Court Opinion

ID: 5792982
Source: CourtListenerOpinion
Date Created: 2022-01-12 18:13:01.506267+00
Date Added: 2024-06-11T08:42:20.068226
License: Public Domain

Heblihy, P. J., (concurring).
I am in agreement with the result reached in this particular ease.
It is abundantly certain that in the present case the formula agreed upon by the parties for the ascertainment of damages constitutes a penalty. Trade association agreements as well as many portions of collective bargaining agreements would leave the parties without effective sanctions to discourage breaches thereof in the absence of penalties as in many instances actual damage would be suffered prior to any ability to secure injunctive relief and such damages would, for all practical purposes, not be subject to any accurate measure. It has been *145held that in regard to trade association agreements and/or collective bargaining agreements, the fact that the formula adopted by the parties in regard to compensation for breaches of the contract constitutes a penalty does not violate public policy as long as such formula is specific. (See Matter of East India Trading Co. [Halari], 280 App. Div. 420, affd. without opn. 305 N. Y. 866; Matter of Mencher [Geller & Sons], 276 App. Div. 556.)
In the present case the formula set forth in the contract for damages is definite and certain and is reasonably related to the contractual relationship entered into between the parties. The award itself as calculated by the arbitrators was based upon an independent finding as to the length and extent of the default and it is demonstrated that the award is related to the breach contemplated by the parties at the time the agreement was entered into. Under the terms of the agreement, the arbitrators could have awarded much more substantial damages.
In Matter of Publishers’ Assn, of New York City (Newspaper & Mail Deliverers’ Union of N. Y.) (280 App. Div. 500) the penalty imposed by the arbitrators did not result from a formula specifically agreed upon by the parties and, as noted by the court therein, the imposition of punitive damages was in the unfettered discretion of the arbitrators. Actually, the Publishers’ Assn, case was entirely different from the Mencher and East India cases and the result therein demonstrates that the imposition of a penalty should not be permitted where the same would depend upon that kind of discretion granted to the arbitrators.
If any general rule is to be drawn from the cases in regard to the public policy prohibiting the imposition of penalties and the waiver thereof as to trade association or collective bargaining contracts involving arbitration, it should be limited to permitting the imposition of penalties pursuant to formulas agreed upon by the parties in the contracts, it further being required that the penalty formula be reasonably related to the purposes of the agreement and the breach contemplated by the parties at the time the agreement was entered into.
The present case falls within that rule and, accordingly, I concur in the affirmance of the judgment.