Court Opinion

ID: 5862279
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:22:26.599897+00
Date Added: 2024-06-11T08:44:28.222239
License: Public Domain

Milonas, J.
(dissenting). Appellant B & R Textile Corporation and respondent Woodcrest Fabrics, Inc. are both textile converters. Through its broker, appellant offered to sell certain textile fabrics to Woodcrest Fabrics, who agreed to the purchase. Appellant subsequently mailed respondent a sales note dated December 1, 1981, confirming the transaction. A second sale was followed by another note dated December 23, 1981. Although the goods were duly delivered and accepted, Woodcrest ultimately refused to make payment, claiming that the material was defective. Four prior transactions between these parties had been completed without difficulty earlier that year, and a fifth order had been canceled by mutual consent. On each occasion, including the two under contention here, appellant sent a sales note to respondent. The notes, which apparently did not have to be signed or returned, were retained by respondent. All of the notes were identical in form and contained an arbitration clause. When appellant demanded arbitration to resolve the conflict over the unpaid invoices, Woodcrest commenced a proceeding seeking to stay the arbitration. In granting the petition, Special Term held that unless it can be demonstrated that the parties manifestly intended to bind themselves to arbitration, they will not be deemed to have relinquished their right to litigate in the courts. I concur with the court’s conclusion that no such agreement exists here. The law is clear that an arbitration provision printed on a written confirmation of an order constitutes a" material alteration of that proposed purchase order. Therefore, absent evidence of an express intention by the parties to resort to arbitration, they will not be found to have obligated themselves thereto. (Schubtex, Inc. v Allen Snyder, Inc., 49 NY2d 1; Matter of Marlene Inds. Corp. [Carnac Textiles], 45 NY2d 327; Raam Fabrics v Scott Corp., 88 AD2d 853.) In the instant matter, appellant asserts that the intent of the parties to employ arbitration is reflected by the previous dealings between *663them, as well as the custom and usage in the industry. However, the subject of arbitration was never discussed between appellant’s broker and Woodcrest. Respondent did not sign or return its sales notes, nor is there any proof that it had actual knowledge of the arbitration clause. The fact that it may be the practice of textile brokers to use sales notes which include an arbitration provision is hardly sufficient indication of a common industry-wide custom or usage such as would bind the buyer to arbitration, thereby foreclosing its right to legal redress in the courts. In Schubtex, Inc. v Allen Snyder, Inc. (supra), and Matter of Marlene Inds. Corp. (Carnac Textiles) (supra), the Court of Appeals, in cases involving precisely the same industry as the one at issue here, did not decide that the custom and practice was for the parties necessarily to arbitrate conflicts arising between them. This court reached a similar conclusion in Raam Fabrics v Scott Corp. (supra), which also concerned the textile industry. In Schubtex, Inc. v Allen Snyder, Inc. (supra, at p 6), the Court of Appeals stated that: “Although evidence of a prior course of dealing is relevant in determining whether the parties have agreed to submit their dispute to arbitration and a determination that their oral agreement included a provision for arbitration could in a proper case be implied from a course of past conduct or the custom and practice in the industry, such a determination must be supported by evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes. As the concurring members of the court concede, ‘evidence of a trade usage or of a prior course of dealings may normally be utilized to supplement the express terms of a contract for the sale of goods’ * * * We would note also that this doctrine has been held to be applicable to arbitration agreements.” In that connection, the concurring opinion pointed out (p 9) that: “It is true, of course, that evidence of a trade usage or of a prior course of dealings may normally be utilized to supplement the express terms of a contract for the sale of goods (Uniform Commercial Code, § 2-202, subd [a]; see, also, § 1-205). General rules of contract law, however, are not always applicable to arbitration clauses because of overriding policy considerations. A purported agreement to arbitrate is severable from the other provisions of a contract (Matter of Weinrott [Carp], 32 NY2d 190, 198), and it has long been true, if it were ever in doubt, that ‘the threshold for clarity of agreement to arbitrate is greater than with respect to other contractual terms’ ”. The majority opinion herein relies predominantly on Matter of Huxley (294 NY 146, 150), for the proposition that where there is a broker on the scene, an acceptance of notes by both parties becomes a contract binding upon the buyer and the seller respectively “inasmuch as thereby each party admits that the broker was his agent in the transaction.” Yet, it is difficult to perceive how a broker who. is, as in the present situation, acting on behalf of the seller may bind the buyer to arbitration under circumstances in which, according to the Court of Appeals in Schubtex, Inc. v Allen Snyder, Inc. (supra), the seller may not. Thus, if the seller submits to the buyer a sales note, or a series of sales notes, containing an arbitration provision, and the buyer retains the note or notes, the seller may not compel arbitration in the absence of a clear showing that this was the intention of the parties. But, on the other hand, under the scenario depicted in the majority opinion, if a broker enters the picture, then the outcome is different since the mere intervention of the broker has the power to confer validity on the arbitration clause. The major flaw in this line of reasoning is that it does not take into account the basic shift which has occurred in the law in the past 37 years since Matter of Huxley (supra), was decided. In that case, the court was concerned almost exclusively with whether the documents delivered to the parties by the broker (bought and sold notes) constituted the actual contract of sale. Arbitration was, in effect, treated as *664simply another clause in the agreement, indistinguishable from any other term therein and was mentioned only incidentally as being the provision in dispute. In the intervening years, the Court of Appeals has held that an arbitration provision of a contract is separable from the other clauses of the agreement. (Matter of Weinrott [Carp], 32 NY2d 190.) Therefore, the emphasis now is on whether the parties did indeed intend to rely upon arbitration to settle any disagreements which might arise. In that regard, what is significant is not whether the sales note was prepared by the seller or the broker, but whether the buyer and the seller reached a meeting of the minds on the subject of arbitration. In Raam Fabrics v Scott Corp., (supra), a case involving a transaction undertaken through the auspices of a broker, this court stated that “absent evidence of an express intention by the parties to resort to arbitration, they will not be deemed to have obligated themselves thereto.” The fact that there was only one sale in Raam, whereas the instant matter concerns a series of sales, is not a relevant distinction. As the Court of Appeals asserted in Schubtex, Inc. v Allen Snyder, Inc. (supra, at pp 6-7), “inasmuch as the mere retention by the buyer of the form containing the arbitration clause failed to create such an agreement in the first instance, repeated use of the same ineffective form should not be held to have done so in subsequent transactions.” Thus, it is not the number of transactions which is crucial but the question of whether the buyer did indeed contemplate that arbitration would be relied upon in the event of possible disputes between the parties. There is nothing in the record of this case to demonstrate that Woodcrest ever contracted itself to arbitrate its disputes with appellant. Respondent simply agreed to purchase certain material from B & R Textile and received a standard broker’s sales note containing a provision for arbitration from the broker originally retained by the seller. Additional transactions ensued in the same manner. It cannot be inferred that Woodcrest obligated itself to arbitration because it did not cancel the order after arrival of the sales note or because it failed expressly to disavow the arbitration clause. Accordingly, Special Term appropriately granted the application to stay arbitration. Judgment of the Supreme Court, New York County (Wolin, J.), entered cn June 30,1982, which granted petitioner’s applications to stay arbitration, should be affirmed, without costs or disbursements.