Court Opinion

ID: 5779458
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:47:43.00306+00
Date Added: 2024-06-11T08:41:56.519006
License: Public Domain

McNally, J. (dissenting).
The order vacating the arbitration award should be reversed and the award confirmed for the following reasons :
1. The arbitrator was properly selected.
2. The respondent waived in writing any objections to the alleged improper appointment before the hearings commenced.
3. There is no evidence whatsoever of misconduct on the part of the arbitrator.
4. The arbitrator was not a neutral arbitrator within the meaning of section 18 of the 'Commercial Arbitration Rules of the American Arbitration Association.
5. Before hearings commenced, the arbitrator reiterated prior dealings with the appellant’s president six and one-half years before.
6. The minutes of the arbitration are not part of the record.
The provision for arbitration is contained in the .agreement between the parties dated January 1, 1969, granting the appellant, for the term of one year, and the option to renew for an additional year, the sole and exclusive license throughout the *111United States to use respondent’s trade-mark in the production and sale of appellant’s women’s scarves and related items. Paragraph 22 of the agreement provides for arbitration of any dispute or controversy arising out of the agreement ‘ ‘ pursuant to the rules then obtaining of the American Arbitration Association ’ ’. Thereby the parties became bound by the rules of the Association. (Korein v. Rabin, 29 A D 2d 351, 355.)
Appellant charged respondent with violation of the agreement of January 1, 1969 in selling to Liggett & Myers, Inc. during 1969 approximately 75,000 scarves bearing respondent’s trade-mark. The Association selected one arbitrator from names submitted to the parties and not objected to, and, in addition, appointed two other arbitrators, one of them an attorney, to complete the panel of three. The attorney accepted his appointment on June 18,1970. On June 22,1970', appellant’s attorney commendably informed respondent’s attorneys that the lawyer-arbitrator had six and one-half years prior thereto represented the appellant’s president on the sale of his interest in a children’s wear company, and that said attorney had prior thereto represented the firm with whom appellant’s president was associated. There is no evidence of any other connection between appellant’s president and said lawyer-arbitrator since the sale on which he represented appellant’s president six and one-half years ago. ¡
On July 7, 1970, the Association, "review thereof, overruled respondent’s objection to the lawyer-arbitrator. The sole ground assigned by Special Terih for the vacatur is noncompliance with section 18 of the Commercial Arbitration Buies of the American Arbitration Association (“ Association ”) providing a neutral arbitrator shall disclos'd any circumstances likely to create a presumption of bias or1-1 which he believes might disqualify him as an impartial Arbitrator ”.
The challenged arbitrator was not a “ netdral arlsratuT"'5 within the meaning of section 18 of the rules uf me Association. The term “ neutral ” is relative, having^applicaiion to' a situation where the parties appoint two of the arbitrators, who, in turn, select a “ neutral ” one, or one such is appointed by the Association upon the inability of the two-party-appointed arbitrators to agree on a “ neutral ’ ’. Section 14 of said rules clearly delineates the typical tripartite arbitration panel incorporating a neutral arbitrator. This concept of a neutral arbitrator was fully elaborated in Matter of Astoria Med. Group (Health Ins. Plan) (11 N Y 2d 128) and is incorporated in CPLB 7511 (subd. [b], par. 1, cl. [ii]) providing for vacatur *112or modification of an award on a showing of prejudice by “ partiality of an arbitrator appointed as a neutral
Section 18 of the rules of the Association requires the prospective neutral arbitrator to disclose circumstances likely to create a presumption of bias. Here the arbitrator' involved was not ‘ ‘ neutral ’ ’, hence he did not have the affirmative duty to disclose, and his failure to do so, in and of itself, is not ground for vacatur of the award. In addition, it does not appear that the said arbitrator, who represented appellant’s president six and one-half years prior to his appointment, knew that the appellant’s president was indirectly involved in the matter to be arbitrated. Moreover, and more importantly, the respondent was informed of the alleged circumstances relative to the arbitrator’s prior legal representation of appellant’s president four days after the arbitrator’s acceptance of his appointment. There is, therefore, no substantive basis for vacatur simply on the basis of the alleged failure to disclose on the part of the said arbitrator.
The remote,, act of representation by the said arbitrator of the appellant’s president in a matter unconnected with the subject matter of- the arbitration is no ground' for vacatur or modification of the award. (Matter of Astoria Med. Group [Health Ins. Plan], 11 N Y 2d 128, supra; Matter of Milliken Woolens [Weber Knit], 11 A D 2d 166.)
= Special Term, pfypwA1jbheld that respondent did not establish bias, prejudice yr misconduct on the part of said arbitrator. Respondent’s petition „o yacate strenuously, but mistakenly, argues the arbitrator was'-not impartial and fair because he stated his opipfion to be that" the agreement of January 1, 1969 was controlling, thereby impliedly rejecting respondent’s contention tbg> a prior oral agreement authorized its sale to Liggett ? Hyerdj Inc. The minutes of the arbitration -are not part of r jbriL/y Assuming, however, the alleged statement of the arbitrator,' A-liens not sustain the claim that he was not impartial and fair. He warsimplv reacting to the compelling evidence of the written agreement of January 1, 1969, complete on its face, containing no suggestion of the reservation of a right by the respondent to cut down the exclusive right of the use of its trade-mark to the extent of the admitted sale by it to Liggett & Myers, Inc. The respondent’s reliance upon a prior oral agreement is unsubstantiated by any writing or correspondence between the parties.
There is no evidence of impartiality. Evidence is properly calculated to persuade, and the fact that an arbitrator manifests *113his reaction to the evidence does not demonstrate lack of impartiality. Moreover, the respondent was allowed to adduce the evidence as to the alleged prior oral agreement.
In addition, on this record, it is clear that the respondent knowingly waived its objection to the said arbitrator. Before the hearing commenced, the said arbitrator affirmed his prior dealings with appellant’s president, and the attorneys for the parties signed a statement to that effect, and certified “ The panel is acceptable to the Parties ”.
Capozzoli, J. P., Kupeerman and Tilzer, JJ., concur with McGivern, J.; McNally, J., dissents in an opinion.
Judgment, Supreme Court, New York County, entered on April 15,1971, affirmed, without costs and without disbursements.