Court Opinion

ID: 5885256
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:29:56.789429+00
Date Added: 2024-06-11T08:45:08.885431
License: Public Domain

Milonas, J.
(dissenting). In my opinion, the order and judgment of the Supreme Court should be affirmed.
Paragraph 11 of the shareholders’ agreement provides that any "claims, difference, dispute or question of interpretation” arising thereunder shall be determined through arbitration. However, the inclusion of an arbitration clause does not mean that an interested party is entitled to avail himself of such a procedure merely on demand regardless of whether or not there is a genuine matter to be arbitrated. In the instant situation, petitioners moved to stay arbitration on the ground that there is no arbitrable issue involved. The existence of an arbitrable issue is generally for the courts to determine. (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co., 37 NY2d 91.) In that connection, the majority concludes that Special Term’s decision was based upon a finding that respondent’s claim is without substantive merit rather than upon an assessment that no issue has been presented which can be arbitrated. I disagree. In my view, the Supreme Court did indeed rule that there is no issue to be arbitrated, and there is, in fact, none.
According to paragraph 4 (b) of the agreement, the shareholders will not authorize the subject corporation to undertake the following without respondent’s express written approval: "(v) sell all or substantially all of Corporation’s assets, or merge, consolidate or liquidate except pursuant to or in furtherance of transactions permitted under paragraph 4 (c) or pursuant to a transition in which MG shares in any direct or indirect benefit accruing to the other shareholders in the same proportion as MG’s shares of Common Stock bear to all of Corporation’s Common Stock then issued and outstanding, including, but not limited to, formation of a partnership as successor to the business and property of the Corporation”.
Thus, it is clear that the agreement expressly authorizes the sale of all or most of the corporate assets so long as respondent shares in the benefits of the liquidation in the same proportion as his interest in the corporation. Although circumstances might conceivably arise in which respondent would be warranted in applying to the courts for an injunction to *151prevent the sale — as, for example, were he to obtain evidence of the other shareholders’ intent to defraud him, or to dissipate the corporation’s property — none have been shown to exist at this time. Similarly, the shareholders’ agreement does not establish particular guidelines to be followed in the event of a sale, so the arbitrator could not direct the manner of the auction. Indeed, the procedural details of the sale have not even been established.
By demanding arbitration, respondent merely suggests that because of petitioners’ conduct in the past, and the extensive history of litigation between the parties herein, he has reason to believe that the future will only bring more of the same and that his interests will not be protected. No breach of the shareholders’ agreement has been demonstrated or even alleged. Certainly, he has not shown that petitioners do not plan to pay him the proportionate share of the liquidation proceeds to which he is entitled or that he has not been afforded full disclosure of the actions of the majority shareholders. He is merely speculating as to what might happen in the future. Consequently, any damages to respondent are, at best, prospective, and an arbitrator cannot determine something that has not yet occurred. However, if his worst fears do materialize, and petitioners, once the liquidation has been effected, fail to distribute the proceeds as mandated under the agreement or can be shown to have engaged in any other improper or fraudulent practices, there is nothing to preclude him from obtaining full relief at that time either through arbitration or, where appropriate, in the courts. Moreover, he will also be able to procure all relevant financial information concerning the assets and property of the corporation, as well as the data surrounding the sale. Since there is no issue to be arbitrated and nothing has yet taken place which would in any way compromise respondent’s interests, arbitration is premature.
Rosenberger and Wallach, JJ., concur with Sandler, J. P.; Fein and Milonas, JJ., dissent in an opinion by Milo-NAS, J.
Order and judgment (one paper), Supreme Court, New York County, entered on December 5, 1985, reversed, on the law, the facts, and in the exercise of discretion, to dismiss the petition to stay arbitration and to grant an injunction pending determination of the issues raised in the arbitration. Appellant shall recover of respondents $50 costs and disbursements of this appeal.