Court Opinion

ID: 5399836
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:35:15.735103+00
Date Added: 2024-06-11T08:30:25.921347
License: Public Domain

Cohn, J. P., and Callahan, J.
(dissenting). Petitioner, a small textile jobber, entered into a collective bargaining agreement with respondent union on November 17,1953, with respect to his only employee, a shipping clerk. In January, 1954, the poor financial condition of his business allegedly required its forced liquidation, and petitioner thereupon disposed of his inventory, surrendered his leasehold, dismissed his employee and gave him three weeks’ severance pay.
The collective bargaining agreement between petitioner and the union provided for the adjustments of all complaints and disputes arising between petitioner as employer and the union concerning the interpretation, operation and performance of the terms of the agreement. It also contained the following provision: “ The Employer shall have the absolute right to go out of business at any time during the term of this agreement and such right shall not be questioned by the Union. Upon such event, all employees employed more than six months, shall receive two wéeks, pay. ’ ’ This clause is patently exclusive of the prior omnibus clause which requires employer and union to *440submit controversies to arbitration. Under the provisions of this contract, petitioner clearly had the right to go out of business at any time. This right he exercised.
The union contends, however, that the question as to whether petitioner actually terminated his business or whether he was continuing it under the guise of a corporation, demonstrates the existence of a bona fide controversy which should be determined only by the arbitrator. However, such a question on the face of the contract is beyond the scope of the arbitration provisions of the contract.
What was stated by this court in the Matter of Kosoff (“ Jones ”) (276 App. Div. 621, 624, affd. 303 N. Y. 663) is particularly apposite here: “ The demand for arbitration does not appear to assert any claim of damages for fraud. Even aside from the form of the demand, we think that no arbitrable issue could exist with respect to the employer’s good faith. In order to constitute actionable bad faith it would be necessary that the corporate employer had assumed an obligation not to dissolve its corporate existence during the period of the contract or had assumed some other contractual obligation that survived dissolution. We find no such obligation express or implied in the agreement between the parties ”.
By agreement of the parties, the right on the part of petitioner to liquidate his business may not even be questioned by the union; any dispute concerning it is effectively removed from the area of arbitration.
Cases such as Matter of Lipman (Haeuser Shellac Co.) (289 N. Y. 76) are distinguishable. In that case the question was whether there had been a cancellation of the basic contract by acts of the parties. The arbitration clause included any and all controversies “ in connection with the contract.” The issue of whether there had been cancellation by act of the parties was held to be for the arbitrator. A contrary ruling was indicated when the parties had effected an accord and satisfaction and liquidated their contract (Matter of Binger [Thatcher], 279 App. Div. 650, affd. 304 N. Y. 627). It has also been held that arbitration may not be had under the provisions of a contract that has been unambiguously cancelled and released by subsequent agreement of the parties (Matter of Minkin [Halperin], 279 App. Div. 226, affd. 304 N. Y. 617).
In the present case, the collective bargaining agreement itself provided that “ The Employer shall have the absolute right to go out of business at any time during the term of this agreement, and such right shall not be questioned by the *441Union.” This provision of the contract is so broad that it limits and infringes upon the right to arbitration. It deprives the union of the right even to question the employer’s right to dissolve or terminate his business. In the event of termination, the employee becomes entitled to severance pay as provided in the contract, but all other rights are ended. This has the same effect as if the contract itself expressly provided that there would be no right to arbitration after the employer went out of business. If, therefore, the employer has effected a termination of his business in good faith, there remains no contract and no arbitrable issue between the parties. A factual question is raised, however, as to whether the employer actually has gone out of business or is operating the same business under a newly organized corporation known as D. C. Fabrics, Inc. This factual issue as to the employer’s good faith in terminating the business is not a matter for the arbitrator, but must be resolved after a trial. (See Matter of Shapiro [Rosenblatt], 282 App. Div. 245.)
The order so far as appealed from should be reversed, motion to stay arbitration granted, and a trial directed as to petitioner’s good faith in terminating his business.
Breitel and Rabin, JJ., concur with Botein, J.; Cohn, J. P., and Callahan, J., dissent in opinion.
Order affirmed, with $20 costs and disbursements to respondents.