MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This suit, removed from a Vermont court to the District Court on grounds of diversity of citizenship, was brought for damages for the discharge of petitioner under an employment contract. At the time the contract was made petitioner was a resident of New York. Respondent is a New York corporation. The contract was made in New York. Petitioner later became a resident of Vermont, where he was to perform his duties under the contract, and asserts his rights there.
The contract contains a provision that in case of any dispute the parties will submit the matter to arbitration under New York law by the American Arbitration Association, whose determination "shall be final and absolute." After the case had been removed to the District Court, respondent moved for a stay of the proceedings so that the controversy could go to arbitration in New York. The motion alleged that the law of New York governs the question whether the arbitration provision of the contract is binding.
The District Court ruled that under Erie R. Co. v. Tompkins, 304 U.S. 64, the arbitration provision of the contract was governed by Vermont law and that the law of Vermont makes revocable an agreement to arbitrate
A question under the United States Arbitration Act, 43 Stat. 883, as amended, 61 Stat. 669, 9 U. S. C. §§ 1-3, lies at the threshold of the case. Section 2 of that Act makes "valid, irrevocable, and enforceable" provisions for arbitration in certain classes of contracts;
The Court of Appeals went on to hold that in any event § 3 of the Act stands on its own footing. It concluded that while § 2 makes enforceable arbitration agreements in maritime transactions and in transactions involving commerce, § 3 covers all arbitration agreements even though they do not involve maritime transactions or transactions in commerce. We disagree with that reading of the Act. Sections 1, 2, and 3 are integral parts of a whole. To be sure, § 3 does not repeat the words "maritime transaction" or "transaction involving commerce," used in §§ 1 and 2. But §§ 1 and 2 define the field in which Congress was legislating. Since § 3 is a part of the regulatory scheme, we can only assume that the "agreement in writing" for arbitration referred to in § 3 is the kind of agreement which §§ 1 and 2 have brought under federal regulation. There is no intimation or suggestion in the Committee Reports that §§ 1 and 2 cover a narrower field than § 3. On the contrary, S. Rep. No. 536, 68th Cong., 1st Sess., p. 2, states that § 1 defines the contracts to which "the bill will be applicable". And H. R. Rep. No. 96, 68th Cong., 1st
The question remains whether, apart from the Federal Act, a provision of a contract providing for arbitration is enforceable in a diversity case.
The Court of Appeals, in disagreeing with the District Court as to the effect of an arbitration agreement under Erie R. Co. v. Tompkins, followed its earlier decision of Murray Oil Products Co. v. Mitsui & Co., 146 F.2d 381, 383, which held that, "Arbitration is merely a form of trial, to be adopted in the action itself, in place of the trial at common law: it is like a reference to a master, or an `advisory trial' under Federal Rules of Civil Procedure . . . ."
We disagree with that conclusion. We deal here with a right to recover that owes its existence to one of the States, not to the United States. The federal court enforces
The District Court found that if the parties were in a Vermont court, the agreement to submit to arbitration would not be binding and could be revoked at any time before an award was made. He gave as his authority Mead's Admx. v. Owen, 83 Vt. 132, 135, 74 A. 1058, 1059, and Sartwell v. Sowles, 72 Vt. 270, 277, 48 A. 11, 14, decided by the Supreme Court of Vermont. In the Owen case the court, in speaking of an agreement to arbitrate, held that ". . . either party may revoke the submission at any time before the publication of an award." 83 Vt., at 135, 74 A., at 1059. That case was decided in 1910. But it was agreed on oral argument that there is no later authority from the Vermont courts, that no fracture in the rules announced in those cases has appeared in subsequent rulings or dicta, and that no legislative movement is under way in Vermont to change the result of those cases. Since the federal judge making those findings is from the Vermont bar, we give special weight to his statement of what the Vermont law is. See
Respondent argues that since the contract was made in New York and the parties contracted for arbitration under New York law, New York arbitration law should be applied to the enforcement of the contract. A question of conflict of laws is tendered, a question that is also governed by Vermont law. See Klaxon Co. v. Stentor Co., 313 U.S. 487. It is not clear to some of us that the District Court ruled on that question. We mention it explicitly so that it will be open for consideration on remand of the cause to the District Court.
The judgment of the Court of Appeals is reversed and the cause is remanded to the District Court for proceedings in conformity with this opinion.
Reversed and remanded.
