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Galt v. Libbey-Owens-Ford Glass Co.

April 26, 1967

ARTHUR T. GALT AND MAYWOOD PARK TROTTING ASSOCIATION, INC., AN ILLINOIS CORPORATION, PLAINTIFFS,
v.
LIBBEY-OWENS-FORD GLASS COMPANY, AN OHIO CORPORATION, AND F. H. SPARKS CO., INC., A NEW YORK CORPORATION, DEFENDANTS. THE GEORGE SOLLITT CONSTRUCTION COMPANY, AN ILLINOIS CORPORATION, INTERVENING PLAINTIFF-APPELLEE, V. F. H. SPARKS CO., INC., A NEW YORK CORPORATION, DEFENDANT-APPELLANT



Hastings, Chief Judge, and Swygert and Cummings, Circuit Judges.

Author: Cummings

CUMMINGS, Circuit Judge.

In this diversity action, the plaintiffs sued to recover for damages occasioned by massive glass breakage at the Maywood Park racetrack in Maywood, Illinois. In 1964, plaintiffs decided to construct a new spectator building for viewing harness racing. The south side of the building was to be enclosed with glass. The plaintiffs created the Arthur T. Galt Building Trust ("Building Trust") to arrange for the construction of the new building, and Lionel K. Levy, a New York, N.Y., architect, was engaged to draw the plans. The George K. Sollitt Construction Company ("Sollitt") of Chicago was chosen as the general contractor.

Defendant F. H. Sparks Co., Inc., ("Sparks") of New York was licensed by Glasbau Heinrich Hahn in the "suspended glazing" method of hanging curtain walls of glass without the usual metal framing supports. Plaintiffs authorized Levy to use the Sparks suspended glazing method at Maywood Park. Sollitt thereupon entered into a subcontract with Sparks for suspended glazing with glass manufactured by Libbey-Owens-Ford Glass Company ("LOF"). Article 21 of the subcontract provided that Sollitt and Sparks would be bound by the American Institute of Architects' provisions for arbitration of disputes. In pertinent part, those provisions are:

"All disputes, claims or questions subject to arbitration under the Contract shall be submitted to arbitration in accordance with the provisions, then obtaining, of the Standard Form of Arbitration Procedure of The American Institute of Architects,*fn1 and the Agreement shall be specifically enforceable under the prevailing arbitration law, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. It is mutually agreed that the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other."

According to the complaint, the suspended glazing installed by Sparks was unsatisfactory, with much of the glass cracking and breaking. Another company was employed by plaintiffs to remove the suspended glazing and install conventional glazing.

On May 31, 1966, Sparks commenced arbitration proceedings against Sollitt to recover $246,856, allegedly representing the unpaid balance on the subcontract and for extra work performed thereunder. Sparks and Sollitt each designated an arbitrator, and a third arbitrator was selected from a panel submitted by the American Arbitration Association. By stipulation, Sparks and Sollitt fixed the compensation of the third arbitrator. So far, Sparks has expended $1,943.71 in arbitration costs. Sollitt filed an answer in the arbitration proceedings, and its attorneys were permitted to examine Sparks' records in New York in order to expedite the arbitration hearings which were scheduled to commence in Chicago on October 18, 1966.

In July 1966, Sollitt was considering the possibility of bringing the Building Trust into the arbitration proceedings, and Sparks suggested that "this be done immediately" if at all. However, neither the Building Trust nor plaintiffs have participated in the arbitration, even though Sollitt's counsel admitted at the oral argument that Sollitt could have "impleaded" at least the Building Trust.

On September 29, 1966, plaintiffs filed their complaint against LOF and Sparks. The first six counts sounded in tort. The seventh count sought to enjoin the arbitration proceedings brought by Sparks against Sollitt. On December 8, 1966, the District Court denied plaintiffs' motion for a temporary injunction to halt the arbitration proceedings. The primary ground for the District Court's ruling was that Sollitt was not a party to the lawsuit. The District Court also ruled that plaintiffs could intervene in the arbitration proceedings to protect their interests.

Two weeks later, under Rule 24(b) of the Federal Rules of Civil Procedure, Sollitt moved to intervene in the lawsuit as a party plaintiff, seeking a declaratory judgment that it was not indebted to Sparks and seeking a preliminary injunction restraining Sparks from proceeding with the arbitration proceedings, which had been adjourned to January 9, 1967. The District Court granted Sollitt permissive intervention and also enjoined the arbitration proceedings. The order permitting Sollitt to intervene is not appealable (4 Moore's Federal Practice (2d ed.) 1966 Cum.Supp. p. 40); therefore, this appeal questions only the propriety of the injunction.

Applicability of Federal Arbitration Act

As seen, the contract between Sparks and Sollitt provides that it "shall be specifically enforceable under the prevailing arbitration law, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction". It is noteworthy that the contract does not refer to any specific arbitration statute. However, Section 2 of the Federal Arbitration Act (9 U.S.C. § 1 et seq.) is sufficiently broad to apply; it provides:

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract" (9 U.S.C. § 2).

In turn, the Act defines commerce as including "commerce among the several States" (9 U.S.C. § 1). Unquestionably, this contract evidencs "a transaction involving commerce" within the meaning of the statute, for Sparks was a New York contractor and came to Illinois to perform the work with glass manufactured by LOF in Toledo, Ohio.*fn2 Therefore, we proceed to the case law interpreting the Federal Arbitration Act to determine whether the injunction against arbitration was erroneous. If the Federal Arbitration Act were not involved, we would have to look at the ...


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