The opinion of the court was delivered by: Getzendanner, District Judge.
MEMORANDUM OPINION AND ORDER
The parties to this litigation are plaintiff D.C. Taylor Co.
("DCT") and defendants Dynamit Nobel of America ("DNA"), Halm
Building Specialties of Iowa, Inc. ("Halm"), and the American
Arbitration Association ("AAA"). DCT is an Iowa corporation in
the business of installing roofs. DNA is a New Jersey
corporation, doing business in the Northern District of Illinois,
that manufactures polyvinylchloride (PVC) membrane roofing
materials under the brand name "Trocal." Halm, an Illinois
corporation, is DNA's exclusive Midwest distributor. From 1974
until 1978 or 1979, DCT was an authorized applicator of DNA's
DCT's Amended Complaint has eight counts. Counts I-III allege
violations of the federal antitrust laws and Counts IV-VII allege
pendent state law claims of retaliatory discharge, tortious
interference with prospective business relationships, defamation,
negligence and fraud. In Count VIII, DCT seeks to enjoin or stay
arbitration of its disputes with DNA. This is the only count
involving the AAA.
The matter is before the court on DNA's motion to stay these
proceedings pending arbitration and DCT's motion to enjoin or
stay arbitration. The motions raise two issues: whether there is
a valid arbitration agreement between DCT and DNA; and, if so,
whether the court should stay arbitration pending judicial
resolution of the anti-trust claims in Counts I-III under the
I. Validity of the Arbitration Agreement
DCT alleges that in mid-1978 it began offering a membrane roof
system manufactured by a competitor of DNA, while continuing to
offer DNA's product. DCT further alleges that in retaliation DNA
terminated DCT as an authorized Trocal applicator. In March,
1979, the parties signed a "Termination Agreement" to wind-up
their affairs in an orderly fashion. See Exhibit IX to the
Paragraph 19 of the Agreement states, in relevant part:
Any dispute or controversy arising out of the
construction of, performance or breach of this
agreement shall be determined by arbitration . . .
and any award rendered shall be enforceable in any
competent court of jurisdiction.
In December, 1980, DNA filed a demand for arbitration pursuant to
this paragraph, claiming that DCT, in violation of the agreement,
failed to install Trocal roofing materials in a workmanlike
manner and in compliance with DNA's standard practices and
specifications. DNA listed 250 roof projects with alleged
installation defects in a rider to its demand.
DCT filed an answer to this demand in which it contested the
scope of the disputes subject to arbitration. DCT's position is
that the Termination Agreement only applies to the 99 roofing
jobs specifically listed as Exhibit A to the agreement and that
the other 151 jobs submitted by DNA are not subject to
arbitration. DCT's answer also raised a number of affirmative
defenses to DNA's claims. It did not, however, challenge the
validity of the Termination Agreement.
In February, 1981, DCT filed its own demand for arbitration,
asserting five counterclaims "without waiver of the objections
raised in [its] Answer." In April, 1981, DCT filed its original
complaint in this action. As previously mentioned, Count VIII of
the Amended Complaint challenges the validity of the arbitration
agreement and seeks to enjoin the arbitration.
DCT argues that there is no valid arbitration agreement and
therefore that arbitration should be enjoined.*fn1 DCT points to
the Federal Arbitration Act, 9 U.S.C. § 1-14, which provides
that a written arbitration provision "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, and contends that the common law contract defenses of
duress, unconscionability, mistake and fraud render this
agreement invalid. DCT also demands an evidentiary hearing on
these defenses pursuant to 9 U.S.C. § 4.*fn2 DNA counters that,
accepting DCT's allegations as true for purposes of this motion,
DCT has not alleged facts establishing its asserted defenses as a
matter of law, and therefore that an evidentiary hearing is not
required prior to denying the motion to enjoin arbitration.
While it is correct that the Federal Arbitration Act requires a
federal court to resolve any issue involving the making of an
arbitration agreement, the Supreme Court has made it clear that
such an agreement is separable from any contract in which it may
be contained. In Prima Paint Corp. v. Flood & Conklin
Manufacturing Co., 388 U.S. 395, 402-04, 87 S.Ct. 1801,
1805-1806, 18 L.Ed.2d 1270 (1967), the issue before the Court was
"whether a claim of fraud in the inducement of the entire
contract is to be resolved by the federal court, or whether the
matter is to be referred to the arbitrators." Id. at 402, 87
S.Ct. at 1805. The Court held:
[I]f the claim is fraud in the inducement of the
arbitration clause itself — an issue which goes to the
"making" of the agreement to arbitrate — the federal
court may proceed to adjudicate it. But the statutory
language does not permit the federal court to
consider claims of fraud in the inducement of the
Id. at 403-04, 87 S.Ct. at 1806-1807. Where the contractual
language of the arbitration agreement is broad enough to include
a defense to the contract, such an issue must be submitted to
With these principles in mind, the court turns to an
examination of DCT's asserted defenses.
In its complaint and in its memorandum in opposition to
defendants' motion to stay these proceedings, DCT alleged that it
was coerced into signing the Termination Agreement by DNA's
wrongful withholding of roof guarantees, which DCT needed in
order to be paid by its customers. This argument speaks to the
validity of the Termination Agreement generally and under the
reasoning in Prima Paint may not be considered by this court as
a defense to the arbitration agreement.
To circumvent this problem, in its later memorandum in support
of its motion to stay arbitration, DCT argues that the inclusion
of the arbitration clause was the result of "a separable duress,"
citing Paragraph 17 of the affidavit of DCT's counsel, Forrest
Rosser. Accepting the assertions in the affidavit as true for
purposes of this motion, DNA first brought up the subject of a
general arbitration clause late at night after several hours ...