# Petition for Writ of Certiorari — Reconstruction Finance Corp. v. Harrisons & Crosfield, Ltd. ex rel. Fred Pusinelli & Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_1802%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1953 - **Citation:** 346 U.S. 854 ## Text INDEX Page a DO es RAS OR OKA ae Re Te 1 TE INR SOE POLO RCL ET OY LY CE ee Pee 2 CI MN oi is 65 oie eh hd eee SS SOO) + Rae 2 SS SOE SARE TARO BPRS SE SOR EE LTS 2 IN oie oe iss cae tone eee aa casi hes ECR 2 Reasons for granting the writ................ 52.000 e. e000 7 oe EEE Roe aL pee iy ie ee tr ey ee sina 21 DOIN 8 iS EREDAR SRE A ERT OS 22 CITATIONS Cases : Airedale Worsted Mills, Inc. v. Bonnie Classics, 198 Mise. , MER a GF Beer rte wry ue rye ey 14 Albrecht Chemical Co. (Anderson Trad. Corp.), Matter of, 208 N. Y. 437, 84 N.EB. 24 625...................... 14 Almacenes Fernandez, S.A. v. Golodetz, 148 F. 2d 625.... 10 Alsop v. Riker, 155 U.8. 448...................00005. 19 American Locomotive Co. v. Gyro Process Co., 171 F. 2d 115, certiorari denied, 336 U.S. 909.................. 11 American Locomotive Co. v. Gyro Process Co., 185 F. 2d BN Es Resa aes aes ck Ree rat 11 Anaconda, The v. Amer. Sugar Co., 322 U.S, 42........ 16,17 Arthur Philip Export Corp. v. Leathertone, 275 App. Bie; 208; BF es BR Oe oo ee es es 14 “Astley & Tyldesley Coal & Salt & Tyldesley Coal Co., Re Arbitration Between, (1899) 80 L.T.116.......... 13 ; Bauer Co., Matter of, 206 App. Div. 423, 201 N.Y.S. : MO GS os PRs eR ae Ok ee eee 11 4 Behrens (Feuerring), Matter of, 296 N.Y. 172, 71 N.E. : We ee a eas Cee ee ait 13 E Benedict v. City of New York, 250 U.S. 321............ 19 ; Cargo Carriers v. Erie &@ St. Lawrence Corp., 105 F. URS TUE os shins oa ee kare on ees ON coed a kiss 1l Cope v. Anderson, 331 U.S. 461.................0.005. 6, 19 Exeter Manufacturing Co., Matter of v. Marrus, 254 App. Div. 406, 6 WTB. BE AOS sooo he a es 13 Feuer Transportation, Matter of , 295 N.Y. 87, 65 N.E. 2d L.A NER RT Une SAG © Uo SLAY GoD EA MER os erie 16 Galion Iron Works & Mfg. Co. v. J. D. Adams Mfg. Co, 208 Fi SG AS CCEA AS 11 Gardner v. Panama R. Co., 342 U.S. 29...........0..... 18 Gitelson & Sons, Matter of , 274 App. Div. 480, 84 N.Y.S. GE BS oe skh sc hoe OE OTE) he BSE PERS 14 (1) = 217308 Cases—Continued p age Godden v. Kimmell, 99 U.S. 201 ..........---- +++ +--+ 19 Guaranty Trust Co. v. York, 326 U.S. 99.........-..--. 6, 19 Hecht Co. v. Bowles, 321 U.S. 321.........-.-....---: 16 Holmberg v. Armbrecht, 327 U.S. 392............ ..-. 6, 18, 19 Kramer, Matter of v. Uchitelle, Inc., 288 N.Y. 467, 43 N.E. eR ey Send oe eae kt mea cee tes 13,14 Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 eo ae Ce Chan ace Bik RA See 16 La Nacional Plantanera v. North American F. ¢ 8.8. Corp., 84 F. 2d 881 ...... 2... 6s ee eee eee eee ee 10 Lipman (Haeuser Shellac Co.), Matter of, 289 N.Y. 76, I oe ca Ch iw actics das be nece gives ss 13 Marine Transit Co. v. Dreyfus, 284 U.S. 263............ 8 Meredith v. Winterhaven, 320 U.S. 228................ 16 Metro Plan, Imc., Matter of v. Miscione, 257 App. Div. G26, 16 N.V.S. BAS ..... 2... eee eee eee 14 Murray Oil Products Co. v. Mitswi & Co., 146 F. 2d 381. . 8 Nagy v. Arcas Brass ¢ Iron Co., 242 N.Y. 97, 150 N.E. RR a ate ee uid 4s heen ke Se se ea 10, 11 Radiator Specialty Co. v. Cannon Mills, 97 F. 2d 318.... 11 Raphael v. Silberberg, 274 App. Div. 625, 86 N.Y.S. 2d 421 SUIS AA eee AR Senet arent Car PPE oe ees 14 Red Cross Line v. Atlantic Fruit Co., 264 U.S.109... .. 8 ’ Robinson, Matter of v. Robinson, 61 N.Y.S. 2d 859, ’ affirmed, 296 N.Y. 778, 71 N.E. 2d 214............... 14 Roselle Fabrics, Inc., Application of, 108 N.Y.S. “d 921, affirmed, 279 App. Div. 1044, 113 N.Y.S. 2d 280...... 14 Russell vy. Todd, 309 U.S. 280..............5-- eee ees 6 Shell v. Strong, 151 F. 2d 909..............-----5---- 17 Son Shipping Co. v. De Fosse & Tanghe, 199 F. 2d eee a Lava Sine se ercw tc Riamy ye 89,80 Mae 11 Stanley v. Schwalby, 147 U.S. 508... ..........