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BELL CANADA v. ITT TELCOMS. CORP.

May 9, 1983

BELL CANADA, Plaintiff, against ITT TELECOMMUNICATIONS CORPORATION, INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION and INSURANCE COMPANY OF NORTH AMERICA, Defendants.


The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, D.J.

This diversity action for breach of contract was commenced by Bell Canada ("Bell"), a Canadian corporation, against ITT Telecommunications Corporation ("ITT"); a related company, International Telephone and Telegraph Corporation; and Insurance Company of North America, domestic corporations, each licensed to do, and doing, business in New York State. Nine days prior to the commencement of this action, ITT served upon Bell a demand for arbitration purportedly authorized by a provision of the agreement upon which Bell's instant action for breach of contract is based.

 Bell now moves pursuant to Fed. R. Civ. P. 65 for an order (1) enjoining ITT from proceeding with the arbitration, and (2) staying the arbitration pending the determination of this action. ITT cross-moves pursuant to the Federal Arbitration Act *fn1" ("the Act") and the inherent power of this Court to (1) stay this action as against all defendants, and (2) for an order pursuant to the Act *fn2" to compel arbitration of the dispute between it and Bell.

 Bell and ITT entered into the contract at issue on June 1, 1980 under which ITT agreed to design, manufacture and install communications equipment intended for use with an integrated system known as the Joint Surveillance System to be used by military and civil agencies of the United States and Canada for aircraft detection and control and related purposes. ITT was to furnish Bell two Regional Operations Control Center switches to be located in North Bay, Ontario, at sites known as Canada East and Canada West, along with certain specified site equipment. Time was to be of the essence with ITT obligated to deliver and install equipment as per a specified schedule. ITT had previously entered into similar contracts with five American telephone companies ("Telcos") and its demand for arbitration also extended to this group.

 During the progress of the work substantial differences arose among the various parties as to requirements and performance under the agreements, but attempts to reconcile their differences failed. On April 21, 1982, Bell served upon ITT notice of cancellation of the contract upon the ground that ITT had failed to meet scheduled dates of performance for the Canada East and Canada West locations and for other alleged defaults.

 Bell's complaint in this action alleges that ITT had breached the agreement as already referred to; also by failing to deliver payment and performance bonds required under the contract and seeks recovery of $1,268,109.20 previously paid to ITT, as well as other damages flowing from the alleged breaches. What is at issue on these respective motions is the scope of Article 4 of the contract which ITT invoked in serving its demand for arbitration. Before discussing the parties' differing contentions, it is desirable to note certain basic principles applicable to interpretation of arbitration clauses that have recently been reiterated by our Court of Appeals:

 [A]rbitration agreements are favored in the law and are to be broadly construed. An order to arbitrate should not be denied unless it can be said that the arbitration clause is not susceptible of a reasonable interpretation covering the asserted dispute. In short, doubts should be resolved in favor of coverage. United Steelworkers of America v. Warrior & Gulf Navigation. 363 U.S. 574, 582-83, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960).

 . . .

 On the other hand, a party cannot be required to submit to arbitration any disputes which he has not agreed to submit. *fn3"

 Also, while the parties in their extensive briefs and affidavits refer to the relative merits of their respective claims, the Court's role here is limited. It has no concern with the merits of their controversy. Its sole inquiry is directed to whether the parties agreed to arbitrate the particular matters at issue -- one to be decided within the framework of their agreement. *fn4"

 The parties are in accord that since their contract evidences a transaction in foreign commerce within the meaning of the Federal Arbitration Act, *fn5" the interpretation, validity and enforcement of the arbitration clause is governed by federal rather than state law, although the contract itself provides that its interpretation shall be governed by the laws of the State of New York. *fn6"

 Against that background of the law, we turn to the arbitration clause contained in Article 4 of the parties' agreement:

 COMPANY'S DECISION

 Company [Bell] shall be the interpreter of the contract but should Contractor [ITT] consider such interpretation to be at variance with the contract documents, he [sic] shall notify Company in writing before proceeding to carry out the work. Should Contractor disagree with Company's interpretation, Contractor shall perform such work according to the interpretation of company. Any question ...


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