Reply Brief of Petitioner — The State of New Jersey v. The State of Delaware

Me ect 2 i ele

WESTCHESTER SERVICE. CORPORATION,

antes Appellee.

REPLY BRIEF FOR PETITIONER.

ALFRED B. NATHAN,

Counsel for Petitioner.

INDEX.

Seeeeme GO AOrrOe Oe POIRE Foo ccc ee cceeseae

A. In view of appellee’s failure to demand arbitra-

tion, the provisions of the arbitration clause

did not bar plaintiff from bringing suit upon

Se CCR GHGAR SG 4 6b aneA068 6050450006

B. The question of the exclusiveness of the forum

and law specified in the arbitration clause. is

property before this Court... ........cesecees

C. Section 3 of the Federai Arbitration Act can-

not be considered apart from the other pro-

Teen Tn Te cubes bwesee

TABLE OF CASES CITED:

Alstieselskabet etc. v. Rederiaktiebolaget Atlanten, 250

ae ee, ee, MO oe UO. HB. BUS... cece ena

Ex Parte Public Nat. Bank, 278 U. S. 101, 104......

aeers v. mermetine, Za0 WN. XY. B86... 02sec ccsceess

Grant v. Pratt & Lambert, 110 App. Div. 867, 869, aff’d

Eee re

Hamilton v. Home Ins. Co., 1387 U. 8. 370, 385........

Jones Vv. York County, 47 F. (2d) 8387, 839..........

Lappe v. Wilcow, 14 F. (2d) 861, 862..............

Marine Transit Corp. v. Dreyfus, 284 U. S. 263, 274..

Matter of Zimmerman y. Cohen, 236 N. Y. 15, 19......

Matter of Bauer Co., 206 App. Div. 423, 426........

ii

PAGE

Metmugel, The, 49 F. (2d) 368, 370, cert. denied 283

eh MR ROCA GL cndptixes asked ere. 5

Packard Motor Car Co. y. U. S., 39 F. (2d) 991, 997,

cert. denied 51 8. Ct. 27... ccc cece ccc ce 5

Red Cross Line y. Atlantic Fruit Co., 264 U. S. 109,

OP 555090 0i NCAR NA eU ER NOd Oke deka 3

Samuels vy. Samis, 124 Mise. WUE OF sb keeediducciacs 4

AUTHORITIES CITED:

State Arbitration Act........ccccccccscccsuscccccc. 3

U. 8. Arbitration Act, Sec. 3...............0000005.. 5, 6

Supreme Court of the United States

OCTOBER TERM, 1934.

No. 211.

ip.

a

SHANFEROKE CoaL & SUPPLY CORPORATION OF

DELAWARE,

Petitioner,

—against—

WESTCHESTER SERVICE CORPORATION,

Appellee.

»s

—

REPLY BRIEF FOR PETITIONER.

Replying to Appellee’s Point I.

A.

In view of appellee’s failure to demand arbitra-

tion, the provisions of the arbitration clause did not

bar plaintiff from bringing suit upon the contract.

Under its first point, and elsewhere in its brief,

appellee urges that the bringing of this action is in

itself a breach of the contract to arbitrate, and a de-

liberate evasion by petitioner of its promise to submit

to arbitration. This contention is without merit.

There is no proof in the record that appellee demanded

arbitration, or took any affirmative steps towards

arbitration, prior to the commencement of the present

action.

Until appellee took some affirmative steps, indica-

tive of a desire to arbitrate, petitioner was under no

2

obligation to submit to arbitration. It was no more

the duty of petitioner than that of appellee to seek

arbitration. The latter had ample opportunity to de-

mand arbitration, if it had a genuine desire to arbi-

trate. In the absence of affirmative action by appellee

ealling for arbitration, the arbitration clause consti-

tuted no bar to an action by petitioner upon the con-

tract.

