ARBITRATION OF INTERSTATE COMMERCIAL DISPUTES.

WEDNESDAY, JANUARY 9, 1924.

CONGRESS OF THE UNITED STATES,

JOINT COMMITTEE OF SUBCOMMITTEES ON THE JUDICIARY,

UNITED STATES SENATE AND
HOUSE OF REPRESENTATIVES,
Washington, D. C.

The joint subcommittee met, pursuant to call of the chairman, at 2.30 o'clock p. m., Senator Thomas Sterling presiding.

Present: Representing Senate subcommittee, Senator Sterling (chairman). Representing House subcommittee, Representatives Dyer, Foster, Hickey, and Kurtz.

Present also: Senator Kendrick, of Wyoming, and Representatives Mills, Perlman, Stengle of New York, and Cleary of New York.

The CHAIRMAN. Gentlemen, I think we may as well proceed with our hearing. I regret that the other two members of the Senate subcommittee are not present at this time, but would like to explain that Senator Ernst, I am informed, is kept away owing to illness, and that Senator Walsh, of Montana, is detained at another hearing. Senator Walsh told me that he might be able to come a little later. STATEMENT OF HON. CHARLES I. STENGLE, A REPRESENTATIVE FROM THE STATE OF NEW YORK.

Mr. STENGLE. Mr. Chairman and gentlemen of the committee, I simply want to note my appearance here in behalf of what is known as H. R. 646. I think on your side the bill is known as S. 1005, which, I understand, is identically the same bill as H. R. 646.

I am here this afternoon by request of the Brooklyn Chamber of Commerce, but owing to official business which calls me into another part of the building immediately, and knowing how kindly disposed this subcommittee is to the question of arbitration legislation, I think I can do more for my country elsewhere at this time, and therefore simply want to note an appearance and express the hope that you gentlemen will report a bill out for action in Senate and House. The CHAIRMAN. The hearing is upon S. 1005 and H. R. 646, being bills to make valid and enforceable written provisions or agreements for arbitration of disputes arising out of contracts, maritime transactions, or commerce among the State or Territories or with foreign nations.

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The bill referred to is here printed in full, as follows:

[S. 1005, Sixty-eighth Congress, first session.]

A BILL To make valid and enforceable written provisions or agreements for arbitration of disputes arising out of contracts, maritime transactions, or commerce among the States or Territories or with foreign nations.

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Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That "maritime transactions," as herein defined, means charter parties, bills of lading of water carriers, agreements relating to wharfage, supplies furnished vessels or repairs to vessels, collisions, or any other matters in foreign or interstate commerce which, if the subject of controversy, would be embraced within admiralty jurisdiction; commerce," as herein defined, means 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.

SEC. 2. That a written provision in any contract or maritime transaction or transaction involving commerce to settle by arbitration a controversy thereafter arising between the parties out of such contract or transaction, or the refusal to perform the whole or any part thereof, or any 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.

SEC. 3. That 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.

SEC. 4. That a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any court of the United States which, save for such agreement, would have jurisdiction under the judicial code at law, in equity, or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days' notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by law for the service of summons in the jurisdiction in which the proceeding is brought. The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to a jury in the manner provided by law for referring to a jury issues in an equity action, or may specially call a jury for that purpose. If the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

SEC. 5. That if in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be

followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise provided in the agreement the arbitration shall be by a single arbitrator.

SEC. 6. That any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions except as otherwise herein expressly provided.

SEC. 7. That the arbitrators selected either as prescribed in this act or otherwise, or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case. The fees for such attendance shall be the same as the fees of witnesses before masters of the United States courts. Said summons shall issue in the name of the arbitrator or arbitrators, or a majority of them, and shall be signed by the arbitrators, or a majority of them, and shall be directed to the said person and shall be served in the same manner as subpoenas to appear and testify before the court; if any person or persons so summoned to testify shall refuse or neglect to obey said summons, upon petition the United States court in and for the district in which such arbitrators, or a majority of them, are sitting may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt in the same manner now provided for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.

SEC. 8. That if the basis of jurisdiction be diversity of citizenship between citizens of several States or one of the parties be a foreign State, citizen, or subject, the district court or courts which would have jurisdiction if the matter in controversy exceeded, exclusive of interest and costs, the sum or value of $3,000, shall have jurisdiction to proceed hereunder notwithstanding the amount in controversy is unascertained or is to be determined by arbitration.

