*3 Judge, WOODBURY, and Chief Before ALDRICH, Circuit HARTIGAN Judges. Judge.
ALDRICH, Circuit
appeal
28 U.S.C. §
under
This is
interlocutory order,
(1)
1292(a)
from an
July
States
of the United
dated
of Puerto
District
for the
Court
District
stay
entering
preliminary
of arbi-
Rico
granting
preliminary
in-
tration
defendant-appellant
enjoining
junction
taking
any
a case
further action
District
pending
United
States
of New
District
for the Southern
steps
in furtherance
York,
other
or
Defendant-appellant,
arbitration.
Company,
cor-
a Delaware
in New
office
poration
its
alia,
engaged,
Y.,
in de-
York,
inter
N.
constructing
signing
oil refineries.
Plaintiff-appellee,
Oil Re-
Inc.,
corpo-
fining Co.,
is a Puerto Rican
ration,
as the own-
describes itself
refinery in Puerto Rico built
an oil
er of
controversy
the defendant.
for it
parties arises
of two
out
between
New York in
into in
entered
under which
July
March
refinery;
relating
build,
projections’)”
design,
ini-
to the
undertook
Lummus
tially
“
per-
projections’ were
guarantee the
that the
‘studies and
supervise,
refinery,
misleading,”
original
LummuS'
false
and that
first,
of,
formance
facilities,
made the
expansion
either knew this
or
so
later
then
representations
of some
indiffer-
guaranteed
“with reckless
maximum cost
for a
thereof”;
falsity
ence
to the
contain
truth or
$35,000,000. Both contracts
the “stud-
following
Commonwealth relied on
clause:
projections”
ies and
induced
and was
“Any controversy
aris-
or claim
representations
to'
therein
contained
Agree-
relating
to this
out
plain-
contracts,
execute the two
“which
by arbitration
shall
settled
ment
*4
tiff
for such
executed but
have
* *
shall be
*. The
misleading
projec-
false and
and
‘studies
York,
in
U.S.A.”1
held New
* * * ”;
“by
that,
tions’
and
reason
refinery
built,
Lum-
The
has
complaint,
of the facts set forth in this
$32,500,000there-
has received some
mus
plaintiff
suffered financial
has
losses
original
oper-
plant commenced
The
for.
damages
exceeding $60,-
in an amount
ex-
* *
on December
ation
000,000
relief,
com-
As
September
pansion
on
facilities
plaint sought:
however,
at marked
Operation,
has been
* * *
judgment
“(a)
in the sum
profit
loss,
substantial
rather than at the
plus
yet
$60,000,000,
un-
other sums
of
anticipated.
least 1957 Com-
Since
* * *; and
determined
expressed dissatisfaction
monwealth has
performance, and Lum-
Lummus’
with
“(b)
under the laws
such rescission
mus,
re-
alia,
Commonwealth’s
inter
York
the two con
New
the State of
pay
to
due for
fusal to
sums claimed
be
*
* *
may
just and
tracts
work
materials.
* * *
equitable
declaration as
or a
mailed,
April 29,1959,
laws
Lummus
under
their inexistence
On
* *
* 2
April
received,
Rico
on
30 Commonwealth
a Commonwealth Puerto
of its claim to
served
demand for arbitration
re- At the
time Commonwealth
same
court, “pursuant
$4,700,000 from Common-
cover some
wealth,
motion in the district
stay
“any
3204(4) (a),”3
set-offs or
counter-
L.P.R.A.
to 32
§
ground
claims
which Commonwealth
York
New
arbitration on
may
May 4,
assert.” On
Commonwealth
were invalid
that the arbitration clauses
by
in
instituted an action
the District of
of fraudulent
inducement
reason
Rico,
alleged,
May
which it
in
Puerto
in
sub-
On
Lummus
the contracts.
prepared
County
stance, that Lummus
“oil
in
York
motion
the New
served a
Supreme
refinery
capability
compel
economic and
studies
arbitration.
Court
earnings projections
May
petition
based thereon
25 Commonwealthfiled a
On
(herein called, collectively,
proceeding
‘studies and
to the United
to remove
respect
1. The entire clause reads:
issue has
wtih
No
been raised
Any controversy
“25.1
or claim aris-
last
we assume it
sentence and
relating
Agreement
applicability
out
to this
in-
no
to the claims here
shall be settled
arbitration in ac-
volved.
rules,
cordance with the
then obtain-
analyze
complaint
will
2. this
in more
ing, of
American
Arbitration As-
further
detail later. There is a
not material
claim
Agreement
sociation. This
enforceable and
shall be
present proceedings,
judgment upon any
preliminary
requested
no
relief is
majority
award rendered
all or a
disregarded.
thereunder, which will be
the arbitrators
be entered
3201-29,
jurisdiction.
Chapter 259,
having
in
court
Title
L.P.
R.A.,
York,
Ar-
shall be
constitutes the Puerto Rico
held in New
provisions
typi-
agreed, however,
Act.
U.S.A.
bitration
Its
are
Agreement
apply
modern arbitration
shall
cal of
statutes.
damages
provisions
further,
claims or
relevant here
discussed
for which either
pro-
has contracts
infra.
of insurance
tecting
respective
their
interests.”
injunction enjoining
for the Southern
from tak
Lummus
District
States
ing any steps
called
York, hereinafter
furtherance of the arbi
New
District
May
tration,
Lum
District. On
Southern District or oth
the Southern
an order
erwise.
from that
mus obtained
cause,
Admittedly
appeal
return
show
Lummus’
from
for Commonwealth
proceedings
why
present
July
pertinent
presents
all
June
decree of
able
steps
enjoined.
further
No
number
matters.
