Court Opinion

ID: 5768426
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:27:24.851709+00
Date Added: 2024-06-11T08:41:43.089681
License: Public Domain

Steuer, J. (dissenting).
On this application for the stay of an arbitration the very narrow question presented is whether the applicable procedure is that provided for in the CP'LR or that set out in the Federal Arbitration Act. Under the former, limitations is a preliminary question to be decided by the court (CPLR 7502, subd. [b]; under the latter, it is a matter for the arbitrators [Federal Arbitration Act; U. S. Code, tit. 9, § 3]; Lowry & Co. v. S. S. Le Moyne D’Iberville, 253 F. Supp. 396, 399). Special Term decided that the Federal act applied and hence did not reach the question of whether the claims are timely. Nor is that question here considered.
The matter sought to be arbitrated arises out of several claims for damage to merchandise during voyages at sea. The contract involved is designated a ‘ ‘ Tanker Voyage Charter Party.” On two grounds, namely, that the contract is maritime, and that it involves foreign commerce, jurisdiction over the disputes emanating under it would be in the Federal courts. However, it is indisputable that Congress has given the State courts concurrent jurisdiction where the remedy sought is in pais and does not constitute an inroad on a harmonious system (Romero v. International Term. Co., 358 U. S. 354, 373). This includes the right of a State court to compel arbitration in such matters (Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, revg. 233 N. Y. 373). When the Red Gross case was decided, there was no Federal arbitration procedure and the arbitration therein ordered was according to State law.
After enactment of the Federal Arbitration Act, an action arose in the United -States courts for fraud in the inducement of a contract involving interstate commerce. A motion to stay the action pending arbitration was denied in the District Court on the ground that as Federal jurisdiction depended on diversity, the rule of Erie R. R. Co. v. Tompkins (304 U. S. 64) requiring Federal courts to follow -State law in such cases applied; and according to the law so applicable, the validity of the contract (whether or not induced by fraud) must first be determined by the court. The Circuit Court of Appeals reversed (Robert Lawrence Co. v. Devonshire Fabrics, 271 F. 2d 402), holding that the Federal Arbitration Act created national substantive law which was to be applied in all cases where arbitration could be had under the Act. This holding was followed in Prima Paint Corp. v. Flood & Conklin Mfg. Co. (360 F. 2d 315). However, when the latter case reached the Supreme Court, that court, though affirming, specifically *375refused to adopt the Lawrence rule. The court held (388 U. S. 395) that Congress could and did eriact a law governing arbitration in the Federal courts, which included freeing the courts of any restrictions based on the Erie rule; However, the' broader rule which imposed ón the State courts the necessity of adhering to the Federal act in State court arbitrations was not adopted. This is pointed by the fact that one Justice who urged that the Lawrence rule be confirmed stood alone (Prima Paint v. Flood & Conklin, op. cit., 407).
The consequence is that, procedure in arbitration in a State court is unaffected by the Federal Arbitration Act and remains what it was before that law was enacted; namely, governed by Staté law.
The order entered October 15, 1968, should be reversed bn the law and the matter remanded to ¡Special Term for further proceedings.'
Capozzoli, J. P., Nunez and Bastow, JJ., concur with McNally, J.; Steuer, J., dissents in opinion;
Order entered October 15, 1968, affirmed, With $30 costs and disbursements to respondents.