Ben Diskin D/B/A Mass. State Mfg. Co. v. J.P. Stevens & Co., Inc., 836 F.2d 47, 1st Cir. (1988)
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Scribd Government DocsBen Diskin D/B/A Mass. State Mfg. Co. v. J.P. Stevens & Co., Inc., 836 F.2d 47, 1st Cir. (1988)
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Scribd Government Docs836 F.
2d 47
5 UCC Rep.Serv.2d 323
Ben DISKIN d/b/a Mass. State Mfg. Co., Plaintiff, Appellant,
v.
J.P. STEVENS & CO., INC., Defendant, Appellee.
No. 87-1234.
United States Court of Appeals,
First Circuit.
Submitted Sept. 18, 1987.
Decided Dec. 31, 1987.
Rehearing Denied Jan. 22, 1988.
Ben Diskin, on brief, pro se.
Gary R. Greenberg, P.C., Goldstein & Manello, Boston, Mass., Kurt J.
Wolff, and Otterbourg, Steindler, Houston & Rosen, P.C., New York City,
on brief, for defendant, appellee.
Before BOWNES, BREYER and SELYA, Circuit Judges.
PER CURIAM.
The appellant, who appears pro se, appeals from the district court's order
granting appellee's motion for a stay of the court proceedings pending
arbitration pursuant to 9 U.S.C. Sec. 3. The district court's decision is reported.
See Diskin v. J.P. Stevens & Co., 652 F.Supp. 553 (D.Mass.1987). At the
outset, we consider whether the order is immediately appealable.
A stay issued under section 3 of the Arbitration Act is normally not appealable
since it qualifies as neither "final" under 28 U.S.C. Sec. 1291 nor as an
"injunction" under 28 U.S.C. Sec. 1292(a)(1). See, e.g., Hartford Financial
Systems v. Florida Software Systems, Inc., 712 F.2d 724 (1st Cir.1983), and
cases cited therein. Nonetheless, an important exception to this rule is embodied
in the well-established Enelow-Ettelson doctrine. This exception provides that
if the underlying suit which is stayed pending arbitration is legal rather than
equitable in nature, the stay order will be appealable under 28 U.S.C. Sec.
1292(a)(1). Id. at 726. See also Ettelson v. Metropolitan Life Insurance Co.,
317 U.S. 188, 63 S.Ct. 163, 87 L.Ed. 176 (1942); Enelow v. New York Life
Insurance Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440 (1935). The original
complaint filed by the plaintiff-appellant is quite clearly legal in that he seeks
money damages relating to contractual issues.1 So, the district court's order
granting a stay of proceedings pending arbitration is properly appealable under
the Enelow-Ettelson exception.
3
Having established that this court has jurisdiction over the appeal, we now
move to the relevant underlying issues. Appellant Ben Diskin, d/b/a Mass. State
Manufacturing Co., is a manufacturer of women's clothing. In December 1984,
Diskin traveled to the New York offices of appellee J.P. Stevens & Co., Inc.,
where Diskin selected, ordered, and tendered full payment by check for a
quantity of flannel to be delivered by Stevens at some point in the future. On
the back of the check, appellant indicated that his tender was "In full payment
for 290 pcs. flannel as per contract...." Appellant also requested that Stevens
send him a sample of the fabric for further evaluation. The record shows that
Stevens subsequently sent Diskin a copy of its confirmation and standard sales
contract--which contained quantity and price terms as well as a clause
indicating that the document would become a contract between the parties if
the buyer received and retained it for ten days without issuing a written
objection. 2 The terms of the confirmation specifically provided for resort to
arbitration in the event of a dispute between the parties. The district court found
that appellant received and retained the form without signing or objecting to it.
In mid-January 1985, appellant received the sample of cloth which he had
requested from Stevens and, finding it unsatisfactory, responded by letter dated
January 24, 1985 to Stevens. Appellant expressed his dissatisfaction with the
sample, and remarked that his "interests are stopped for re-evaluation...." The
record shows that appellant refused to assort3 or give delivery instructions with
respect to the ordered goods for a number of months, after which time appellee
unilaterally decided to ship the goods to a warehouse to be held for the account
of appellant.
On August 25, 1986, appellant filed suit against Stevens, seeking judgment in
the amount of his original payment of $151,380 plus interest and costs.
Appellee moved for a stay of proceedings pending arbitration. Its motion was
allowed by the district court. See Diskin, supra, 652 F.Supp. at 558-60.
