The Arbitration Law of New York, enacted April 19, 1920, c. 275, and amended March 1, 1921, c. 14, declares that a provision in a written contract to settle by arbitration a controversy thereafter arising between the parties "shall be valid, enforcible and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract." It authorizes the Supreme Court, or a judge thereof, to direct, upon the application of a party to such an agreement, that the arbitration proceed in the manner so provided; to appoint an arbitrator for the other party, in case he fails to avail himself of the method prescribed by the contract; and to stay trial of the action, if suit has been begun. The law applies to contracts made before its enactment, if the controversy arose thereafter. Matter of Berkovitz v. Arbib & Houlberg, 230 N.Y. 261, 270, 271. Prior to this statute an agreement to arbitrate was legal in New York and damages were recoverable for a breach thereof. Haggart v. Morgan, 5 N.Y. 422, 427. But specific performance of the promise would not be enforced; the promise could not be pleaded in bar of an action; and it would not support a motion to stay. Finucane Co. v. Board of Education, 190 N.Y. 76, 83. These limitations upon the enforcement of a promise to arbitrate had been held to be part of the law of remedies. Meacham v. Jamestown,
Proceeding under the Arbitration Law, the Red Cross Line applied to the Supreme Court of the State, on April 12, 1921, for an order directing the Atlantic Fruit Company to join with it in the arbitration of a dispute arising out of the charter of the steamship Runa. The substantive claim was that the master had not prosecuted the voyage with the utmost dispatch and, hence, that certain amounts paid by the charterer should be returned. The charter party, which had been executed in New York on November 28, 1919, contained the following provision:
"That should any dispute arise between Owners and Charterers, the matters in dispute shall be referred to three persons in New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision, or that of any two of them, shall be final and for the purpose of enforcing any award, this agreement may be made a rule of Court. . . ."
Before instituting this proceeding the Red Cross Line had duly appointed its arbitrator; but the Atlantic Fruit Company had refused to appoint the one to be named by it. The court ordered the latter company to proceed to arbitration as provided in the contract, and to appoint its arbitrator by a day fixed. This order was affirmed by the Appellate Division without opinion. Its judgment was reversed by the Court of Appeals, which stated that the controversy between the parties is one of admiralty; that under Article III, § 2, of the Federal Constitution, and § 256, Clause Third, of the Judicial Code,
Respondent contends that the petition should be dismissed for lack of a federal question. The argument is that the Court of Appeals held, as a matter of statutory construction, that the Arbitration Law does not extend to controversies which are within the admiralty jurisdiction; and that the substantive claim sought to be enforced is so cognizable. The claim to recover an amount paid under a charter party as charter hire is within the admiralty jurisdiction. Morewood v. Enequist, 23 How. 491. If that court had construed the Arbitration Law as excluding from its scope controversies which are within the admiralty jurisdiction, the construction given to the state statute would bind us; and there would be no occasion to consider the constitutional question presented. Quong Ham Wah Co. v. Industrial Accident Commission, 255 U.S. 445; Ward & Gow v. Krinsky, 259 U.S. 503, 510. An expression used by the Court of Appeals lends some color to respondent's contention, 233 N.Y. 373, 381. But a reading of the whole opinion shows that the state court excluded maritime contracts from the operation of the law, not as a matter of statutory construction, but because it thought the Federal Constitution required such action. Compare State Industrial Commission v. Nordenholt Corporation, 259 U.S. 263. We proceed, therefore, to the consideration of the constitutional question.
The federal courts — like those of the States and of England — have, both in equity and at law, denied, in large measure, the aid of their processes to those seeking to enforce
In admiralty, also, agreements to submit controversies to arbitration are valid. Reference of maritime controversies to arbitration has long been common practice.