It raises a substantial
should not
They
District be
questions.
difficult
can be divid
taken
Southern
First,
day
groupings.
ob
major
same
Commonwealth
into
cause on the
ed
three
parte,
court,
below,
ex
from the court
Lummus
district
tained
temporary
contends that the
restraining
pro
jurisdiction,
further
equitable
order
as a
matter
ceedings
enjoined
District. On
York
the New
the Southern
should
pre
moved
proceedings,
should rather have
June
restraining
contention,
injunction
liminary
stayed
its own. It bases
taking any
first,
priority
action
further
arguing
they
proceedings,
com
fur
elsewhere
District or
*5
Southern
final deter menced with the service of
arbitra
until
arbitration
therance of
second,
May
demand,
4
tion
and
on
conten
for
of the motion of
mination
proper
stay
re
tion that New York is a more
Decision was
of arbitration.
temporary
motion,
law
forum because New York
is controll
on this
but
served
ing,
restraining
in force
because New
is more conven
continued
order was
Judge
date,
parties
witnesses,
Ruiz
and
ient
and
18. On that
to June
jurisdiction
being
district,
over
in
a hear
because
Lummus
out
Nazario
ing
Judge
stop
Ma
Puerto Rico is doubtful.5
not
held
Senior
do
before
was
sitting
gruder,
in
consider these contentions at
the district
length.
assignment,
presently
special
matter of con
we
here
on the
What
have
restraining
question
temporary
simply
pending actions,
tinuing
order
of two
Judge
stay
e.,
pending
Ruiz
determination
i.
the motion to
arbitration and
stay
original
compel arbitration,
motion to
of the
the action to
in two
Nazario
arbitration,
jurisdiction,
pre
for a
motion
federal courts of concurrent
Judge
injunction.
being
liminary
19
On June
each of which
consider
asked to
injunc
basically
Magruder
preliminary
entered
what is
a different
side of
stating
July 20,
tion,
expire
why
he
coin.
same
There is no reason
both
Judge
doing
give
in
Ruiz
so
order
should
at the same time.
suits
continue
opportunity
make the final
This would
detrimental
Nazario
to both the
questions
parties
judicial system.
on the
before him.
decision
and the federal
July
Although
F.Supp.
priority
6
On
Lum
174
485.
of suit is
See
often taken
Judge
determining
a modification of
moved for
as a basic factor in
mus
give
Magruder’s
permit
way,
Graybar
order
it move
should
Martin
see
Co.,
Cir., 1959,
to remand
ac
Southern District
Elec.
7
266 F.2d
judicial
giving
administration,
state court. This motion was
to the
re
tion
“wise
July
F.Supp.
gard
judicial
175
17. See
873.4
to conservation of
denied
resources
Judge
July
litiga
comprehensive disposition
20
Ruiz-Nazario
On
entered and
staying
rigid
preliminarily
tion,
an order
arbi
not counsel
does
mechanical
problems.”
“until
determining
its
this Court enters
order
solution
Mfg.
such
tration
Kerotest
finally
Co.,
Equip.
whether
are
there
Co. v. C-O-Two Fire
agreements
existing
180, 183,
219, 221,
valid and
U.S.
S.Ct.
**
granted
*,”
preliminary
disposed
L.Ed.
200. We are
to believe
Appeals
jurisdiction
person
these orders of June 19
found that
over
July
They
17 are also
before us.
of Lummus had been obtained. We con-
separately
preliminary finding,
will be
considered.
cur
the
ap-
really
before us
issue
on this
argued
tangential
peal except
This
last matter was
to some
in this
fashion.
preliminarily
below and
extent
the court
Puerto Rico
voidability
District Court in
stantial issue
hold
the first court to take
was in fact
war-
contracts which would
hearing.
plenary
Marchant v. Mead-
this matter. Cf.
rant a
Mfg.
Cir.,
Co., 2
29 F.2d
Morrison
All
facts were established
affidavits
denied, 1929,
40, 42-43,
certiorari
and exhibits. Commonwealth was incor-
565;
73 L.Ed.
49 S.Ct.
U.S.
porated
May
1953. Since October
Schneider,
Houses,
Inc. v.
American
1951, however, Lummus had been work-
Cir., 1954,
44 A.L.R.
F.2d
ing
persons
promot-
those
who were
Frocks,
1352; Minkoff v. Scranton
2d
Inc., D.C.S.D.N.Y.,
organizing
refinery.
1959,
ly twenty days pro- Books, made within because not used to interest and White for spective after the service demand arbi- The construction con- investors. tration; third, negotiated the Southern Dis- with Lummus were tracts trict, court, long time, period Article III as an without had over a each diversity jurisdiction prior Common- because six date least months an effective at Rico, wealth is a citizen Puerto which date of execution. to guaranteed meaning within not a State the maximum construction guaranteed costs, product yields, Article III of Constitution. Should both quantity quality, the first we answer two contentions in toas neither but Commonwealth, profitability type favor of we would be contained fore- third, faced with the which Lummus had raises con- which earlier fur- casts prin- provi- stitutional issues. Under familiar Both contracts contained nished. ciples, designed performance should these not be decided unless for tests sions necessary. accordingly pass whether or establish refineries guarantees. dispositive. grouping, third which find the contractual For met we. allegations including reasons, This is that Commonwealth’s various fact that present processing of fraudulent no inducement sub- been hot guaranteed upon completion planned capital upon of other oils the crude refinery “is, general, for based, expenditures, .yields demands Lummus’ mechanically capable opera- has been met. This sound and have tests report major tion a normal also area of contention. basis.” manage- that, present top stated “The mak- months after May two In thoroughly competent ment is now expansion fa- deserving every reasonable confi- making ceased cilities, Commonwealth Kellogg report dence.” The also estimat- under Lummus payments due to yearly refinery ed a return for the after claiming In contract, (cid:127)original setoffs. improvements certain basic had been that, n October Lummus informed made, figure [ap- and stated: “This our appear reports confirm “Recent proximately one half de- that] concerning inade- possible basic fears picted in the so-called‘White Book-—Case design or construction.” quacies figures grossly C’. Book’ The ‘White Report Annual Commonwealth’s optimistic respect yields n dated January num- 31, 1957, indicates high quality (high price) products and op- encountered the difficulties ber of operating report costs.” The then recom- in a substantial resulted erations which mended capital substantial additional ex- contemplated profit. It instead of a loss penditures would, opinion, in its greatest difficulties “our stated comparable achieve returns to those tower, the cata- vacuum been with the lytic originally predicted. which had been namely, utilities, cracker and cooling ap- appears It power, record Com- water.” from the steam and irregular pears that the work- record monwealth and Lummus continued ing from the n electric together adjust power supply was the fault their differences Authority, shortly Resources Rico Water until before this suit was Puerto irregularities brought.6 apparently caused had men working operating refinery time be- loss under the con- (cid:127)considerable highly February con- the use of sensitive cause of until at least tracts Meetings a more needed trol mechanisms which were held officials between *7 February power companies In stable both underwriters source. the changes having top during in man- were extensive 1958 and the last agement, were and the executive offices held on March been 1959. Another April post- New York to Puerto Rico. moved from for was scheduled Kellogg May 1957, poned May 4, In Co. M. W. the Lum- before date underwriters an in- hired to make The mus demanded arbitration. record refinery. dependent evaluation of the also Common- contains affidavit of report, 25, 1957, (who president as The dated November wealth’s took office pinpointed change February upon of October four ma- of man- jor accounting agement). factors “uneco- an calls Kel- for He to the attention operating history.” logg report nomic These were: and seeks establish that power; figures “grossly 1. optimis- electric 2. unrealiable elec- described as incompatible yields tronic product instrumentation with tic” supplied