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KNORR BRAKE CORP. v. HARBIL

February 9, 1983

KNORR BRAKE CORPORATION, PLAINTIFF,
v.
HARBIL, INC., ET AL., DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

Knorr Brake Corporation ("Knorr Brake") originally sued Harbil, Inc. ("Harbil") and P.E.P. Industries, Ltd. ("P.E.P.") for rescission, breach of contract and injunctive relief based on their alleged breach of an agreement (the "Agreement") between Knorr Brake and Harbil.*fn1 This Court entered a preliminary injunction against Harbil and P.E.P. Harbil has now moved to vacate that injunction, to stay these proceedings and to compel arbitration under the Agreement. For the reasons stated in this memorandum opinion and order, Harbil's motion to vacate the preliminary injunction is denied, but its motions for a stay (except for any necessary enforcement of the preliminary injunction itself) and to compel arbitration are granted.

Procedural History

Knorr Brake filed its Complaint December 8, 1981. This Court entered a December 9 temporary restraining order against Harbil and P.E.P. and promptly (on December 14 and 18) conducted a hearing on Knorr Brake's motion for a preliminary injunction. At the December 14 hearing Harbil's counsel moved orally for a stay pending arbitration pursuant to Agreement ¶ 7:

  Any dispute arising pursuant to this Agreement
  shall be submitted to arbitration by the American
  Arbitration Association, and in accordance with
  their rules and procedures, and interpreted under
  the laws of the State of New York.

Ruling on that motion was reserved pending resolution of the motion for preliminary injunction (Dec. 14, 1981 Tr. 10).

This Court's January 28, 1982*fn2 memorandum opinion and order ("Opinion I") reflected its findings of fact and conclusions of law, as required by Fed.R.Civ.P. ("Rule") 52(a), granting Knorr Brake's preliminary injunction motion. Next the preliminary injunction itself was issued February 22, contemporaneously with a supplemental memorandum opinion.

On that same day Harbil filed its Answer and a Counter-Complaint against Knorr Brake and its corporate parent, Knorr-Bremse GmbH ("Knorr-Bremse") (collectively "Knorr"). Harbil's Answer did not raise the arbitration issue by affirmative defense or otherwise.

In August Harbil filed its First Amended Counter-Complaint, together with a motion to join additional counterdefendants and a motion to continue ruling on Knorr's Rule 12(b)(6) — Rule 56 motion. This Court established a briefing schedule for the first of those motions and took the second under advisement.

This Court's October 27 memorandum opinion and order denied Harbil's motion to join additional counter-defendants and struck Count V of the First Amended Counter-Complaint. 550 F. Supp. 476 (N.D.Ill. 1982). As a sequel to that episode this Court's January 20, 1983 memorandum opinion and order (556 F. Supp. 484, at 487-88) granted Knorr's motion for an assessment under 28 U.S.C. § 1927 against Harbil's original counsel in the amount of "the excess costs, expenses, and attorneys' fees reasonably incurred" by Knorr because of Harbil's joinder motion.

On January 14, 1983 Harbil's newly-retained counsel filed the present motion, contending:

    1. Agreement ¶ 7 clearly encompasses the dispute
  between Knorr Brake and Harbil. Jan. 14 Mem. 5-7.
    2. Harbil has not waived its right to
  arbitration. Id. at 7-8.
    3. Section 3 of the Federal Arbitration Act,
  9 U.S.C. § 3 ("Section 3"),*fn4 and applicable case
  law so limit this Court's jurisdiction over this
  arbitrable dispute that even the preliminary
 ...

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