Lumbard, Chief Judge, Kaufman and Feinberg, Circuit Judges.
These two appeals by American Safety Equipment Corp. (ASE) are from orders of the United States District Court for the Southern District of New York, Constance B. Motley, J., which stayed, pending arbitration, two declaratory judgment actions by ASE, one against Hickok Manufacturing Co., Inc., and the other against J. P. Maguire & Co., Inc. The merits of these actions are not now directly in question, but the propriety of directing arbitration is. We conclude that the court should have decided itself at least some of the issues it referred to the arbitrators. Accordingly, we remand for further proceedings.
In August 1963, ASE and Hickok entered into a License Agreement under which Hickok granted to ASE an exclusive license to use the "Hickok" trademarks in connection with "safety protective devices" and "accessories."*fn1 The former were principally seat belts; the latter were defined as anything intended for use in a vehicle provided it was not a safety protective device or a regular body or motor part. Several substantive elements of the License Agreement, which had a fifteen year term,*fn2 are relevant here. Paragraph 3 provided for royalties based on ASE's total annual sales of safety protective devices (whether or not the Hickok trademarks were used) and of accessories (if sold under trademark). Paragraph 27 allowed ASE to grant sublicenses for territories outside the United States, subject to approval by Hickok, if certain conditions were met; the most important of these was that the sublicensee could not be "a competitor of Hickok or of any of its licensees with respect to any products sold or dealt with by said proposed sublicensee." Among Hickok's products are trouser belts, suspenders, a variety of gift items for men, and several types of men's wearing apparel. Paragraph 28 limited each company to its own field of activity; Hickok would neither sell nor market safety protective devices or accessories, and ASE would "not directly or indirectly engage in the business of manufacturing, selling or dealing with any items or types of items of wearing apparel, apparel accessories and gift sets, other than sets related to transportation." Three other provisions of the License Agreement are also relevant: One allowed assignment only with the consent of the other party; another contained a standard severability clause, and the third provided:
All controversies, disputes and claims of whatsoever nature and description arising out of, or relating to, this Agreement and the performance or breach thereof, shall be settled by arbitration . . . .
The 1963 License and Manufacturing Agreements*fn3 extended a business relationship which had started in 1959. Under the agreements, operations apparently continued on a mutually satisfactory basis for several more years, during which time ASE and Hickok did many millions of dollars worth of business together. But, as so frequently occurs, there was a falling out. On October 21, 1966, ASE filed a complaint against Hickok in the district court seeking a declaratory judgment that the License Agreement was illegal and void ab initio and that no royalty obligations had or would accrue under it. The complaint alleged that paragraphs 3, 27 and 28 of the agreement violated the Sherman Act because they unlawfully extended Hickok's trademark monopoly and unreasonably restricted ASE's business.*fn4 Twelve days later, J. P. Maguire & Co., Inc., claiming to be the assignee of Hickok's royalty rights, invoked the arbitration clause quoted above and demanded arbitration of a claim to $321,000.25 for royalties due under the License Agreement. In response, ASE filed another declaratory judgment action, this time against Maguire. This complaint repeated the claim for relief already made against Hickok; in addition, it sought an injunction against the arbitration proceeding commenced by Maguire. The grounds urged were: (1) that the License Agreement was illegal because of antitrust violations, and that the district court had exclusive jurisdiction to determine that illegality; and (2) that Maguire had no right to demand arbitration under the License Agreement because the purported assignment by Hickok was invalid. Subsequently, ASE sought a preliminary injunction; Maguire, in turn, moved under the United States Arbitration Act, 9 U.S.C. §§ 2-4, 6, to stay the declaratory judgment action against it, pending arbitration of all issues. A similar procedural position was reached in ASE's action against Hickok. In December, Hickok formally abandoned all rights to enforce the challenged provisions of paragraph 28 of the License Agreement. A month later, Hickok demanded that ASE arbitrate all issues relating to the License Agreement, and moved to stay ASE's declaratory judgment action pending that arbitration; ASE countered with a motion for a preliminary injunction against that arbitration also.
