396 F2d 425 Boston and Maine Corporation v. Illinois Central Railroad Company

396 F.2d 425


No. 396, Docket 32000.

United States Court of Appeals Second Circuit.

Argued April 30, 1968.
Decided May 31, 1968.

Donald L. Wallace, New York City (Clark, Carr & Ellis, New York City; Craig M. Shields, New York City, of counsel), for appellant.

Robert S. Ogden, Jr., New York City (Donovan, Leisure, Newton & Irvine, New York City; Carl E. Newton, M. Luck Walton, New York City, of counsel), for appellee.

Before WATERMAN, FRIENDLY and KAUFMAN, Circuit Judges.

FRIENDLY, Circuit Judge:

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This is another in a series of cases in which the District Court for the Southern District of New York has granted Boston & Maine Corporation (B & M) summary judgment against middle western railroads to enforce awards of arbitrators under the mandatory arbitration rules of the Association of American Railroads (AAR) holding B & M entitled to collect interline freight balance without set-off of the defendants' claims for per diem freight car rentals-- the proper amount of which bids fair to be settled at long last on judicial review of the order of the Interstate Commerce Commission in Chicago, B. & Q. R.R. v. New York, Susquehanna & W. R.R., 332 I.C.C. 176 (1968). We affirmed such judgments in Boston & Maine Corp. v. Chicago, B. & Q. R.R., 381 F.2d 365 (2 Cir.1967), and Chicago & N. W. R.R. v. Boston and Maine Corporation summary affirmance, unreported, cert. denied, 390 U.S. 1027, 88 S.Ct. 1419, 20 L.Ed.2d 285 (1968). We agree with the Illinois Central (IC) that this case is different; indeed, if we were dispensing Cadi justice, we would be disposed to rule in defendant's favor. However, the limited scope of judicial review under the Federal Arbitration Act forbids our doing so, and we therefore affirm Judge Herlands' judgement, 274 F.Supp. 257 (1967).


The difference arises from the fact that B & M initially sought to collect interline balances accruing from May 1 through September 30, 1958,1 by a suit in the Supreme Court of New York. That court sustained the sufficiency of IC's counterclaim for per diem freight car rentals and denied B & M's motion for summary judgment, but held that the determination of amount should await the decision of the Interstate Commerce Commission in the proceeding cited above. Several years later, in 1963, the parties filed a stipulation in the state court that neither would take any action 'before this Court in the above-captioned action' until the I.C.C. had fixed per diem rates and judicial review had been concluded, at which time the attorneys for the parties would utilize their best efforts to resolve any remaining issues.


With something less than full regard for the spirit of the stipulation, B & M, in July 1965, invoked the mandatory arbitration rules of the AAR to recover the interline freight balances withheld by IC. Although contesting the propriety of arbitration in view of the New York state action and the stipulation filed in that case, IC participated therein. The three arbitrators ruled against IC's claim of set-off and were affirmed by the Appeals Committee.2


While the briefs contain much discussion of 'jurisdiction' and 'waiver,' two of the most elusive and chameleon like phrases in the legal lexicon, the issue is quite simple. The parties made an arbitration agreement valid under the Federal Arbitration Act, 9 U.S.C. 2. The grounds for vacating an award are exceedingly few, 9 U.S.C. 10; the only one even remotely applicable is a portion of 10(d), 'Where the arbitrators exceeded their powers * * *.' But we have held only recently, World Brilliance Corp. v. Bethlehem Steel Co., 342 F.2d 362, 364-365 (2 Cir. 1965), that bringing an action instead of seeking arbitration does not destroy the agreements to arbitrate, that parties may agree that the effect of the action shall itself be arbitrated, and that any doubts regarding their intentions as to the treatment of so-called 'procedural issues' should be resolved in favor of arbitrability. While the combination of B & M's bringing an action in the New York courts, the proceedings there taken, and the stipulation, on the one hand, and the possible inability of the AAR arbitrators to consider the issue of 'waiver,'-- more accurately, election-- on the other, might well have justified a stay of arbitration in a proceeding by IC under New York CPLR 7503 or in a federal suit for an injunction, compare Armstrong-Norwalk Rubber Corp. v. Local Union No. 283, etc., 269 F.2d 618 (2 Cir. 1959); Greenstein v. Nat'l Skirt & Sportswear Ass'n, Inc., 274 F.2d 430 (2 Cir. 1960), IC sought no such relief, as the Lehigh & New England successfully did in an action pending before Judge Ryan.3 Having submitted the entire controversy, including the claim of 'waiver' of arbitration by B & M, to the arbitrators, IC is bound by their decision.


Local 719, American Bakery & Grocery Workers of America, AFL-CIO v. National Biscuit Co., 378 F.2d 918 (3 Cir. 1967), on which IC places great reliance, dealt with a claim of lack of arbitrability and not of 'waiver' of arbitration, contrast 378 F.2d at 923. We therefore need not decide whether we would follow that decision or what seem the contrary implications of Reeves v. Tarvizian, 351 F.2d 889 (1 Cir. 1965) (Massachusetts law), and Nat'l Cash Register v. Wilson, 8 N.Y.2d 377, 208 N.Y.S.2d 951, 171 N.E.2d 302 (1960) (New York law), in a proceeding governed by the Federal Arbitration Act, as Local 719 was not, see 9 U.S.C. 1.




The interline balances in the arbitration award accrued between May 1, 1958 and April 1965

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The only clear statement by any of the three arbitrators on whether the New York state suit and the stipulation constituted a binding election was by the chairman who said, 'As a layman it is hard for me to consider the action of the court as a preventive for any further cause of action by the B & M particularly due to the variance in periods covered.' It seems likely that the Appeals Committee thought itself unable to entertain IC's 'waiver' objection, although statements that it could not 'consider legal aspects' were addressed also to IC's contention that the right of set-off was res judicata as a result of the decision of the New York court. Even if the Appeals Committee erred in thinking that the mandatory arbitration rules forbade its considering the 'waiver' objection, as to which we express no opinion, this would not entitle IC to relief. See Wilko v. Swan, 346 U.S. 427, 436-437, 74 S.Ct. 182, 98 L.Ed. 168 (1953)


We are unpersuaded that the stipulation in the New York state action prevented IC's pursuing these roads to relief-- even if an inability created by its own act would matter. The stipulation barred only further proceedings 'in the abovecaptioned acton,' where as an application under CPLR 7503 for a stay or a plenary suit in the federal court to enjoin the arbitration would have been a separate proceeding. Such proceedings, not prohibited by the words of the stipulation, would have been precisely in its spirit