by were based therein on power supply; 3. circulation diffi- also Lummus. He seeks to catalytic cracking unit; any might culties in the and rebut inference which be overly integrated exchange 4. “an heat drawn from the fact 1958 Com- * * system. (This latter had also monwealth also contracted with Lummus pointed costing out to Commonwealth to build an additional unit al- independent study $3,000,000, another complet- submitted in most which unit was January 1956.) report accepted 1959, pointing The in March indicated ed and steps already same been taken to cor- at the time out that continuing rect some of these deficiencies and that indicated its dissatisfaction differences, developed present proceed- 6. fraud, These as will basis of infra-, any ings. charges did not include compelled acts, refinery, to tion but felt and we need not decide which with the completion governing ultimately speed in order to statute.7 Un use Finally, act, “may persons first es- der unit. after of the new con qualifications tablishing chemi- tract settle his arbitration a contro arising versy engineer spent “entire who his thereafter between cal them * * * working closely valid, associated and such in or contract shall time research, opera- irrevocable, petroleum refining, upon enforceable with save grounds design tion, equity administra- construction and such as exist law or in any tion,” for the states: revocation of contract.” If affiant “oppos arbitration is demanded anticipated “I believe * * * ing party evidentiary forth sets earning resulting yields product raising facts a substantial issue projections Green set forth * * making *, of the contract an based on Books were not White trial immediate shall same be had.” prepared estimates sound technical 1448, 1458, Act, N.Y.Civil Practice §§ standards accordance id., 1450,1451. subd. See also refinery engineering. professional I agree provides Puerto Rican statute they on were based estimates believe valid, ments arbitrate “shall be re personnel, which Lummus very quirable except and irrevocable for the engineering nature of the grounds prescribed by law for the re analysis they were mak- economic ing, agreement.” versal “If the court false or must have known were dispute finds that a substantial has arisen misleading they should regards validity or existence of the known were false or mislead- agreement, ing or, they prepared else proceed immediately court shall to hear any belief or en- without sound dispute.” give such “In order rise gineering belief, foundation * * dispute *, [such] con refinery part of Lummus that the equipment proved cerned shall state the facts on attaining capable such * * dispute which said is founded earnings yields projected could 3201, 3204(2), (4). L.P.R.A. §§ guar- price it be constructed at the federal statute follows the earlier New anteed.” York form and omits the word “substan many statement, There “or”s tial,” significantly but is otherwise not present purposes assume but we will different. 9See U.S.C. §§ legal that it asserts fraud. granted stay upon The court find- *8 ing probably The district court believed that Com- that “Commonwealth can * * * right stay prove repre- to arbitration was monwealth’s that [Lummus’] governed by proved the Puerto Rico arbitration have in been sentations fact to be statute, particularly 3204, false”; and “Commonwealth can intro- 32 L.P.R.A. These sections are upon Title sentially es- evidence duce that it relied these * * to similar related representations sections of “that given both the New and federal arbitra- not have into entered the governing granted, as to Questions the law certiorari 2d 362 U.S. number of this case in different con 80 S.Ct. 4 L.Ed.2d tells us, been gov much texts have mooted before ns the U. S. Arbitration Act entirely so, has but neither been con If this latter be then of erns. course using suggests objections power the law sistent controlling. as its to the some jurisdiction tells us we of both the Puerto to the law must look of Puerto Rico but Rican and New York district courts col presents (other give lapse. us with none than the We our reasons below statute). question applying arbitration Lummus contends New York law to the applies, then, York law that New but of construction tracts, con reply brief, beyond the basis of the deci but we do not find it necessary go. sion in Robert Lawrence Co. Devon Fabrics, Inc., Cir., shire 271 F. F.Supp. with York perhaps omitted].” contracts cases contracts page Judge adopt- representations”; Ruiz-Nazario but for these approach introduce ed the he can same when ruled and that “Commonwealth * * * that, alleged rep- would, tending prove these “The fraud evidence proved, if it is fraudulent.” so whole of the were vitiate the resentations contracts; dis- “A issue fraud in the substantial of such then concluded: issue pute inducement not arbitrable and cannot a substantial arisen and has ** * was be there submitted to arbitration.” We think as to whether exists Magruder’s Judge ruling, contracts that corresponding inducement of fraud * * findings essential “the remark that issue of are These obviously case. fraud cannot be submitted to Commonwealth’s foundation for they arbitration,” require unwar- further considera- Lummus contends arguments may Although First, have tion. must the fraud ranted. falsity agreements whereby re- have induced8 the presented on the issues design, build, liance, is- Lummus undertook to that a substantial we believe guarantee (which real difficul- the refineries con- made out. sue has been (or tracts, ty question clauses, minus the arbitration we fraudulent lies principal agreements) reckless) Com- shall call think that intent. regarded undertakings vitiating task to a difficult monwealth has assumed is, defendant’s ? That arbitrate the arbi- that a concern of establish consequence agreements reputation sepa- tration considered as admitted $35,000,000 though separable merely build a rate and they even undertook to guarantee agreed refinery, physically are embodied same agreements performance, principal price and the instruments ? maximum indifference, Secondly, in- let alone if the arbitration clauses are with reckless separable, scope misrepresentations, to not are within claims tentional necessarily performance could be of the arbitration non- clause whether they merely arbitrable, us or do The evidence before become so achieved. could be in- conduct virtue of Commonwealth’s election to such intent or agreements? merely principal reference avoid And ferred “grossly finally, Kellogg optimistic” principal report if avoidance agreements Book, requisite figures and the eon- avoidance White allegations elusory clauses, Commonwealth’s Common- having sought properly the in- president. in mind But wealth to exercise that fraud, right tangible the inher- ? nature of proof, we are short ent difficulties Although assumed Com- pre- willing the lower court’s to reverse prima made facie monwealth has show- liminary prefera- findings, and believe it voidability so far as the look other issues. into ble to agreements concerned, respect agreement opinion supporting arbitrate, his order of considered In to its his 19, Magruder Judge appear itself, “If the stated: to have been no June misrepresentations fraud [in finds to be at all. If the factual agreement District *9 ** agreement *, and that such to to build and the inducement] contract, regarded single a the whole the is- to be vitiates arbitrate are agreement, as fraud obviously promises fraud cannot be submit- both obtained sue fraud, by The is arbitration. thus and the one must fall the one ted to agreement obliged preliminarily decide whether But if the to with the other. regarded separate as and the arbitration is a clause to arbitrate by particularly undertaking, if it nullified fraud. This it is are is within enough any encompass York law well as to under New as under issue so broad inducement, an Rican such [Citation law. of New under- Puerto fraud any factum, very question ease, a different mat- in this 8. No arises or fraud tlie opinion, cited as to of the cases ter.
