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KIRSCHNER v. WEST CO.

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA


April 20, 1960

Leon KIRSCHNER and Henry Naftulin, individually and as co-partners, trading as K-N Enterprises
v.
WEST COMPANY

The opinion of the court was delivered by: GOODRICH

Plaintiffs in this case have brought an action against the defendant for breach of contract. Federal jurisdiction is based on diversity of citizenship. The defendant has filed a motion to stay proceedings pending the arbitration provided for in paragraph 15 of the 1952 agreement between the parties. *fn1" The plaintiffs oppose this motion. They say that this Court cannot stay the proceedings pending arbitration because Illinois law, which they assert will not permit such a stay, governs this case, the Federal Arbitration Act being inapplicable. They also contend that defendant is in 'default' in proceeding with the arbitration.

It is now settled that, in spite of the broad language of Section 3 of the Federal Arbitration Act, *fn2" its compulsory effect is applicable only to those contracts covered by Section 2 of the Act, *fn3" i.e., 'any maritime transaction or a contract evidencing a transaction involving commerce.' Bernhardt v. Polygraphic Co., 1956, 350 U.S. 198, 201-202, 76 S. Ct. 273, 275-276, 100 L. Ed. 199.

 The contract in this case has nothing to do with any maritime transaction. It is a contract by which the plaintiffs grant a license to the defendant 'to make, use and apply the coating material covered by this agreement as hereinafter set forth, for use in connection with rubber or synthetic closures, which are to be used for the pharmaceutical industry, and for no other purpose.' Is this a contract 'evidencing a transaction involving commerce?' By 'commerce,' of course, is meant the type or commerce within federal jurisdiction, i.e., interstate or foreign commerce. *fn4"

 The defendant says that it 'produces bottle closures which are shipped, sold, and used throughout the entire United States.' This assertion does not establish the fact and we must go back to the words of the contract. The contract does provide a license for the use of the material in the 'pharmaceutical industry.' We may take judicial notice of the fact that the pharmaceutical industry covers the entire United States. This, therefore, is a contract which provides for the supplying of material to an industry which is country-wide. This type of contract evidences a transaction involving 'commerce' as that term is now defined by the Supreme Court. *fn5" The citation of cases involving a concept of 'commerce' prevalent in the days of Hammer v. Dagenhart, 1918, 247 U.S. 251, 38 S. Ct. 529, 62 L. Ed. 1101, does not help us on this problem at the present time.

 There is no merit to the plaintiff's last point. The motion for stay was made within a reasonable time after the complaint was filed and we do not think there is any basis for saying that any rights which the defendant had were waived.

 The motion will be granted.


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