MR. JUSTICE FRANKFURTER, concurring.
It is my view that the judgment of the Court of Appeals should be reversed and the case remanded to that court and not to the District Court.
This action was brought in the Bennington County Court of the State of Vermont by petitioner, a citizen of
Respondent invoked another provision of the contract whereby disputes under the agreement were to be submitted to arbitration subject to the regulations of the American Arbitration Association and the pertinent provisions of the New York Arbitration Act. It did so by a motion to stay the proceeding in the District Court pending arbitration.
The District Court denied the stay because, on its reading of the Vermont cases, Vermont law, while recognizing the binding force of such an agreement by way of a suit for damages, does not allow specific performance or a stay pending arbitration. It rested on a decision rendered by the Supreme Court of Vermont in a bill for an accounting
The Court of Appeals found it unnecessary to consider what the Vermont law was today, for it held that the arbitration provision did not concern a matter of "substantive" law, for which, in this diversity case, Vermont law would be controlling on the United States District Court sitting in Vermont. It held that the arbitration provision fell within the law of "procedure" governing an action in the federal court, whatever the source of the jurisdiction. So holding, the Court of Appeals found § 3 of the United States Arbitration Act, 9 U. S. C. § 3, applicable and, accordingly, directed the District Court to heed that Act and allow the matter to go to arbitration. 218 F.2d 948.
This Court explained in Guaranty Trust Co. v. York, 326 U.S. 99, why the categories of "substance" and "procedure" are, in relation to the application of the doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64, less than selfdefining. They are delusive. The intrinsic content of what is thought to be conveyed by those terms in the particular context of a particular litigation becomes the essential inquiry. This mode of approaching the problem has had several applications since the York decision. I agree with the Court's opinion that the differences between arbitral and judicial determination of a controversy under a contract sufficiently go to the merits of the
Vermont law regarding such an arbitration agreement as the one before us, therefore, becomes decisive of the litigation. But what is Vermont law? One of the difficulties, of course, resulting from Erie R. Co. v. Tompkins, is that it is not always easy and sometimes difficult to ascertain what the governing state law is. The essence of the doctrine of that case is that the difficulties of ascertaining state law are fraught with less mischief than disregard of the basic nature of diversity jurisdiction, namely, the enforcement of state-created rights and state
As long as there is diversity jurisdiction, "estimates" are necessarily often all that federal courts can make in ascertaining what the state court would rule to be its law.
Surely in the light of all that has happened since 1910 in the general field of the law of arbitration, it is not for us to assume that the Court of Appeals, if it had that question for consideration, could not have found that the law of Vermont today does not require disregard of a provision
I would remand the case to the Court of Appeals for its determination of Vermont law on matters which the basis of its decision heretofore rendered it needless to consider.
MR. JUSTICE HARLAN, concurring.
I concur in the opinion of the Court except insofar as it undertakes to review and affirm the District Court's interpretation of Vermont law. I agree with MR. JUSTICE FRANKFURTER that the review of questions of state law should ordinarily be left to the Courts of Appeals and would remand the case to the Court of Appeals for that purpose.
MR. JUSTICE BURTON, dissenting.
Whether or not § 3 of the Federal Arbitration Act is applicable to this contract, the judgment of the Court of Appeals should be affirmed.
Assuming the validity of the arbitration clause in the New York contract here involved. I regard the procedure
FootNotes
"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
"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."
". . . commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation, but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."
Since no transaction involving commerce appears to be involved here, we do not reach the further question whether in any event petitioner would be included in "any other class of workers" within the exceptions of § 1 of the Act.
"It has never been denied that the hostility of English-speaking courts to arbitration contracts probably originated (as Lord Campbell said in Scott v. Avery, 4 H. L. Cas. 811)—`in the contests of the courts of ancient times for extension of jurisdiction—all of them being opposed to anything that would altogether deprive every one of them of jurisdiction.'
"A more unworthy genesis cannot be imagined. Since (at the latest) the time of Lord Kenyon, it has been customary to stand rather upon the antiquity of the rule than upon its excellence or reason . . . ." 222 F., at 1007.
"I think the decisions cited show beyond question that the Supreme Court has laid down the rule that such a complete ouster of jurisdiction as is shown by the clause quoted [the arbitration clause] . . . is void in a federal forum." 222 F., at 1012.
On the other hand, in 1924 this Court observed in Red Cross Line: "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." 264 U. S., at 125.
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