The two sets of motions growing out of this procedural morass were heard in February 1967. Thereafter, Judge Motley denied ASE's motions to enjoin arbitration and granted the motions of Maguire and Hickok. The judge held that the arbitration clause was broad enough to encompass the claims of antitrust violations and found no public policy against referring them to arbitration; the validity of the assignment would also be resolved in that forum. Accordingly, the judge stayed ASE's two declaratory judgment actions pending arbitration, and directed arbitration with respect to "all claims, disputes and controversies between the parties relating to the License Agreement, including the issue as to the validity thereof."
The basic question we must resolve is whether the district court erred in staying ASE's actions and ordering arbitration of ASE's antitrust allegations.*fn5 Before reaching it, however, we must determine whether these orders are properly before us at all, i.e., whether they are appealable. That issue was not initially noticed by the parties; we brought it to their attention, however, and they subsequently submitted briefs on the matter. A very recent case in this circuit, Standard Chlorine, Inc. v. Leonard, 384 F.2d 304 (2d Cir. 1967), is dispositive of the law to be applied. As we stated there, adopting the Fifth Circuit's formulation, id. at 308:
An order staying or refusing to stay proceedings in the District Court is appealable under § 1292(a) (1) only if (A) the action in which the order was made is an action which, before the fusion of law and equity, was by its nature an action at law; and (B) the stay was sought to permit the prior determination of some equitable defense or counterclaim.
The second requirement has clearly been met here; setting up the arbitration agreement is itself an equitable defense. Id.; see Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 452, 79 L. Ed. 583, 55 S. Ct. 313 (1935).
Whether the first requirement has been fulfilled is more complicated. A declaratory judgment action is a statutory creation, and by its nature is neither fish nor fowl, neither legal nor equitable. Where, as here, such an action has required classification, the courts have looked to the basic nature of the suit in which the issues involved would have arisen if Congress had not created the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02. E.g., Simler v. Conner, 372 U.S. 221, 9 L. Ed. 2d 691, 83 S. Ct. 609 (1963); Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 504, 515, 3 L. Ed. 2d 988, 79 S. Ct. 948 (1959); see Wright, Federal Courts § 100, at 392-93 (1963). Were it not for the availability of declaratory relief, the dispute between ASE and Hickok would normally arise in one of two ways. ASE could bring an action for treble damages based upon the alleged antitrust violations. On the other hand, ASE could wait until Hickok attempted to collect outstanding royalties, and then assert the illegality of the agreement as a defense. In either instance, the action would be legal, not equitable. See Beacon Theatres, Inc. v. Westover, supra; Ring v. Spina, 166 F.2d 546 (2d Cir.), cert. denied, 335 U.S. 813, 93 L. Ed. 368, 69 S. Ct. 30 (1948). Since the basic nature of ASE's declaratory judgment action against Hickok is thus legal, the conditions set forth in Standard Chlorine are met, and the appeal will lie.*fn6
As to Maguire, it asserts that ASE's demand for an injunction in its declaratory judgment complaint shows that the basic nature of the proceeding is equitable. This argument might be persuasive if the action against Maguire were analyzed in isolation; a suit to enjoin pending arbitration proceedings, coupled with a claim for declaratory relief, has a pronounced equitable cast. See Greenstein v. National Skirt & Sportswear Ass'n, 274 F.2d 430 (2d Cir. 1960); Wilson Bros. v. Textile Workers Union, 224 F.2d 176 (2d Cir.), cert. denied, 350 U.S. 834, 100 L. Ed. 745, 76 S. Ct. 70 (1955). However, the action against Maguire is not in a vacuum; it is, instead, an integral part of the dispute between ASE and Hickok, including ASE's declaratory judgment action against Hickok. ASE sought to enjoin the arbitration that Maguire had already commenced merely as an adjunct to ASE's second declaratory judgment action, which stated the basic issues of the controversy between all three parties. Thus, we conclude that the Maguire order is also appealable. We are not gratified that this exercise in following convoluted case law is necessary, but we are heartened that the result reached is desired by both ASE and Hickok, the original major principals.
We now come to the merits of the district court orders, which stayed the declaratory judgment actions and required ASE to proceed to arbitration on all disputes with Hickok and Maguire, including the validity of the License Agreement. The basic issue was aptly phrased by this court fifteen years ago in Wilko v. Swan, 201 F.2d 439, 444 (2d Cir. 1953):
We think that the remedy a statute provides for violation of the statutory right it creates may be sought not only in any "court of competent jurisdiction" but also in any other competent tribunal, such as arbitration, unless the right itself is of ...