By reason of the saving clause, state courts have jurisdiction in personam, concurrent with the admiralty courts, of all causes of action maritime in their nature arising under charter parties. Judiciary Act of September 24, 1789, c. 20, § 9, 1 Stat. 73, 77; Judicial Code, § 24, par. 3; Leon v. Galceran, 11 Wall. 185; Schoonmaker v. Gilmore, 102 U.S. 118; Chappell v. Bradshaw, 128 U.S. 132; De Lovio v. Boit, 2 Gall. 398, 475. The "right of a common law remedy", so saved to suitors, does not, as has been held in cases which presently will be mentioned, include
This state statute is wholly unlike those which have recently been held invalid by this Court. The Arbitration Law deals merely with the remedy in the state courts in respect of obligations voluntarily and lawfully incurred. It does not attempt either to modify the substantive maritime law or to deal with the remedy in courts of admiralty. The Workmen's Compensation Laws involved in Southern Pacific Co. v. Jensen, 244 U.S. 205; Clyde S.S. Co. v. Walker, 244 U.S. 255; Peters v. Veasey, 251 U.S. 121; and Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, were declared invalid, because their provisions were held to modify or displace essential features of the substantive maritime law. In Union Fish Co. v. Erickson, 248 U.S. 308, the state statute did not deal with the substantive maritime law. It was held invalid, because, as construed
As the constitutionality of the remedy provided by New York for use in its own courts is not dependent upon the practice or procedure which may prevail in admiralty, we have no occasion to consider whether the unwillingness of the federal courts to give full effect to executory agreements for arbitration can be justified.
This controversy arose out of a charter-party dated November 28, 1919, a maritime contract, which contains a clause providing for the settlement of disputes by arbitration. 233 N.Y. 373.
Parties to such agreements contract with reference to the maritime law; consequent rights and liabilities depend upon its rules and are the same in all courts, admiralty or state. This general doctrine, definitely stated in Southern Pacific Co. v. Jensen, 244 U.S. 205, has been reaffirmed and applied again and again. Clyde S.S. Co. v. Walker, 244 U.S. 255; Chelentis v. Luckenbach S.S. Co., 247 U.S. 372; Union Fish Co. v. Erickson, 248 U.S. 308; Knickerbocker Ice Co. v. Stewart, 253 U.S. 149; Western Fuel Co. v. Garcia, 257 U.S. 233; Grant Smith-Porter Ship Co. v. Rohde, 257 U.S. 469; Carlisle Packing Co. v. Sandanger, 259 U.S. 255; Industrial Commission v. Nordenholt Co., 259 U.S. 263; Osaka Shosen Kaisha v. Pacific Lumber Co., 260 U.S. 490; Great Lakes Co. v. Kierejewski, 261 U.S. 479.
No admiralty court would enforce the arbitration clause of the charter-party before us — their accepted policy forbids. Accordingly, it was not obligatory upon the parties. The law of the sea became part of their agreement.
But it is said, under the local law a state court may enforce arbitration and thus effectuate the provision, although unenforceable in admiralty, since the statute relates to the remedy and not to substantive rights. In Union Fish Co. v. Erickson, an admiralty cause, we refused to give effect to the state statute of frauds, holding that the parties had contracted with reference to maritime law, not the local enactment. Here, also, the effort is to modify an agreement made with reference to the general rules of maritime law by applying the local law. Certainly this could not be done in an admiralty court;
Fifty years ago this Court pointed out the essential relationship between rights and remedies. Von Hoffman v. City of Quincy, 4 Wall. 535, 552. "Nothing can be more material to the obligation than the means of enforcement. Without the remedy the contract may, indeed, in the sense of the law, be said not to exist, and its obligation to fall within the class of those moral and social duties which depend for their fulfilment wholly upon the will of the individual. The ideas of validity and remedy are inseparable, and both are parts of the obligation, which is guaranteed by the Constitution against invasion. The obligation of a contract `is the law which binds the parties to perform their agreement.'"
Under the guise of providing remedies no state statute may add to or take from the obligations imposed by the contract within the admiralty jurisdiction, The doctrine concerning the general maritime law announced here over and over again forbids. If state courts can enforce provisions for compulsory arbitration contrary to the policy of the admiralty courts, what will become of the uniformity of maritime rules which the Constitution undertook to establish?
