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October 19, 1976


The opinion of the court was delivered by: KNOX

KNOX, District Judge.

 In this case, the court must interpret the scope and meaning of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, enacted into law in the United States as 9 U.S.C. 201 et seq. and the extent of the parties' contractual agreement to arbitrate. On June 5, 1970, Fuller Company, a Pennsylvania corporation, and Compagnie Des Bauxites De Guinee [Hereinafter: CBG], a Delaware Corporation, executed a contract under which Fuller would design, manufacture, and sell a drying and calcining plant and certain related equipment to be used at CBG's bauxite plant in the Republic of Guinea. The equipment was to be manufactured by Fuller in the United States and shipped FOB at Philadelphia.

 In April, 1974, Societe de Traction et d'Electricite, S.A. ("Tractionel"), a Belgian corporation retained by CBG as a consulting engineer, issued a draft of a provisional acceptance certificate with certain reservations relating to alleged defects in the equipment supplied by Fuller. Fuller refused to sign this certificate as well as three subsequent drafts of provisional acceptance certificates issued in December, 1974, by Tractionel.

 On January 28, 1975, a meeting of representatives of CBG, Tractionel, and Fuller was held in Pittsburgh, Pennsylvania. Fuller alleges that the purpose and effect of this meeting was to settle all outstanding differences of the parties. CBG, on the other hand, alleges that the meeting was solely concerned with the parties' differences over the drafts of the provisional acceptance certificates and that the meeting did not result in any final settlement agreements.

 On November 5, 1975, CBG submitted a request for arbitration to the Court of Arbitration of the International Chamber of Commerce seeking indemnification for certain costs related to alleged defects in the equipment supplied by Fuller. Fuller responded on December 29, 1975, but pleaded the alleged January 28, 1975, settlement as a defense. On April 14, 1975, Fuller, filed a petition for a declaratory judgment in the Court of Common Pleas of Allegheny County. Fuller's petition sought a determination of the binding effect of the January 28, 1975, settlement. On May 20, 1975, CBG removed the case to this court.

 This opinion will not resolve the underlying claims and disputes between the parties. Rather, the court at this stage of the proceedings is called upon to determine which of three possible forums should proceed with factual hearings on the merits:

 (1) This court.

 (2) An arbitration panel in Pittsburgh. *fn1"

 (3) The Court of Common Pleas of Allegheny County.

 Four motions are pending before the court:

 (1) Fuller's motion to strike the supplemental affidavit of John Lambert and the affidavit of Paul DuPont.

 (2) Fuller's motion to remand.

 (3) CGB's motion for stay of trial and all further proceedings pending issuance of final award or determination in the arbitration.

 (4) Fuller's motion for a preliminary injunction.

 (1) Motion to Strike Affidavits

 This motion will be denied and the court will consider all of the evidence presented by the parties. While the affidavits of John W. Lambert and Paul DuPont are parol evidence, as Fuller argues, they are clearly admissible under two well recognized exceptions to the parol evidence rule.

 First, the court has the right to consider extrinsic evidence when the terms of a contract are ambiguous. Keystone Aeronautics Corporation v. R. J. Enstrom Corporation, 499 F.2d 146 (3d Cir. 1974); Thompson-Starrett International, Inc. v. Tropic Plumbing, Inc., 457 F.2d 1349 (3d Cir. 1972). Such an ambiguity exists in regard to Fuller's contractual obligation to provide personnel in Guinea -- a matter of crucial significance in considering the jurisdiction of this court. (Discussed in detail in Part Two of this opinion). The contract contains the following conflicting provisions, clearly creating an ambiguity:


"The supervision of erection and the provisions of a chief operator after the startup of industrial operation are not included.


Appendix II to the contract.