In Grant v. Pratt & Lambert, 110 App. Div. 867,

869, affd. 186 N. Y. 611, the court, discussing an,

arbitration clause in the contract said:

““* * * the rule is well settled that such a

clause is no defense to an action to recover

upon a contract in the absence of evidence that

before the commencement of the action the de-

fendant took steps for the selection of arbitra-

tors and to perform this arbitration agreement

on its part. As was said in Smith v. Alker

(102 N. Y. 87), in speaking of a point made by

the appellant that the dispute between the

parties should have been submitted to arbitra-

tion under the clause in the contract, ‘No evi-

dence was given that the defendant took any

steps for their selection. Jt was not more the

duty of the plaintiff than that of the defend-

ant to do so.’ Certainly in the absence of evi-

dence that the defendant insisted on its right

to arbitrate or took some steps to carry out this

agreement when the dispute between the parties

arose, such a covenant is not a defense to an

action to recover the amount due under the

eontract.’’ (Italics ours.)

Provisions for arbitration, it is well settled, may

be waived or abandoned by the agreement or action of

the parties (Matter of Zimmerman v. Cohen, 236 N. Y.

15, 19; Matter of Bauer.Co., 206 App. Div. 423, 426).

3

In the absence of a demand for arbitration, there

is no presumption that either party to the contract

desires to arbitrate. In the case at bar, assuming

for the sake of argument that an arbitrable issue

existed, petitioner was not barred from bringing suit,

in view of appellee’s failure to demand arbitration.

We find nothing to the contrary in the decision

of Red Cross Line v. Atlantic Fruit Co., 264 U. S.

109, 118, cited at page 16 of appellee’s brief. In

that case this Court adverted merely to the rule pre-

vailing in New York prior to the enactment of the

State Arbitration Act, that an agreement to arbitrate

was legal, and damages were recoverable for a breach

thereof, citing Haggart v. Morgan, 5 N. Y. 422. The

Haggart case, however, sustains petitioner’s conten-

tion that it was not barred from maintaining the

present action. Thus, the court said in that case, at

page 427:

‘The motion for a non suit was properly

overruled. First, because the agreement to

arbitrate only entitled the party to damages,

but was no bar to an action.”’ (Italics ours.)

A similar rule prevails in the Federal Courts. In

Aktieselskabet etc. v. Rederiaktiebolaget Atlanten, 250

Fed. 935, 937, affd. 252 U. S. 313, it was said:

“Tt is, however, fair to assume from Hamil-

ton v. Home Insurance Co., 137 U. 8. 370,

11 Sup. Ct. 133, 134 L. Ed. 708, that an agree-

ment like this, which leaves the disposition of

the whole matter to arbitration is not a bar

to an action in court, even if it may support

an action for breach of the agreement. In

such a case, when no arbitration has been

4

actually begun and expenses incurred, only

nominal damages could be recovered. Munson

v. Straits Dover SS Co. (D. C.), 99 Fed. 787.”’

See also:

Lappe v. Wilcox, 14 F. (2d) 861, 862.

In effect, appellee contends that arbitration con-

stitutes a condition precedent to the accrual of any

right of action under the contract. The arbitration

clause here under consideration, however, is not so

framed. In order to bar suit, the clause must pro-

vide that no action shall be brought until there has

been an arbitration, or that arbitration shall be a

condition precedent to the right of action. Since the

arbitration clause in the instant case, contains no such

provisions, and in view of appellee’s failure to de-

mand arbitration, petitioner had an absolute right to

bring suit, and in doing so it was not guilty of any

evasion of its contract obligations (Hamilton v. Home

Ins. Co., 187 U. S. 370, 385; Samuels v. Samis, 124

Mise. 35, 37).

B.

The question of the exclusiveness of the forum and

law specified in the arbitration clause, is properly

before this Court.

At page 17 of its brief, appellee urges that petition-

er’s contention that since the parties selected the New

York courts, no other court can recognize or give

any effect to the arbitration clause, does not seem

to be covered by petitioner’s specification of errors.

Petitioner’s contention, however, as recognized by

appellee, is inherent in petitioner’s first specification

o

of error, that the court below erred in holding See.

