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Genesco Inc. v. Kakiuchi

decided: April 1, 1987.


Defendants T. Kakiuchi & Co., Ltd. and T. Kakiuchi America, Inc. appeal from an order of the United States District Court for the Southern District of New York (Lowe, J.) entered July 30, 1986 denying in whole and in part respectively, their motions to stay this action pending arbitration. Plaintiff Genesco, Inc. cross-appeals from the portion of the district court's order granting a stay as to specific claims. Affirmed in part; reversed in part.

Author: Cardamone

Before: OAKES, CARDAMONE and DAVIS,*fn* Circuit Judges.

CARDAMONE, Circuit Judge :

Plaintiff Genesco, Inc., (Genesco), a manufacturer of tailored clothing, brought this damage action in the United States District Court for the Southern District of New York (Lowe, J.), against two of its principal fabric suppliers, alleging essentially that they had conspired with one of its high-ranking employees to supply it with over-priced, damaged, and unsuitable goods. Defendants T. Kakiuchi & Co., Ltd. (Kakiuchi-Japan) and T. Kakiuchi America, Inc. (Kakiuchi-America), moved to stay the proceedings pending arbitration, which the district court denied except as to two claims against Kakiuchi-America. Both Kakiuchi defendants appeal the denial of their stays motions, and Genesco cross-appeals from the grant of the stay as to Kakiuchi-America's two claims.


Genesco is an American corporation engaged in the manufacture and distribution of tailored clothing throughout the United States. Kakiuchi-Japan, a Japanese corporation, exports fabric or "pierce goods" to textile manufacturers and distributors. Kakiuchi-America, an American corporation, exports fabric or "piece goods" to textile manufacturers and distributors. Kaiuchi-America, an American corporation wholly owned by Kakiuchi-Japan, is Kakiuchi-Japan's agent in the United States. Genesco obtains fabric for its manufacturing operations from Japan, Korea, and Great Britain, and began purchasing piece goods from Kakiuchis Japan and America, both of which have contacts in the textile business in those areas. These piece goods were purchased pursuant to a series of written orders and confirmation notices, together forming the parties' purchase and sales agreements. Each sales agreement contained an arbitration provision.

In 1979 the Kakiuchi defendants allegedly entered into a conspiracy with Genesco's vice-president or purchasing. In exchange for substantial payments, this official allegedly arranged to purchase all of Genesco's Japanese or English-origin piece goods solely from Kakiuchi-Japan or its affiliates. Genesco maintains that its employee also improperly approved the purchase of overpriced, damaged, unsuitable, or noncompetitive piece goods. Upon discovering this scheme, Genesco filed suit against Kakiuchis Japan and America*fn1 raising fraud, Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(a), (c), and (d) (1982), Robinson-Patman Act, 15 U.S.C. § 13(c) (1982), unjust enrichment, tortious interference with contractual relations, money had and received, and unfair competition claims. Kakiuchis Japan and America then moved pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-14 (1982)*fn2 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, T.I.A.S. No. 6997, reprinted at 9 U.S.C.A. § 201 app. foll. (West Supp. 1986),*fn3 to stay the action pending arbitration. The district court judge referred the motions to a federal magistrate who issued his Report and Recommendation on March 5, 1986. On July 30, 1986, based on this recommendation, the district court granted Kakiuchi-America's motion to stay the fraud and RICO claims, denied its motion to stay the fraud and RICO claims, and denied Kakiuchi-Japan's motion in toto. On September 23, 1986, the district court certified the arbitration question for immediate appeal pursuant to 28 U.S.C. § 1292(b) (1982). We have jurisdiction over the legal claims on this appeal under 28 U.S.C. § 1292(a)(1), see Paine, Webber, Jackson & Curtis, Inc. v. Chase Manhattan Bank, 728 F.2d 577, 579 n.2 (2d Cir. 1984) and over the equitable claims under 28 U.S.C. § 1292(b).

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 such 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 the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3 (1982).

1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which may have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

21 U.S.T. at 2519; 9 U.S.C. § 201, Article II.


The United States Arbitration Act (the Act), codified at 9 U.S.C. §§ 1-14, reflects a legislative recognition of "the desirability of arbitration as an alternative to the complications of litigation." Wilko v. Swan, 346 U.S. 427, 431, 98 L. Ed. 168, 74 S. Ct. 182 (1953). The Act, "reversing centuries of judicial hostility to arbitration agreements," Scherk v. Alberto-Culver Co., 417 U.S. 506, 510, 41 L. Ed. 2d 270, 94 S. Ct. 2449 (1974), was designed to allow parties to avoid "the costliness and delays of litigation," and to place arbitration agreements "upon the same footing as other contracts . . ." H.R. Rep. No. 96, 68th Cong., 1st Sess. 1, 2 (1924); see also S. Rep. No. 536, 68th Cong., 1st Sess. (1924). To achieve these goals, it provides that written provisions to arbitrate controversies in any contract involving commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Section 2 is "a congressional declaration of a liberal federal policy favoring arbitration agreements . . ." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). The Act also provides in § 3 for a stay of proceedings where the court is satisfied that the issue before it is arbitrable under the agreement, and § 4 of the act directs a federal court to order parties to proceed to arbitration if there has been a "'failure, neglect, or refusal' of any party to honor an agreement to arbitrate." Scherk, 417 U.S. at 511. These provisions are mandatory: "[b]y its terms, the Act leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218, 84 L. Ed. 2d 158, 105 S. Ct. 1238 (1985) (original emphasis).