-.-+--. 6 Tanenbaum Textile Co., Inc., Matter of v. Schlanger, 287 N.Y. 400, 40 N.E. 2d 225.............-...5.55. 13 Telegraphers v. Ry. Express Agency, 321 U.S. 342...... 8 Wilko v. Swan, No. 39, this Term...................-. 20 , Zimmerman, Matier of v. Cohen, 236 N.Y. 15, 139 N.E. Be ce cs CAR Kes Ra meh bbe Re Malacn bea wads ae 10, 11 Statutes : Act of July 30, 1947, ec. 392, 61 Stat. 669, Section 1...... 2 Federal Arbitration Act, 9 U.S.C. 1, et seg............- 20 ee SS wea hawde ka wadla be 10, 15, 22 OSS SRRER Se Se pect Oe ee eee wee ey 10 I ea a vee hen eks ae et euk 5, 10, 12, 16, 22 RI ook A ON h oe aha nae peas o5,5 12, I Soe eda s coh’ caN eae ekaeme 12, 24 Joint Resolution approved June 30, 1945 (59 Stat. 310) . 3 Im Statutes—Continued Reconstruction Finance Corporation Act of January 22, 1932, 47 Stat. 5, as amended by § 5 of the Act of June 25, 1940, c. 427, 54 Stat. 572, 573-574, 15 U.S.C. GO 1), Welles GBA oo ee ea New York Civil Practice Act: Miscellaneous : 13: CPR. 100) Saupe. p. 100. 2... ee 13 C.F.R. 1946 Supp. 01.1 et seg............-...----- H. Rep. No. 96, 68th Cong., Ist Sess. p.1.............. SR BA eae Sareea eee wena ee ee Inthe Supreme Gourt of the United States OctToBER TERM, 1953 No. 226 RECONSTRUCTION FINANCE CORPORATION, PETITIONER Vv. Harrisons & CrosFIELD, Ltp., By FRED PUSINELLI & COMPANY, INCORPORATED, AGENT PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEC- OND CIRCUIT The Acting Solicitor General, on behalf of the Reconstruction Finance Corporation, prays that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Second Circuit, entered in the above-entitled cause on May 8, 1953. OPINONS BELOW The opinion of the United States District Court for the Southern District of New York (R. 46-53) is reported ot 106 F', Supp. 358. The opinion of the Court of Appeals (R. 61-68) is reported at 204 F. 2d 366, (1) 2 JURISDICTION The judgment of the Court of Appeals was en- tered on May 8, 1953 (R. 68). The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTIONS PRESENTED 1. Whether an action to compel arbitration under Section 4 of the Arbitration Act is barred by the applicable six year statute of limitations where the demand for arbitration was made and the ac- tion to compel arbitration was instituted more than nine years after the contractual right to arbitrate arose. 9. Whether the burden of pleading and proving freedom from laches should not be placed upon an applicant who seeks, in a district court, to compel arbitration of a claim which arose more than nine years before the demand to arbitrate was made or the suit to compel arbitration was instituted. 3. Whether a district court, sitting as a court of equity, should order compulsory arbitration pursuant to Section 4 of the Arbitration Act with- out passing on the defense that the claim involved in the proceeding is time barred. STATUTE INVOLVED 9 U.S.C. 2, 4, 10, and 11 are set forth in the Ap- pendix, infra, pp. 22-25." STATEMENT In December, 1941, the Rubber Reserve Com- pany, a corporate subsidiary of the Reconstruction l'Title 9 of the U.S. Code became positive law pursuant to § 1 of the Act of July 30, 1947, c. 392, 61 Stat. 669. 3 Finance Corporation,’ entered into a series of crude rubber contracts with Pagel, Horton & Co. By the terms of the agreements, Rubber Reserve agreed to purchase various quantities of crude rubber which was to be shipped to the United States from the Netherland East Indies by Jan- uary 31, 1942 (Exh. F, R. 25). The contracts (six in number) evidencing the agreements were identical in form (see Exh. F, R. 25-27) and designated Pagel, Horton & Co. as ‘‘Seller’’ and Rubber Reserve as ‘‘Buyer.’’ Pay- ment for the shipments, however, was to be made to Harrisons & Crosfield, Ltd., designated in the contract as ‘‘Seller’s Eastern Shipper.’’ For pay- ment purposes, Rubber Reserve was to open a line of credit through the Bank of The Manhattan Com- pany, New York, in favor of the Eastern Shipper, Harrisons & Crosfield, Ltd. (R. 25). Payment for the rubber was to be made against confirmed letter of credit upon presentation to an intermediate bank of shipping documents transferring the title to the crude rubber to Rubber Reserve (R. 6, 47-48), and, as a condition to payment, the shipping documents ? Rubber Reserve Company, a corporate subsidiary of R.F.C., was created on June 28, 1940, under authority of § 5d of the Reconstruction Finance Corporation Act of January 22, 1932, 47 Stat. 5, as amended by § 5 of the Act of June 25, 1940, c. 427, 54 Stat. 572, 573-574, 15 U.S.C. 606b(3). The pur- poses and object of the corporation were to perform the acts and transactions in connection with the acquisition, storage, egy , manufacturing, etc. of natural raw or cured rub- r. (6 F.R. 2970; 18 C.F.R. 1941 Supp., p. 1561). By Joint Resolution approved June 30, 1945 (59 Stat. 310), Rubber Reserve Company was dissolved and its functions, rights, and liabilities were transferred to the Reconstruction Finance Corporation (13 C.F.R. 1946 Supp. 01.1 et seq.). q were to ‘‘include ‘On-Board’ bills of lading of ~ ocean-carrying vessel destined for Continental U.S.A. ports, or local or through bill of lading en- dorsed ‘On-Board’ by ocean-carrying vessel des- _tined for Continental U.S.A. ports” (Exh. F, R. 25). The contracts all contained arbitration clauses reading as follows (Exh. F, R. 26): Failing amicable settlement, all claims, dis- putes or controversies arising under or in rela- tion to this contract shall be determined by arbitration under the Temporary Procedure for Arbitration between Eastern Shippers, American Dealers, American Consumers, and the Rubber Reserve Company approved by Rubber Reserve Company, September 12, 1941, and such Procedure shall be considered part hereof as if herein set forth in full. * _/ In January, 1942, 661 packages and cases of crude rubber were allegedly ‘‘destroyed by enemy action or otherwise lost while in transit’’ before de- livery on board an ocean carrier destined for a United States port (R. 7, 12-13, 47). Although Harrisons & Crosfield was thus unable to present the required on-board bills of lading, nevertheless payment in the amount of $18,622.37, the value of the 661 packages and cases, was obtained under the letter of credit arrangement from an intermediate Far Eastern bank (R. 47-48). Subsequently, Har- risons & Crosfield was required to refund this 8 The “Temporary Procedure for Arbitration between East- re ny meng nar Dealers, American Consumers, and the Rubber Company,” approved September 12, 1941, is set forth at R. 19-24. 5 amount (R. 48) and thereafter, through Pusinelli, an agent, laid claim to the same amount on the basis of an alleged breach, by Rubber Reserve, of the war and marine insurance provisions of the contract (R. 48).* On September 14, 1951, after Reconstruction Finance Corporation, as successor to Rubber Re- serve, declined to recognize the claim, Harrisons & Crosfield invoked the arbitration clause of the con- tract to settle its claim (R. 12-13; Exh. F, Condi- tion 10, R. 26). By letters dated October 2 and October 10, 1951, R.F.C. was notified by the Rub- ber Manufacturers Association Incorporated (des- ignated for this purpose in the arbitration proce- dure incorporated in the contract) of the appoint- ment of arbitrators (R. 14-16), and by letter of De- cember 4, 1951, that the arbitration would be held on December 11, 1951 (R. 17-18). On December 6, 1951, R.F.C. petitioned the dis- trict court for an injunction restraining Harrisons & Crosfield from seeking arbitration (R. 5-11). Harrisons & Crosfield moved to dismiss the peti- tion and cross petitioned, on January 3, 1952, for an order under 9 U.S.C. 4 (infra, pp. 22-24) to direct R.F.C. to arbitrate the claim allegedly arising under the insurance provisions of the contracts (R. 30-39). R.F.C. opposed the cross petition on the ground, among others, that the claim was barred, * The relative responsibilities and duties of the parties to the contract with regard to the placing or assumption of war and marine insurance risks were covered by complex provi- sions of the contract, designed to fit varying situations (Exh. F, R. 25). 