Court Opinion

ID: 5793012
Source: CourtListenerOpinion
Date Created: 2022-01-12 18:13:04.410372+00
Date Added: 2024-06-11T08:42:20.111091
License: Public Domain

Lupiano, J. (concurring in part; dissenting in part).
This special proceeding was instituted by the petitioner for the purpose of obtaining a stay of arbitration in regard to the dispute delineated in the demand for arbitration served by respondents. The demand for arbitration alleges three separate agreements providing for arbitration which are respectively dated December 3,1971, March 6,1972 and January 1,1973. “ Breach of restrictive covenant provisions of said Agreements ” is set forth as the “ nature of dispute ”. The agreements of December 3,1971 and March 6,1972 are employment agreements containing identical provisions, except that the former is between petitioner and National Laundry Linen Service, a division of Modern Silver Linen Supply Co., Inc., and the latter is between petitioner and Premier Laundry of New Jersey, Inc. Paragraph 2 of these employment agreements sets forth the restrictive covenant provisions, and subdivision (e) thereof provides that “ any and all controversies, claims or disputes which may arise with respect to whether the Employee shall have violated any of the foregoing provisions of this paragraph 2 may be enforced by the Company, at its option, either by an action or proceeding in any court having jurisdiction or by arbitration in accordance with the provisions of paragraph 7 hereinafter ” (emphasis supplied). Paragraph 7 states: “ Except to the extent that the Company elects otherwise pursuant to the provisions of paragraph 2(e) above, any controversy or''claim arising out of or relating to this contract or any breach thereof, shall be settled by arbitration ” (emphasis supplied). Patently, the petitioner cannot seek arbitration of a dispute with respect to breach of the restrictive covenant provisions of paragraph 2 against the wishes of the company.
*200In Matter of General Silk Importing Co. (200 App. Div. 786, 792 [1st Dept., 1922], affd. 234 N. Y. 513 [1922]), it was aptly observed That “ although arbitration agreements in this State are now enforceable, that does not mean that the rules, heretofore applicable to the interpretation of contracts to determine whether the parties had agreed to arbitration, have been abrogated * * * It is thus clear that, where the parties agreed to arbitrate, the courts, of course, will enforce such an agreement. But, on the other hand, since the contract to arbitrate presupposes an agreement to forego the right to resort to the courts for redress, an alleged contract to arbitrate, which is disputed, will be subjected to strict construction in order that the parties may not be deprived of their constitutional rights to seek redress in the courts. In Supreme Lodge v. Raymond (57 Kans. 647, 653), the court said: ‘ The right of resort to the courts will not be deemed to have been taken away by mere inference; and, if it can be done at all, it will only be where the restriction is stated in the clearest and most explicit terms ’ * * * In Western Assurance Co. of Toronto v. Decker (98 Fed. Rep. 381, 382), the court, referring to an arbitration agreement, said: ‘ One of the fundamental and essential constitutional rights of the citizen is the right to appeal to a court of justice for a redress of his grievances. One of 'the chief ends of government is to secure this right to the citizen. While some courts hold that the citizen may, by contract, bargain away this right, the agreement to do so will not be extended by construction or implication (See, also, Matter of River dale Fabrics Corp. [Tillinghast-Stiles Co.], 306 N. Y. 288, 289; Matter of ITT Avis v. Tuttle, 27 N Y 2d 571; Matter of Levin-Towns end Computer Corp. [Holland], 29 A D 2d 925.)
Pursuing the arbitration provisions as they appear in the employment agreements', it is clear that the parties did not mutually promise to resolve all controversies by arbitration. The power to invoke arbitration in respect of disputes involving breach of the restrictive covenant provisions existed only at the option of the respondent companies. The petitioner as employee had no such right. Accordingly, the agreement to arbitrate such disputes was not mutually binding, for there was no reciprocal obligation upon the company to do so (see Hull Dye & Print Works v. Riegel Textile Corp., 37 A D 2d 946 [1st Dept, 1971]). Since arbitration depends upon the agreement of the parties and mutuality of the right of invocation of arbitration with respect to disputes under paragraph 2 of the employment agreements is not present, there is no valid agree*201ment to arbitrate such disputes (Matter of Kaye Knitting Mills v. Prime Yarn Co., 37 A D 2d 951 [1st Dept., 1971]). To hold that the employment agreements require arbitration of the dispute set forth in the demand is to reform the agreements without any equitable basis therefor. It has oft been noted that “ equity will reform an instrument, but not make one ” (6 N. Y. Jur., Reformation of Instruments, § 24, p. 571).