Given these statutory directives, a court asked to stay proceedings pending arbitration in a case covered by the Act has essentially four tasks: first, it must determine whether the parties agreed to arbitrate, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 105 S. Ct. 3346, 3354, 87 L. Ed. 2d 444 (1985); second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable, see Mitsubishi, 105 S. Ct. at 3355; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then determine whether to stay the balance of the proceedings pending arbitration. With these tasks in mind, we consider first whether Genesco and the Kakiuchi defendants agreed to arbitrate their disputes.

I The Agreement to Arbitrate

In each sales transaction Genesco submitted a written purchase order to Kakiuchi-Japan which then returned to Genesco a written sales confirmation form. On the back of the form is set forth a comprehensive list of terms and conditions. Among these terms and conditions, Clause 14 provides, in relevant part:

All claims and disputes of whatever nature arising under this contract shall be settled amicably as far as possible, but in case of failing it shall be referred to [arbitration in Japan before the Japan Commercial Arbitration Association].

Genesco received these forms without objection, and returned a number of them to Kakiuchi-Japan with the initials or signature of a high-ranking officer. When it returned items Genesco also acknowledged the sales confirmation forms by referring to them in the return notices.

Genesco and Kakiuchi-America transacted business through a similar exchange of purchase orders and confirmation notes. On the bottom of the front side, Kakiuchi-America's sales confirmation note states: "THIS CONTRACT IS SUBJECT TO ALL THE TERMS AND CONDITIONS ON THIS AND THE REVERSE SIDE THEREOF, INCLUDING THE PROVISIONS OF PARAGRAPH 7 PROVIDING FOR ARBITRATION OF ALL DISPUTES." The arbitration clause on the reverse side states in relevant part:

Any controversy arising out of or relating to this contract or any modification or extension thereof, including any claim for damages and/or rescission shall be settled by arbitration before a panel of three arbitrators in New York City.

Again Genesco received these forms without objection and returned a number of them with its signature.

Based on these exchanges and after a detailed review of the voluminous evidentiary submissions, the district court found that Genesco had agreed to arbitrate its disputes under both the signed and unsigned agreements with both the Kakiuchi defendants. We see no reason to disturb this factual finding. Fed. R. Civ. P. 52(a); see In re Hart Ski Manufacturing Co., 711 F.2d 845, 846 (8th Cir. 1983) (whether the parties have agreed to arbitrate is a factual question); Hanes Supply Co. v. Valley Evaporating Co., 261 F.2d 29, 34-35 (5th Cir. 1958) (same).

In enacting the federal Arbitration Act, Congress created national substantive law governing questions of the validity and the enforceability of arbitration agreements under its coverage. See Mitsubishi, 105 S. Ct. at 3354; Moses H. Cone, 460 U.S. at 24; Varley v. Tarrytown Associates, Inc., 477 F.2d 208, 209 (2d Cir. 1973). Hence whether Genesco is bound by the arbitration clause of the sales confirmation forms is determined under federal law, which comprises generally accepted principles of contract law.*fn4 See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, 18 L. Ed. 2d 1270, 87 S. Ct. 1801 (1967); In re Hart Ski Manufacturing, 711 F.2d at 846; Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir. 1960); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406 (2d Cir. 1959), cert. dismissed, 364 U.S. 801 5 L. Ed. 2d 37, 81 S. Ct. 27 (1960); but see Supak & Sons Manufacturing Co. v. Pervel Indus., Inc., 593 F.2d 135, 137 (4th Cir. 1979).

Under general contract principles a party is bound by the provisions of a contract that he signs, unless he can show special circumstances that would relieve him of such an obligation. See Coleman v. Prudential Bache Securities, Inc., 802 F.2d 1350, 1352 (11th Cir. 1986) (per curiam); N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722, 727 (8th Cir. 1976). Here, the district court found that Genesco was an experienced textile concern with economic power equal to that of Kakiuchi-Japan. It also found no impediment to the validity of the agreement. On the contrary, the widespread use of arbitration clauses in the textile industry puts a contracting party, like Genesco, on notice that its agreement probably contains such a clause. See N & D Fashions, 548 F.2d at 726 & n.8; Avila Group, Inc. v. Norma J. of California, 426 F. Supp. 537, 541 n.10 (S.D.N.Y. 1977). Thus, the district court properly concluded that Genesco was bound to arbitrate disputes arising under the signed sales confirmation forms. Genesco does not contest these findings, but claims instead that it never specifically agreed to the arbitration clauses. Such misapprehends our inquiry. We focus not on whether there was subjective agreement as to each clause in the contract, but on whether there was an objective agreement with respect to the entire contract. See N. & D Fashions, 548 F.2d at 727.

As to the unsigned forms it is well-established that a party may be bound by an agreement to arbitrate even absent a signature. See, e.g., McAllister Brothers, Inc. v. A & S Transportation Co., 621 F.2d 519, 524 (2d Cir. 1980). Further, while the Act requires a writing, it does not require that the writing be signed by the parties. See 9 U.S.C. § 3; Medical Development Corp. v. Industrial Molding Corp., 479 F.2d 345, 348 (10th Cir. 1973); Fisser, 282 F.2d at 233. Thus, the district court did not err in finding that in this long standing and on-going relationship Genesco agreed to arbitrate disputes arising under the unsigned sales confirmation forms as well. See Imptex International Corp. v. Lorprint Inc., 625 F. ...

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