the contract was a penalty. In the Authority's Answer to the complaint, it admitted in paragraph 14 that this was a question of law for the Court. This indicates that the Authority recognized that this question of the liquidated damages was properly before the Court. This supports Monte's contention that the only reason it brought this declaratory judgment was because it felt this damage provision was illegal. A party to an arbitration agreement does not give up its rights to seek relief in the Courts on questions challenging the validity of the very contract under which the arbitration arose. Also, an occasion may arise, such as a wildcat strike, which would require the interposition of injunctive relief by a Court of Equity, even though the parties concerned had agreed to arbitrate all labor disputes in their contracts.
Monte voluntarily discontinued the declaratory judgment proceeding. The Authority further contends that since it filed the motion to stay the declaratory judgment in the Common Pleas Court that this forever committed the parties to the Common Pleas Court. The Authority emphasizes the words of 5 P.S. § 178 which states in part:
'* * * If prior to the award, any court of common pleas shall have entertained any motion in respect to said arbitration, such court shall retain jurisdiction, and all subsequent proceedings, shall be filed in said court. * * *'
Now in order to give the statute the interpretation which the Authority contends, we will have to say that a motion to stay a declaratory judgment proceeding 'pending' arbitration is a motion 'in respect to said arbitration.' We do not agree with this contention. An arbitration is not begun until one of the parties requests arbitration pursuant to the agreement. At the time this motion was made no one had requested arbitration. If one party requests the other party for arbitration and is refused, he can come into court and compel arbitration pursuant to § 163 of the Arbitration Act of 1927. This is one of the significant features and differences between the Arbitration Act of 1927 and common law arbitration. This motion to stay the declaratory judgment proceeding was merely ancillary to the court proceeding which was the only proceeding between the parties then in existence.
This arbitration between Monte and the Authority did not come into existence until Monte demanded arbitration by letter dated April 18, 1961. If an arbitration situation was in existence at the time the Authority made its motion to stay the court proceeding, there was no need for the Authority also to demand arbitration on April 20, 1961 by letter. This contradicts the Authority's position completely in this regard, and lends emphasis to the proposition that no arbitration situation existed as of April 3, 1961 when the motion to stay was filed.
Subquestion A: Does this contract evidence a transaction involving interstate commerce?
It is recognized that we have the diversity of citizenship requirements since Monte is a Michigan partnership and the Authority is a Pennsylvania Municipal Corporation. Also, the amount in controversy, being in excess of $ 200,000, is well beyond the jurisdictional amount.
The only jurisdictional matter in dispute is whether this transaction evidenced interstate commerce.
Sections 1 and 2 of the Federal Arbitration Act limit the Court's jurisdiction under the Act to situations involving transactions in interstate commerce. Section 1 defines such commerce as follows:
'* * * 'commerce', as herein defined, means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation, * * *.'
The leading case for defining commerce is Bernhardt v. Polygraphic Co., 350 U.S. 198, 76 S. Ct. 273, 100 L. Ed. 199 (1956). This case concerned an employment contract containing an arbitration clause. The Court held that federal jurisdiction attached only when the contract evidenced a transaction involving commerce. Ross v. Twentieth Century-Fox Film Corporation, 236 F.2d 632 (9 Cir., 1956), followed the definition of the Bernhardt case. The most important case cited by either party dealing with this commerce question is Metro Industrial Painting Corp. v. Terminal Construction Co., Inc., 287 F.2d 382 (2 Cir., 1961), cert. den. Metro-Goldwyn Pictures Corp. v. Sheldon, 368 U.S. 817, 60 S. Ct. 263, 84 L. Ed. 515 (1961). The Court of Appeals for the Second Circuit in that case stated at page 384 as follows:
'Respondents correctly assert that diversity of citizenship alone was not enough to empower the court below to compel arbitration under Section 4 of the Act, and that, in addition, the contract in which the arbitration clause is included must be one 'evidencing a transaction involving commerce' within the meaning of Sections 1 and 2 of the Act. Robert Lawrence Co. v. Devonshire Fabrics Inc., supra (2 Cir., 271 F.2d 402); see Bernhardt v. Polygraphic Co. of America, 1956, 350 U.S. 198, 76 S. Ct. 273, 100 L. Ed. 199. Irrespective of whether Congress intended the coverage of the Act to be as broad as the constitutional dimensions of the commerce power, the facts found by the judge below are sufficient to support a finding that the transaction evidenced by the contract was within the statutory requirements of the Arbitration Act. It is true that the actual painting work was to be done within the confines of one state (Florida). However, as the trial judge correctly found, many other interstate elements were involved in the performance of this contract. For example, twenty per cent of Metro's work force at the Florida site, as well as a substantial number of supervisory personnel, were transported from New York City to Florida; and materials used by Metro's employees, were purchased from other states, as were materials used by other subcontractors, many of whom were also from out of state. The transaction evidenced by the contract thus involved commerce. See International Broth. of Elec. Workers v. N.L.R.B., 1951, 341 U.S. 694, 699, 71 S. Ct. 954, 95 L. Ed. 1299; Del E. Webb Const. Co. v. N.L.R.B., 8 Cir., 1952, 196 F.2d 841, 843 (38 A.L.R.2d 402).'
The 'test' developed by this case is in the concurring opinion of Chief Judge Lumbard which states as follows, at page 387:
'The significant question, therefore, is not whether, in carrying out the terms of the contract, the parties did cross state lines, but whether, at the time they entered into it and accepted the arbitration clause, they contemplated substantial interstate activity.'
Using this standard Judge Lumbard applied the test to the facts of the Metro case as follows at page 388:
'In this case, at the very top of the written contract between the parties was the following designation:
'Name of Job Armed Services Housing Project Homestead Air Force Base Homestead, Florida
'The body of the contract named one of the subcontractors as 'Metro Industrial Painting Corp. of 404 Exterior Street, Borough of Manhattan, New York New York.' When taken together with the uncontradicted statement in the affidavit submitted by the President of the Metro Corporation that at least 20% Of the men working on the project were transported from New York to Florida, and that the supervisory forces were from New York, it appears reasonably clear that the parties anticipated substantial interstate traffic. The trips made by supervisors must have been foreseen, as well as the interstate transportation of some of the working force to Florida. The contract was therefore, one 'evidencing a transaction involving commerce,' it came within 2 of the Arbitration Act, and federal law controlled construction of the arbitration clause.'
Now, applying the test of the majority and concurring opinions to the instant case we find as follows:
At the very top of the written contract between the parties was the following designation:
'The Upper Chichester Municipal Authority
'Upper Chichester Township 'Delaware County, Pa.'
In the middle of the contract cover we find:
'Sewer System and 'Pumping Station'
'Contract Documents and Specifications'
The body of the contract at page 13 named 'John Monte Co. of 21144 Greenfield Rd., Oak Park 37, Michigan,' as contractor. Of all the employees employed by Monte from the beginning of this job on October 22, 1958, until the end of the maintenance period on October 4, 1961, a sufficient number were non-resident Pennsylvanians as to indicate substantial interstate traffic was anticipated. This is not counting the two non-resident supervisors who made numerous interstate trips from Michigan to Pennsylvania from October 1958 until October 1961.
The employee figures which seem to be either uncontradicted in the Monte affidavits or representative as proved by the Authority depositions are the following:
John Monte Co.
Year Employees Residents Percent
1958 12 7 58.3
1959 89 15 16.8
1960 61 12 19.6
1961 6 4 66.6
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