6 having accrued more than six years prior to the commencement of the proceeding (R. 43). The district court held (R. 46-53) that only two issues were triable in a proceeding under 9 U.S.C. 4: (1) the making of the arbitration agreement, and (2) the failure, neglect or refusal to perform the agreement (R. 52). The court declined-+te-pass on the statute of limitations defense, holding that, | the question was within the competence—of the “aritientots ce 52). Accordingly, R.F.C.’s peti- tion was dismissed and the cross petition of Harri- sons & Crosfield granted (R. 53). The Court of Appeals, Judge Clark dissenting, . affirmed the order of the district court, holding / (1) that the action to compel arbitration was not time barred since, for this purpose, the six-year period ° was to be measured from the date of Har- risons & Crosfield’s demand for arbitration (in 1951) rather than from the date of the accrual of the claim (jn 1942) ; (2) that the effect of the stat- ute of limitations on Harrisons & Crosfield’s claim, although the court assumed the claim to be time barred, was to be remitted to the arbitrators for decision; and (3) that R.F.C. had not discharged its burden of showing circumstances which would 5 It is common ground in this case that the applicable limita- tion period is six years as provided by New York law for contract actions or special proceedings. New York Civil Practice Act, § 48, infra, n. 13. The federal arbitrative statute contains no independent limitations provision. As to the applicability of state statutes of limitations to proceedings in the federal courts, see Cope v. Anderson, 331 US. 461, 463-464; Guaranty Trust Co. v. York, 326 U.S. 99; Holmberg v. Armbrecht, 327 U.S. 392; Russell v. Todd, 309 U.S. 280; Stanley v. Schwalby, 147 U.S. 508. 7 warrant applying the doctrine of laches to Harri- sons & Crosfield’s asserted right to arbitration, al- though the judgment of the district court, which had limited the hearing to the two issues specified above, was affirmed (204 F. 2d 366 ff., R. 61-68). REASONS FOR GRANTING THE WRIT The Second Circuit, presiding over the center of American commercial activity where arbitration clauses are commonplace, has held that arbitration will be enforced by federal courts even though the underlying claim to be resolved has long been time barred. This strange ruling does not fall into the valid pattern of court decisions designed to foster and encourage the proper use of arbitration proce- dures. On the contrary, this conclusion, reached through what appears to be legalistic over-refine- ment, will necessarily encourage the resuscitation and litigation of stale claims and make necessary expensive and prolonged hearings which ought to be avoided. The decision merits, therefore, the attention and consideration of this Court. 1. The core of the holding below is the separa- tion into two parts of the R.F.C.’s defénse that the applicable six-year statute of limitations had long run on Harrisons & Crosfield’s claim that a breach of the insurance provision of the contract had taken place. The court first held that the statute had not run as to the proceeding, under Section 4 of the Arbitration Act, to compel arbitration since | the suit had been instituted within six years of the 1951 demand for arbitration. This holding was ~ announced without regard to the fact, assumed by Fe, 8 the court below, that the six-year limitation period had clearly run on the sole contractual dispute in- volved. The latter question was then said to be wholly within the competence of the arbitrators, to be determined by them in the course of the ar- bitration proceedings. 