The Judicial Code, § 256, endows the District Court with exclusive jurisdiction "of all civil causes of admiralty and maritime jurisdiction, saving to suitors in all cases the right of a common-law remedy where the common law is competent to give it." The remedy saved must relate to some right or liability given or imposed by maritime law — certainly not one which that law does
"The cognizance of civil causes of admiralty and maritime jurisdiction vested in the District Courts by the ninth section of the Judiciary Act, may be supported upon like considerations. It has been made exclusive by Congress, and that is sufficient, even if we should admit that in the absence of its legislation the State courts might have taken cognizance of these causes. But there are many weighty reasons why it was so declared. `The admiralty jurisdiction,' says Mr. Justice Story, `naturally connects itself, on the one hand, with our diplomatic relations and the duties to foreign nations and their subjects; and, on the other hand, with the great interests of navigation and commerce, foreign and domestic. There is, then, a peculiar wisdom in giving to the national government a jurisdiction of this sort which cannot be yielded, except for the general good, and which multiplies the securities for the public peace abroad, and gives to commerce and navigation the most encouraging support at home.'
"The case before us is not within the saving clause of the ninth section. That clause only saves to suitors `the right of a common-law remedy, where the common law is competent to give it.' It is not a remedy in the common-law courts which is saved, but a common-law remedy. A proceeding in rem, as used in the admiralty courts, is not a remedy afforded by the common law; it is a proceeding under the civil law. When used in the common-law courts, it is given by statute."
The same view is approved by The Hine v. Trevor, 4 Wall. 555, 571; The Glide, 167 U.S. 606, 616, 617; and Knapp, Stout & Co. v. McCaffrey, 177 U.S. 638, 644, 648.
Even where permitted by local law state courts cannot entertain proceedings in rem for the reason stated by The Moses Taylor. "A proceeding in rem, as used in the admiralty courts, is not a remedy afforded by the common law; it is a proceeding under the civil law. When used in the common-law courts, it is given by statute." The same reason inhibits state courts from enforcing any remedy not recognized at common law when the controversy is within the admiralty cognizance. Common-law remedies are within the saving clause, and no others. It is not enough that one has been provided by statute.
The Hine v. Trevor (p. 571) declares — "But it could not have been the intention of Congress, by the exception in that section, to give the suitor all such remedies as might afterwards be enacted by State statutes, for this would have enabled the States to make the jurisdiction of their courts concurrent in all cases, by simply providing a statutory remedy for all cases. Thus the exclusive jurisdiction of the Federal courts would be defeated." This negatives the suggestion that the remedy of the saving clause includes any means other than proceedings in rem which may be provided for the enforcement of rights or to redress injuries.
Knapp, Stout & Co. v. McCaffrey (p. 648) clearly affirms that the thing saved to suitors is the right of a common-law remedy. "The true distinction between
I can find no authority for the broad claim that the "right of a common-law remedy" extends to any and all means other than proceedings in rem which may be employed to enforce rights or redress injuries, including remedies in pais as well as proceedings in court, those conferred by statute as well as those existing at common law. Neither Knapp, Stout & Co. v. McCaffrey nor Rounds v. Cloverport Foundry supports it. It conflicts with The Hine v. Trevor, and is clearly opposed by the reason advanced in The Moses Taylor for excluding proceedings in rem from state courts.
The court below has held
If petitioner is right, why may not a State require the parties to any maritime contract to submit their controversies to varying methods of arbitration and thus introduce the very discord which framers of the Constitution intended to prevent by adopting general maritime rules as laws of the United States? Also why may it not apply other than common-law remedies to controversies within admiralty jurisdiction contrary to plain congressional enactment and repeated decisions of this Court?
To announce principles is not enough; they should be followed. I think opinions of this Court led the conclusion of the court below and require affirmation of its judgment.
The phraseology of the arbitration clause here in question is identical with that contained in the common form of the time charter party long in use. Scrutton, Charter Parties and Bills of Lading (1886), pp. 268, 270. The form appears as clause 15 of the charter party executed in New York in 1885 which was involved in Compania Bilbaina v. Spanish-American Light & Power Co., 146 U.S. 483.