Section 6. At the request of the Engineer, the Contractor shall provide the services of an experienced chief erection supervisor and one or more other experienced erection supervisors who shall collectively supply the necessary know-how, technical information and advice for proper off-loading at Port Kamsar, erection, installation and Start-up of Industrial Operation of the Equipment, and who shall give the necessary instructions for such erection and installation to the erection and electrical personnel designated by the Engineer to receive such instructions. The Contractor shall provide the services of such supervisors for such periods as shall have been reasonably requested in writing by the Engineer.


Section 7. In order to ensure the proper operation of the Equipment after the Start-up of Industrial Operation, the Contractor shall provide the services of a chief operator if so requested in writing by the Engineer, to operate the Equipment for such period as shall have been reasonably requested by the Engineer."

 A second exception to the parol evidence rule is that the conduct of the parties may serve to vary the terms of a contract. Under the Uniform Commercial Code, applying to this case under either New York or under Pennsylvania law, courses of dealing, usages of trade, courses of performance, modifications, and waivers may all supplement or alter the written terms of a contract. *fn2" The affidavits of Lambert and DuPont fall under one or more of these five exceptions to the parol evidence rule.

 (2) Motion to Remand

 Jurisdiction of this court is invoked by CBG pursuant to the terms of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, enacted into law by Congress on July 31, 1970, as 9 U.S.C. 201-208. (hereinafter: The Convention). As a contract entirely between citizens of the United States, it is clear that the Fuller-CBG contract meets the jurisdictional requirements of the implementing legislation to the Convention if any one of four conditions are met: *fn3"


(1) The agreement involves property located abroad.


(2) The agreement envisages performance abroad.


(3) The agreement envisages enforcement abroad.


(4) The agreement has some other reasonable relation with one or more foreign states.

 No court has yet interpreted the meaning of the Convention as it applies to contracts executed between citizens of the United States. However, some guidance can be obtained from the legislative history of the act.

 Mr. Richard D. Kearney, the Chairman of the Secretary of State's Advisory Committee on Private International Law gave the following testimony before the Senate Committee on Foreign Relations (Chaired by Senator Fullbright) on February 13, 1970:


"We have included in section 202 a requirement that any case concerning an agreement or award solely between U.S. citizens is excluded unless there is some important foreign element involved, such as property located abroad, the performance of a contract in a foreign county, or a similar reasonable relation with one or more foreign states. The reasonable relationship criterion is taken from the general provisions of the Uniform Commercial Code. Section 1-105(1) of the code *fn4" permits the parties to a transaction that bears a reasonable relationship to any other state or nation to specify that the law of that state or nation will govern their rights and duties.


In this connection of course, it should be recalled that what we are dealing with under the Convention is solely a situation in which the parties have voluntarily agreed to arbitration. The Convention and implementing legislation will apply to a transaction only because the parties to that transaction have agreed to settle disputes by arbitration. The provision on choice of law in the Uniform Commercial Code is also based on the same kind of voluntary action by the parties to a transaction. Since the Commercial Code is basic law on commercial transactions in the United States it seemed appropriate to incorporate its test of reasonable relationship into the implementing legislation on foreign arbitral awards." [Footnote added.] Appendix to S.Rep.No. 702, 91st Cong. 2d Sess. at 6 (1970).

 The comments to section 1-105 provide the following explanation of what constitutes a reasonable relationship:


"Ordinarily the law chosen must be that of a jurisdiction where a significant enough portion of the making or performance of the contract is to occur or occurs." 12A PS 1-105, Comment one. *fn5"

 The Pennsylvania Bar Association's Notes to 12A PS 1-105 seem to reflect an even broader definition of the meaning of reasonable relationship:


"Choice of Law. The rules governing the instances in which a Pennsylvania court shall apply the Code are broad -- in many instances broader than the 'conflicts' rule which otherwise would be applicable. * * * The Code would make a significant change in the rules of conflict of laws, which are designed to fix a single jurisdiction as the source of the legal rule. Under the Code the forum would apply the Pennsylvania (Code) rule where any one of several aspects of the transaction is connected with the state. This broadens the possibility that another forum which has not adopted the Code would apply a different law to the same transaction, -- and thereby make the decision turn on choice of the forum."

