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COOK v. KULJIAN CORP.

January 29, 1962

R. L. E. COOK
v.
The KULJIAN CORPORATION and Damodar Valley Corporation



The opinion of the court was delivered by: KRAFT

In our first opinion and order in this case we granted the motion of defendant, Kuljian, to dismiss as to counts 1 to 12, inclusive.

Counts 13, 14 and 15 pleaded claims sounding in tort. With respect to these counts, we said:

 'Briefly, count 13 alleges that Kuljian in violation of the duty owed Cook, arbitrarily and maliciously refused to approve Cook's vouchers as a result of which Damodar refused to pay the vouchers; further, that Kuljian maliciously caused to be entered against Cook's account certain back charges which Kuljian knew were not valid or proper. Count 14 avers that defendants 'entered upon a course and concert of action' to defraud Cook by refusing to negotiate, each defendant claiming that Cook should seek redress from the other. Count 15 avers that defendants knowingly and maliciously circulated false rumors that Cook was not the owner of a certain housing development in India as a result of which Cook lost its prospective sale.'

 Cook amended his complaint, as ordered, and averred that the acts charged occurred in India on certain specified dates.

 The case is presently before us on Kuljian's motion to dismiss the amended complaint, or, in the alternative, to stay the suit until Cook proceeds to arbitration, in accordance with the provisions of the two contracts involved.

 The contracts contain identical arbitration clauses in the following form:

 '8. ARBITRATION. If any dispute, question or controversy, the settlement of which is not herein specifically provided for should at any time arise between the Sub-Contractor and the contractor touching this agreement or any clause herein contained or the construction thereof or any matter connected with this agreement or the operation of the same or the rights or dutieis (sic) or liabilities of either party, then and in every case the matter in difference shall be referred to two Arbitrators, one to be nominated by the Sub-Contractor and the other by the contractor within one week or, in case of disagreement between the Arbitrators lasting one week, to an Umpire appointed by the Arbitrators in writing under their hands before proceeding with the arbitration, and the decision of such Arbitrators or Umpire, as the case may be, shall be final and binding on both parties. Any such reference shall in all respects conform to such statutory enactment or enactments regulating arbitration as may from time to time, be in force in India. Upon/and/any every such reference the assessment of the costs incidental to the reference and award respectively shall be in the discretion of the Arbitrators, or, in the event of their not agreeing, of the Umpire appointed by them. Notwithstanding the existence of any such dispute, question or controversy, the works shall be continued by the Sub-Contractor during the arbitration proceedings and no payments due or payable by the Contractor to the Sub-Contractor or vice-versa shall be with held on account of such proceedings, unless they are the subject matter or one of the subject matters of such arbitration proceedings.'

 Cook contends that even though Kuljian was a party signatory, it cannot enforce the contract against Cook because Cook cannot enforce the contract against Kuljian. Cook's reference here is to language in the contract which admittedly absolved Kuljian from direct financial responsibility thereunder, as noted in our earlier opinion. The obligation to arbitrate, however, is another matter. The arbitration clause expressly provides for arbitration of disputes between 'the Sub-Contractor (Cook) and the contractor (Kuljian).' The mutual promises to arbitrate are consideration for each other.

 Cook further contends that the matters in dispute here are not arbitrable under the terms of the arbitration clause, i.e., that the claims sound in tort; that the arbitration clause was intended to cover only differences and disputes arising from time to time during the actual performance of the work, etc. We think the question of the arbitrability of Cook's claim is not for us, but for the arbitrators themselves.

 To be sure, since arbitration is a creature of contract, a court must always inquire, when a party seeks to invoke its aid to avoid recourse to the arbitration table, whether the parties have agreed to arbitrate the particular dispute. Here, however, the parties have couched the arbitration provision in the broadest and most all-inclusive terms. They agreed to arbitrate any dispute 'touching this agreement or any clause herein contained or the construction thereof.' Since the arbitration promise itself is a clause in the agreement, the parties agree that its construction is for the arbitrators. It must follow, therefore, that the parties provided that any dispute as to whether a particular claim is within the arbitration clause is itself a matter for arbitration. The fact that Cook's claims sound in tort has no bearing, of course, on the question of their arbitrability. Almacenes Fernandez, S.A. v. Golodetz, 148 F.2d 625, 161 A.L.R. 1420 (2d Cir. 1945); Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959).

 Cook next contends that 'the federal general law controls,' and that arbitration agreements are not enforceable thereunder. He cites several cases to us which, taken at face value, would surely sustain his position. However, the attitude of the courts toward arbitration agreements has undergone a remarkable transformation in recent years. Courts no longer view these agreements to 'oust their jurisdiction' with the jaundiced eye of yesteryear. Perhaps the increasing volume of litigation has exerted a contributory influence. At any rate, the evolution in judicial thought was noted in the concurring opinion of Mr. Justice Frankfurter in Bernhardt v. Polygraphic Co., 350 U.S. 198, 76 S. Ct. 273, 100 L. Ed. 199 (1956). In consequence, the cases which Cook relies upon are no longer authority. The sharp break with the past can be demonstrated without unduly extending this opinion. In Hunkin-Conkey Const. Co. v. Pennsylvania Turnpike Commission, 34 F.Supp. 26 (D.C.M.D.Pa.1940), it was held:

 'State statutes making arbitration clauses enforceable are 'remedial statutes' and not 'substantive statutes,' and hence federal District Courts cannot enforce such statutes but must apply rule followed in federal courts, which does not permit enforcement of arbitration agreements to the extent of refusing to take jurisdiction where arbitration has not been instituted.'

 In the opinion of the Court in Bernhardt, supra (350 U.S. 198, 202-204, 76 S. Ct. 273, 276, 100 ...


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