The opinion of the court was delivered by: CARTER
Plaintiff, Makress Lingerie, Inc., by Order to Show Cause, has applied for an order permanently staying arbitration of the validity of a Settlement Agreement between it and defendants. The Order to Show Cause, with a temporary stay of arbitration, was signed on April 16, 1975, the day before arbitration was to commence. Oral argument was held on April 22, and the temporary stay was continued pending a final determination. For reasons set forth herein, the temporary stay is vacated and plaintiff is ordered to proceed to arbitration.
A collective bargaining agreement ("Association Agreement"), covering the period May 1, 1972 through May 31, 1975, is in effect between the Apparel Manufacturers Association of Puerto Rico, Inc. ("Association") and defendants International Ladies' Garment Workers' Union, AFL-CIO ("ILGWU") and Local 601, ILGWU (herein collectively "the Union"). Plaintiff, a Puerto Rican corporation with principal offices in New York City and Arecibo, Puerto Rico, is engaged in the business of manufacturing and selling lingerie and allied products. Its factory in Arecibo employs workers represented by Local 601.
In 1973, the Union filed a claim in arbitration alleging that plaintiff was producing lingerie in the Dominican Republic in violation of Article XXII of the Association Agreement, which prohibits work in outside shops when workers in an inside shop are not fully employed or where the outside shop employees are non-Union. Herman Kass, a senior member of the family which owns plaintiff and several related corporations, represented to the Union that the Dominican Republic operation was necessary for the preservation of jobs in Puerto Rico. Purportedly relying on this representation, the Union agreed to settle its claim against plaintiff. Affidavit of Lester Kushner, Assistant General Counsel of the ILGWU, paras. 5, 12.
The parties accordingly executed a Settlement Agreement, effective July 3, 1973. By its terms plaintiff agreed to employ no less than thirty-three operators at its Arecibo plant, and acknowledged that it continued to be bound by the Association Agreement; in return the Union agreed to withdraw with prejudice its claim for arbitration. Both sides also stated that the grievance and arbitration features of the Association Agreement would govern any violation of the Settlement Agreement.
In January of 1975, plaintiff withdrew from the Association and in March it advised the Union that it was terminating its Puerto Rican activities and transferring all its work to the non-Union plant in the Dominican Republic. On February 7, 1975, the Union filed the claim in arbitration which is the basis of this dispute, alleging that plaintiff was performing work outside its Puerto Rican plant in violation of both the Association and Settlement Agreements. Subsequently the Union amended the claim in arbitration, asserting that it had been fraudulently induced by plaintiff to enter into the Settlement Agreement and requesting that that agreement be vacated.
Two grounds are offered by plaintiff in support of a permanent stay of the scheduled arbitration. The first is that the arbitrator is without jurisdiction to hear the claim of fraud in the inducement of the Settlement Agreement for the dual reasons that such a claim exceeds the scope of the arbitration clause of the Settlement Agreement and that, in any case, that issue is one for the court. The second ground relates to the arbitration procedure; because of plaintiff's withdrawal from the Association and its operation of a non-Union shop outside Puerto Rico, its interests are diametrically opposed to the interests of the Association and the Union, which designated the arbitrator. The latter, professedly, thus has a real appearance of bias by being identified with and holding his office subject to the joint interests of the Association and the Union.
Arbitrability of the Fraud Claim
Plaintiff's initial contention is that the ostensibly limited arbitration provisions of the Settlement Agreement pose a bar to the arbitration of the validity of that Agreement. The clause in question states:
"Any violation of this Agreement will, however, be subject to the grievance and arbitration procedure contained in the aforementioned Agreement between the Union and the Apparel Manufacturers Association of Puerto Rico, Inc." Exhibit B to Kushner affidavit.
Purportedly, this language establishes that the grievance and arbitration procedures can be evoked only to resolve alleged violations of the Settlement Agreement; the restrictive language was purposefully inserted to prevent assaults on the validity of the Settlement Agreement and to provide clear evidence of an intent to submit the issue of validity to a court rather than to an arbitrator. Plaintiff's Supplemental Memorandum at 13, 15.
Whether the parties to a bargaining agreement have agreed to submit specific issues to arbitration is a question the court must decide, Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 8 L. Ed. 2d 462, 82 S. Ct. 1318 (1962), and in my view the language of the Settlement Agreement ...