SEC. 9. That if the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then, notwithstanding anything herein to the contrary, the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings, and the court shall then have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon the award.

SEC. 10. That the award in any case must be in writing and acknowledged or proved in like manner as a deed for the conveyance of real estate in the State or district where the award is made and delivered to the parties or their attorneys. If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in the next two sections. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made. Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.

SEC. 11. That in either of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration—

(a) Where the award was procured by corruption, fraud, or undue means. (b) Where there was evident partiality or corruption in the arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

(d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

(e) Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators.

SEC. 12. That in either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.

(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matters submitted.

(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties.

SEC. 13. That notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court. For the purposes of the motion any judge who might make an order to stay the proceedings in an action brought in the same court may make an order, to be served with the notice of motion, staying the proceedings of the adverse party to enforce the award.

SEC. 14. That upon the granting of an order confirming, modifying, or correcting an award, judgment may be entered in conformity therewith, no exceptions shall be taken, but an appeal may be taken from such order or judgment, as hereinafter set forth.

SEC. 15. That the party moving for an order confirming, modifying, or correcting an award shall, at the time such order is filed with the clerk for the entry of judgment thereon, also file the following papers with the clerk: (a) The agreement; the selection or appointment, if any, of an additional arbitrator or umpire; and each written extension of the time, if any, within which to make the award.

(b) The award.

(c) Each notice, affidavit, or other paper used upon an application to confirm, modify, or correct the award, and a copy of each order of the court upon such an application.

The judgment shall be docketed as if it was rendered in an action.

The judgment so entered shall have the same force and effect, in all respects, as, and be subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered.

SEC. 16. That an appeal may be taken from an order vacating an award or from a judgment entered upon an award as from an order or judgment in an action.

SEC. 17. That this Act may be referred to as "The United States Arbitration Act."

SEC. 18. That all Acts and parts of Acts inconsistent with this Act are hereby repealed, and this Act shall take effect on and after the 1st day of January next after its enactment, but shall not apply to contracts made prior to the taking effect of this Act.

(H. R. 646 is in the identical language as S. 1005.)

The CHAIRMAN. This is practically the same bill that was before the Congress at the last session, being known as S. 4214 and H. R. 13522. With some slight changes this bill, S. 1005, is the same.

Senator Kendrick of Wyoming is here, and according to the usual custom we will accord to him first place in addressing the committee. STATEMENT BY HON. JOHN B. KENDRICK, A SENATOR FROM THE STATE OF WYOMING.

Senator KENDRICK. Mr. Chairman and members of the committee, it is not my purpose to detain you more than just a moment to say that I have not had an opportunity or occasion to study this bill closely myself, but my people in the West have been wiring and writing me indorsing the proposed legislation, and even a superficial study of it would indicate that there has been for some years not only a demand, but I might say a necessity, for some such legislation. I want only at this time, through the convictions drawn from less than a careful study on my own account but from the attitude of business men of my section of the West, to give my indorsement to the proposed legislation.

The CHAIRMAN. Your people in Wyoming are in favor of this bill, are they?

Senator KENDRICK. They are wiring and writing and asking me to indorse the proposed legislation, and even to appear before your subcommittee here and indicate to you their approval of the bill. From what I have heard about it, and from what little study I have given it, I am inclined to think there will be naturally very little opposition to the proposed legislation. I am sure that some such measure would go a long way toward harmonizing differences in connection with transactions not only as regards interstate commerce, but between citizens of this country and foreign countries. I hope your committee will act favorably upon the bill, and I thank you.

The CHAIRMAN. The committee is very glad to have heard from Senator Kendrick.

Mr. Bernheimer, do you care to make a statement at this time? Mr. BERNHEIMER. I will thank you if you will permit me to do so. The CHAIRMAN. The committee will be glad to hear from Mr. Bernheimer.

STATEMENT OF MR. CHARLES L. BERNHEIMER, CHAIRMAN COMMITTEE ON ARBITRATION, CHAMBER OF COMMERCE OF THE STATE OF NEW YORK, NEW YORK CITY.

Mr. BERNHEIMER. Mr. Chairman and gentlemen of the committee, it is from the business point of view that I will approach the subject of the reintroduced and slightly modified bill which is now before your committee.

Representative HICKEY. Whom do you represent?

Mr. BERNHEIMER. I represent the New York State Chamber of Commerce. I represent the Importers and Exporters' Association and the Merchants' Association of New York; and I have been, without definite appointment but so understood, representing the 73