Case Name: In the Matter of the Arbitration between Stanley J. Staklinski, Respondent, and Pyramid Electric Company, Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1959-05-29
Citations: 6 N.Y.2d 159
Docket Number: 
Parties: In the Matter of the Arbitration between Stanley J. Staklinski, Respondent, and Pyramid Electric Company, Appellant.
Judges: 
Reporter: New York Reports
Volume: 6
Pages: 159–167

Head Matter:
In the Matter of the Arbitration between Stanley J. Staklinski, Respondent, and Pyramid Electric Company, Appellant.
Argued March 3, 1959;
decided May 29, 1959.
Marvin E. Frankel, Harold H. Levin, Howard Lichtenstein and Michael L. Matar for appellant.
I. The decree of reinstatement violates the legislatively declared public policy that corporate management is for the directors. (Long Park v. Trenton-New Brunswick Theatres Co., 297 N. Y. 174; D’Arcangelo v. D’Arcangelo, 137 N. J. Eq. 63; Jackson v. Hooper, 76 N. J. Eq. 592; Clark v. Dodge, 269 N. Y. 410; Ripin v. United States Woven Label Co., 205 N. Y. 442; Matter of Burkin [Katz], 286 App. Div. 740, 1 N Y 2d 570; Rochester v. Bergen, 265 App. Div. 547, 291 N. Y. 656; Christal v. Petry, 275 App. Div. 550, 301 N. Y. 562; Matter of Western Union Tel. Co. [ACA], 299 N. Y. 177.) II. The decree of reinstatement, where damages would be an ample remedy, offends basic principles of equity. (Cuppy v. Ward, 187 App. Div. 625, 227 N. Y. 603; Bleendes v. Fellerman, 264 App. Div. 223; Kerr S. S. Co. v. Kerr Nav. Corp., 113 Misc. 56; Matter of Devery [Daniels & Kennedy], 266 App. Div. 213, 292 N. Y. 596; Matter of United Culinary Bar & Grill Employees [Schiffman], 272 App. Div. 491, 299 N. Y. 577; Goldman v. Cohen, 222 App. Div. 631; United Office & Professional Workers v. Monumental Life Ins. Co., 88 F. Supp. 602; Case Co. v. Labor Bd., 321 U. S. 332; Odom v. Thompson, 85 F. Supp. 477; Matter of Freydberg Bros. v. Corey, 177 Misc. 560, 263 App. Div. 805.) III. The courts in arbitration proceedings follow the commands of public policy and the principles of equity in determining the jurisdiction of arbitrators and the propriety of awards. (Matter of Lipschutz [Gutwirth], 304 N. Y. 58; Matter of Feuer Transp. [Local No. 445], 295 N. Y. 87; Reconstruction Finance Corp. v. Harrisons & Crosfield, 204 F. 2d 366, 346 U. S. 854; Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F. 2d 978; Matter of Western Union Tel. Co. [ACA], 299 N. Y. 177; Matter of Publishers’ Assn. [Newspaper Union], 280 App. Div. 500; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284, 282 U. S. 808; Matter of Kingswood Management Corp. [Salzman], 272 App. Div. 328; Matter of Hill [Hill], 199 Misc. 1035; Matter of Swislocki v. Spiewak, 273 App. Div. 808; Matter of Knickerbocker Agency [Holz], 4 N Y 2d 245; Wilko v. Swan, 346 U. S. 427; Black v. Cutter Laboratories, 43 Cal. 2d 788, 351 U. S. 292; Matter of Ruppert [Egelhofer], 3 N Y 2d 576.) IV. The contract did not authorize the arbitrators to order petitioner’s reinstatement or to compel him to work if he quit. But even if it had, the award would be unenforcible. (Matter of Riverdale Fabrics Corp. [Tillinghast-Stiles Co.], 306 N. Y. 288; Dolman v. United States Trust Co., 2 N Y 2d 110; Curtis v. Gokey, 68 N. Y. 300; Matter of Berkovits v. Arbib & Houlberg, 230 N. Y. 261; Matter of Kingswood Management Corp. [Salzman], 272 App. Div. 328.) V. The decree of reinstatement effects an improper interference with the internal affairs of a foreign corporation. (Langfelder v. Universal Laboratories, 293 N. Y. 200; Bickart v. Kelly-Springfield Tire Co., 243 App. Div. 72; Travis v. Knox Terpezone Co., 215 N. Y. 259; Cohn v. Mishkoff Costello Co., 256 N. Y. 102; Sternfeld v. Toxaway Tanning Co., 290 N. Y. 294; Nothiger v. Corroon & Reynolds Corp., 293 N. Y. 682; Cohen v. American Window Glass Co., 126 F. 2d 111; Long Park v. Trenton-New Brunswick Theatres Co., 297 N. Y. 174; Cuppy v. Ward, 187 App. Div. 625, 227 N. Y. 603; Hallenborg v. Greene, 66 App. Div. 590; Butler v. Standard Milk Flour Co., 146 App. Div. 735; People ex rel. Ruman v. National Slavonic Soc., 144 App. Div. 574; Gregory v. New York, L. E. & W. R. R. Co., 40 N. J. Eq. 38; Guilford v. Western Union Tel. Co., 59 Minn. 332; Edwards v. Schillinger, 245 Ill. 231; Wason v. Buzzell, 181 Mass. 338.) VI. Matter of Ruppert (Egelhofer) (3 N Y 2d 576) neither requires nor justifies the decision below. (Matter of Finsilver, Still & Moss v. Goldberg, Maas & Co., 253 N. Y. 382; Matter of Mencher [Abeles & Kahn], 274 App. Div. 585; Matter of Klein, 261 App. Div. 941; Matter of of Lipschutz [Gutwirth], 304 N. Y. 58; Matter of Feuer Transp. [Local No. 445], 295 N. Y. 87.)
