The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
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
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 ...