 The court has not discovered any cases decided under 1-105 involving facts similar to those of the case, sub judice. The reasonable relationship criteria appears to constitute a flexible standard which the courts apply on a case-by-case basis. *fn6"

 Bearing in mind the text of 9 U.S.C. § 202, the statement of Mr. Kearney, and the reasonable relationship standard reflected in 12A PS 1-105, the court has concluded that this contract bears a sufficient connection with the Republic of Guinea to sustain jurisdiction under the Convention. *fn7" Specifically, the June 5, 1970, Fuller-CBG contract meets the requirement under 9 U.S.C. § 202 of envisaging performance abroad. *fn8"

 Three letters attached to the affidavit of John W. Lambert indicate that the June 5, 1970, Fuller-CBG contract envisaged that Fuller personnel would provide extensive technical services in Guinea. *fn9" The European Variation orders, Exhibits D-H of the affidavit of John W. Lambert, indicate that CBG actually paid substantial sums of money to Fuller for the services of engineers and erection supervisors for extended periods of time in 1972 and 1973. *fn10"

 John W. Lambert's affidavit indicates that the total cost of Fuller's technical representatives in Guinea was $269,562.08 (at page 4) while Philip Richter's affidavit in support of motion to remand (at page 3) alleges that the total amount was $192,020.00.

 The statements contained in the affidavits submitted in this case differ sharply in regard to the significance the parties attached to overseas technical services when entering into their contract. Philip Richter, manager for project management of Fuller alleges that this technical advice in Guinea was at most a very minor and insignificant part of the contract while John W. Lambert, chief engineer of CBG and Paul DuPont, chief engineer of Tractionel allege that overseas technical services of Fuller were relied upon by CBG in entering into the contract and constitute a crucial part of the bargain. *fn11" It is not necessary to resolve this conflict in the evidence. Clearly, extensive overseas technical services were contemplated by Fuller in entering into the contract and were in fact provided. *fn12"

 In addition to the substantial amount of performance of this contract in Guinea already mentioned, a number of other foreign contacts serve to create a "reasonable relationship with one or more foreign states:


(1) Under the original agreement, arbitration was to occur in Geneva Switzerland. Thus, the original agreement envisaged enforcement overseas, although the parties have subsequently agreed to arbitration in Pittsburgh, Pennsylvania.


(2) Section 2(s) of Contract No. 16 requires Fuller to deliver replacement parts to Port Kamsar, Guinea. (Further performance overseas).


(3) Section 2(d)(ii)(1) of Contract No. 16 requires Fuller to be afforded full access and opportunity to recommend modification or adjustments of the equipment in Guinea after the start-up of industrial relations. (Further performance overseas).


(4) Section 2(d)(ii)(5) of Contract No. 16 guarantees Fuller full access and opportunity to recommend improvements of possible defects as to the functioning or manufacturing, during the performance tests of the equipment in Guinea. (Further performance abroad).


(5) To the extent that Fuller had erection responsibilities in Guinea, it is arguable that the contract involves property abroad. But in light of the ambiguity in the contract in this regard and the fact that Fuller shipped the goods FOB Philadelphia, the court places little reliance on this point.


(6) Tractionel is headquartered in Brussels, Belgian and appears to have had important connections with all phases of this contract as witnessed by their attendance at the January 28, 1975, meeting in Pittsburgh, Pennsylvania. Under Section 8.6.2 of Volume I -- General Conditions, Fuller was to apply to Tractionel for the issuance from Brussels, Belgian of Provisional and Final Acceptance Certificates. *fn13"

 The motion to remand will therefore be denied.

 (3) Motion to Stay

 Now that jurisdiction has been determined to properly lie in this court, the question arises as to how it should be exercised. The court will order that arbitration be convened pursuant to the terms of the implementing legislation to the Convention. The defendant's motion to stay trial and all further proceedings pending issuance of final award or determination in the arbitration will therefore be granted.

