default); Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978 (2d Cir. 1942) (9 month delay; answer amended two months before trial to assert right to arbitration; "no important intervening steps * * * taken"; held: no default); Lumbermens Mut. Cas. Co. v. Borden Co., 268 F. Supp. 303 (S.D.N.Y. 1967) (motion for stay of proceedings delayed two years; no direct dispute between plaintiff and movant until some 21 months after suit initiated; answer never filed; discovery initiated by plaintiff; held: no default).
To be distinguished are cases where a defendant initially failed to assert his arbitration defense, asserted a counterclaim and only later sought arbitration, American Locomotive Co. v. Chemical Research Corp., supra; Barber & Ross Co. v. Cornell & Co., 242 F. Supp. 825 (D.D.C. 1965), aff'd 123 U.S.App.D.C. 378, 360 F.2d 512 (D.C. Cir. 1966), or where a plaintiff sought to stay his own action pending arbitration, Galion Iron Works & Mfg. Co. v. J. D. Adams Mfg. Co., 128 F.2d 411 (7th Cir. 1942); The Belize, 25 F. Supp. 663 (S.D.N.Y. 1938).