AMF, Inc. v. Brunswick Corp. - 621 F. Supp. 456 (E.D.N.Y. 1985)

Rule:

Arbitration is a creature of contract, a device of the parties rather than the judicial process. If the parties have agreed to submit a dispute for a decision by a third party, they have agreed to arbitration. The arbitrator's decision need not be binding in the same sense that a judicial decision needs to be to satisfy the constitutional requirement of a justiciable case or controversy.

Facts:

AMF Incorporated and Brunswick Corporation were competitors. An earlier litigation between the parties resulted in a settlement agreement, which stipulated that any future dispute involving an advertised claim of “data based comparative superiority” of any bowling product would be submitted to an advisory third party, the National Advertising Division ("NAD") of the Council of Better Business Bureaus, to determine whether there was experimental support for the claim. In March and April 1985, Brunswick advertised a product which competed with a product produced by AMF. AMF, disputing the content of the advertisement, sought from Brunswick the underlying research data referred to in the footnote to the advertisement. Brunswick replied that having undertaken the expense of research it would not make the results available to AMF. Thereupon AMF informed Brunswick that it was invoking Paragraph 9 of the settlement agreement and requested that Brunswick provide substantiation to an independent third party. Brunswick responded that its advertisement did not fall within the terms of the agreement. AMF brought the instant action to compel Brunswick to submit its data to the NAD for nonbinding arbitration.

Issue:

Pursuant to the parties’ agreement, could AMF compel Brunswick to submit its data to a third-party for nonbinding arbitration? 

Answer:

Yes.

Conclusion:

The court held that AMF’s petition to compel Brunswick to submit data to third-party for nonbinding arbitration was enforceable under the Federal Arbitration Act and pursuant to equity jurisdiction. According to the court, the parties’ agreement on its face covered the parties' dispute over Brunswick’s advertising claims since the agreement provided that if either party made claim to data-based comparative superiority, the other may request substantiation delivered to third-party for nonbinding resolution. Moreover, the agreement provided alternative means to litigation, even though it was nonbinding. The court further held that the agreement was enforceable in equity because it clearly expressed the parties' intent to require confidential submission to third party of disputes.