The opinion of the court was delivered by: McLAREN, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff here seeks an injunction against a demand for
arbitration filed by the defendant, Pan American Gyro-Tex
Company, Ltd. ("Pan American") on May 7, 1971, and declaratory
judgment. The injunction will be granted. The Court's findings
of fact and conclusions of law are contained in the following
The arbitration sought by defendant concerns disputes
allegedly arising under an agreement between plaintiff, U.S.
Plywood-Champion Papers, Inc. ("USP") and American Gyro-Tex
Company, Inc. ("Gyro-Tex"). Pan American claims to be the
successor and assignee of Gyro-Tex by reason of having
acquired the assets of that corporation, which thereupon
On November 5, 1965, USP and Gyro-Tex entered into a number
of agreements. A sales agreement provided for the purchase by
USP of its requirements of Gyro-Tex's products. It also
contemplated the establishment by Gyro-Tex of a Los Angeles
area plant as a source of supply for USP's West Coast sales
division area. This agreement had a seven year term, and it
was not assignable by either party without the written consent
of the other.
A loan agreement provided for the making of loans totalling
$1,200,000 by USP to Gyro-Tex for use in establishing Los
Angeles and New York production facilities. This agreement
obligated Gryo-Tex to establish a Los Angeles plant as quickly
as possible and to use its best efforts to commence commercial
production therein by June 30, 1966. The sales agreement gave
USP the right to terminate it upon 30 days' written notice in
the event of a default by Gyro-Tex under the loan agreement.
Gyro-Tex did not establish a plant in Los Angeles. In May of
1966 USP terminated its agreements with Gyro-Tex on the basis
of Gyro-Tex's failure to establish a Los Angeles plant and its
admission that it had no intention of doing so in the future.
In July of 1966 USP and Gyro-Tex entered into a new
agreement but agreed that the new agreement would be without
prejudice to any claims either might have under the November
5, 1966 agreements.
On February 28, 1968, the owners of Gyro-Tex, Armand White
and Earl Spiro, entered into an agreement with American
Gyro-Tex Company (now known as Pan American Gyro-Tex Company,
Ltd., defendant herein) pursuant to which they sold all of the
stock in Gyro-Tex to said company.
Neither Spiro nor White has an ownership interest in Pan
American. Both are employed by it and manage its affairs. This
1968 agreement provides that each of the sellers is to receive
35 per cent of the net amount that may be collected by the
buyer (Pan American) on account of any cause of action or
claim that Gyro-Tex may have against USP. Spiro and White
claim the other 30 per cent is a fund from which the
partnership would pay income taxes on any recovery.
On February 29, 1968, Gyro-Tex filed a statement of intent
to dissolve in Wisconsin, its state of incorporation, and
executed an assignment of all its assets to Pan American. USP
did not consent to this assignment. Gyro-Tex's articles of
dissolution were filed on April 1, 1968.
The Court is unable to accept plaintiff's arguments denying
the existence of an agreement to arbitrate and claiming that
the present dispute does not in any event come within the
arbitration clause. However, the Court does find that
defendant's rights were extinguished by operation of Wisconsin
law, and that it has been guilty of laches.
Plaintiff relies on Wis.Stat.Ann. § 180.787 which provides
that actions by or against corporations, their directors,
officers or shareholders on any right or claim existing prior
to dissolution must be commenced within two years of
dissolution. Although the section is titled "survival of
remedies" it has been construed as an abatement statute which
extinguishes rights rather than limiting remedies. United
States for and on Behalf of Small Business Administration v.
Palakow, 438 F.2d 1177, 1179 (7th Cir. 1971). Therefore, ...