924 taking unless should not be voidable Robert Co. Lawrence v. Devonshire Fab specifically rics, Inc., supra, 7; directed there was fraud note Amicizia Societa says Navegazione il this is it. logical. v. Chilean Nitrate & Iodine no Corp., Cir., 1960, not. see rea We think We Sales 2 274 F.2d they why agree, 808-809; parties Parsell, should not if son Fraud Arbitration of to, question arises Contract, wish that if a as in the Inducement of a 12 Coi' agreement L.Q. principal ob nell (1927); whether the Sturges, 351 Fraudu by fraud, question will tained lent Inducement as Defense a to the En hold For court then to be arbitrated. a Contracts, of Arbitration forcement only upon bore that fraud which principal (1927); Nussbaum, Yale L.J. 866 automatically agreement invali “Separability Doctrine” in American would be the arbitration contract dated Foreign N.Y.U.L.Q.Rev. Arbitration, 17 destroy parties precisely what (1940). sought Moreover, other create. stage delaying approach ac sets the This, however, not matter is a injured tion, party to and invites to follow our own in which feel free we basically for breach claim cast what Polygraphic Co. Bernhardt v. views. See warranty perform, failure America, 1956, 350 U.S. 76 S.Ct. arbitrable, would be into an action based 273, clear L.Ed. 199.9 'We think it In some in on fraudulent stances, inducement. govern. Not New York law must that only injured prevent even the agreements in New made were the doing party from who wishes arbitrate agreements York, to arbitrate but the very he wishes fraud for which so. performed Other sub were to be there. defrauding by to recover can be used York include with New stantial contacts plaintiff’s to take the claim from there, agreements negotiation Wrap-Vertiser Corp. arbitrator. Cf. and the that at the time the con fact Plotnick, 1957, 3 N.Y.2d N.Y.S. parties main tracts were made both For 2d infra. these N.E.2d principal their executive offices tained including analysis reasons, other Additionally, there. contracts con both language the arbitration stat stating clauses that the contracts tained strong themselves, utes can case made, to have been ex “shall be deemed construing agree made for York, ecuted and delivered in New New separable principal ments as from the York,” a factor which indicates choice agreements, and as voidable parties themselves, of law the as does affecting directly existence, fraud their provision for arbitration York.10 New distinguished representations re Looking law, believe that the lating making approach to the content or York courts would not agreements. Although generally, question See as we would. case, voidability. 9. In Lawrence closed the claim of the Robert the Sec Our presently support separability treated the belief that uot ond Circuit issue 2d, a matter of federal law Restatement under ed Conflict of Laws (Tentative question 6, April 22, 1960) Arbitration Act. Draft No. U. S. 332a, e, separability Comments d §§ whether is matter of fed 334b. Com diversity significant law far eral rather than state in a ment c. As case, concerned, it whether or not the federal arbitra is true actual con applies purposes. place in tion act for other struction took Puerto On See Rico. hand,, (1960); designing other 73 Harv.L.Rev. cf. Ameri the re equip Airlines, procuring Inc. & and the can v. Louisville Jeffer fineries County Bd., Cir., undoubtedly Air son 209 F. ment occurred in New York. Century-Fox id., 332a, 811; 332b, 334b, generally, 2d v. Twentieth Ross See *10 Corp., 1956, 334e, Dominguez, Cir., Film 9 236 F.2d See Cruz 632. 354h. also v. Note, 847, 1905, 551; Registrar Yale 8 But see 69 L.J. 858- P.R.R. Colon v. 1915, 344; (1960). Aguadilla, 22 P.R.R. Del 61 City Bank, 1937, v. National Moral 52 221. Commonwealth contends that reference P.R.R. 10. such matters the contracts is fore
925
Realty
Danann
squarely con
the court has decided
Appeals
never
has
317,
Corp.
1959,
184
doctrine,
Harris,
5 N.Y.2d
v.
separability
it
sidered the
599,
There
subject
N.Y.S.2d
157
597.
N.E.2d
on the
observations
made
plaintiff
not
could
it was held
specifically withdrawn
would have to
complain
suggested
of a
of fraud in the inducement
re
reach our
it could
before
purchase
Corp.
Plot
contract to
a lease because
Wrap-Vertiser
v.
sult. See
agreement
buyer
provision in
17,
163 N.Y.S.2d
nick, supra
N.Y.2d
[3
relying
any
represen
upon
prior
parties
case,
had was not
In that
641].
said,
page-
agreed
tations. The
321,
5 N.Y.2d at
question “as to
court
to arbitrate
602,
page
157 N.E.
perform
184 N.Y.S.2d at
interpretation
validity,
or
alleged
page 599,
2d
“It is not
agreement.”
at
Plotnick
this
ance
sought
understood,
provision
matters,
was
or
in
this
to arbitrate several
by
provision
procured
was
that the
itself
was
cluding
court held
one which
fraud.”
could be
damages
induce
The same observation
for fraudulent
claim
majority
made
can be
in the case at bar.
