Court Opinion

ID: 9457151
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:14:00.098106+00
Date Added: 2024-06-11T17:35:14.245932
License: Public Domain

SWYGERT, Chief Judge
(dissenting).
I respectfully dissent. Section 4 of the Federal Arbitration Act, if read alone, would confine the issues in an action seeking to enforce an arbitration agreement to (1) whether the agreement was made and (2) whether there has been a failure to perform it; however, that section must be read with section 2 of the Act which provides that commercial arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for revocation of any contract.” (Emphasis added.)
I would not confine the meaning of the word “revocation” in section 2 to the narrow limits suggested by Judge Sprecher. In the context of the savings clause, I think the word encompasses not only rescission of an arbitration agreement induced by fraud, mistake or duress, but also its termination or “unmaking” on equitable grounds of laches, es-toppel or waiver.
In construing the Federal Arbitration Act, the Supreme Court in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), ruled that, despite the limitation of issues placed on a court by section 4 of the Act, the issue of whether an arbitration agreement has been induced by fraud is for the court to decide, as a preliminary matter, rather than for the arbitrator. If the issue of fraud in the inducement of the agreement must be decided by a court as a threshold issue in an enforcement proceeding under section 4, similar reasons require that laches as a preliminary issue must be decided by the court. Laches, like fraud constitutes a defense to the invocation of an agreement to arbitrate.1 It appears anomalous to me to hold in one instance that the court may preliminarily inquire as to whether fraud induced the agreement and in the other that the arbitrator rather than the court must decide whether laches bars the very proceeding the court has ordered. To compound the anomaly, if the arbitrator determines that it would be inequitable to proceed because of the delay by one party in demanding arbitration and the resultant prejudice to the other party, the court in ordering arbitration would have in effect enforced unenforceable obligations on the parties.2
Furthermore, will all deference to the views of the majority, I am unable to distinguish in principle the instant case from our recent decision in International Union of Operating Engineers, Local *164150, AFL-CIO v. Flair Builders, Inc., 440 F.2d 557 (7th Cir. 1971). There we held that the district court properly entertained the question of laches raised as a defense to a demand to arbitrate pursuant to a collective bargaining contract. We relied for support on the Sixth Circuit’s decision in Amalgamated Clothing Workers of America, A. F. L-C. I. O. v. Ironall Factories Co., 386 F.2d 586 (6th Cir. 1967), another labor arbitration case. The fact that both Flair and IronaU arose under section 301 of the Labor-Management Relations Act and the instant suit is brought under the Arbitration Act is of no significance. The underlying principles defining the respective spheres of jurisdiction between courts and arbitrators are the same. Indeed, many of the cases cited as authority for the result in Ironall were cases which had arisen under the Arbitration Act.
I would reverse.

. Fraud in the inducement does not render a contract void, but rather renders it avoidable and subject to ratification. 1A Corbin, Contracts § 6 at 12-13 and § 146 at 636 (1963). Fraud in the inducement thus does not nullify the making of the contract, but may render the contract unenforceable by a party because of his own conduct. By the same token, laches raised as a defense does not nullify the obligations of a contract, but may render them unenforceable by a party because of his own conduct.

. As the Supreme Court noted in Prima Paint:
[T]he purpose of Congress [in enacting the Act] was to make arbitration agreements as enforceable as other contracts, but not more so. To immunize an arbitration agreement from judicial challenge on the ground of fraud in the inducement would be to elevate it over other forms of contract — a situation inconsistent with the “savings clause” [of section 2 of the Act]. 388 U.S. at 404 n. 12, 87 S.Ct. at 1806.
That reasoning applies with equal force where laches is the issue.