Court Opinion

ID: 5860376
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:16:56.932812+00
Date Added: 2024-06-11T08:44:24.618621
License: Public Domain

Silverman, J.
(dissenting in part). I would modify the order appealed from so as to stay arbitration of disputes as to the value of shares of stock held by respondent employee and the claims made by him of misappropriation, conversion and waste of income and corporate assets, and I would also stay the claim on the guarantee insofar as relates to these claims. In New York there is a *852“special rule that the courts have laid down with respect to arbitration clauses, namely, that the agreement to arbitrate must be direct and the intention made clear, without implication, inveiglement or subtlety”. (Matter of Doughboy Inds. [Pantasote Co.], 17 AD2d 216, 218-219.) Further, “[t]he agreement to arbitrate must be express, direct, and unequivocal as to the issues or disputes to be submitted to arbitration”. (Gangel v DeGroot, 41 NY2d 840, 841.) Insofar as relates to disputes as to the value of the stock, or stockholder’s derivative claims for misappropriation, conversion and waste of income and corporate assets, the arbitration clause here involved does not meet these tests. There are three related written agreements between the parties, an “Employment Agreement”, a “Stock Purchase Agreement”, and a third agreement which is primarily a guarantee agreement. The disputes as to value of the stock and the derivative claim for misappropriation, conversion, etc., obviously relate to respondent’s rights under the stock purchase agreement and as a stockholder. Only the employment agreement contains the arbitration clause relied upon for arbitration before the American Arbitration Association. Each of the three agreements contains an introductory clause, which among other things, defines the term “Agreement”, i.e., “This Employment Agreement (the ‘Agreement’)”; “This Stock Repurchase Agreement (the ‘Agreement’)”; and as to the guarantee agreement “This Agreement (the ‘Agreement’)”. The arbitration clause contained in the employment agreement provides for arbitration of “[a]ny controversy or claim arising out of or relating to this Agreement (Italics mine.) By definition, “this Agreement”, as used in the arbitration clause, thus relates only to the employment agreement. The limitation of the arbitration clause to disputes under the employment agreement is further demonstrated by the fact that the stock purchase agreement contains its own provision for resolution of disputes relating to the purchase price of respondent’s stock. It sets forth certain formulae for determining the value and purchase price of the stock, and then provides that all determinations with respect to those formulae should be made by “a national certified public accounting firm mutually acceptable to the parties, and such determinations and decisions made in good faith shall be final, conclusive and binding on the parties hereto.” The only basis that I can see for arguing that disputes under the stock purchase agreement shall be subject to the arbitration clause in the employment agreement is the fact that paragraph 11 of the employment agreement provides that on termination of the employment agreement or not later than a certain date the company will purchase from respondent his stock “pursuant to the terms of the attached Stock Purchase Agreement, marked Exhibit ‘B’ and incorporated herein as if set forth in full.” But in the face of the limitation of the arbitration clause to the employment agreement and the provision contained in the stock purchase agreement for a different method for determining the most important disputes likely to arise under that agreement, I think that to say that this provision of paragraph 11 of the employment agreement brings under the arbitration clause the entire stock purchase agreement violates the rule “that the agreement to arbitrate must be direct and the intention made clear, without implication, inveiglement or subtlety” (Matter of Doughboy Inds. [Pantasote Co.], 17 AD2d, supra, at pp 218-219). This would I think be to arrive at an obligation to arbitrate by “implication, inveiglement or subtlety.” It would not meet the higher standard of directness and clarity required for arbitration clauses. The claim with respect to misappropriation, conversion and waste of income and corporate assets is essentially a stockholder’s derivative claim. It seems likely that the parties in drafting the agreement never thought of this kind of a claim. There is certainly no clear and direct showing that the parties intended that this kind of a dispute, *853involving respondent’s rights as a stockholder, should be arbitrated under the arbitration clause in the employment agreement. On the oral argument appellant agreed that, to the extent that a dispute under the employment agreement was arbitrable, the obligations of the guarantee would also be arbitrable. But as I think the stock value and derivative stockholder’s claims are not arbitrable, the obligations under the guarantee agreement as to those claims are also not arbitrable, the guarantee agreement containing no arbitration clause.