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HUNTINGTON INT'L CORP. v. ARMSTRONG WORLD INDUS.

October 22, 1997

HUNTINGTON INTERNATIONAL CORP., Plaintiff,
v.
ARMSTRONG WORLD INDUSTRIES, INC., Defendant.



The opinion of the court was delivered by: GERSHON

 GERSHON, United States District Judge:

 In January 1997, plaintiff filed a New York State court action raising breach of contract, fraud, and deceptive trade practice claims. Asserting diversity jurisdiction, defendant removed the case to this court in early February 1997. Later, defendant filed a demand for arbitration with the American Arbitration Association. Now pending are defendant's motion for a stay of this action pending arbitration and plaintiff's motion to stay the arbitration commenced by defendant.

 Underlying Claims

 Plaintiff's underlying claim is that it contacted defendant, a manufacturer of flooring products, and offered to try to develop a market for defendant's flooring products in Argentina. Defendant indicated that, if plaintiff could develop such a market, plaintiff would become defendant's sales agent for the Argentinian market. In 1993, plaintiff began ordering defendant's products for Libertad, a major retail chain in Argentina. From 1993 to 1996, plaintiff placed approximately $ 10,000 to $ 30,000 worth of orders with defendant per year for Libertad. In June 1996, Libertad placed two orders totaling approximately $ 500,000 with plaintiff for defendant's products. When plaintiff attempted to confirm those orders with Libertad, Libertad demanded a lower price, indicating that defendant had offered a lower price if Libertad were to purchase the products directly from defendant. Defendant then refused to lower the price it charged plaintiff, and Libertad placed its order directly with defendant, eliminating plaintiff as distributor.

 For its part, defendant agrees that plaintiff was one of its customers from 1993 through 1996 and that, during that time, plaintiff placed a number of orders with defendant. Until July 1996, defendant shipped the goods requested in plaintiff's orders. However, plaintiff often failed to pay defendant in a timely manner, and to this date plaintiff owes defendant $ 29,000 on one order. When plaintiff placed an order in July 1996, plaintiff's outstanding balance and poor payment history, and the size of its latest order, led defendant to require plaintiff to provide a letter of credit before defendant would agree to ship the requested goods. When plaintiff was unable to obtain the line of credit, defendant refused to ship the goods. According to defendant, its refusal to ship to plaintiff had nothing to do with its desire to do business directly with Libertad, and everything to do with plaintiff's inability to obtain a letter of credit.

 Arbitration

 Defendant represents that its policy is to include a Terms and Conditions of Sale document with each and every order acknowledgment that it sends to an export customer, such as plaintiff, after that customer has submitted a purchase order. The Terms and Conditions of Sale document contains the following arbitration provision:

 
Any dispute or claim of [purchaser] arising in connection with the sale of Merchandise ordered from, manufactured, or sold by Armstrong shall be settled and adjudicated pursuant to the law of the Commonwealth of Pennsylvania, U.S.A. (conflict-of-laws principles excluded). Armstrong and Purchaser mutually agree that the rules of the U.N. Convention on the International Sale of Goods shall not apply to this transaction. Disputes shall be settled finally by arbitration in accordance with UNCITRAL Rules in Philadelphia using the facilities of the American Arbitration Association. . . . Neither [purchaser] nor any course of dealing hereunder or otherwise shall act to constitute [purchaser] as a Distributor of Armstrong. Any distributorship shall only be created by a separate written agreement.

 The document also states in its first paragraph, "By entering an Order directly with [defendant] . . . you agree that the terms and conditions set forth below shall be incorporated in your Order."

 Plaintiff does not dispute defendant's policy or that it received the Terms and Conditions of Sale document during its course of dealings with defendant; plaintiff also acknowledges that it has "one or two copies" of the document in its files. Transcript of May 23, 1997 argument, at p. 7. Moreover, plaintiff does not assert that it ever objected, prior to the filing of this action, to the arbitration clause or any other provision in the Terms and Conditions of Sale document. Instead, it relies on the absence of evidence that the Terms and Conditions of Sale document was ever presented directly by defendant to one of plaintiff's executives or signed by any of plaintiff's officers.

 ANALYSIS

 "Federal policy, as embodied in the Federal Arbitration Act . . ., strongly favors arbitration as an alternative dispute resolution process." Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 45 (2d Cir. 1993) (footnote omitted). The Federal Arbitration Act ("the FAA") provides that written arbitration provisions in contracts involving interstate or international commerce are "'valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" Id. (quoting 9 U.S.C. ยง 2). Thus, the FAA requires that court proceedings be stayed and parties ordered to arbitration if a court is satisfied that a dispute is subject to arbitration:

 
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which the suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of ...

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