In granting appellee's motion for a stay pending arbitration, the district court
concluded that an enforceable contract between the parties had indeed been
formed, id. at 555-57, and that appellant was bound by the arbitration clause
contained in appellee's written confirmation. Id. at 558-59. The parties do not
dispute the district court's application of New York law.4
CONTRACT FORMATION
7
With respect to contract formation, appellant contends that the totality of the
parties' dealings were intended only as preliminary negotiations, performed in
contemplation of a contract to be formed at a later time. After a careful review
of the record, we conclude that the evidence defies appellant's assertion. The
district court correctly found that a binding contract had been formed between
the parties. We need not recapitulate the district court's thorough discussion of
this issue. See Diskin, supra, at 556-57.
In ascertaining the existence of an enforceable contract, the district court
concluded that appellant had failed to object to appellee's written confirmation,
and was therefore bound by the terms set forth therein pursuant to New York
Uniform Commercial Code Sec. 2-207(1) and (2). Appellant contests this
finding, arguing that his January 1985 letter to appellee, which expressed his
disappointment with the fabric sample he had received, was in fact an objection
to the terms of appellee's confirmation form, thereby precluding the possibility
of contract formation. We find this argument to be completely unconvincing.
First, appellee's confirmation required objection within 10 days of receipt by
appellant: there is no indication that appellant complied with this requirement.
Moreover, it was reasonable for the district court to conclude that the vague
language of Diskin's letter was insufficient to constitute an objection to the
contract as a whole, or to any of its terms. Additionally, appellant's contention
that his dissatisfaction with the fabric sample precluded contract formation (or
somehow nullified the agreement) is unsupported by the evidence. There is
simply no indication that the agreement of the parties was in any way
contingent upon appellant's acceptance or rejection of the fabric sample. In fact,
we note that appellant accepted and used the fabric sample to manufacture
garments before rejecting it as being unsatisfactory.
THE ARBITRATION CLAUSE
9
The appellant received and retained the confirmation form containing the
arbitration clause, but neither signed the form nor objected contemporaneously
to its contents. The district court found that, under the circumstances, the
confirmation operated as appellee's acceptance of the original offer to purchase
embodied in the tender of appellant's check for $151,380. Id. at 556-57.5 The
district court also found that the arbitration agreement was binding. Id. at 558-
59. Appellant now contends that his failure to sign the form or otherwise
explicitly agree to the arbitration clause prevents him from being bound by it.
This contention brings into play Sec. 2-207 of the Uniform Commercial Code.
Section 2-207(1) states that:
10
... a written confirmation which is sent within a reasonable time operates as an
acceptance even though it states terms additional to or different from those
offered or agreed upon....
11
Although additional terms will generally be considered only as proposals for
addition to the contract, "[b]etween merchants [the additional] terms become
part of the contract unless: ... (b) they materially alter it." U.C.C. Sec. 2-207(2)
(b). If the additional term is "such as to materially alter the original bargain, [it]
will not be included unless expressly agreed to by the other party." U.C.C. Sec.
2-207, Official Comment 3.
12
When assessing the materiality of an arbitration clause, one must start with the
premise that, under New York law, "it is clear that an arbitration clause is a
material addition which can become part of a contract only if it is expressly
assented to by both parties." Matter of Marlene Inds. Corp. (Carnac Textiles),
45 N.Y.2d 327, 334, 380 N.E.2d 239, 242, 408 N.Y.S.2d 410, 414 (1978)
(citations omitted). Marlene was a textile case involving an exchange of
conflicting forms between buyer and seller. The state's highest court found that
the seller's attempted addition of an arbitration clause was a material alteration
which was not binding on the buyer absent an express assent to the provision.
In Marlene, as here, the buyer simply received and retained the seller's form
without signing it or otherwise assenting to the arbitration clause. In reaching
its conclusion, the court observed the longstanding rule in New York that, in
the absence of an express, unequivocal agreement to arbitrate, a party should
not be compelled to do so. Id. at 333, 380 N.E.2d at 242, 408 N.Y.S.2d at 413.
Since an agreement to arbitrate involves a waiver of many of a party's
substantive and procedural rights under state law, it would be unjust to imply
such a waiver "on the basis of anything less than a clear indication of intent."
Id. at 334, 380 N.E.2d at 242, 408 N.Y.S.2d at 413.
13
One year later, the court decided Schubtex, Inc. v. Allen Snyder, Inc., 49
N.Y.2d 1, 399 N.E.2d 1154, 424 N.Y.S.2d 133 (1979). Schubtex involved an
oral agreement which was "confirmed" by the seller's form containing an
arbitration provision. The buyer retained the seller's written confirmation form
without acting on it. The buyer had received and retained similar written
confirmations from this seller on two prior occasions. The court indicated that
an agreement to arbitrate could, in a proper case, be implied from a prior course
of dealing, or from custom and usage in the trade; it held, however, that "such a
determination must be supported by evidence which affirmatively establishes
that the parties agreed to arbitrate their disputes." Id. at 6, 399 N.E.2d at 1156,
424 N.Y.S.2d at 135. The retention of the form, without objection, was
insufficient to this end. With regard to the buyer's previous retention of the
seller's forms, the court stated that:
14inasmuch as the mere retention by the buyer of the form containing the arbitration
...
clause failed to create such an agreement [to arbitrate] in the first instance, repeated
use of the same ineffective form should not be held to have done so in subsequent
transactions.
