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Shanferoke Co. v. Westchester Co.

U.S.
Jan 7, 1935
293 U.S. 449 (1935)

Summary

holding that "there is no reason to imply that the power to grant a stay is conditioned upon the existence of power to compel arbitration in accordance with section 4 of the [FAA]" (footnote omitted)

Summary of this case from SANDERS v. KAVE ENTERPRISES, LLC

Opinion

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.

No. 211.

Argued December 7, 1934. Decided January 7, 1935.

1. Denial by the District Court of an application for a stay of proceedings in an action on a contract until an arbitration shall be had in accordance with the terms of the contract, is in effect an order denying an interlocutory injunction, and is appealable, under Jud. Code, § 129, to the Circuit Court of Appeals. Enelow v. New York Life Ins. Co., ante, p. 379. P. 451. 2. As bearing on this question of jurisdiction on appeal, it is immaterial whether or not the terms of the contract sued on would preclude entry in a federal court of a decree for specific performance of the arbitration. P. 452. 3. The power of the District Court under § 3 of the U.S. Arbitration Act of February 12, 1925, to grant a stay of an action until arbitration has been had in accordance with the terms of a written agreement, is not confined to cases in which that court may itself compel arbitration under § 4 of the same Act, but extends to cases in which the arbitration agreement provides for compulsory proceedings exclusively in the state courts. P. 452. 70 F.2d 297, affirmed.

CERTIORARI to review the reversal, on an interlocutory appeal, of an order of the District Court denying a stay of proceedings in an action on a contract between citizens of different States.

Mr. Alfred B. Nathan for petitioner.

Mr. Ernest E. Wheeler, with whom Mr. Ralph Royall was on the brief, for respondent.


This action was brought by the Shanferoke Coal Supply Corporation, a citizen of Delaware, in the federal court for southern New York against the Westchester Service Corporation, a citizen of the latter State. The declaration alleged that the defendant had by a contract in writing agreed to purchase from the plaintiff a large quantity of coal to be taken in instalments throughout a period of years; and that the defendant had, after accepting part of the coal, repudiated the contract. The defendant set up in its answer, as a special defense, that prior to the commencement of the action a dispute had arisen concerning the construction of the contract, the rights and duties of the respective parties thereunder and its performance; that the contract contained an arbitration clause; and that prior to the commencement of the action the defendant had notified the plaintiff of its readiness and willingness to submit the dispute to arbitration and ever since had been ready and willing to do so; but that the plaintiff had refused to proceed with the arbitration. The defendant then moved that the action, and all proceedings therein, be stayed until an arbitration should be had in accordance with the terms of the contract sued on. The motion was heard on affidavits and counter affidavits.

The arbitration clause is as follows:

"In case any dispute should arise between the Buyer and Seller as to the performance of any of the terms of this agreement, such dispute shall be arbitrated and the cost thereof shall be borne equally by both parties. The Buyer and the Seller shall each appoint one arbitrator and the two arbitrators so appointed shall select a third arbitrator and the decision of a majority of the three arbitrators shall be final and conclusive on both parties. In case for any reason any such arbitration shall fail to proceed to a final award, either party may apply to the Supreme Court of the State of New York for an order compelling the specific performance of this arbitration agreement in accordance with the arbitration laws of the State of New York."

The District Court interpreted the clause as making the arbitration enforceable only in state courts of New York; and on that ground denied the stay. On an appeal from the order of denial, the Court of Appeals held that even if the clause should be so interpreted, § 3 of the United States Arbitration Act authorized the stay. It, therefore, reversed the order and directed the District Court to grant the stay, with leave to the court "to vacate it at any time, should it appear that the defendant is in default in proceeding with the arbitration." 70 F.2d 297. This Court granted certiorari.

Act of February 12, 1925, c. 213, § 3, 43 Stat. 883: "If any suit or proceeding he brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration."