204 F. 2d at 369, R. 65. We submit that this disposition of the problem entirely misconceives the nature of an agreement to arbi- trate disputes as well as the power and function of a district caurt sitting in a Section 4 proceeding. As stated in Murray Oil Products Co. v. Mitsui £ Co,, 146 F. 2d 381, 383 (C.A. 2), ‘‘[a]rbitration is merely a form of trial, to be adopted in the action itself, in place of the trial at common law.’’ By a contractual agreement to arbitrate, the parties elect, in lieu of their right to a judicial resolution of controversies, to submit their disputes to deci- sion by third persons of their own choosing. * Since arbitration is an alternative remedy, the same con- siderations which have justified the imposition of time limitations on common law and statutory ac- tions, should apply with equal force. Whether a claim be asserted in a court of law or submitted to arbitrators, it is ‘‘unjust not to put the adversary on notice to defend within the period of limitation and * * * the right to be free of stale claims in time comes to prevail over the right to prosecute them.’”’ Telegraphers v. Ry. Express Agency, 321 U.S. 342, 349. The basic error of the court below was the at- ‘. ®Cf. Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109; Marine Transit Co. v. Dreyfus, 284 U.S. 263, 277-279. eee sama ames 9 tempt to view the arbitration procedure, comprised of the demand for arbitration and the right to com- pel arbitration if the demand is not honored, as a substantive and separate Tight, not connected with or dependent upon the claim sought to be as- serted. As with all remedies, the validity of th assertion of the right to arbitrate must be measured, for limitations purposes, from the date when the right to invoke the remedy accrued. Here, the right to demand and compel arbitration became vr rfect when the alleged breach by Rubber Reserve ~~ of the insurance obligations of the contract took j Respondent should, therefore, be time barred from enforcing the arbitration remedy which the parties had selected, in the same manner as it would have been time barred from attempting to assert a right to judicial resolution of a dispute. The contrary view, adopted by the court below, permits a claim, no matter how stale it may be, to be asserted by means of arbitration long after court action on the same claim would be barred. To hold this is to permit those who, for one reason * In answer to the suggestion that the court’s holding could well result. in compelling arbitration of disputes after the lapse of 30 or 50 years, the court suggested, in addition to the possibility of laches, that the parties to a contract em- bodying an arbitration clause could “easily put in it an ‘express time limitation.’ ” 204 F. 2d at 370, R. 66-67. But we do not conceive how a time limitation placed by the parties upon an agreement to arbitrate could or should be more efficacious for this purpose than a statutory time limitation plainly ap- plicable to arbitration since, if the court’s interpretation is correct, such a limitation would presumably not commence to run until there had been a request and refusal to arbitrate, or, if that were not the case, the issue of limitations would still be left for the lay arbitrators. v 10 or another, failed to assert their rights in a reason- able time, to wait with safety until long after mem- ories have faded, evidence is lost and witnesses have died or disappeared. * Nothing prevents the district court from taking account of these very pertinent considerations. While the Federal Arbitration Act ascribes an ir- revocable character to arbitration agreements (9 U.S.C. 2)° and provides for their enforcement in the federal courts (9 U.S.C. 4), the right to arbi- trate is nonetheless not an absolute one, to be en- forced by the mechanical issuance of a court order. ‘suit or proceeding * * * brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration’’ may be stayed by the court until the ‘‘arbitration has been had * * *, providing the applicant for the stay is not in de- fault in proceeding with such arbitration”? (em- phasis supplied). Under this section, applica- tions for a stay of court proceedings have been denied because of the applicant’s delay in invoking the arbitration clause. Almacenes Fernandez, S.A. v. Golodetz, 148 F. 2d 625 (C.A. 2); La Nacional [: Section 3 of the Act, for example, provides that a Plantanera v. North American F. & S.S. Corp., 84 8See Nagy v. Arcas Brass & Iron Co., 242 N.Y. 97, 150 N.E. 614: “But the Arbitration Law contemplates prompt action, and too long a delay in seeking appropriate relief may easily construed as an indication that this claim is waived.” bs agers of Zimmerman v. Cohen, 236 N.Y. 15, 139 9«* * * save upon such grounds as exist at law or in equity for the revocation of any contract.” Ibid. | aceaeeana 11 F. 2d 881 (C.A. 5); American Locomotive Co. v. Gyro Process Co., 171 F. 2d 115 (C.A. 6), certiorari denied, 336 U.S..909; Radiator Specialty Co. v. Cannon Mills, 97 F. 2d 318 (C.A. 4); Cargo Car- riers v. Erie & St. Lawrence Corp., 105 F. Supp. 638 (W.D. N.Y.) ; cf. under the New York Arbi- tration Law, Matter of Bauer Co., 206 App. Div. 423, 201 N.Y.S. 438; Nagy v. Arcas Brass & Iron Co., 242 N.Y. 97, 150 N.E. 614; Matter of Zimmer- man v. Cohen, 236 N.Y .15, 139 N.E. 764. The Second Circuit has stated that a demand for arbitration must be made ‘within a reasonable time,’’ Son Shipping Co. v. De Fosse and Tanghe, 199 F’, 2d 687, 689; and, in a proceeding under Sec- tion 4 of the Act, the Sixth Circuit has held that a contractual right of arbitration was waived by the _- party seeking enforcement of the agreement to arbitrate where it had actively participated in a law suit and delayed asserting its right to arbitra- tion for over seven years. American Locomotive Co. v. Gyro Process Co., 185 F. 2a 316, 318. See also Galion Iron Works & Mfg. Co. v. J. D. Adams Mfg. Co., 128 F. 2d 411, 414 (C.A.7 }s The plain import of these and like holdings is’ that a district court possesses and must exercise discretion in determining whether an order com- peling arbitration is appropriate. However, in the instant case, both the district court and the court of appeals have declined to pass on the question of the effect of the statute of limitations on respond- ent’s claim and have held that the issue must be de- termined by the arbitrators. The holding of the 12 prc of appeals on this point was predicated upon the assumption that the claim was barred. If the claim is barred, however, and the arbitrators are bound to give effect to the statute of limitations, the court performs a useless act by remitting the question to the arbitrators and, in so doing, puts the parties to unnecessary delay and expense, both of which are contrary to the purpose of arbitration and inconsistent with equitable principles which should govern a proceeding under Section 4. If the arbitrators are bound to give effect to the stat- ute of limitations and fail to do so, their award may be subject to review under Section 10 of the Act (App.,-iyfra, p. 24). This would merely achieve yf treatment. It would be far better that the district court pass on the statute of limitations issue in the first instance. If, on the other hand, the arbitrators are not bound to give the same effect to the statute of limitations as would a court, or if their determina- tion of the limitations issue is ‘‘final and bind- ing’”’ (Exh. E, R. 22) with no appeal on the correct- ness of their decision (see Sections 10 and 11 of the Arbitration Act, infra, pp. 24-25), legal matters be remitted to the unreviewable determination of lay arbitrators. It is not lightly to be assumed that the parties contemplated such treatment of a purely legal defense as basic as that of limitations and generally