Court Opinion

ID: 5750290
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:56:04.788497+00
Date Added: 2024-06-11T08:41:16.068254
License: Public Domain

Steuer, J. (dissenting).
Plaintiff corporation has its main office in Georgia. It has two contracts with the several defendants, insurance companies, for the placing of reinsurance. One of the contracts is with 16 companies, the other includes 18 companies. Both contracts provide for arbitration of disputes. As the business between the defendants and plaintiff spread all over the country, the contracts provide that arbitrations are to be held in New York City unless otherwise agreed upon. There is no provision that New York law shall apply to the arbitrations or to any proceedings in connection with them.
Several of the companies experienced dissatisfaction with the way plaintiff was handling reinsurance matters and desired an examination of plaintiff’s books (a right granted them under the *506contracts), an accounting, and whatever relief such an accounting showed them entitled to. They began two actions in Georgia seeking that relief. Plaintiff answered in the Georgia actions. Among other defenses, it set up the agreement to arbitrate as a plea in abatement. There has been no decision by the Georgia court on this plea, but that court- has temporarily restrained plaintiff from removing or altering its books and records. Prior to the institution of these proceedings, counsel for the defendants there (the moving party here) expressed their readiness to proceed in the Georgia actions. This was presumably on all issues, including the right to arbitrate.
Plaintiff demanded arbitration in New York, Following that, it sought by special proceeding to compel arbitration, with a stay of the Georgia actions. These proceedings were abandoned and plaintiff commenced two actions, one in regard to each of the contracts. In these actions permanent injunctions against the companies prosecuting the Georgia actions is sought and also a direction to them to arbitrate. On a motion for a preliminary injunction, Special Term granted all the relief asked for in the complaint,
Special Term rested its determination on the fact that it had the power to restrain defendants from proceeding in Georgia, To a degree it has that power (Matter of Wolff Co. [Tulhoff], 9 N Y 2d 356). But even assuming that the power goes to the extent claimed, there is a vast difference between a power and its proper exercise. It has always been the rule that proceedings begun in another State should not be interfered with unless there is some necessity clearly shown (Merritt-Chapman & Scott Corp. v. Mutual Benefit Life Ins. Co., 237 App. Div. 70; cf. Colson v. Pelgram, 259 N. Y. 370; Savage v. Allen, 54 N. Y, 458). Generally the court which has first taken jurisdiction is the one in which the matter should be determined and it is a violation of rules of comity to interfere. This rule, of very long standing, was admirably enunciated in this State as far back as 1847 in Burgess v. Smith (2 Barb. Ch. 276) and has been quoted with approval frequently since. It is there stated (p. 280): “ [I]f this court has the power, it must be a very special case which will induce it to break over the rule of comity, and of policy, which forbids the granting of an injunction to stay the proceedings in a suit, which has already been commenced, in a court of competent jurisdiction in a sister state.”
Two years later the United States Supreme Court made a very similar pronouncement. In these comparatively early days of exploration of the effect of concurrent jurisdiction in courts of several States and the United States, the words are specially *507significant. “It is a doctrine of law too long established to require a citation of authorities, that, where a court has jurisdiction, it has a right to decide every question which occurs in the cause * * * and that, where the jurisdiction of a court, and the right of a plaintiff to prosecute his suit in it, have once attached, that right cannot be arrested or taken away by proceedings in another court. These rules have their foundation, not merely in comity, but on necessity. For if one may enjoin, the other may retort by injunction, and thus the parties be without remedy; being liable to a process for contempt in one, if they dare to proceed in the other. * * * The fact, therefore, that an injunction issues only to the parties before the court, and not to the court, is no evasion of the difficulties that are the necessary result of an attempt to exercise that power over a party who is a litigant in another and independent fórum.” (Mr. Justice Grier, in Peck v. Jenness, 7 How. [48 U. S.] 612, 624-625.)
That this continues to be the law is evident from the fact that it was quoted with approval over 115 years later, in Donovan v. City of Dallas (377 U. S. 408) where the Supreme Court held that an order of the Texas Supreme Court restraining the prosecution of a related action in the Federal court was invalid.