  The main bone of contention in this case is the purpose and effect of the January 28, 1975, meeting of representatives of Tractionel, CBG and Fuller held in Pittsburgh, Pennsylvania. Consideration of events prior to and subsequent to this meeting in some detail is necessary in order to determine whether further proceedings appropriately lie with this court or with an arbitration panel.

 Mr. John W. Lambert of CBG in his affidavit in support of motion to stay at page 7, states the purpose of the January 28, 1975, meeting to be the following:


"In order to attempt to resolve the outstanding issues concerning the reservations in the drafts of the Provisional Acceptance Certificates issued in December, 1974, and in order to resolve certain other related issues concerning the payment of the price of the drying and calcining plant by CBG as well as payment by Fuller of the costs of correcting the defects mentioned in the Provisional Acceptance Certificates issued by Tractionel in December 1974, Mr. DuPont of Tractionel sometime late in December, 1974, suggested, and I agreed, that a meeting should be held among CBG, Fuller and Tractionel in January 1975. That meeting was called solely to consider issues related to the payment of the price of the drying and calcining plant and the acceptance by Tractionel and Fuller of a Provisional Acceptance Certificate or Provisional Acceptance Certificates covering the drying and calcining plant."

 Mr. Paul DuPont of Tractionel in his first affidavit in support of motion to stay states at page 5, the purpose of the January 28 meeting to be as follows:


"In order for CBG and Fuller to reach an agreement regarding the defects for which reservations had been made in the three Provisional Acceptance Certificates issued by Tractionel in December, 1974, a meeting was held among CBG, Fuller and Tractionel."

 In contrast with the above two affidavits, Mr. Philip Richter, in his affidavit in support of Fuller's motion for a preliminary injunction, at page 3, states the purpose of the meeting as follows:


"The purpose of this conference was to close out all disputes, controversies, backcharges and claims between the parties arising out of contract # 16."

 On February 10, 1975, Tractionel sent minutes of the meeting to all parties with a cover letter which is attached hereto as Exhibit A.

 The parties agree that the money mentioned in numbered paragraphs two and three of Tractionel's letter have been paid. However, provisional and final acceptance certificates and a final acceptance certificate, mentioned in numbered paragraphs 1, 4 and 5 have not been signed.

 The reference in numbered paragraphs 4 and 5 to the necessity of signed provisional and final acceptance certificates is in accord with the basic terms of the contract:




8.4.1 The CONTRACT shall be considered as being completely fulfilled only on the issue by the ENGINEER of a FINAL ACCEPTANCE certificate endorsed by the Chairman of the C.C.C. and by the OWNER. The said certificate made out according to par. 8.6.2 hereafter shall be delivered within 28 days from the date of expiry (sic) of the Period of Guarantee, as defined in par. 8.5.1 hereafter. Such provisions shall take full effect notwithstanding any previous intervention or taking over by the OWNER. FINAL ACCEPTANCE shall however on no account be granted as long as the corresponding PROVISIONAL ACCEPTANCE has itself not been granted.


8.4.2 The FINAL ACCEPTANCE certificate shall alone signify final approval of the WORKS and shall imply acknowledgment of the proper fulfilment of the CONTRACT. No other certificate shall signify final acceptance of the amount of the CONTRACTOR's claims or of additional WORKS or of variations ordered by the ENGINEER or shall affect the powers of the ENGINEER or put an end thereto."

  It appears that the January 28, 1975, meeting may be regarded as having any one of four possible effects:


(1) It may constitute a final settlement of all outstanding claims of the parties as Fuller argues. However, the contract provides for final settlement only after provisional and final acceptance certificates have been signed by all parties and this requirement was affirmed in Tractionel's letter of February 10, 1975. Thus, a final settlement can only be found by virtue of conduct of the parties amounting to a waiver of the terms of the original agreement.


