In Re the Arbitration Between Utility Laundry Service, Inc. & Sklar

The Appellate Division has reversed appellant's judgment for damages, rendered in confirmation of an arbitration award, upon the ground that the parties' agreement to arbitrate did not afford the arbitrator power to assess damages.

Prior to November, 1945, respondents, Sklar and Shampaner, were employed by Utility Laundry Service, Inc., as salesmen and drivers. Each of their individual employment contracts contained a covenant binding the employee, during one year after termination of his employment, to refrain from soliciting any customer of the employer whose name had been learned through the employment. Each employee also deposited $200 with the laundry company and authorized the employer "to deduct from the moneys so paid over such sum or sums as shall be necessary to fully reimburse said ``Company' for any damage or loss sustained by it occasioned by the ``Employee'." In respect of that remedy each agreement continued: — "the remedy provided for by this paragraph shall not be construed as an exclusive remedy or waiver of the right of the ``Company' to apply to any court of competent jurisdiction for injunctive relief or otherwise, it being the intention of the parties hereto that the aforesaid provision and any remedy afforded by application to any court of competent jurisdiction for relief by way of injunction shall be independent remedies and that the denying or granting of either thereof upon application therefor, shall not prejudice or affect the other remedy or right." Neither contract contains any reference to arbitration.

In November, 1945, the collective bargaining representative of the drivers entered an agreement with Utility covering their employment. All individual contracts with the employees were to remain "in full force * * * except as to such provisions thereof as are inconsistent with the specific provisions of this agreement". The collective contract contains provision for appointment of an "Impartial Chairman", and for arbitration before him of "any and all matters in dispute between the parties hereto arising out of this agreement". Another provision of that contract reads as follows: "The Impartial Chairman shall have jurisdiction to hear and determine (1) complaints by drivers of discriminatory treatment by the Employer resulting in an impairment of the drivers' earnings; and (2) complaints by the Employer of breaches by drivers of the negative covenants of their individual agreements with the Employer. Such individualagreements shall be deemed modified accordingly." (Emphasis supplied.)

The collective agreement also provides for a grievance procedure, whereby "complaints" are to be taken up first by the shop chairman and a representative of the employer. Upon their failure to adjust a "complaint", a union representative is to discuss the matter with the employer, and continued failure to reach agreement shall cause the complaint to be referred to the impartial chairman. The precise character of such complaints is not defined.

Sklar and Shampaner left the employ of Utility on August 29, 1947, to establish a laundry business of their own, and later were accused by Utility of soliciting customers in violation of their covenants. In an arbitration proceeding subsequently held under the collective agreement both ex-employees conceded the unlawful solicitation and objected to determination of the damages suffered by Utility. Shampaner countered with a claim that Utility owed him his $200 deposit and $100 in accrued wages. The arbitrator found that Sklar and Shampaner had breached their covenants and thereby caused Utility to suffer a loss of business in the amount of $325 per week. His award enjoined further solicitation for one year from August 29, 1947, ordered respondents to pay Utility $2,700 in damages, and denied Shampaner recovery of the $300. After the injunctive provision had expired the award was confirmed at Special Term, and a judgment entered for Utility in the amount of $2,700. Shampaner did not then challenge the denial of his counterclaim. That judgment has been vacated, after modification of the order of confirmation so as to strike therefrom all reference to damages, upon the ground that the issue was not within the scope of the parties' agreement to arbitrate.

An agreement to arbitrate "any and all controversies" arising under a contract will be construed as affording "authority to assess the damages against the party in default". (Matter ofMarchant v. Mead-Morrison Mfg. Co., 252 N.Y. 284, 298, 299.) The issue must turn upon the intent of the parties as expressed in their agreement, and the general submission of "``any dispute'" has been held to confer power to award damages (Matter ofGeneral Footwear Co. v. Lawrence Leather Co., 252 N.Y. 577).

Respondents had bound themselves, through the collective agreement, to submit any "complaints" concerning their covenants to the impartial chairman. No restriction of his authority can be inferred from that language. The provision stands by itself, unaffected by the section governing "disputes" between employer and union, or by the fact that a grievance procedure was established for complaints arising during the period of employment. Nor can we say that an award of damages would conflict with an implied limitation of the drivers' liability on this head to the $200 deposited under their individual contracts. That remedy was "not to be construed as exclusive", and the individual contracts were modified expressly by the arbitration agreement. Under the latter contract the award of damages was proper.

The judgment of the Appellate Division should be reversed, and that of Special Term affirmed, with costs in this court and in the Appellate Division.