If fraud
contract.
ment of the
only
“principal
said to relate
to the
was
claim
held that
court
agreement”
provi
so as not to affect
within
not fall
it did
because
arbitrable
doubly
fraud,
sion not to
dif
particular
assert
it is
arbitration
terms of
inducing
court,
According
ficult for us
how fraud
claim
to see
to the
clause.
agreement
inopera
“interpretation”
nor
renders
neither
concerned
provision
tive a
arbitration. Possib
Plotnick was
since
“performance,” and
damag
ly
seeking
now,
squarely presented'
the court
if
affirming
by
issue,
avoiding
seeking
depart
by
re
will
from obiter
it
than
es rather
scission,
“validity”
expressed Wrap-Vertiser.
dictum
But
question
was
present
for the
we feel constrained to ac
court went
But the
not in issue.
cept as an established doctrine of New
say
had “asked for
Plotnick
even if
York law that an
rescission,
arbitration clause can
issue would
such an
have
it
separable
in court before
decided
not be treated
from the
agreement exist
known that
parts
could be
contract.
other
juris
supplying
for the
a foundation
ed
which has
at
course a contract
3 N.Y.2d
Of
of the arbitrators.”
diction
fraudulently
page 641,
void but
20,
143
induced is not
page
163 N.Y.S.2d
been
merely
injured
voidable,
page
and the
While this was
N.E.2d at
dictum,
367.
.contract,
directly expressed.
elect
but
It also
avoid the
it was
need not
damages in deceit.
support
seek
York decis
finds
in other New
to affirm
alluded
that case
distinction was
ions.11 It
true
since
This
Dresses,
Inc.,
Cheney
v. Joroco
Bros.
11. It
is clear
that a claim of rescission
App.Div. 652,
1926,
upon
219
218
N.Y.S.
based
total breach or “fraud
performance”
put
reversed in the Court
That
case
does
in issue
ground
“making
(This phrase,
Appeals
that no fraud
on the
of the contract.”
express-
previously
shown,
noted,
but
occurs in a number
had been
pass
separability ques-
places
ly
on the
New York
did not
act.
375,
1927,
precise
N.E.
245 N.Y.
157
tion.
Puerto Rican act uses the more
Cheney Bros.,
phrase,
“validity
similar to
other cases
existence
For
Gruen, 1940,
Application
g.,
agreement,”
see,
it
is clear
e.
765,
990,
equiva
18 N.Y.S.2d
affirmed
Misc.
the two have been treated as
173
App.Div. 712,
opinion,
lent.)
See,
g.,
Ap
18
259
Matter of
without
e.
Kahn’s
1023;
plication, 1940,
515,
Horli Chemical Sales
284 N.Y.
32 N.E.2d
N.Y.S.2d
Oliphant, Sup.1945,
534; Lipman
Co.,
Corp.
N.Y.S.2d
68
v. Haeuser
Shellac
177;
Application
of Manufacturers
N.Y.
N.E.2d
App.Div.
1088;
Fields,
Co., 1940,
A.L.R.
Charles S.
Inc. v.
Chemical
dismissed,
171, appeal
Hydrotherm Corp.,
Man-
American
19 N.Y.S.2d
Co.
v. Caswell
Chemical
A.D.2d
But
ufacturers
N.Y.S.2d 184.
Co.,
28 N.E.2d
&
283 N.Y.
has been held that a claim of fraudulent
Strauss
Bros,
Cheney
place
issue,
case is criticized
404. The
inducement
does
Sturges
noted
the comment
“if
the contract was voided
fraud the
Dean
(1927).
provision
supra,
Yale L.J. 866
therein
falls.”
*11
Wrap-Vertiser.
Wrap-Vertiser,
days
Appeals
after
two
of
in
decided
Court
Appellate
in
that
decision
from
Division’s
think the inference
clear
damage Amerotron,
claim
that a mere
had established that a
court’s decision
though
Shapi-
claim,
of
based on fraudulent
fraudulent
even
inducement such
put
Re-
inducement,
issue the
ro’s
does not
in
Brief for
was
arbitrable.
“making
may
spondent-Appellant
Shapiro
and
of the contract”
Maxwell
sufficiently
arbi-
of
broad
Woolen Co.
York
arbitrated under
in the New
holding Appeals, pp.
Ap-
Both the actual
tration clause.
8-10. The Court of
peals,
opin-
however,
seem
affirmed,
relevant dictum
case
its
without
following
ion,
passage: “If
1958,
well stated
the decision
N.Y.2d
below.
seeking rescission,
722,
111,
were
he
927
posing
gets
We
time
fraud.14
cries
rescinds
contract and
resti-
proper
by
unless,
recovery
of
hold that
means
a
tution. Such
nowhere
double
is
rescission,
claim,
therefore,
claim
Commonwealth
allowed.
for
The
must be
contract,”
“making
interpreted
put
damages
in issue the
for
as either
de-
for
fraud,
asserting
stay
cannot, by merely
upon
part
it
ceit based
an affirmance of
of
together
proceedings.
contract,
of
with rescission
part
contract;
it must
be for
purpose
for
The
of
action
together
rescission,
an entire
with such
distinguished
rescission,
for
one
as
special damages
necessary
as are
to make
par
damages,
permit
is
defrauded
Commonwealth whole. On the
of
face
ty to
benefits
obtain restitution
complaint,
the first
construction
conferred
him.15
is
The
proper
prayer
seems the
one. The initial
merely
(as with
“rescis
terminated
a
money damages
asks for
almost double
breach),
is
sion” based on
total
paid
in amount what Commonwealth
abrogated
begin
and undone from the
Lummus, “plus
yet
other sums as
unde-
ning.
Black,
See
Rescission of Contracts
addition,
termined.”
In
and
Instruments
Cancellation of Written
any part
indicates no intent
to return
1929);
Restatement,
(2d
1
2
Con
ed.
§
refinery.
suggest
Such claims
an af-
349,
(1932). With
tracts
Comment a
§
firmance
the contracts. We note that
mind,
this in
what
we must determine
Judge Magruder’s
in both
order
June
kind of
it
rescission
is
Common
19,
Judge
and
order
Ruiz-Nazario’s
any,
wants,
kind,
wealth
to what
if
July 20, Commonwealth’s claim is termed
is
The
entitled.
thrust of
“damages,”
as one for
and its motion for
complaint,
pertinent
parts
stay
having
of arbitration as
been filed
above, appears
forth
were set
present
“in the
tort case.” Common-
damages.
be a tort action
To this wealth nowhere criticizes
these charac-
“ * * *
for;
appended
claim
a demand
is
prayer
terizations
as inaccurate.
* * *
may
(b)
such rescission
as
follows, for
“such rescission
* *
just
equitable
may
be
*.” These
just
equitable,”
be
has the
claims,
plainly
appearance
are not alternative
partial
of a mere claim for
one
intended
of which is
to be carried
appended
damage
upon
rescission
ac-
through
judgment.
they
Nor
partial
can
tion.