(2) The meeting may constitute a modification of the original agreement concerning the responsibility of Fuller for the alleged defects in the equipment supplied to Guinea.


(3) The meeting may have only served to iron out differences in the wording of the provisional acceptance certificates and thus may not have effected any change in the original contract.


(4) The parties may have discussed problems arising from the contract but reached no conclusions or agreements of any type.

 The arbitration clause in the original agreement reads as follows:




Should any dispute arise from interpretation or performance of the CONTRACT, the parties shall agree to settle such disputes by arbitration, according to the Rules of Conciliation and Arbitration of the International Chamber of Commerce, of one or several arbitrators designated in conformity with said Rules. Arbitration shall take place in Geneva."

 The issue before the court can thus be stated as follows: Is the above language, under applicable legal standards, broad enough to encompass resolution of the four possible conflicting inferences regarding the effect of the January 28, 1975, meeting?

 Initially, the court must determine which law to apply in interpreting the scope of the above arbitration clause. While the contract states that the substantive law of the state of New York applies, *fn14" this provision would seem to be of no effect if New York does not bear a reasonable relationship to the case.

 12A PS 1-105, discussed at length in Part Two of this memorandum, supra, requires that jurisdictions specified in choice of law provisions in contracts bear reasonable relationships to the transaction. *fn15" The record in this case discloses no connection of New York to the making or performance of this contract other than the retention by CBG of New York counsel. Therefore, Pennsylvania appears to be the only state bearing a reasonable relationship to this transaction.

 A careful study of Pennsylvania law discloses that the precise issue before this court has not been decided. The court has concluded, however, that the Supreme Court of Pennsylvania would decide that a case of this type should proceed to arbitration.

 The Pennsylvania Supreme Court has stated the focus of judicial inquiry in deciding questions of arbitrability to be as follows:


"When one party to an agreement to arbitrate seeks to enjoin the other from proceeding to arbitration, judicial inquiry is limited to the questions of whether an agreement to arbitrate was entered into and whether the dispute involved falls within the scope of the arbitration provision."

 Flightways Corp. v. Keystone Helicopter Corp., 459 Pa. 660, 331 A.2d 184 (1975).

 The court must also be guided by the general judicial presumption in favor of arbitration, as this court has previously stated:


"Under Pennsylvania law, with its favorable policy towards arbitration, doubts as to whether an arbitration clause may be interpreted to cover the asserted dispute should be resolved in favor of arbitration unless the court can state with 'positive assurance' that the dispute was not meant to be arbitrated." Gavlik Construction Co. v. H. F. Campbell, Co., 389 F. Supp. 551, 554 (W.D.Pa.1975)., aff'd in part, 526 F.2d 777 (3d Cir. 1975).

 A strong preference for arbitration is also reflected in the legislative history to the Convention. *fn16"

 Two 1975 decisions of the Pennsylvania Supreme Court are of great assistance in analyzing the issues in the case sub judice, although not directly on point. Waddell v. Shriber, 465 Pa. 20, 348 A.2d 96 (1975) and Chester City Sch. Auth. v. Aberthaw Construction Co., 460 Pa. 343, 333 A.2d 758 (1975). In each case, one of the parties to an arbitration agreement unilaterally terminated the contract. The court held in each case that disputes arising out of the contractual relationship of the parties must be arbitrated, despite the termination.

 The Pennsylvania Supreme Court in Waddell explained this holding as follows:


"The reasons contracting parties agree to arbitration -- the need for a faster means of dispute settlement than the courts can provide and the desire to utilize a less formal and less expensive decisionmaking process -- are seldom affected by the termination of the contractual relationship. When parties create a contractual relationship which includes a broad arbitration agreement, they intend to include within the scope of arbitration any dispute arising from the termination of that contractual relationship unless they clearly evidence a purpose to exclude such disputes."