so little dependent on particular facts 13 or on unique commercial or mercantile knowl- edge. *° Though we believe these principles to be plain, _there is no judicial decision directly in point on _the question.of remitting the statute of limitations issue to arbitrators. The New York Court of Ap- peals held, under the New York Arbitration Law, that the issue of the cancellation of a contract con- taining an arbitration clause is for the arbitra- tors. Matter of Lipman (Haeuser Shellac Co.), 289 N.Y. 76, 78, 43 N.E. 2d 817. But the Court of Appeais decided, on the same day, that, where per- formance of contracts had been frustrated by or- ders of the Federal Price Administrator, a stay of arbitration proceedings was properly granted. Matter of Kramer v. Uchitelle, Inc., 288 N.Y. 467, 43 N.E. 2d 493; but see Matter of Behrens (Feuer- ring ), 296 N.Y. 172, 71 N.E. 2d 454, where it was held that whether a party was released from a con- tract when the war precluded performance was a matter within the competence of the arbitrators. With respect to the statute of frauds as a defense to a proceeding to compel arbitration, the New York courts are in apparent disagreement. ™ © Here, for example, the arbitration panel was to consist of members appointed by the Rubber Manufacturers Asso- ciation, drawn bin the various rubber companies. (Exhs. A, B, C, D, E, R. 12-24). Cf. Re Arbitration Between Astley & Tyldesley Coal & Salt & Tyldesley Coal Co. (1899) 80 L. T. 116; cf. dissenting opinion in Matter of Exeter Manufacturing Co. v. Marrus, 254 App. Div. 496, 499, 501, 5 N.Y.S. 2d 438. 1 See e.g., Matter of Exeter Manufacturing Co. v. Marrus, 254 App. Div. 496, 5 N.Y.S. 2d 438; Matter of Tanenbaum, Textile Co., Inc. v. Schlanger, 287 N.Y. 400, 40 N.E. 2d 225; 14 It has been said that ‘‘proceedings to enforce arbitration presuppose the existence of a valid and enforceable contract at the time when the remedy is sought.’’ Raphael v. Silberberg, 274 App. Div. 625, 86 N.Y.S. 2d 421; Matter of Kramer v. Uchitelle, Inc., supra." And this, we believe, con- stitutes a reasonable approach in determining whether an order to compel arbitration should issue. For the court to determine initially whether the claim is barred by the statute of limitations will in no way determine the merits of a claim or dispute since the limitation pertains only to the remedy. The merits of a claim, if not barred by time, will remain for the arbitrators, more than likely all that the parties intended in the first place. If the claim is barred, the fault lies with those who have inexcusably delayed. * Matter of Ailbrecht Chemical Co. (Anderson Trading Corp.), 298 N.Y. 437, 440, 84 N.E. 2d 625; Matter of Gitelson & Sons, 274 App. Div. 480, 482, 84 N.Y.S. 2d 605, 607; Arthur Philip Export Corp. v. Leathertone, 275 App. Div. 102, 104, 87 N.YS. 2d 665, 667; Airedale Worsted Mills, Inc. v. Bonnie Classics, 198 Misc. 259, 260, 98 N.Y.S. 353. 12 And see Matter of Metro Plan, Inc. v. Miscione, 257 App. Div. 652, 15 N.Y.S. 2d 35, where it was held that whether a contract containing an arbitration clause was usurious and hence unenforceable, was for the court. Cf. Application of Roselle Fabrics, Inc., 108 N.Y.S. 2d 921, affirmed, 279 App. Div. 1044, 113 N.Y.S. 2d 280; Matter of Robinson v. Robinson, 61 N.Y.S. 2d 859, affirmed, 296 N.Y. 778, 71 N.E. 2d 214. 