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Hussey Metal Division of Copper Range Co. v. Lectromelt Furnace Division

decided as amended march 5 1973.: December 14, 1972.


Seitz, Chief Judge, and Forman and Hunter, Circuit Judges.

Author: Hunter


HUNTER, Circuit Judge.

Appellant Hussey Metals Division of Copper Range Company appeals under 28 U.S.C. § 1292(a)(1) from an order of the District Court staying proceedings in a breach of contract suit brought by appellant against appellee Lectromelt Furnace Division McGraw-Edison Company.

This is a diversity action, and we are thus bound by Pennsylvania law according to Erie Railroad Company v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). The District Court's order is appealable under 28 U.S.C. § 1292(a)(1). Merritt-Chapman and Scott Corp. v. Pennsylvania Turnpike Commission, 387 F.2d 768, 770 (3 Cir., 1967). Under a series of documents, appellee sold, designed, and installed a furnace for appellant. The parties dispute whether these documents constitute one contract or several. There was a document, signed April 20, 1966 and revised May 25, 1966, which provided for the furnishing of a furnace by appellee. There was a document dated May 25, 1966 which provided for the design of the furnace, and a document signed September 7, 1966 which provided for construction and installation of this facility. The first document contained an arbitration clause*fn1 while the other two did not. Appellee installed the furnace and appellant was not satisfied with its performance. Appellant refused to make the final payment due under the contract and eventually brought this suit. Appellee counterclaimed for the final payment and demanded that the suit be stayed pending arbitration. The District Court ordered the parties to arbitration. In doing so, the Court did not decide whether the arbitration clause was applicable to this dispute. Instead it permitted the arbitrator to decide whether the parties had agreed to arbitrate appellant's claims.

Appellant presents several arguments for reversal:

(1) The District Court should have determined whether the arbitration clause was applicable to this case;

(2) Under settled Pennsylvania law, the arbitration clause is inapplicable by its own terms;

(3) The third document, for installation of the furnace, was the sole agreement between the parties. Since it contained no arbitration clause, the District Court was incorrect in sending the contract to the arbitrator. But even if the arbitration clause did belong in the installation contract, it was improper for the District Court not to decide whether it applied to this dispute;

(4) Appellee failed to make a timely request for arbitration;

(5) This suit revoked the arbitration clause.

Appellee's basic argument is that this dispute arose under the document for sale of the furnace. This document contains the arbitration clause, and that clause is applicable to this dispute.

Initially, it was incorrect for the District Court not to determine whether this dispute was covered by the terms of the arbitration agreement. It is settled under both Federal and Pennsylvania law that the court must decide whether a party is bound to arbitrate and what issues he must arbitrate. Arbitration is a matter of contract, and a party cannot be forced to arbitrate something which he did not agree to. John Wiley & Sons v. Livingston, 376 U.S. 543, 546, 547, 84 S. Ct. 909, 11 L. Ed. 2d 898 (1964); Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 82 S. Ct. 1318, 8 L. Ed. 2d 462 (1962); Strauss v. Silvercup Bakers, Inc., 353 F.2d 555 (2d Cir. 1965); Howard v. International Brotherhood of Electrical Workers, Local Union No. 570, 423 F.2d 164 (9th Cir. 1970); Women's Society for the Prevention of Cruelty to Animals of Pennsylvania v. Savage, 440 Pa. 34, 269 A.2d 888 (1970); Schoellhammer's Hatboro Manor, Inc. v. Local Joint Executive Board, 426 Pa. 53, 231 A.2d 160 (1967); United Steelworkers of America v. Westinghouse Electric Corp., 413 Pa. 358, 196 A.2d 857 (1964).

In view of the favorable policy towards arbitration, Mendelson v. Shrager, 432 Pa. 383, 248 A.2d 234 (1968), doubts as to whether an arbitration clause may be interpreted to cover the asserted dispute should be resolved in favor of arbitration unless a court can state with "positive assurance" that this dispute was not meant to be arbitrated. See United Steelworkers of ...

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