15
Id. at 6-7, 399 N.E.2d at 1156, 424 N.Y.S.2d at 135. Thus, in both Marlene and
Schubtex, the New York Court of Appeals has made clear its view that an
intention to be bound by an arbitration clause must be affirmatively established,
and will not be implied from a party's mere retention of a form containing such
a provision. 6
16
Applying the holdings of Marlene and Schubtex to the instant case, we
conclude that the record does not support a finding that appellant ever
expressed an intention, either implicit or explicit, to be bound by the arbitration
provision of appellee's confirmation form. We note that, under New York law,
the burden of proving agreement to arbitrate is on the party seeking to resolve
the dispute in that forum. Marben Realty Co. v. Sweeney, 87 A.D.2d 561, 448
N.Y.S.2d 196, (1st Dept.1982). Here, appellant received and retained appellee's
confirmation form without signing it. We have established that, under New
York law, this behavior alone fell short of consent to arbitration. Additionally,
there was no indication that the issue of arbitration or dispute resolution was
ever raised during verbal negotiations between the parties. Through the
affidavit of its assistant general counsel, appellee asserts that the parties had
"conducted business under this form of contract in the past." Assuming this fact
to be true, this statement, without more, provides insufficient evidence to
establish Diskin's assent to arbitration through prior dealings of the parties.
Under Schubtex, mere use of the same ineffective form of contract is not the
functional equivalent of evidence which affirmatively establishes a party's prior
consent to arbitrate. Thus, we will not imply appellant's consent to arbitrate
based only on appellee's vague assertion of prior dealings. With respect to
appellee's contention that arbitration is a customary method of dispute
resolution in the textile industry, "[a] vague, unspecific reference ... to the effect
that 'in the textile industry arbitration is the usual accepted method of resolving
disputes' is not an acceptable substitute ... for finding a specific agreement to
arbitrate." Jones Apparel Group, Inc. v. Petit, 75 A.D.2d 504, 426 N.Y.S.2d
739 (1st Dept.1980). On this record, Diskin was not bound by an agreement to
arbitrate.
17
Our rejection of the enforceability of the arbitration clause does not undermine
our conclusion that the district court, supportably, found that a contract existed.
We emphasize, however, that mere recognition of contract is not tantamount to
assent to a material additional term; to adopt such an approach would defeat the
rationale of U.C.C. Sec. 2-207, which allows contract formation whenever
possible, without binding an unconsenting party to clauses which, if enforced,
will materially alter the nature of the original agreement.
18
The motion to stay judicial proceedings was improvidently granted, and is
reversed. The action is remanded to the district court to be heard and
determined in that forum. Costs in favor of appellant.
Although appellant's complaint contests the existence of a contract, the district
court concluded that a contract did indeed exist between the parties. Appellant's
suit for monetary damages resulting from his dissatisfaction with goods
supplied by appellee and with appellee's alleged untimely delivery of goods
must therefore logically be construed as akin to a suit for breach of contract
A number of other events were also listed as triggering the formation of a
contract, none of which are germane to the facts of this case
"Assortment" appears to be a term used in the textile trade which means
finishing and coloring unfinished (greige) fabric
We are, of course, at liberty to accept this "implicit concession." See
Mathewson Corp. v. Allied Marine Industries, Inc., 827 F.2d 850, 853 n. 3 (1st
Cir.1987) (citation omitted). We do so in this instance as respects the
determination of whether or not these parties entered into a binding written
agreement to arbitrate any disputes arising from this transaction
The record leaves open the possibility that the writings of the parties, that is,
the check and the confirmatory form, were simply confirmatory of an oral
contract made at the time appellant ordered the goods from appellee. Either
approach produces the same result under Sec. 2-207 of the Uniform
Commercial Code. Matter of Marlene Inds. Corp. (Carnac Textiles), 45 N.Y.2d
327, 380 N.E.2d 239, 408 N.Y.S.2d 410 (1978)
We decline to follow Imptex International Corp. v. Lorprint, Inc., 625 F.Supp.
1572 (S.D.N.Y.1986), relied upon by appellee. Imptex, which cited no case
decided after 1976, relied upon an outdated view of New York law. We believe
that the more modern New York cases, e.g., Marlene and Schubtex, require a
different result
