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Monte v. Southern Delaware County Authority

August 26, 1963


Author: Staley

Before BIGGS, Chief Judge, and STALEY, Circuit Judge, and STEEL, District Judge.

STALEY, Circuit Judge.

The narrow question presented by this appeal is whether the district court is precluded from reviewing an arbitrators' award because the parties have contractually agreed that such review would be limited to the common pleas courts of Pennsylvania. The district court concluded that the award was properly before it,*fn1 but certified the case for immediate appeal pursuant to the Interlocutory Decisions Appeals Act, 28 U.S.C.A. § 1292(b). We granted Southern Delaware County Authority's application for permission to appeal.

In 1958 John Monte Company, a Michigan partnership, entered into a contract with the Authority covering the construction and installation of certain portions of a sanitary sewer system in Delaware County, Pennsylvania. While the contract was being performed, disputes arose, and in May 1960 Monte filed suit in the Court of Common Pleas of Delaware County, seeking a declaratory judgment that it was not to be surcharged for tardy completion of the contract, and requesting money damages for certain payments alleged to have been wrongfully withheld under the contract. When the Authority filed a motion for stay pending arbitration, Monte served notice of its demand for arbitration in accordance with the contract. The Authority did likewise, and the declaratory judgment action was apparently abandoned.

Following hearings before the selected arbitrators, an award was made on behalf of Monte on August 31, 1962. On September 4, 1962, the Authority filed a motion in the Court of Common Pleas of Delaware County to modify, correct, or vacate the award. On that very day Monte, basing jurisdiction on diversity of citizenship, jurisdictional amount, and the United States Arbitration Act, 9 U.S.C.A. §§ 1-14, filed a motion in the District Court for the Eastern District of Pennsylvania to confirm the award, and subsequently removed the Authority's state court motion to that court. The Authority then filed a motion in the district court to dismiss Monte's motion to confirm as well as a motion to dismiss or remand the removal of the Authority's state court motion. It is from the denial of these latter motions that this appeal was taken.

The Authority's challenge to the decision of the district court is premised on its view that the Pennsylvania Arbitration Act, Chapter 4, 5 Purdon's Pa. Stat. Ann. §§ 161-181, including that Act's court review and enforcement provisions, is an integral part of the contract, and further, that the contract as so construed precludes review in the district court. The state Act is said to be incorporated in the contract both as a matter of law and by the express agreement of the parties. Additionally, the Authority urges that the contract is not one "evidencing a transaction involving commerce" as required by § 2 of the United States Arbitration Act, 9 U.S.C.A. § 2.

Since it goes to the question of federal jurisdiction, we must first decide whether this contract evidences a transaction involving commerce.*fn2 The Authority argues that it does not, because the construction project was within the confines of the state of Pennsylvania. But such a narrow interpretation of this remedial Act finds no support in the cases. Indeed, in holding that the contract before it did not involve commerce, the Supreme Court in Bernhardt v. Polygraphic Co., 350 U.S. 198, 200-201, 76 S. Ct. 273, 275, 100 L. Ed. 199 (1956), articulated the standard to be applied in the following words:

"* * * Nor does this contract evidence 'a transaction involving commerce' within the meaning of § 2 of the Act. There is no showing that petitioner while performing his duties under the employment contract was working 'in' commerce, was producing goods for commerce, or was engaging in activity that affected commerce, within the meaning of our decisions."

In Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382 (C.A.2, 1961), the facts of which are strikingly similar to those of the instant case, the court held that the presence of many interstate elements in the performance of the contract satisfied the jurisdictional prerequisite. Here the district court fully set forth the facts upon which it based its conclusion that this contract evidenced a transaction involving interstate commerce. 212 F.Supp. at 610-611. We need not again recite them, but need only say that they amply support its conclusion.

As the district court pointed out, the parties concede that they followed the state Act throughout the arbitration hearings. Moreover, the district court properly held that the Authority is a corporate agency of the state, In re Municipal Authority of Twp. of Upper St. Clair, 408 Pa. 464, 184 A.2d 695 (1962), and that, as such, the provisions of the Pennsylvania Arbitration Act apply to this contract.*fn3 The relevant portion of § 178 of that Act, 5 Purdon's Pa.Stat.Ann. § 178, provides:

"Except as otherwise specifically indicated, all references in this act to the courts are to be construed to mean the common pleas courts of the county having jurisdiction of the parties or the subject matter. 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. * * *" (Emphasis supplied.)

In rejecting the Authority's contention that this section precluded review by it,*fn4 the district court held:

"* * * This is indeed a tortured construction of the Act. The Federal Arbitration Act is coextensive with the Pennsylvania Arbitration Act. If the jurisdictional requirements are met, then the Federal Act controls because the parties never specified in the contract which court would be proper for such proceedings. * * *"

We think that the district court's conclusion was based on a misconception of the agreement to arbitrate. As the court acknowledged, the Pennsylvania Arbitration Act must be applied to the contract. Moreover, the parties expressly recognized ...

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