First. The order of the District Court denying the stay was not a final judgment appealable under § 128 of the Judicial Code. Being an interlocutory order, it was appealable to the Circuit Court of Appeals under § 129, only if the denial of the stay should be deemed the denial of an injunction. Compare General Electric Co. v. Marvel Co., 287 U.S. 430, 432. That question we must first determine although it was not raised below or by counsel here. See Mansfield, C. L.M. Ry. Co. v. Swan, 111 U.S. 379, 382. For the reasons stated in Enelow v. New York Life Ins. Co., decided this day, ante, p. 379, an order granting or denying a stay based on an equitable defense or cross-bill interposed in an action at law under § 274b, is appealable under § 129. We are of the opinion that the special defense setting up the arbitration agreement is an equitable defense or cross-bill within the meaning of § 274b; and that the motion for a stay is an application for an interlocutory injunction based on the special defense. Compare Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 121. As bearing on this question of jurisdiction on appeal it is immaterial whether or not the terms of the contract sued on would preclude entry in a federal court of a decree for specific performance of the arbitration. Since the appeal here in question was taken within thirty days from the entry of the order denying the stay, the Court of Appeals had jurisdiction under § 129.

Second. The plaintiff contends that the District Court was without power to grant the stay, because the contract provides that arbitration can be compelled only by proceedings in a state court of New York. The provision is that "either party may apply to the Supreme Court of the State of New York for an order compelling specific performance of this arbitration agreement in accordance with the arbitration law of the State of New York." The contract does not in terms prohibit proceedings in the federal court. Whether it should be construed so as to exclude the bringing of a suit in the federal court to compel specific performance of the agreement to arbitrate, we have no occasion to decide. For the District Court was not asked, in the proceedings now under review, to compel specific performance. The motion was to stay the action until arbitration shall have been had; and the direction of the Court of Appeals was limited to granting a stay. Section 3 of the United States Arbitration Act provides broadly that the court may "stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." We think the Court of Appeals was clearly right in concluding that there is no reason to imply that the power to grant a stay is conditioned upon the existence of power to compel arbitration in accordance with § 4 of the Act. Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 274, is not to the contrary. There is, on the other hand, strong reason for construing the clause as permitting the federal court to order a stay even when it cannot compel the arbitration. For otherwise, despite congressional approval of arbitration, it would be impossible to secure a stay of an action in the federal courts when the arbitration agreement provides for compulsory proceedings exclusively in the state courts; since only in exceptional circumstances may a state court enjoin proceedings begun in a federal court. See Central National Bank v. Stevens, 169 U.S. 432. Compare § 265 of the Judicial Code; Kline v. Burke Construction Co., 260 U.S. 226.

In the lower federal courts there has been some difference of opinion as to whether a stay should be granted when the court is not in a position to compel arbitration. Compare Danielson v. Entre Rios Ry. Co., 22 F.2d 326, 328, with The Silverbrook, 18 F.2d 144. See, too The Beechwood, 35 F.2d 41; The Volsinio, 32 F.2d 357, 358; Ex parte De Simone, 36 F.2d 773; The Fredensbro, 18 F.2d 983. Interpretations of the English arbitration statutes are in accord with the view adopted here. See Law v. Garrett, L.R. 8 Ch. Div. 26 (C.A.); Austrian Lloyd S.S. Co. v. Gresham Life Assurance Society, [1903] 1 K.B. 249; Kircher Co. v. Gruban, [1909] 1 Ch. Div. 413; The Cap Blanco, [1913] Pro. Div. 130.

Third. The plaintiff also contends that the defendant was not entitled to a stay because its answer raised no arbitrable issues; and because on the facts developed by the affidavits, the defendant appears to have waived its rights under the arbitration clause by unreasonable delay in demanding arbitration. The reasons why these contentions are without merit are sufficiently stated in the opinion of the Court of Appeals.

Affirmed.


Summaries of

Shanferoke Co. v. Westchester Co.

U.S.
Jan 7, 1935
293 U.S. 449 (1935)

holding that "there is no reason to imply that the power to grant a stay is conditioned upon the existence of power to compel arbitration in accordance with section 4 of the [FAA]" (footnote omitted)

Summary of this case from SANDERS v. KAVE ENTERPRISES, LLC

In Shanferoke, the Supreme Court applied the now defunct Enelow doctrine, which was decided on the same day as Shanferoke, to find jurisdiction.

