The opinion of the court was delivered by: CHARLES L. BRIEANT
By motion fully submitted on December 11, 1991, defendant Chilewich International Corp. moves to stay this action pending arbitration in Moscow. Plaintiff Filanto has moved to enjoin arbitration or to order arbitration in this federal district.
This case is a striking example of how a lawsuit involving a relatively straightforward international commercial transaction can raise an array of complex questions. Accordingly, the Court will recount the factual background of the case, derived from both parties' memoranda of law and supporting affidavits, in some detail.
Plaintiff Filanto is an Italian corporation engaged in the manufacture and sale of footwear. Defendant Chilewich is an export-import firm incorporated in the state of New York with its principal place of business in White Plains. On February 28, 1989, Chilewich's agent in the United Kingdom, Byerly Johnson, Ltd., signed a contract with Raznoexport, the Soviet
Foreign Economic Association, which obligated Byerly Johnson to supply footwear to Rasnoexport. Section 10 of this contract--the "Russian Contract"--is an arbitration clause, which reads in pertinent part as follows:
"All disputes or differencies which may arise out of or in connection with the present Contract are to be settled, jurisdiction of ordinary courts being excluded, by the Arbitration at the USSR Chamber of Commerce and Industry, Moscow, in accordance with the Regulations of the said Arbitration." [sic]
Ex. C to July 19 Simon Chilewich Affidavit. This contract was signed by Byerly Johnson and by Raznoexport, and is sometimes referred to as "Contract No. 32-03/93085".
The first exchange of correspondence between the parties to this lawsuit is a letter dated July 27, 1989 from Mr. Melvin Chilewich of Chilewich International to Mr. Antonio Filograna, chief executive officer of Filanto. This letter refers to a recent visit by Chilewich and Byerly Johnson personnel to Filanto's factories in Italy, presumably to negotiate a purchase to fulfill the Russian Contract, and then states as follows:
"Attached please find our contract to cover our purchase from you. Same is governed by the conditions which are enumerated in the standard contract in effect with the Soviet buyers [the Russian contract], copy of which is also enclosed."
Ex. A to September 16 Melvin Chilewich Affidavit. The next item in the record is a letter from Filanto to Chilewich dated September 2, 1989. Ex. D to October 29 Filograna Affidavit. This letter refers to a letter from Chilewich to Filanto of August 11, 1989, which "you [Chilewich] sent me with the contracts n 10001-10002-10003." These numbers do not correspond to the contract sued on here, but refer instead to other, similar contracts between the parties.
None of these contracts, or their terms, are in the record, both parties having been afforded ample opportunity to submit whatever they wished.
The last paragraph of the September 2, 1989 letter from Filanto to Chilewich states as follows:
"Returning back the enclosed contracts n 10001-10002-10003 signed for acceptance, we communicate, if we do not misunderstood, the Soviet's contract that you sent us together with your above mentioned contract, that of this contract we have to respect only the following points of it:
-n 7 Delivery - Acceptance of Goods
We ask for your acceptance by return of post." [SIC]
Ex. D to October 29 Filograna Affidavit. The intent of this paragraph, clearly, was to exclude from incorporation by reference inter alia section 10 of the Russian contract, which provides for arbitration. Chilewich, for its part, claims never to have received this September 2 letter. In any event, it relates only to prior course of conduct.
It is apparent from the record that further negotiations occurred in early 1990, but the content of those negotiations is unclear; it is, however, clear that deliveries of boots from Filanto to Chilewich were occurring at this time, pursuant to other contracts, since there is a reference to a shipment occurring between April 23, 1990 and June 11, 1990. Ex. H to December 4 Simon Chilewich Affidavit.
The next document in this case, and the focal point of the parties' dispute regarding whether an arbitration agreement exists, is a Memorandum Agreement dated March 13, 1990. This Memorandum Agreement, number 9003002, is a standard merchant's memo prepared by Chilewich for signature by both parties confirming that Filanto will deliver 100,000 pairs of boots to Chilewich at the Italian/Yugoslav border on September 15, 1990, with the balance of 150,000 pairs to be delivered on November 1, 1990. Chilewich's obligations were to open a Letter of Credit in Filanto's favor prior to the September 15 delivery, and another letter prior to the November delivery. This Memorandum includes the following provision:
Ex. A to July 24 Simon Chilewich Affidavit. Chilewich signed this Memorandum Agreement, and sent it to Filanto. Filanto at that time did not sign or return the document. Nevertheless, on May 7, 1990, Chilewich opened a Letter of Credit in Filanto's favor in the sum of $ 2,595,600.00. The Letter of Credit itself mentions the Russian Contract, but only insofar as concerns packing and labelling. Ex. A to December 4 Simon Chilewich Affidavit.
Again, on July 23, 1990, Filanto sent another letter to Chilewich, Ex. D to October 23 Filograna Affidavit, which reads in relevant part as follows:
"We refer to Point 3, Special Conditions, to point out that: returning back the above-mentioned contract, signed for acceptance, from Soviet Contract 32-03/93085 we have to respect only the following points of it:
- No. 5 - Packing and Marking
- No. 6 - Way of Shipment
- No. 7 - Delivery Acceptance of Goods".
It should be noted that the contract referred to in this letter is apparently another contract between the parties, as the letter refers to "Sub. Contract No. 32-03/03122", while the contract sued on in the present action is No. 32-03/03123.
This letter caused some concern on the part of Chilewich and its agents: a July 30, 1990 fax from Byerly Johnson, Chilewich's agent, to Chilewich, mentions Filanto's July 23 letter, asserts that it "very neatly dodges" certain issues, other than arbitration, covered by the Russian Contract, and states that Johnson would "take it up" with Filanto during a visit to Filanto's offices the next week. Ex. G to December 4 Simon Chilewich Affidavit.
Then, on August 7, 1990, Filanto returned the Memorandum Agreement, sued on here, that Chilewich had signed and sent to it in March; though Filanto had signed the Memorandum Agreement, it once again appended a covering letter, purporting to exclude all but three ...