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Prima Paint Corp. v. Flood & Conklin Mfg. Co. - 360 F.2d 315 (2d Cir. 1966)

Rule:

If the contract sought to be rescinded evidences a transaction involving interstate commerce (excluding employment contracts of interstate workers) the arbitration clause in the contract is valid, irrevocable and enforceable unless grounds exist to revoke the contract, 9 U.S.C.S. §§ 1, 2, and the court is required to order arbitration when satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue. 9 U.S.C.S. § 4.

Facts:

Appellant paint company (paint), a Maryland company, and appellee consulting company (consultant), a New Jersey company, executed a contract that had a mandatory arbitration clause. Paint company notified the consultant that it considered the consultant to be in breach of the contract and was directing its monthly contract payments to an escrow account. The consultant filed a notice to arbitrate, and thereafter, the paint company filed a diversity action in the district court requesting rescission of the contract, claiming that it had been induced by fraud to enter into the contract. The paint company filed a claim to stay the arbitration pending resolution of its complaint, and the consultant filed a cross-claim to stay the federal matter pending the arbitration. The district court dismissed the paint company's claims and ordered the parties to proceed to arbitration. The paint company challenged the district court's decision.

Issue:

Pursuant to the contract between the parties, should they proceed with arbitration of their disputes and differences?

Answer:

Yes.

Conclusion:

The court affirmed the district court's order dismissing appellant paint company's complaint against appellee consultant and granting the consultant's request that the parties proceed to arbitration because the arbitration clause was separable from the contract between the parties, within which it was contained, and as no fraud was alleged with regard to the execution of the arbitration clause, arbitration was proper.

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