## Facts

- Recognition Equipment, Inc. agreed to supply mechanical goods and related parts to NCR Corporation under a commercial contract.
- The contract included a detailed default-and-remedies provision (Paragraph 18) and a broadly worded arbitration clause (Paragraph 28.11).
- Recognition delivered goods and claimed NCR underpaid by using the wrong price list.
- Recognition sued to recover the alleged underpayment; NCR sought a stay under Federal Arbitration Act (FAA) § 3 to require arbitration.
- Recognition argued the payment dispute was not covered by the arbitration clause and that Paragraph 18.4 (allowing “relief ... at law or in equity” for “any other default”) preserved a right to litigate; alternatively, it sought to continue federal discovery during arbitration.

## Issues

1. Whether the contract’s arbitration clause required arbitration of the parties’ price-list/payment dispute, notwithstanding Paragraph 18.4’s reference to legal or equitable relief.
2. If the dispute was arbitrable and the case stayed under FAA § 3, whether federal court discovery should proceed pending arbitration.

## Decision

- The court held the payment dispute fell within the scope of the contract’s arbitration clause.
- The court granted NCR’s motion to stay all judicial proceedings under FAA § 3 and directed the parties to proceed to arbitration.
- The court denied Recognition’s request to conduct discovery in federal court while arbitration was pending.

## Legal Principles

- Under FAA § 3, once a court determines issues in a suit are referable to arbitration under a written agreement (and the movant is not in default), the court must stay the action.
- In determining a § 3 stay request, courts assess whether the parties agreed to arbitrate, the scope of the arbitration agreement, and whether any federal statute or policy makes the claims nonarbitrable.
- Arbitration clauses are construed in light of the contract as a whole; remedial language describing available relief does not necessarily specify the forum or method for resolving disputes.
- Doubts about the scope of a broadly phrased arbitration clause are resolved in favor of arbitration.
- A § 3 stay generally halts litigation activity, including discovery, leaving discovery management to the arbitral process.

## Conclusion

The court compelled arbitration of a contract payment dispute under a broad arbitration clause, treated FAA § 3’s stay as mandatory once arbitrability was found, and stayed the case in full, including federal discovery, pending arbitration.


Recognition Equip., Inc. v. NCR Corp., 532 F. Supp. 271 (N.D. Tex. 1981)