If
rescission is what
claims for cumulative
sought,
relief under which
presumably
provisions
Commonwealth both affirms the contract
for arbitration.
No other division is
damages,
suggested.
and receives
same
However,
cannot be
g.,
Co.,
See,
e.
(1951,
Supp.1959).
Matter of General Fuse
note
1956,
598,
695,
Lawrence,
2 A.D.2d
153 N.Y.S.2d
in Robert
the Second Circuit
opinion, 1957,
997,
later
7 Misc.2d
162
New
examined the
York cases and found
* *
630, reversed, 1958,
expressive
N.Y.S.2d
1013,
5 A.D.2d
of a
them
“restrictive
270;
Garment,
policy.”
page
174 N.Y.S.2d
Reo
a cannot in to go part. 2 scind of part in in Restate Commonwealth must out and affirmed 17 implication (1932); 5 business.” of is ment, this 487 Willis Contracts § p. (Rev. to ton, clear—Commonwealth no wish 1525 4271 has Contracts § 1939, go business. 1937); Meiselman, Cir., make of 2 restoration out In re ed. Realty party acquired 998; Merry But if a a busi- Co. 105 F.2d exactly rescission, Co., ness is wishes this & Hollis Estate Shamokin Real what it do. 308. must 230 N.Y. 130 N.E. us con ask to Commonwealth cannot first Although requirement of restora- and indivisi the contracts entire sider as specie number ex- tion in admits making purpose of the arbi ble for the ceptions, of no con- most of these are by tration clauses voidable virtue relevancy Certainly no ceivable here.18 agree relating fraud to by exception predicated is choice on a ments, pro and then seek to treat party If defrauded not restore. to part separable affirm visions as so toas restore, does not to it should care and rescind the rest. recognize, course, to elect rescind. We money in that restoration in specie rather than no rescis Our construction permitted in instances is certain was intended the entire sion specific “impossi- where is restoration by supported certain state further is noth- It is noted that there is ble.” to be partyA brief. Commonwealth’s ments in ex- to indicate to what the record is, course, nor restitution who seeks impossi- such in fact tent restoration is required mally make restoration to Passing this, important fact and the ble. received, specie, so that the the benefits appears not wish that Commonwealth to well, party, be restored as can other might be possible.16 to restore even that which it quo far This so the status action, to, logical consequence this do believe to be able is the proper case such substituted and returns restora- the contract disaffirms specific party “if assume that whatever he has tion. We will to the defrauded impossible before the parted when with this restoration became party with. But faced seeking knew facts “Lum restitution prospect, states: Commonwealth thereon, suggest opportunity act if and had an now even mus plaintiff granted upon payment place is induced to its eco restitution imposition by fraud, or of conditions Lummus’ hands of value future nomic justice be cannot otherwise done is now to tender bound Commonwealth if * * Restatement, substantially Restitution 66 its as business § back entire refineries, exception sets, (3).19 re- is not in- a condition to This limited By clarity, term Received One Entitled to Avoid a the sake of “res- fits For Transaction, Report 1946 used to denote relief the Law titution” N.Y.Legis.Doe. party, Commission, sought defrauded Revision and the 65(B), pp. 71-77; (1946) 5 No. “restoration” used to denote the Willis- term ton, (Rev. party §§ Contracts 1529-30 ed. the defrauded what he return Corbin, 1937); § Contracts 1114 has received. Note, (1951); Colum.L.Rev. protest do not construe We (1934). (1929); Mich.L.Rev. meaning simply that Commonwealth does go tender, wish to make out given as an 19. This rule is fact ex- precedent now, aas condition of business applied ception, case of litigating. made no Lummus such things chattels, than other to the more require. suggestion, law so nor does the general in the Restatement rule g., N.YCiv.Prae.Act, 112-g; See, § e. regard non-fungible chattels re- with Report of the Revision Com- Law be had cannot if substantial res- scission mission, N.Y.Legis.Doe. (1946) No. 65 specie possible. is not We toration (B). stringent, too believe Restatement, the more assume flexible rule 65-66 therefore 18. See Restitution Patterson, quoted. (1937); refer to the Restatement be- Bene- Restoration informed view compatible our “possible inade- basic (other of its as to than fears res valuable retain a construction”; design quacies in or some fungible goods) make money or earlier, Common- adjustment, November “compensatory” credit or Kellogg report, concept rescis- wealth had received contrary entire “grossly optimistic” significant with its reference to restitution. sion and *14 analysis figures, its detailed where and a case found nowhere have that we any effecting refinery. is bare as to rescis- The record in succeeded a any subsequent threw retained occurrence which time sion, the same has at light very parties res new possession ón the situation. all of the own in its frequently perform- their met discuss various to tendered the which constituted assuming Not, done. claims and what should be Even side. ance of the other however, might de- “if had allowed until after Lummus such a result that done,” April do did justice we manded arbitration otherwise be cannot anything say re- arbi- Commonwealth about to avoid desire not that a believe any scinding imperative any agreement, or make an such tration constitutes suggests contrary, nothing mention of fraud. On the the case else in where January 1959, neces- late as Commonwealth was restitution are that rescission compensa- expressly calling upon meet sary Lummus to afford Commonwealth to obligations contracts,20 injury. its under allow Common- its To tion for implicitly posi- keep the fruits at least maintained that wealth to rescind and to by permitting to tion it until the institution this suit. the contracts Throughout period spent, would be Lummus make substituted restoration according “huge allowing affidavit, just way amounts it rescind to an another to very money, time,” merely clauses, effort which it as- the arbitration spent part serts it would have un- to there was no fraud. not as which derstood there was to claim for re- be a reason is an additional There scission. why effect could Commonwealth agreements. Although filed num- Commonwealth rescission manifesting motions, delay present on of affidavits “An unreasonable ber alleged, lengthy, after it has not of a transaction some of them avoidance an knowledge form, conclusory acquired ter facts that acquisition of even knowledge power any for rescission later than in the fall new minates by it “discov- interests of means if the of 1957 fraud * * * right reply harmed or were rescind. In to are to ered” its transferee delay.” Re likely it must be tak- harmed such contention that Lummus’ statement, id. well 64. See also affirmed be- Restitution en § Restatement, May 1959, 68; 483- states in Contracts fore Commonwealth § throughout January independent the summer and In brief that discussing engineer consulting employed parties Com 1958 the fall of design major questioned performance tests called for monwealth January feature, contracts, Lummus’ that “as and stated that one of late as demanding realistic; in October 1959 Commonwealth