UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
June 7, 1978
JOHN J. SWEENEY, as President of Local 32B, Service Employees International Union, AFL-CIO, Plaintiff,
SAMUEL MORGANROTH d/b/a MOREN REALTY CORP., Defendant
The opinion of the court was delivered by: WEINFELD
EDWARD WEINFELD, D.J.
Plaintiff brings this action to confirm the award of an arbitrator in the amount of $26,170.64. Defendant cross-moves pursuant to 9 U.S.C., section 10, to vacate the award. The arbitration in question resulted from the provisions of the last in a series of collective bargaining agreements (the "Agreement") entered into by Local 32B, Service Employees International Union, AFL-CIO (the "Union") and defendant, a former apartment house owner. Article VII of the Agreement provides in pertinent part:
In case of any sale, lease, transfer or assignment of control, occupancy or operation of the premises (hereinafter referred to as "transfer") the Employer shall give the Union two (2) weeks written notice prior to the effective date thereof; the Employer, be he seller, lessor, transferor, assignor or otherwise, shall, as a condition of the transfer require the transferee to agree in writing to adopt this agreement and offer employment to all employees of the Employer. Without in any way limiting the other rights and remedies of the Union, anyone failing to adhere to the foregoing provisions shall pay, in addition to such further damages as may be found by the Arbitrator, six (6) months pay for the benefit of the employees as liquidated damages to them.
In October, 1976, defendant sold his apartment building without notifying the Union of the sale, or requiring the purchaser to accept the agreement and/or offer to retain the employees. Upon acquiring title, the new owner discharged all of defendant's Union employees.
By letter dated January 27, 1977, addressed to the arbitrator named in the Agreement, the Union demanded arbitration for violation of the above clause:
The employer of the above building failed to give two weeks written notice of sale of the building. The Union claims six month's pay for employees as liquidated damages under Article VII of the contract, but the employer has failed to adjust this matter.
Defendant then brought an action in Supreme Court of the State of New York, arguing that there was no valid contract between the parties providing for arbitration and seeking to stay the proceedings.
His motion was denied and thereafter a similar motion was denied in the Appellate Division which summarily affirmed the lower court. Plaintiff wrote another letter to the Arbitrator requesting a hearing, stating: "The Employer at [defendant's] building has failed to comply with the requirements of Article 7 (Sale or Transfer) of the collective bargaining agreement," and reiterating the demand for liquidated damages set forth in the first letter. Hearings were held, following which the Arbitrator awarded liquidated damages to the Union for the benefit of the ex-employees pursuant to the above-quoted clause, in the amount of $26,170.64, that being the total of six months wages for each of the five employees involved, which was specifically authorized by the Agreement as noted above.
This Court's review of an arbitrator's award is necessarily "severely limited," being confined to the grounds specified in 9 U.S.C., section 10,
or the product of a "manifest disregard" of applicable law,
a "judicially-created addition to the proscriptions of 9 U.S.C. § 10" which is also "'severely limited.'"
Defendant's first challenge to the award is that the arbitrator exceeded and imperfectly executed his powers under 9 U.S.C., section 10(d). The second challenge, presumably resting upon the "manifest disregard" theory is that the award constitutes an unlawful penalty which violates the public policy of the State of New York and of the United States.
Defendant's first claim arises from the fact that although the Union's first letter seeking arbitration referred only to the failure to give the Union two weeks' notice of sale as required by Article VII, during the hearing and in his opinion, the Arbitrator referred generally to violations of Article VII, as had the Union's second letter. In addition to the two weeks' notice requirement, Article VII also obliged the selling employer to require the purchaser to agree in writing to adopt the Agreement and to employ the employees. It is undisputed that the defendant failed to comply with the terms of this Article.
It is difficult to discern what practical difference defendant sees in the two formulations of the issue. By the first letter, defendant was put on notice that a breach of Article VII was claimed and that the Union claimed "six month's pay for employees as liquidated damages under Article VII," and the Agreement's language supports an award on that basis alone. Moreover, in his summation before the Arbitrator, defendant's attorney stated: "The question that you have to decide is what are the terms of the contract and then of the terms of the contract has the contract been violated." Having thus stated the issue in the broadest terms possible, defendant will not now be heard to complain that the Arbitrator exceeded his powers. The Arbitrator had been granted the authority under the Agreement to render this award, and that is sufficient.
Defendant next claims that the award is punitive in nature and as such cannot be enforced by the arbitrator without clashing with state and federal policy to the contrary. Even assuming that the award is a penalty -- no small assumption under either state or federal law
-- where, as here, the contract expressly provides the arbitrator with power to grant the award,
and recognizing the substantial leeway which must be granted an arbitrator in fashioning remedies, especially in labor-related disputes,
the award seems wholly consistent with the prevailing law, both state and federal; it certainly does not evidence manifest disregard therefor.
Plaintiff's motion to confirm the award is granted; defendant's motion to vacate or modify, denied. It is so ordered.
EDWARD WEINFELD / United States District Judge