 See also two recent decisions of this district in accord with the above two cases. Kastanias v. Nationwide Auto Transporters, Inc., 390 F. Supp. 720 (W.D.Pa.1975) (Marsh, J.); Zenol, Inc. v. Carblox, Ltd., 334 F. Supp. 866 (W.D.Pa.1971) (Knox, J.).

 Fuller argues that cases such as Waddell and Chester City giving broad scope to arbitration agreements should be distinguished from this case on the basis of the language of the arbitration clauses involved. For instance, the arbitration clause in Chester City refers to "all claims, disputes and other matters in question arising out of, or related to this Contract or the breach thereof." (Emphasis added).

 Fuller's argument constitutes a distinction without legal meaning. In the first place, no cases are cited which have relied on additional language -- such as the related to clause in Chester City -- not present in the contract between CBG and Fuller. Secondly the agreement between Fuller and CBG to arbitrate all disputes arising from interpretation or performance is very broad and inclusive. Finally, the discussions at the January 28, 1975, meeting were clearly related to the performance of the contract and additional language such as that found in Chester City is not necessary to encompass these discussions within the scope of the arbitration agreement.

 Fuller also argues that settlement agreements should be viewed differently than terminations -- or cancellations, modifications or rescissions. The court agrees that this may be true when there is a dispute solely as to the terms of such an agreement and not over its existence. Such was the situation in the case of Morris et al. v. Swan, 94 Dauph. 142 (1971). In that case, all parties agreed that a 1969 contract had superseded a 1966 contract. 94 Dauph. at p. 143. The court held that the 1969 agreement was a new, independent contract containing no arbitration agreement and that the 1966 arbitration clause was therefore rendered null and void. *fn17"

 Morris can therefore be distinguished from Waddell and Chester City on the existence of a new, independent contract. Fuller's attempt to distinguish between terminations and settlement agreements again is without legal significance. Waddell and Chester City indicate that broad arbitration clauses encompass disputes arising out of alleged attempts to wind up the agreement of the parties -- whether they are called terminations, settlements, rescissions or cancellations does not seem important. The court therefore reads the law of Pennsylvania to be that only a new contract terminates the life of a broad arbitration clause. But when such a settlement agreement is only one of four possible inferences arising from the conduct of the parties at a meeting held in the course of performing the contract, the court predicts that Pennsylvania courts would order arbitration.

 Finally, it should be noted that the parties could have agreed upon a time span or a sequence of events -- such as termination or settlement -- which would cancel the duty to arbitrate. The Pennsylvania courts have not hesitated to uphold such clauses. For instances, in Emmaus Municipal Authority v. Eltz, 416 Pa. 123, 204 A.2d 926 (1964), the court held that a clause in the contract stating that a demand for arbitration shall be filed in no case later than the time for final payment indicated that arbitration should be used only during the lifetime of the contract. Arbitration therefore would not survive termination.

  This court has recently had occasion to consider the effect of an arbitration clause on work allegedly performed -- but not paid for -- by a subcontractor. Gavlik Construction Co. v. H. F. Campbell Co., 389 F. Supp. 551 (W.D.Pa.1975) aff'd on this point 526 F.2d 777 (3d Cir. 1975). The court held that the arbitration clause remained in effect after full performance of the contract. The contract had no clause requiring a demand for arbitration before final payment and on this basis the case of Hussey Metal Division v. Lectromelt Furnace Division, 471 F.2d 556 (3d Cir. 1972), was distinguished. The contract in Hussey Metals contained a clause similar to that in Emmaus requiring an arbitration demand before final payment.

  In the case sub judice there is no language terminating the agreement to arbitrate and the arbitration clause is broad and inclusive. The court therefore cannot state with positive assurance that the four possible conflicting inferences arising from the January 28, 1975, meeting are not for a panel of arbitrators to decide.

  (4) Motion for a Preliminary Injunction

  Granting of the defendant's motion for a stay of trial renders the plaintiff's motion for a preliminary injunction moot.


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