was was not estimates ** * cases, Company. we have found no either ties to this [Y]ou cause any your obligations jurisdiction, New York or in other are not relieved of point. required perform to be in services which we consider under Similarly, contract.” when Lummus in- example January 15, February 20. For in a letter of formed Commonwealth in secretary withdrawing operators Commonwealth’s that it was four general although refinery, presi- counsel stated at Commonwealth’s acceptance- replied, felt far as Commonwealth dent “So we are con- operators provisions, cerned, test of the contracts were no these are at the re- longer applicable, finery contracts, “We did not and under the construction do your but, being employees, mean that we think re- of course any supervision subject your of its contractual leased liabili- control.” larger hardly dently below, we can respect replacement even action with ** apology refinery take counsel’s as a substitute These pumps any the total the record described absence from matters are and other similar conclusory, allegations factual, or even “significant indicat- in its brief facts subject. thing discovery the rec- true date recent * * newly ord discovered is an shows to be Lummus’ nature of antipathy us to arbitration. (Italics supplied.) seems What significant nowhere there is more pursuing If Commonwealth were discovery was, affirmation vigor attempt an evident rescind alleged as truth, facts recent. The principal agreements, presented and had was, no more “indicating” indicate that it some, slightly plausible, even excuse did not choose than having sooner, made its claim *15 distinguished not rescind, as to might say disposed be an issue that right knowing a to. it had that beenymade Instead, of fact had out. how- is a comes Commonwealth closest ever, opportunity full after to make a magnitude very “the statement presentation, appears there a consistent refineries complexity of the technical pattern attempt of an to defeat arbitra- of what comprehension complete made by asserting tion fraud to the Even difficult.” belated had occurred seeking agreements, then to rescind any brief, however, not its this, inis agreements solely Com- to arbitrate. the necessarily adds, “The It then affidavit. blow hot cold in cannot monwealth presen- the to make brief available time agreements If the same breath. the precluded, of below tation separable princi- from the arbitrate are demonstra- course, most exhaustive agreements ground pal has been no position.” Hav- tion Commonwealth’s of they shown their If are for avoidance. ing us record before oc- in mind separable, we hold it no has shown printed pages, cupies was evi- 588 basis for rescission at all.21 complaint, 3404, asked Commonwealth 21. In its § 31 what L.P.R.A. includes rescission for fraud either referred to as the in or, alternatively, law, Code, 1221, under Civil § ducement. 31 L.P. 3408; Diaz, their inexistence as to “a declaration R.A. 1949, Rivera v. § Heirs 168; laws of the Commonwealth under P.R.R. Cruz Re 70 v. Water Although 1954, Authority, Commonwealth Rico.” Puerto 76 sources 291. P.R.R. given latter, (dolo briefed this we have has not If deceit is “serious” caus ante), Code, An action for a dec 1222, it attention. some Civil 31 L.P.R.A. § proper give 3409, inexistence is the laration it will rise to an § action for remedy nullity Code, all three or of the where § under 1252 of the 31 requisites contract, (Sections in for essential cluding L.P.R.A. 3511. 1242-51 of § wholly consent, lacking, Code, 3491-3500, in a is L.P.R.A. §§ provide § contract. See 1213 of simulated for also what Puerto Rico is 3391; Code, “rescission,” § 31 L.P.R.A. Civil Gonzalez an action for termed 1928, 497; Logia Fumero, matter, 38 P.R.R. v. this ais different 1944, Garcia, Municipality del Plata v. Caballeros relevant here. See of Ponce 279; Guzman, 346). Vidal, Guzman v. P.R.R. v. P.R.R. think We period 640. There no 78 P.R.R. action it clear that is the for a dec (statute prescription limitations) nullity, inexistence, for not of laration of Guzman, remedy Guzman such an action. v. be Commonwealth’s However, supra, 649. if at a contract under Agostini law of Puerto Rico. See necessary effectuating req Philippi, contains v. 16 P.R.R. “although provides uisites, tainted with or defect 630. The Code further for the restoration, upon vice,” is nonetheless nullification, a contract of “the possibility object things there is the of con “because which have been firming fruits, the same and this de cures the with their and the value ** Numero, subject supra, Gonzalez fect.” interest words, applica In other the contract ex other sections not here certain Code, ists but is voidable. One form de § ble. Civil L.P.R.A. § per fect in the consent be that it was we have 3514. The ease found money deceit, Code, mitting obtained Civil § restoration in rather than- * * * Agreement sufficiently . failed ” —is Since Commonwealth damages mak broad raise substantial as to to include claim issue for contracts, particu inducement, based on or the existence of fraudulent stay larly preliminary many was not when entitled the fundamental is Similarly, proceedings. basically sues involved the arbitration are the same against injunction would have preliminary had the claim raised since granting been cast as one for breach of contract. rested Kellogg it, vacated. See M. stay too, must be W. preliminary Co. v. Monstanto staying Co., supra.22 arbitra Chemical As motion to reason no No other it, compel shown. has been arbitration is before we believe tion does claim Lummus’ proper contended that course is for the district within issue stay proceedings. an arbitrable not constitute its own See here provisions of the clause Co., the broad Landis v. North American question, question. 248, 254, believe We U.S. 81 L.Ed. S.Ct. one, fore therefore parties if there could If all the issues between as a mat rule that disposed of, also arbitrated, it. closed to We otherwise eventually If, Commonwealth’s suit can dismissed. construction ter reason, occurs, some no scope such solution arbi within the claims are pursue Commonwealth can then its ac under have seen that tration clause. *16 tion. fraud the issue of York cases the New We think non-arbitrable. is not in itself question appeals A remains as to the controversy “any the clause July from the orders of June 19 and 17. here — relating arising expired by out of or this These orders or claim their terms when facts, specie thought governed is, in on its well within to be the New York law. exceptions recognized by Restatement, common-law See Conflict of Laws § 347 2d, jurisdictions. (1934); Colon, & Forteza Co. v. Restatement Conflict of 1926, (Tentative 6, 1960) P.R.R. 269. The Code Laws Draft Civil No. § provides for the or con 334b. also ratification hy of a contract conduct in firmation Wrap-Vertiser Corp. Plotnick, 22. an nullifi consistent with intent to seek v. supra, Code, 1261-65, contrary, 31 L.P. is not to the §§ cation. Civil as the 3520-24; quite clause there was Sucn. Del Moral v. different. Nor is R.A. Co., 1939, Lipman Mayaguez the in L.P. & Ice statement v. Haeuser major Co., supra respects, 149. In there Shellac “that all P.R.R. acts of the fore, parallel parties subsequent making find the civil law