Court Opinion

ID: 5783026
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:53:52.395053+00
Date Added: 2024-06-11T08:42:01.806256
License: Public Domain

Steuer, J. (dissenting).
This application to stay arbitration is in reality one to limit the issues to be submitted to arbitration. The contract is one for the sale of textiles. The buyer, claiming the goods to be defective, demanded arbitration. The contract provides:1 ‘ The limit of liability of Seller for defective merchandise shall be the difference in value on contract date of delivery between goods specified and goods actually delivered. * * * In no event shall Buyer be entitled to claim any other damages or any consequential damages for defective goods or late delivery or non-delivery and in no instance shall damages include profit on contemplated use or profit of any description.”
The demand for arbitration seeks damages for loss of profits in the sum of $40,000 and loss of goodwill in the sum of $100,-000. The application seeks to have these items stricken from the demand. There is no dispute that these items are not recoverable under the contract but the majority of the court hold that nevertheless it is proper to allow the arbitrator to pass upon them. This result is apparently brought about by the phrase in the arbitration clause conferring on the arbitrator the power to interpret the contract. Where there is no controversy as to the plain meaning of a provision in a contract, it is impermissible under the guise of interpretation to change *290or avoid it (Matter of Western Union Tel. Co. [ACA], 299 N. Y. 177, 184; 10 N. Y. Jur., Contracts, § 189). An arbitrator has no greater latitude in this respect than does a court.
Some confusion has arisen from the manner and at what stage of the arbitration this question has been raised. Where, as here, the application has been made on a motion prior to the submission to the arbitrator, the law seems very clear that the submission must be made to conform to the contract (De Lillo Constr. Co. v. Lizza & Sons, 7 N Y 2d 102, 106; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284). Where the question is raised on a motion to confirm the award, there is always the difficulty of determining just what the arbitrator did decide. In that event the party objecting to confirmation must show that the award includes damages in excess of those allowable under the contract (Matter of Deering Milliken & Co. [Boepple Sportswear Mills], 4 A D 2d 652, affd. 4 N Y 2d 956). But where the award itself shows that the arbitrator did not follow the contract provisions in calculating damages, it will be vacated (Matter of Stange v. Thompson-Starrett Co., 261 N. Y. 37). Furthermore such a deviation from the contract terms is not an error of fact or law that does not vitiate the award but is a repudiation of the contract (Matter of Stange v. Thompson-Starrett Co., supra, p. 42).
It would naturally follow that orderly procedure would best be served by limiting the scope of the arbitration at the outset instead of inviting the arbitrator to fall into error by submitting to him issues on which he is powerless to act. Nothing in Matter of Granite Worsted Mills (Cowen) (25 N Y 2d 451) mandates the contrary. While an arbitrator may rule a contract provision inapplicable or unenforceable because he deems it unconscionable, both the majority and the dissent there recognize that there is a limitation on such power, that limitation being the one enunciated by the court in Matter of National Cash Register Co. (Wilson) (8 N Y 2d 377) namely, whether the construction is such as may reasonably be given it (see dissent of Breitel, J. in Granite, supra, pp. 458-459). In Granite, the determination was to remand to the arbitrator to clarify his award so that an advised determination could be made as to whether or not he exceeded his powers. It should be pointed out that in that case the limitations on recovery were so drastic that a finding of uneonscionability was well within the area of reasonbleness. Here there is no suggestion that a limitation of liability to the amount of the transaction to protect against insatiable claims is contrary to good conscience.
*291Markewich, J. P., Kupferman, Tilzer and Eager, JJ., concur in Per Curiam opinion; Steuer, J., dissents in an opinion.
Judgment, Supreme Court, New York County, entered on January 4, 1972, affirmed, without costs and without disbursements.