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April 24, 1981


The opinion of the court was delivered by: Shadur, District Judge.


This case poses a problem that, though it must recur with some degree of frequency, has seldom been addressed by the federal courts. It stems from an apparent tension between Sections 3 and 9 of the Federal Arbitration Act, 9 U.S.C. § 3 and 9 (cited in this opinion as "Section —"). For the reasons stated in this memorandum opinion and order, the Court resolves the tension in a manner it believes gives effect to both sections, by ordering enforcement of an arbitration award.

Plaintiff NII Metals Services, Inc. ("NII") initially brought this action for claimed breach of contract by defendant ICM Steel Corporation ("ICM"), predicating federal jurisdiction on diversity of citizenship. Because the contract in suit contained an arbitration clause,*fn1 ICM successfully invoked the provisions of Section 3 to "stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement. . . ." Now that the arbitration (conducted in New York City in accordance with the contract) has been concluded, NII as the prevailing party moves for confirmation of the award in its favor. ICM resists on the ground that the following provision of Section 9 limits jurisdiction for confirmation of the award to the United States District Court for the Southern District of New York:*fn2

  If no court is specified in the agreement of the
  parties, then such application [for an order
  confirming the award] may be made to the United
  States court in and for the district within which
  such award was made.

Neither party has cited the Court to any case law authority except for NII's citation of Murray Oil Products Co. v. Mitsui & Co., 146 F.2d 381, 383 (2d Cir. 1944), a case whose language as to the nature of arbitration proceedings was later disavowed by the United States Supreme Court in Bernhardt v. Polygraphic Company of America, Inc., 350 U.S. 198, 203, 76 S.Ct. 273, 276, 100 L.Ed. 199 (1956). But our own research has disclosed two District Court cases pointing in opposite directions:

(1) Arthur Imerman Undergarment Corp. v. Local 162, 145 F. Supp. 14 (D.N.J. 1956), held that Section 9 was mandatory in its terms, so that the arbitration award could not be confirmed outside of the district within which the award had been made.

(2) Paul Allison, Inc. v. Minikin Storage, 452 F. Supp. 573 (D.Neb. 1978), held that because the Arbitration Act is not itself a grant of jurisdiction (a well-established principle), a federal court that otherwise has jurisdiction of the parties may confirm the award even though it is not the district where the award was granted.

In this Court's view, though the Arbitration Act is hardly a model of clarity in this respect, the result reached in the later decision is preferable. It gives meaning, as ICM's position does not, to both sections of the Act. ICM's argument would effectively read Section 3 out of the Act because it would make the "stay" meaningless — a stay that could only lead to ultimate dismissal whichever side prevailed in the arbitration. On the other hand, Section 9 can be read consistently with Section 3 — albeit with some strain on the normal reading of the first two sentences of Section 9 — by treating the word "may" in the second sentence as permissive and not exclusive.

Because the Arbitration Act does not confer federal jurisdiction by its own weight,*fn3 it is most profitable to approach the analysis in jurisdictional terms. As indicated at the outset, this Court has jurisdiction of the parties and the action on diversity grounds. In that respect it sits as though it were an Illinois trial court. Illinois choice of law rules in contract actions have not yet adopted the "most significant contacts" approach, but still look in a somewhat mechanistic way to the respective places of execution and performance (see for example Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill. App.3d 965, 304 N.E.2d 27, 31-32 (1st Dist. 1973)). It is not necessary to determine whether those rules would refer to Illinois law or to New York law, because each state has a statute (Ill.Rev.Stat. ch. 10, § 111; N YCiv.Prac.Law § 7510 (McKinney)) giving courts power to confirm arbitration awards. Whatever law applies, then, this Court has the same power in jurisprudential terms.

It would of course appear wasteful for this Court, already having jurisdiction of the parties, to be required to dismiss the action, making the prior stay a meaningless act and compelling NII to sue in New York to confirm the award. Accordingly the conclusion expressed in this opinion is consistent with principles of judicial economy. This ...

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