The agreement of January 1, 1973 between petitioner on the one hand and Premier Essex Linen Service, Inc., Modern Silver Linen Supply Co., Inc. and Premier Laundry of New Jersey, Inc. (respondents herein) on the other hand, sets forth the relationship between the parties on an independent contractor rather than on an employer-employee basis, and provides that it ‘ ‘ shall supersede all prior agreements and understandings between the parties respecting the subject matter hereof ” (par. 6, subd. [d]). Arbitration of ‘ ‘ any controversy or claim arising out of or relating to this Agreement, or the breach thereof ’ ’ is provided for, without the infirmity noted above in respect of the prior employment agreements (par. 6, subd. [a]). At issue is whether the restrictive covenant provisions of this agreement are so broad as to run afoul of the public policy of this State delineated in section 340 of the General Business Law. If so, then the covenants are void and arbitration may not be had. Essentially, petitioner, pursuant to the agreement of January 1, 1973, covenanted that for a period of two years after termination he would not solicit or obtain any business from parties who were customers of the respondents during the term of the agreement for the furnishing of laundry service (respondents’ business) within the following territory: Washington, D. C. and the States of New York, New Jersey, Pennsylvania, Maryland and Virginia (par. 4,' subd. [a]). Further, petitioner agreed that for a period of five years after termination he would not divulge any customer’s lists of respondents or other secret or confidential information which is disclosed to or learned by him as a consequence of his employment by respondents (par. 4, subd. [b]).
Petitioner asserts in conclusory fashion that this agreement is “ unconscionable, grossly unreasonable * * * violate [s] the public policy of this State and in the premises [is] unenforceable ” and that the restrictive covenants enumerated above “ are in restraint of trade and violate the provisions of federal anti-trust legislation ”. On its face, the agreement of January 1, 1973, cannot- be held as a matter of law to be violative of the public policy of this State (General Business Law, § 340). The *202restraints are not general; appear reasonably limited in time and in geographic area and appear reasonably related to protection of the covenantee’s interests. It was, therefore, incumbent upon the petitioner to demonstrate a prima facie showing that the restrictions are unreasonable under all the circumstances.
Respecting restrictive covenants, it has been observed that “ in very early times such agreements were, void as against public policy beqause they constituted a denial of the means of the covenantor to earn his living, but the tendency of modern thought has been no longer to uphold in its strictness the doctrine which formerly prevailed in this regard. The modern policy is to give contracting parties the widest latitude to make contracts with reference to their private interests and to uphold bargains made by them with their eyes open ” (37 N. Y. Jur., Monopolies, Etc., § 40). Granted a restrictive covenant is to be strictly construed against the party responsible for its preparation, it is still the burden of the party seeking to avoid its consequence to demonstrate that such covenant is “ an unreasonable restriction of the liberty of a man to earn his living or exercise his calling ” (37 N. Y. Jur., Monopolies, Etc., §§ 40, 41; cf. Paramount Pad Co. v. Baumrind, 4 N Y 2d 393 [1958] where on its face the agreement unreasonably prevented the former employee from pursuing his occupation in that it provided that he could not accept any position in the shoulder pad industry without written permission of the covenantee). Upon making the requisite prima facie showing of unreasonableness, a party may justly be said to be within the ambit of the rationale delineated in Matter of Aimcee Wholesale Corp. [Tomar Prods.] (21 N Y 2d 621 [1968]) so as to warrant a stay of arbitration or at least a preliminary stay pending a hearing to determine whether the Donnelly Act (General Business Law, § 340) has been violated.
In their motion to dismiss the petition, respondents called attention to the deficiency of petitioner’s showing in that “ Petitioner has not alleged in what way the restrictive covenant is restraint of trade ”, especially since the agreement on its face is not vioíátive of antitrust law. No reply was made by petitioner. Accordingly, I would hold that the order of the Supreme Court entered March 8,1974 should be. modified by reversing so much thereof as dismissed the petition with respect to the employment agreements dated December 3, 1971 and March 6, 1972; the petition should be granted as to these two agreements and as so modified, the judgment should be affirmed.
*203Murphy and Lane, JJ., concur with Tilzer, J.; Nunez, J. P., dissents in an opinion; Lupiano, J., concurs in part and dissents in part in an opinion.
Judgment, Supreme Court, New York County, entered on March 8,1974, affirmed, without costs and without disbursements.