Opinion ID: 339102
Heading Depth: 2
Heading Rank: 3

Heading: Sufficiency of Contract Terms

Text: 58 UNC in its separate brief contends that the terms of the contract do not bind the parties to any arbitration award, and that the district court should not have ordered arbitration which will not be binding, but advisory only. UNC's argument centers on the provisions of 9 U.S.C. § 9 which allow a court 16 to confirm an arbitration award if the parties in their agreement have agreed that a judgment of the court shall be entered upon the award . . . . It is argued that the arbitration clause in the contract, which provides that the arbitration proceedings are to be conducted in accordance with the rules of the American Arbitration Association, 17 does not contain a provision for entry of a judgment on the award, thereby making any award non-binding on the parties. 59 UNC bases this argument on Varley v. Tarrytown Associates, Inc., 477 F.2d 208 (2 Cir. 1973), which held insufficient an arbitration clause (very similar to that involved here) which provided: Any controversy arising under this agreement or breach thereof shall be settled by arbitration pursuant to the rules of the American Arbitration Association. Id., at 209. The court found no explicit agreement to make an award binding. Id., at 210. While the rules of the AAA had been incorporated into the agreement, there was nothing in those rules indicating that the parties thereby consented to entry of judgment on the award. 18 Id. 60 UNC further contends that without an agreement providing for entry of judgment on an award, the federal court is without jurisdiction to enter the judgment under § 9 of the Federal Act. Hellman v. Program Printing, Inc., 400 F.Supp. 915, 917 (S.D.N.Y.1975), citing I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424, 426 (2 Cir. 1974). UNC argues, therefore, that under Varley the district court could not properly require the parties to submit to arbitration under the Federal Act. 61 However, as Edison notes in its brief, UNC's argument ignores significant developments in the law and changes in the Rules of the AAA since Varley. The agreement of the parties to have any arbitration governed by the rules of the AAA incorporated those rules into the agreement, as the Varley court recognized. Varley, supra at 210, citing Reed & Martin, Inc. v. Westinghouse Elec. Corp., supra. At the time of execution of the contract in this case, Rule 1 of the AAA provided: 62 The parties shall be deemed to have made these Rules a part of their arbitration agreement whenever they have provided for arbitration by the American Arbitration Association or under its Rules. These Rules and any amendment thereof shall apply in the form obtaining at the time the arbitration is initiated. (Emphasis added.) In 1973 Rule 46(c) of the AAA was added: 63 Parties to these Rules shall be deemed to have consented that judgment upon the arbitration award may be entered in any Federal or State Court having jurisdiction thereof. 19 64 This amendment, although not in effect at the time Varley was decided, was in effect at the time Edison initiated arbitration and thus is binding on the parties according to the terms of the contract. 65 This conclusion is supported by I/S Stavborg v. National Metal Converters, Inc., supra, which was decided after Varley. The court in Stavborg explained that Varley did not require an explicit agreement to be bound by arbitration, but allowed the parties to incorporate rules of arbitration into their agreement, thereby establishing the requisite consent to entry of judgment, if the rules so provided. Id., at 426. The problem in Varley was that the AAA Rules at the time of the decision made no reference to entry of judgment. Id. However, in this case the arbitration action was commenced after the Rules had been amended by the addition of Rule 46(c). The parties to the agreement are, therefore, deemed to have consented to entry of judgment on any arbitration award, as required by 9 U.S.C. § 9. 66 UNC's further contention that a substantive change in the AAA Rules cannot be applied retroactively to render enforceable an arbitration award when the parties did not contract for binding arbitration is similarly without merit. The parties specifically agreed that the AAA Rules should govern any arbitration proceedings, and Rule 1 expressly provides that the Rules and any amendment thereof shall apply in the form obtaining at the time the arbitration is initiated. UNC clearly contracted to be bound by any amendments to the AAA Rules.