18 Our position is sustained by the clear text of the applicable New York limitations statutes. Section 48 of the N. Y. Civil Practice Act provides that an action upon a contract obligation “musi be commenced within six years after the cause of action has accrued.” By Section 10 of the Civil Practice Act, the term “action,” as employed in Section 48, is to be construed as in- cluding a “special proceeding”; and Section 1459 of the Civil Practice Act provides that the arbitration of a controversy “shall be deemed a special proceeding.” Thus, New York im- — 15 2. Harrisons & Crosfield’s asserted right to ar- + - ¢ bitrate should have been barred not only by the statute of limitations, as we have shown above, but also by the doctrine of laches. (a). Section 2 of the Federal Arbitration Act (9 U.S.C. 2, infra, p. 22) provides that a written’ provision to settle by arbitration a controversy aris- ing out of a contract ‘“‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist t law ori ity for the revocation of any con- tract.’” Where a party to an arbitration agree- ment is ‘‘aggrieved by the alleged failure, neglect, or refusal of another to arbitrate’ in accordance with their agreement, he may petition any federal court which, ‘‘save for such agreement,’’ would poses a six-year limitation period (under Section’48) on arbi- tration. And that this period must be computed from the date when the right to invoke the remedy accrued, is underscored by Section 11 of the Civil Practice Act, which provides: The periods of limitation prescribed by this article, except as otherwise specially provided therein, must be com om the time of the accruing.of the right to relief by action, special proceeding, defense or otherwise, as the case requires, to the time when the claim to that relief is actually interposed by the party as a plaintiff or a defendant in the particular action or special proceeding. [Emphasis supplied. ] Further, Section 15 of the New York Civil Practice Act provides: Where a right exists, but a demand is necessary to entitle & person to maintain an action, the time within which the action must be commenced must be ed ine when thy to make the demand complete * * * Even if it be assumed that a demand for arbitration was neces- sary to start the running of the limitation period, the New York statute equates the right to demand with the demand, thus preventing a claimant from tolling the limitation period by a refusal to act. 16 otherwise have jurisdiction of the subject matter, for an order directing that the arbitration proceed in the manner provided for in the agreement. 9 U.S.C. 4, infra, pp. 22-24. An agreement to arbitrate is thus ‘‘placed upon the same footing as other contracts’’ “* and the fed- eral courts are made available for their enforce- ment. The remedy provided by Section 4 is the equitable remedy of specific performance of the contract ‘to arbitrate and one who seeks specific performance of a contract appeals to the equity jurisdiction of the federal courts and ‘‘to the sound diseretion which guides the determination of courts of equity.’’ Meredith v. Winter Haven, 320 U.S. 228, 235; The Anaconda v. Amer. Sugar Co., 322 U.S. 42, 44; Hecht Co. v. Bowles, 321 U.S. 321, 329; Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F. 2d 978 (C.A. 2) ; ef. Matter of Feuer Trans- portation, 295 N. Y. 87, 65 N.E. 2d 178. Disregarding the traditional concepts which govern the grant or denial of equitable relief, the district court held that, in a proceeding under Sec- tion 4, only two issues were open to the court (R. 52): (1) the making of the agreement, and (2) the failure, neglect or refusal to perform the agree- , ment. The court below correctly rejected this limitation of the district court’s function, stating that ‘‘as a court, when asked to enter an order, un- erd the federal Arbitration Act, requiring a party to arbitrate as he promised, sits ‘in equity,’ passing .on a prayer for specific performance, it must take 14H. Rep. No. 96, 68th Cong., Ist Sess., p. 1. 17 into account equity considerations, and notably laches.’’ 204 F. 2d at 369, R. 65. Cf. The Anaconda v. Amer. Sugar Co., 322 U.S, 42, 44. However, the court below, recognizing that laches might serve to bar respondent’s right to arbitration, went on to hold that R.F.C. had not discharged its burden of showing laches. 204 F. 2d at 370, R. 66. Coupled with the affirmance of the district court judgment, this holding, we submit, was clear error __since it presupposes, contrary to the fact, that the