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Prima Paint Corp. v. Flood & Conklin Mfg. Co.

Supreme Court of the United States

March 16, 1967, Argued ; June 12, 1967, Decided

No. 343

Opinion

 [*396]  [***1273]  [**1802]    MR. JUSTICE FORTAS delivered the opinion of the Court.

This case presents the question whether the federal court or an arbitrator is to resolve a claim of "fraud in  [*397]  the inducement," under a contract governed by the United States Arbitration Act of 1925, 1 where there is no evidence that the contracting parties intended to withhold that issue from arbitration.

 [****5]  The question arises from the following set of facts. On October 7, 1964, respondent, Flood & Conklin Manufacturing Company, a New Jersey corporation, entered into what was styled a "Consulting Agreement," with petitioner, Prima Paint Corporation, a Maryland corporation. This agreement followed by less than three weeks the execution of a contract pursuant to which Prima Paint purchased F & C's paint business. The consulting agreement provided that for a six-year period F & C was to furnish advice and consultation "in connection with the formulae, manufacturing operations, sales and servicing of Prima Trade Sales accounts." These services were to be performed personally by F & C's chairman, Jerome K. Jelin, "except in the event of his  [***1274]  death or disability." F & C bound itself for the duration of the contractual period to make no "Trade Sales" of paint or paint products in its existing sales territory or to current customers. To the  [**1803]  consulting agreement were appended lists of F & C customers, whose patronage was to be taken over by Prima Paint. In return for these lists, the covenant not to compete, and the services of Mr. Jelin, Prima Paint agreed to pay  [****6]  F & C certain percentages of its receipts from the listed customers and from all others, such payments not to exceed $ 225,000 over the life of the agreement. The agreement took into account the possibility that Prima Paint might encounter financial difficulties, including bankruptcy, but no corresponding reference was made to possible financial problems which might be encountered by F & C. The agreement stated that it "embodies the entire understanding of the parties  [*398]  on the subject matter." Finally, the parties agreed to a broad arbitration clause, which read in part:

"Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in the City of New York, in accordance with the rules then obtaining of the American Arbitration Association . . . ."

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388 U.S. 395 *; 87 S. Ct. 1801 **; 18 L. Ed. 2d 1270 ***; 1967 U.S. LEXIS 2750 ****

PRIMA PAINT CORP. v. FLOOD & CONKLIN MFG. CO.

Prior History:  [****1]  CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.

Disposition:  360 F.2d 315, affirmed.

CORE TERMS

arbitration, Paint, commerce, inducement, diversity, interstate, evidencing, revocation, rescind, contractual, fraudulent, maritime, save

Admiralty & Maritime Law, Maritime Contracts, General Overview, Business & Corporate Compliance, Alternative Dispute Resolution, Arbitration, Arbitrability, Contracts Law, Contract Conditions & Provisions, Enforcement of Arbitration, Federal Arbitration Act, Judicial Review, Civil Procedure, Federal Arbitration Act, Constitutional Law, Congressional Duties & Powers, Commerce Clause, Pretrial Matters, Contracts Law, Arbitration Clauses, Affirmative Defenses, Fraud & Misrepresentation, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Torts, Public Entity Liability, Immunities, Judicial Immunity, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Transportation Law, Interstate Commerce, Federal Powers, Governments, Courts, Authority to Adjudicate, Federal Government, US Congress, Legislation, Enactment