to be the we of the only exclusively to the common law. The difference lie within jurisdiction one which would the of we have discovered is the arbitrators.” [289 adversely. is, 819]. Commonwealth That N.Y. 43 N.E.2d affect The court was holding the action for a declaration of nul that under a clause read- subject ing “any lity all based on deceit is to an ex controversies in con- tremely rigid with, arising of, statute of limitations of nection out this and/or years contract,” four “from the date of con the defense cancellation Code, of the contract.” Civil was for light arbitrators. summation Viewed in the Apparently holding 31 L.P.R.A. 3512. of that § § court was ex- running pressing broad, restrictive, the during of the statute is tolled not a not ar- period injured par jurisdiction. when the bitral As the court went on ty say, language appear is not aware of See “this deceit. would suf- Diaz, supra, ficiently express Rivera v. Heirs broad the intention opinion) parties (concurring ; Guzman v. Guz of the to include within the ex- jurisdiction man, supra, at 649. Once the action is clusive the arbitrators barred, general parties the contract as a rule all deemed valid for acts Agostini Philippi, supra. purposes. giving in all v. rise to issues relation to the except making contract, It would then follow that Commonwealth thereof.” nullify contract, page 80, page the first 289 N.Y. at N.E.2d at could July 8, 1954, was executed affective De Since we have ruled out 819. rescis- pursue bar, “making cember 1953. We do not sion in the case at question in in of whether Puerto Ri contract” is not in issue sens'e apply Lipman. co would also this statute of limita court in used might to a cause of action tions be July agreement, sion of we do order entered its the court appeals carry as believe that to the these this to dismiss it If we were point permitting (where moot, conceivably of res the fraud contention some way it) might predicated had no to what effect would judicata on what related be therein, see United be a true rescission been determined rehearing only. Munsingwear, Inc., 1950, petition 340 clause States v. 36; Kela- is what confirms our belief that this L.Ed. U.S. 71 S.Ct. seeking. ghan Co., Cir., Commonwealth Trust Industrial 134, notably, perhaps, issues 211 F.2d petition portion next July 17 which we involved in the order extraordinary. find Hav somewhat deciding. likelihood of While alleged ing, pointed out, fraud as we remote, fact view vaguest and most district court in the us to cause the same errors that general terms, now July 20 “infected” the order vacate specifical what, submits affidavit as to orders, make simi- these we will earlier ly, part, at least in the fraud consisted. disposition. lar Then submits an affidavit that Judgments vacating will entered particular matter was discovered orders Court. of the District It asserts these “pre March Rehearing accepted should On affidavits now be jurisdiction.” appellate serve court’s Judge. ALDRICH, Circuit explanation why they There is no sug earlier, except not submitted some petitioned Commonwealth has gestion that the issue date of dis alleging rehearing, court has that the covery However, ripe. was not Com record, “materially misapprehended” the original sug monwealth’s brief did not questions on decided *17 gest ripe, issue not was but con “fur the district court was to take tended, quite ineffectually, the record that alleges It first we ther evidence.” that adequate. was We have devoted a sizable meaning decide, not could not should portion past of the several months to the decided, spe whether restoration unusually complexities of this difficult required. points cie was things It out that some If we on be ease. have erred the record restored, in fact could not be us, we would wish reconsider. fore having others, acquired that not no But we have consider a new desire to Lummus, (Lum not did have to stage. record at this The affidavits will having purchasing acted, mus paying not be received. material, for certain as Common agent, vendor). It and not as a wealth’s Commonwealth’s last contention is ripe that, adds the time was not that “Since the below was the first event what restoration was to determine hold of this matter court take charges for, called the court with court which Commonwealth’s having pending, that restoration “conclude[d] claims are the District Court required.” stay proceedings entire refineries This should not its own un- reading opinion. is not correct of our and until Lummas a less establishes that Rather, we decided that Commonwealth Commonwealth’s claims are arbitrable really pursuing restitutionary was not the terms of under the arbitration remedy part- there has deduction been no clause.” What Commonwealth has —a attempt ly to refute —but serious that the in mind is arbitration that clause an of the action was true nature endeavor excludes the arbitration of “claims or damages damages rescinding to recover while which either con- has agreement Possibly protecting alone. tracts of insurance spective their re- adequately express did our views interests.” Commonwealth we Although York lav/. our on the New we rec fears that statement in footnote regard ognize (“No respect New York ar an has been raised with issue falling upon sentence bitration clause as a rescis- the last and we assume applicability here' no the claims America, UNITED STATES from con- involved.”), foreclose it will Appellant, against tending of its claims that some Lum- Lummus are not arbitrable because al., SLING, etc., Bernard E. et ROES protected by We of mus is insurance. Appellees. course We mere- no intention. such ly No. 17857. insurance there no assumed that was point But because no made it. Appeals United Court of States alleges goes It further. Fifth Circuit. also, effect, we decided this issue July 19, 1960. when we below stated Rehearing Aug. 30, 1960. Denied stay proceedings should now before it, overlooking apparently two last penultimate paragraph
sentences opinion.
of the
Basically, Commonwealth con stay
tends court could
proceedings ef to that without motion
fect Lummus. is true that as one
could have made such a motion compel
of the which it means could already has But Lummus arbitration. pending in ac an action thing. very stay
complish equivalent
we indicated stay upon mo be entered would stay tion for a action under stay Such statute. questions of indeed settle all arbitrabili ty. suggested stay is based
the belief no fur should be *18 litigation duplication ther Fed in two jurisdiction.
eral courts of concurrent beginning
We intimated at of our
opinion that there would sound have been reasons for below court to have de initially to
ferred the New York court. Clearly now certain issues decided,*
case have been we see no rea son court below to remain as supervise
court which will whatever arbi tration is to had. the terms of Under agreement place
will take in New York. New York controlling.
law will be We think supervise New York should
arbitration. petition rehearing denied.
* exception might sug- exist, seems late for Commonwealth to cial of which gest general scope damage of the arbi- claims covered insurance ia example. tration clause was not before the court. an obvious spe- But we have not decided that some