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.
293 U. S. 379. P.
293 U. S.
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.
293 U. S.
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.
293 U. S.
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.
Page 293 U. S. 450
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
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 installments
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.
Page 293 U. S. 451
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. [
Footnote 1] It
therefore reversed the order and directed the District Court to
grant the stay, with leave to that 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, 299. This Court granted
certiorari.
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,
287 U. S. 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,
Page 293 U. S. 452
111 U. S. 382.
For the reasons stated in
Enelow v. New York Life Ins. Co.,
ante, p.
293 U. S. 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, as amended. 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,
264 U. S. 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, as
amended.
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 New York for
an order compelling specific performance of this arbitration
agreement in accordance with the arbitration law of the 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
Page 293 U. S. 453
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. [
Footnote 2]
Marine Transit Co. v.
Dreyfus, 284 U. S. 263,
284 U. S. 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.
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
Page 293 U. S. 454
in demanding arbitration. The reasons why these contentions are
without merit are sufficiently stated in the opinion of the Court
of Appeals.
Affirmed.
[
Footnote 1]
Act of February 12, 1925, c. 213, § 3, 43 Stat. 883:
"If any suit or proceeding be 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."
[
Footnote 2]
In the lower federal courts, there has been some difference of
opinion as the whether a stay should be granted when the court is
not in a position to compel arbitration.
Compare Danielsen v.
Entre Rios Rys. 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.);
Austrain Lloyd S.S. Co. v. Gresham
Life Assurance Society, [1903] 1 K.B. 249;
Kirchner &
Co. v. Bruban, [1909] 1 Ch.Div. 413;
The Cap Blanco,
[1913] Pro.Div. 130.