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

388 U.S. 395 (1967)

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

United States Supreme Court

388 U.S. 395 (1967)

Facts

Prima Paint Corporation (Prima) (plaintiff), a Maryland corporation, bought the paint business of Flood & Conklin Manufacturing Company (F&C) (defendant), a New Jersey corporation. Three weeks after the purchase, the parties entered into a consulting agreement pursuant to which F&C agreed to provide Prima with its customer list and to provide consulting services for a period of six years. In exchange, Prima agreed to pay F&C a percentage of its receipts. The consulting agreement contained a broad arbitration agreement pursuant to which the parties agreed to arbitrate any claim controversy arising from the agreement or its breach. One week after the consulting agreement was signed, F&C filed a petition for bankruptcy. Nearly a year later, Prima’s first payment to F&C was due. Instead of paying F&C on the due date, Prima paid the money into escrow 17 days after the due date. F&C responded by filing a notice of intent to arbitrate. Rather than respond to the notice, Prima filed a lawsuit in federal district court for recission of the consulting agreement, alleging that F&C had fraudulently induced Prima to enter the agreement by misrepresenting itself as solvent. Prima also requested an injunction barring F&C from proceeding with arbitration. F&C filed a cross-motion to stay the lawsuit, arguing that the issue of fraudulent inducement should be arbitrated. The district court granted F&C’s motion to stay the lawsuit pending arbitration, and the court of appeals affirmed. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Fortas, J.)

Dissent (Black, J.)

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