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May 13, 1991


The opinion of the court was delivered by: Sweet, District Judge.


Defendants/respondents Koehring Company and AMCA International Corporation (collectively "AMCA") have moved pursuant to Rules 12(b)(6), 56(b), 60(b)(6), and 62(b) of the Federal Rules of Civil Procedure and Sections 3 and 4 of the Federal Arbitration Act, 9 U.S.C. § 1-14 (1970) to dismiss the complaint of plaintiff Blue Tee Corporation ("Blue Tee") in 90 Civ. 2701 (the "Injunction Action"), to compel Blue Tee to proceed to arbitration before the AAA pursuant to the parties' written agreement to arbitrate, and to stay all proceedings in 90 Civ. 2654 (the "Confirmation Proceeding") in which Blue Tee seeks to confirm the findings of Arthur Andersen & Co. ("Arthur Andersen") dated March 30, 1990, or alternatively to stay the entry and/or the enforcement as a money judgment or any judgment confirming Arthur Andersen's findings. Blue Tee has moved to clarify the judgment entered by the court on January 14, 1991 (the "Judgment"). The motions of AMCA are granted except with respect to a stay, and the motion of Blue Tee is granted as set forth below.

Prior Proceedings

On April 20, 1990 Blue Tee filed its petition to confirm the arbitration award issued by Arthur Andersen on March 30, 1990 (the "Petition") and its complaint seeking (1) to enjoin the arbitration commenced by AMCA before the AAA in Charlotte, North Carolina (the "Charlotte Arbitration") in violation of the express terms of the Purchase Agreement, and (2) indemnity and reimbursement from AMCA for Blue Tee's attorneys' fees, costs and disbursements incurred in the litigation and in enforcing the Award, pursuant to the terms of the Purchase Agreement. On June 1, 1990, AMCA served its motion to vacate the Award.

On December 21, 1990, the court issued its opinion (the "Opinion") granting Blue Tee's petition to confirm, denying AMCA's motion to vacate, and denying Blue Tee's motion for sanctions, 754 F. Supp. 26. On January 14, 1991, the court signed the Judgment entered upon the Opinion.

On January 23, 1991, in response to Blue Tee's letter to the court of January 18, AMCA submitted an extensive letter setting forth its objections to the Judgment and enclosed its counter-proposal and an additional complete set of its motion papers on January 14. The counter-proposal recites "that the respective parties had no obligation to pay any sums to each other until further order of this Court." On January 24, 1991, Blue Tee submitted its letter response to the arguments set forth in AMCA's January 23 letter.

On January 30, after being advised by AMCA's counsel that the letters exchanged between the parties would be treated by the court as motions and that the motions would be heard by the court on February 11, Blue Tee consented to stay enforcement of the Judgment pending the disposition of the pending motions and AMCA agreed to place the amount currently owing to Blue Tee in an interest-bearing escrow account as security for the Judgment.

The Motion To Compel Arbitration Is Granted

Section 12.15 of the Asset Purchase Agreement of May 26, 1989 (the "Purchase Agreement") provides in relevant part:

  Arbitration. Any dispute, controversy or claim
  arising out of or in connection with or relating to
  this Agreement . . . shall be determined and
  settled by arbitration in the City of New York
  pursuant to the rules then in effect of the
  American Arbitration Association . . .

The dispute between the parties concerns the proper interpretation and performance of their contract, including their last minute understandings.

The disagreements between AMCA and Blue Tee concerning the nature and intended effect of various last minute understandings pertaining to inventory valuations (the "Understandings") is a "controversy . . . arising out of or in connection with or relating to" the Purchase Agreement though not part of the Section arbitration conducted by Arthur Andersen. Similarly, AMCA's claim that Blue Tee committed fraud by purporting to agree to the Understandings with the intent to disown the Understandings when it came time to determine the final purchase price is clearly a "claim arising out of" the Purchase Agreement. Blue Tee, therefore, is bound by virtue of Section 12.15 of the Purchase Agreement to proceed to arbitration before the AAA.

The Injunction Action Is Dismissed

It is well-settled that where a defendant (such as AMCA in the Injunction Action) can establish that no relief can be granted to a plaintiff (such as Blue Tee) under any set of facts that could be proved consistent with the allegations of the complaint, defendant is entitled to dismissal of the complaint. H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 2906, 106 L.Ed.2d 195 (1989); Scheuer v. Rhodes, 416 U.S. 232, 237, 94 S.Ct. 1683, 1687, 40 L.Ed.2d 90 (1974); Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir. 1984), cert. denied, 470 U.S. 1084, 105 S.Ct. 1845, 85 L.Ed.2d 144 (1985); Branko International, Inc. v. Saudi Arabian Airlines, 704 F. Supp. 386, 389 (S.D.N.Y. ...

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