Philip G. Samuels, Jacob Gruber and Arthur Elfenbein for respondent.
I. The judgment, confirming the award of reinstatement which gives effect to the clearly manifested contractual intention of the parties, should be affirmed. (Matter of Julliard & Co. [Baitch & Castaldi], 2 Misc 2d 753; Matter of Level Export Corp. [Wolz, Aiken & Co.], 305 N. Y. 82; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284; Matter of River Brand Rice Mills v. Latrobe Brewing Co., 305 N. Y. 36; Matter of Wilkins, 169 N. Y. 494; Matter of Pine St. Realty Co. v. Coutroulas, 233 App. Div. 404, 258 N. Y. 609; Matter of Ruppert [Egelhofer], 3 N Y 2d 576; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76.) II. The arbitrators’ award is final and binding, unless vacated on grounds set forth in section 1462 of the Civil Practice Act and appellant’s contention that the arbitrators exceeded their powers in making the award is untenable. (Matter of Grayson-Robinson Stores [Iris Constr. Corp.], 9 Misc 2d 796; Matter of Publishers’ Assn. [Newspaper Union], 280 App. Div. 500; Matter of Devery [Daniels & Kennedy], 292 N. Y. 596; Matter of Freydberg Bros. v. Corey, 177 Misc. 560, 263 App. Div. 805, 263 App. Div. 858; Matter of Young [Deschler], 202 Misc. 811; Matter of Samuel Adler, Inc., v. Local 584, Int. Brotherhood of Teamsters, 282 App. Div. 142; Cuppy v. Ward, 187 App. Div. 625, 227 N. Y. 603; Kerr S. S. Co. v. Kerr Nav. Corp., 113 Misc 56; Matter of United Culinary Bar & Grill Employees [Schiffman], 299 N. Y. 577; Goldman v. Cohen, 222 App. Div. 631; Matter of Kingswood Management Corp. [Salzman], 272 App. Div. 328; Matter of Western Union Tel. Co. [ACA], 299 N. Y. 177; Matter of Spectrum Fabrics Corp. v. Main St. Fashions, 285 App. Div. 710, 309 N. Y. 709; Matter of Lipschutz [Gutwirth], 304 N. Y. 58.) III. The award creates no interference with the functions of the board of directors; nor does it regulate the affairs of this foreign corporation. (Matter of DeCaro, 261 App. Div. 975; Long Park v. Trenton-New Brunswick Theatres Co., 297 N. Y. 174; Langfelder v. Universal Laboratories, 293 N. Y. 200; Gilbert v. Burnstine, 255 N. Y. 348; Matter of Gantt [Hurtado & Cia.], 297 N. Y. 433, 335 U. S. 843; Westchester Mtge. Co. v. Grand Rapids & I. R. R. Co., 246 N. Y. 194.)

Opinion:
Desmond, J.
We see nothing illegal about this arbitration award and no reason for vacating it. Petitioner was for years appellant's president and in charge of its production and engineering and one of its directors and largest stockholders. In 1954 appellant entered into an 11-year contract employing petitioner as manager in charge of production and engineering at a large salary plus a percentage of net profits. Included was a covenant that, if petitioner should be declared permanently disabled, he would receive reduced compensation for the next three years and then the contract would end. The contract provided that any controversy arising out of it should be settled by arbitration in accordance with American Arbitration Association rules and the rules of that Association in so many words authorized an arbitrator to grant equitable relief including " specific performance of a contract
In June, 1956 the corporation's directors made a determination that appellant was permanently disabled and that his services should be terminated. Petitioner disputed the finding of permanent disability. The resulting difference of opinion was just such a controversy as the parties had agreed to submit to arbitration and to arbitration it went. The arbitrators held in favor of petitioner on the issue and ordered petitioner's reinstatement. That, of course, put beyond reach of the courts the question thus conclusively determined by arbitration as to whether petitioner was in fact permanently disabled. It is now asserted, however, that it is against public policy to compel a corporation to continue the services of an officer whose services are unsatisfactory to the directors. But we must remember that this corporation made a valid long-term employment contract with this man and agreed that any disputes would go to arbitrators who would be empowered to order specific performance. Since the contract was indisputably valid, so is the arbitration award. The power of an arbitrator to order specific performance in an appropriate case has been recognized from early times (see Justice Story in McNeil v. Magee, Fed. Cas. No. 8915 [1829]).
In Matter of Ruppert (Egelhofer) (3 N Y 2d 576) we upheld the grant by arbitrators of an injunction against a strike in a labor dispute, and we cited a number of precedents therefor. A supposed "public policy" against such an injunction was urged on us in Buppert since there we had a specific statute (Civ. Prac. Act, § 876-a) which would have made it impossible for a court to grant that same injunction. However, we held in Buppert that the parties had agreed not only to submit their controversies to arbitration but had validly authorized the arbitrators to issue an injunction. The same is true here. Whether a court of equity could issue a specific performance decree in a case like this (see Matter of Buffalo & Erie Ry. Co., 250 N. Y. 275, 280-281) is beside the point. There is no controlling public policy which voids an arbitration agreement like this one and the courts are not licensed to announce a new public policy to fit the supposed necessities of the case (see Matter of Rhinelander, 290 N. Y. 31, 36).
The judgment should be affirmed, with costs.