Of course, if special circumstances do exist, they will warrant restraining the foreign action. Such circumstances are if the action sought to be restrained is vexatious, oppressive or instituted to obtain some unjust or inequitable advantage (Savage v. Allen, supra; Merritt-Chapman & Scott Corp. v. Mutual Benefit Life Ins. Co., supra). The action in Georgia is neither vexatious nor oppressive. Georgia is the moving party’s home jurisdiction. In a case in which voluminous records will presumably play a large part, it is the place where those records are located. Actually the plaintiff might well claim that suit against it in any other jurisdiction would be vexatious and oppressive. The claim is, however, seriously made that it will give the plaintiff there, defendants here, an inequitable advantage. That advantage is stated to be that plaintiff will lose its right to arbitrate. To Support this, all that is shown is that the courts of Georgia take a somewhat less favorable view of the right of precedence of arbitration than do the courts of this State. This is hardly a ground to base a claim of oppression. In the first place, by its own pleading plaintiff here has submitted the question of its right to arbitrate to the Georgia court. There is absolutely nothing to show, nor any reason to believe, that the Georgia courts will not determine the issue in accord with whatever law is applicable. What plaintiff ostensibly fears is that the Georgia *508court will apply Georgia law and that this may result in limiting the scope of the arbitration. Assuming this to be the result, it is by no means oppressive. Concededly plaintiff’s right to arbitrate depends on the contracts. Neither of these, including the arbitration clauses, is stated to be governed by New York law. Nor is there any language from which an intent can be deduced that whether or not arbitration should be had, or the extent of it, is to be governed by New York law. The mere fact that in the absence of agreement as to any other site arbitration would be conducted in New York City is neither an agreement to have the contract interpreted by New York law nor any indication of intent to make such an agreement. It can hardly be said that the foreign suit seeks an unfair advantage because the court there will follow the law applicable to the case rather than a law which the party seeking to restrain prefers to have applied (Paramount Pictures v. Blumenthal, 256 App. Div. 756).
Nor does Matter of Wolff Co. (Tulhoff) (9 N Y 2d 356, supra) mandate a different conclusion. On its facts the case does not deal with the specific situation. There the proceeding restrained was not an action pending in the courts of another jurisdiction, or even an action at all. The proceeding was one under the Perishable Agricultural Commodities Act (U. S. Code, tit. 7, § 499a et seq.) before the Agricultural Marketing Service. It was, in the court’s words, “ not designed to preclude resort to other statutory or common-law remedies ” (p. 361). But it is true that the opinion does not rest on this ground but rather on the ground that the provisions of section 1451 of the Civil Practice Act vest the Supreme Court with power to stay actions irrespective of where they may have been instituted.
Section 1451 of the Civil Practice Act gave the right to stay proceedings pending arbitration to the Supreme Court or the court in which the action is brought. As seen in Wolff, no court at all was involved and an applicant for a stay had perforce to go to the Supreme Court. If a court — even a foreign court — was involved, the petitioner could conceivably under the strict wording of the statute go to either. But under the successive statute (CPLR 7503, subd. [a]) (which statute governs this application), if the court in which the action is pending has jurisdiction to compel arbitration, the application must be made in that court. This would certainly include a foreign court, as Wolff stated that when the predecessor section referred to an action it meant an action pending in any court, anywhere. A similar interpretation is indicated. And this is the only inter*509pretation which can make effectual the rule of comity which restricts the enjoining of actions in foreign courts.
It is moreover crystal clear that these maneuvers by the plaintiff are an effort to forestall the opening of its books. The papers show that a demand was made in accord with the contract to allow a representative of the insurance companies to examine the books. The demand was refused. The Georgia suit followed. When an injunction in regard to the books issued, came this attempt to block revelation by enjoining all procedures in Georgia.
The motion should have been denied. But in any event no permanent injunction should have issued. Putting aside the procedural proposition that the relief granted was in excess of what was requested, the injunction clearly by-passes the issues. Will there be irreparable damage if the Georgia action is allowed to take its course? Is there no question at all of plaintiff’s right to arbitration, and are the defendants to have no opportunity to contest this issue? While it is believed that plaintiff has shown no right to any relief, it is submitted that at least on these grounds the order cannot be allowed to stand.
The orders should be reversed and the motions denied.
McNally and Staley, JJ., concur with Botein, P. J.; Eager, J., dissents in part in opinion; Steuer, J., dissents in opinion.
Orders and judgments affirmed, with costs to the respondent.