The opinion of the court was delivered by: JUDD
HON. ORRIN G. JUDD, U.S.D.J.
In this diversity contract action, defendant Docutel Corporation has moved for an order directing plaintiff to submit its claim to arbitration, and staying the action pending such arbitration. The parties have stipulated to adjourn the taking of depositions and the production of documents until after the decision on this motion.
Plaintiff entered into an agreement dated September 9, 1971 with defendant Winston-Donovan, a joint venture acting as agent for defendant Docutel Corporation, to do certain work on the installation of Docutel's Telecar Outbound Baggage Handling System at the expanded terminal building of Pan American World Airways, Inc. (Pan Am) in the John F. Kennedy International Airport. The agreed compensation was to be $671,000.
Docutel had made a General Contract with Pam Am in June 1970 for the manufacture, delivery and installation of the baggage handling system. Thereafter in January 1971, defendants Winston Bros. Company and Donovan Construction Company of Minnesota entered into a joint venture named Winston-Donovan, which agreed to assist Docutel in the planning and installation of the baggage handling system and the coordination of the subcontractors' work.
The General Contract between Docutel and Pan Am included an arbitration clause among its General Conditions. Article XVIII headed Insurance and Liabilities contains the arbitration clause in question:
All disputes or controversies arising under, out of, in connection with, or in relation to this Agreement which cannot be resolved between the parties direct shall be finally settled by arbitration, to be held at New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. . . .
In the September 9, 1971 contract between plaintiff and Winston-Donovan, designated Subcontract No. 4, plaintiff is desginated as the Subcontractor. The Subcontract, signed by plaintiff and Winston-Donovan and approved in writing by Pan Am and Docutel, states on the very first page:
Whereas, Subcontractor acknowledges that it is familiar with the terms and conditions of the General Contract and that the General Contract as hereinabove defined is a part hereof and is incorporated as a part of this Subcontract as though set forth in full herein ; and
Whereas, the parties are desirous of entering into a Subcontract whereby Subcontractor shall undertake the performance of a part of the work to be done under the General Contract. . . . (Emphasis added).
A second agreement between plaintiff and Winston-Donovan dated May 5, 1972, and designated Subcontract No. 5, contained the same language. The agreed compensation was to be $16,241.25.
The complaint sets forth that on or about August 1, 1972 plaintiff had completed 99 percent of its work under Subcontract 4, 100 percent of its work under Subcontract 5, and all agreed upon extra work, but that defendants failed to make payments of the money remaining due. A supporting affidavit asserts that Winston-Donovan and Docutel were progressively in arrears of payment from the spring of 1972, that in August 1972 plaintiff could not get a schedule from defendants for the completion of the insignificant amount of remaining work, and that plaintiff was forced to leave the job-site in November 1972 because of defendants' breaches of contract.
Plaintiff's executive vice-president asserts that no mention was made of the arbitration clause prior to the filing of the complaint in November 1972 and that he was not informed about it until January 1973, just before Docutel served the pending motion.
The complaint in its first count asks for $70,000 balance due under the contracts, $120,000 for extra work, and $50,000 for damages, a total of $240,000. Other counts ask for the same amount as quantum meruit, for $50,000 from Pan Am and Docutel for damages for negligent failures on defendants' part, and for $190,000 from Pan Am and Docutel as unjust enrichment.
Defendants obtained extensions of time to respond to the complaint until February 1, 1973. Meanwhile, plaintiff served a notice to depose six officers or employees of Docutel and to obtain inspection of contracts, correspondence, memoranda, job records, audit reports, and other documents. A stipulation suspending discovery was signed on January 22, 1973 and the motion papers were served on February 1, 1973.
Plaintiff asserts that it has been given no explanation by Docutel of the reason it has not been paid for the work it performed and that other subcontractors of Docutel and Winston-Donovan have not been paid, and implies that the purpose of the demand for arbitration is primarily to delay the day when Docutel will have to pay its bills. Docutel in its papers in support of its motion for a stay has failed to disclose any defenses which it may have to plaintiff's claim for payment for the work it has done.
Pan Am filed an answer on March 19, 1973, with a cross-claim against Winston-Donovan and its ...