3 of the U. 8S. Arbitration Act authorizes a stay pend-

ing arbitration, even though such arbitration must

take place beyond the jurisdiction of the Federal

Court, and under the law of a different forum (Peti-

tion for Writ, p. 16). Under the circumstances, peti-

tioner’s contentions concerning the exclusiveness of

the forum and law specified in the arbitration clause,

are properly before this Court.

C.

Section 3 of the Federal Arbitration Act cannot be

considered apart from the other provisions of the Act.

Section 3 of the Federal Arbitration Act cannot

be considered, or construed, apart from the other pro-

visions of the Act, as appellee urges at pages 19 and

20 of its brief. Section 3 is an integral part of the

Act, and its intent and meaning can be determined

only by considering it in the light of the other pro-

visions of the Act.

It is a well settled principle of statutory construc-

tion that the legislative intent is to be deduced from

a view of the whole and every part of the Statute

taken and compared together (Jones v. York County,

47 F. [2d] 837, 839; Packard Motor Car Co. v. U.S.

39 F. [2d] 991, 997, cert. den. 51 S. Ct. 27; Hx Parte

Public Nat. Bank, 278 U.S. 101, 104; The Metmugel,

49 F. [2d] 368, 370, cert. den. 283 U. S. 866).

Viewing the Federal Arbitration Act as a whole

and comparing the various parts thereof, it is evident

that Section 3 was not intended to have a larger scope

than, Section 4, which is limited in application to

agreements that call for arbitration within the juris-

diction of the Federal Courts.

6

Appellee concedes, at page 18 of its brief, that

Section 4 is limited in application. In both Section

3 and Section 4 reference is made to an agreement

in writing for arbitration, as furnishing a basis for

invoking the court’s aid. We are unable to perceive

any distinction between the type of agreement re-

ferred to in Section 3 and that mentioned in Section

4. Nor is there any ground upon which a distine-

tion can be based.

Since there is no distinction between the arbitra-

tion agreements referred to in these two sections,

and in view of the fact that Section 4 concededly is

limited in application, it follows that Section 3 is

subject to the same limitation, and can be invoked

only in the case of agreements calling for arbitra-

tion within the jurisdiction and under the control

of the Federal Courts. As a necessary corollary it

follows that a stay under Section 3 may not be granted

where the agreement requires arbitration to proceed

in another jurisdiction and under another law.

Manifestly, it would be an anomaly if the court,

lacking the power to direct arbitration, were held to

have power to grant a stay pending arbitration,

which is merely an indirect method of enforcing

arbitration. In Marine Transit Corp. v. Dreyfus,

284 U.S. 263, 274, this Court said:

‘“‘* * * it may be observed that section 3

provides for a stay in a pending suit until arbi-

tration has been had in accordance with the

terms of the agreement, and it. would be an

anomaly if the court could grant such a stay

and could not direct the arbitration to proceed

* * *” (Italics ours.)

In the case of an agreement calling for arbitra-

7

tion in a foreign jurisdiction, application for relief,

whether to compel arbitration or obtain a stay, must

be made to the tribunal designated by the parties.

In Gilbert v. Burnstine, 255 N. Y. 348, where the

parties had agreed to arbitrate at London pursuant

to the Arbitration Law of Great Britain, the Court

said at page 358:

‘‘We do say that there was an implied sub-

mission to the terms of the act itself, and to any

rules or procedural machinery adopted by com-

petent authority in aid of its provisions.’

(Italies ours.)

A stay of proceedings pending arbitration is part

of the procedural machinery established in aid of

arbitration. An agreement to arbitrate in a desig-

nated forum manifestly constitutes a submission ex-

clusively to the arbitration law of that forum and

to the procedural machinery of such forum in

aid of arbitration. Consequently, it is improper for

any tribunal or forum other than that designated,

to apply its procedural machinery at the request of

a party who applies to it for relief in defiance of

the agreement. Only the tribunal designated by the

parties, is competent. to grant relief. Hence, the

Court below erred in granting appellee’s motion for

a stay.

Respectfully submitted,

ALFRED B. NATHAN,

Counsel for Petitioner.

Louis H. Maas,

BENJAMIN LEWIS,

Of Counsel.