Summary of this case from Administrative Mgmt. v. Royal Amer. Managers

In Shanferoke Coal Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 452, 55 S.Ct. 313, 314, 79 L.Ed. 583 (1935), decided the same day, the Court held that under the rule just laid down in Enelow the stay of an action at law pending arbitration in accordance with the contract between the parties (the kind of stay issued by the district judge in the present case) was appealable as an injunction.

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In Shanferoke, evidently the defendant had notified plaintiff that it was ready and willing to submit the dispute to arbitration prior to commencement of the action and continued in its willingness to arbitrate, but that plaintiff had refused to proceed with arbitration.

Summary of this case from Tenneco Resins, Inc. v. Davy International, AG

In Shanferoke Coal Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583 (1935), the Supreme Court held that the defense setting up the arbitration agreement is in the nature of an equitable defense, and that the grant or denial of a stay sought under the United States Arbitration Act is therefore appealable, provided the action sought to be stayed is legal in nature.

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In Shanferoke, supra, Justice Brandeis noted that the stay there was, in fact, authorized by § 3 of the Arbitration Act, 293 U.S. at 451, 55 S.Ct. 313 and that "the motion for a stay is an application for an interlocutory injunction based on the special defense."

Summary of this case from Tradax Limited v. Holendrecht

In Shanferoke Coal Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583 (1935), the Supreme Court held that a motion to stay pending arbitration under 9 U.S.C. § 3 is, in effect, an application for an interlocutory injunction, the denial of which is appealable under Section 9 of the Judicial Code [now, as amended, 28 U.S.C. § 1292.] See also Hoover Motor Express Co., Inc. v. Teamsters, Chauffeurs, Helpers and Taxicab Drivers, Local No. 327, 217 F.2d 49, 51 (6th Cir. 1954).

Summary of this case from Dorton v. Collins Aikman Corporation

In Shanferoke Coal Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583 (1935), decided the same day, defendant in a suit on a contract pleaded an exclusive arbitration clause in the contract; the court denied a stay of the contract action pending arbitration.

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In Shanferoke Corp. v. Westchester Corp., 1935, 293 U.S. 449, 452, 453, 55 S.Ct. 313, 315, 79 L.Ed. 583, in which it sustained this court in granting a stay when the arbitration clause provided for specific performance by the New York courts of the agreement to arbitrate, the Supreme Court said: "Whether it [the contract] should be construed so as to exclude the bringing of a suit in the federal court to compel specific performance of the agreement to arbitrate, we have no occasion to decide.

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In Shanferoke, the two early cases to the contrary, The Silverbrook (D.C.La. 1927) 18 F.2d 144, and The Beechwood (D.C.N.Y. 1929) 35 F.2d 41, were disapproved (see note 2, 293 U.S. p. 453, 55 S.Ct. 313) and, in 12 A.L.R.3d 907, were described as "apparently no longer the law in view of later federal decisions".

Summary of this case from Batson Y. F.M. Gr. v. Saurer-Allma GmbH-Allgauer M.

In Shanferoke Coal Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 452-453, 55 S.Ct. 313, 79 L.Ed. 583, the Supreme Court stated that the power of a court to order a stay of proceedings until arbitration is had does not necessarily depend upon its power to order affirmative specific performance of the arbitration clause in the first instance.

Summary of this case from W.R. Grimshaw v. Nazareth Literary Benev. Inst.

In Shanferoke Coal Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S Ct 313 (1934), the Supreme Court had before it facts similar to the case at bar.

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Case details for

Shanferoke Co. v. Westchester Co.

Case Details

Full title:SHANFEROKE COAL SUPPLY CORP. v . WESTCHESTER SERVICE CORP

Court:U.S.

Date published: Jan 7, 1935

Citations

293 U.S. 449 (1935)
55 S. Ct. 313

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