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REEVES BROS. v. CAPITAL-MERCURY SHIRT CORP.

April 24, 1997

In the Matter of the Arbitration Between: REEVES BROTHERS, INC., Petitioner, - against - CAPITAL-MERCURY SHIRT CORP., Respondent.


The opinion of the court was delivered by: SWEET

 Sweet, D.J.

 Petitioner Reeves Brothers, Inc. ("Reeves") has sought the confirmation of an arbitration award in its favor against Respondent Capital-Mercury Shirt Corp. ("Capital"), which has cross-moved to vacate the award because of an inadequately disclosed relationship between two of the arbitrators and Reeves. For the reasons set forth below, the motion to confirm the award is granted, and the cross-motion to vacate denied.

 Prior Proceedings

 The petition and motion to enforce the arbitration award, described below, was filed on December 13, 1996. Capital moved to vacate the award on December 23, 1996, and both motions were heard and considered fully submitted on January 22, 1997.

 The Parties

 Reeves is a corporation incorporated under the laws of the State of Delaware, having its principal place of business Spartanburg, South Carolina. Among other things, Reeves manufactures and finishes apparel textiles.

 Capital is a corporation incorporated under the laws of the State of New York, having its principal place of business New York, New York. It operates plants in Gassville and Walnut Ridge, Arkansas. Capital manufactures men's and ladies' shirts which it sells to specialty, department, and chain stores located throughout the United States.

 Facts

 The Arbitration

 The underlying controversy involved the manufacture and sale by Reeves of chemically-treated fabric in Bishopville, South Carolina, delivered to Capital in Gassville, Arkansas during 1994. Capital accepted the fabric from which it manufactured men's shirts. Nine invoices for the fabric due between July 22, 1994 and January 16, 1995, in the aggregate of $ 145,586.51 were unpaid on the basis that certain fabric sold earlier in certain shades was defective.

 The Reeves' sales contracts and Capital purchase orders contained a provision for arbitration. The Reeves' contracts provide:

 
Any controversy arising under or in relation to this order or contract, or modification thereof, shall be settled by arbitration. In the absence of agreement otherwise among the parties hereto such arbitration shall be held in the City of New York in accordance with the laws of the State of New York and the rules then obtaining of the American Arbitration Association, or the General Arbitration Council of the Textile and Apparel Industries, as the party first referring the matter to arbitration shall elect, and the parties consent to the jurisdiction of the Supreme Court of the State of New York, and further consent that any process or notice of motion or other application to the Court or a Judge thereof, and any notice in connection with the arbitration proceedings, may be served with or without the State of New York by registered mail or by personal service provided that reasonable time for appearance is allowed. Judgement upon the award rendered by the arbitrators may be entered in any State or Federal court having jurisdiction thereof.

 The Capital purchase orders provide:

 
Any controversy or claim arising out of, or in any way relating to this contract or the breach thereof, shall be settled by arbitration in New York City, in accordance with the Rules of the American Arbitration Association, and judgment upon any award may be entered in any court having jurisdiction thereof.

 On May 25, 1995, Reeves served upon Capital a notice of intention to arbitrate pursuant to N.Y.Civ. Prac. L. & R. § 7503(c), and on or about June 8, 1995, Reeves initiated the arbitration, electing to do so under the General Arbitration Council of the Textile and Apparel Industries ("GAC"), a specialized division of the American Arbitration Association.

 Pleadings were served and filed, and three arbitrators were appointed by the GAC in accordance with GAC Rule 13(b). The panel of arbitrators comprised Norman Hackel, chairman ("Hackel"), Norman Katz, and Lawrence H. Bober ("Bober"), who were drawn from the textile/apparel industries.

 The arbitration proceeded over a year and a half period. The hearing on the merits of the arbitration spanned eight hearing days, on May 14-16, 1996, July 30-31, August 1 and October 8-9, 1996.

 The arbitrators' unanimous award was acknowledged on November 5, 8 and 9, 1996 and delivered to the parties on November 11, 1996 in favor of Reeves, and assessed hearing costs and expenses against Capital and directed Capital to pay Reeves the sum of $ 178,084.63 within thirty days of transmittal of the award, i.e., by December 11, 1996, and to pay other sums to claimant representing reimbursement of arbitrators' compensation and arbitration expenses.

 Capital refused to pay any sums when due under the award "voluntarily," and advised that Reeves would need to seek payment through the judicial process.

 The Reeves' petition to enforce the award was filed thereafter as set forth above, followed by the Capital motion to vacate.

 The Relationship Between the Arbitrators and Reeves

 Prior to the arbitration, the parties submitted lists of witnesses to the American Arbitration Association ("AAA"). Bober had been employed by Manufacturer's Hanover Trust Co. for about 35 years, holding various offices at different times. During a time that Bober was an officer of that bank, Reeves was a customer of the bank.

 Bober disclosed his connection or possible connection to Reeves several weeks after his appointment. Capital applied to the AAA to disqualify him. The application was denied by the AAA. No further disclosure of Bober's relationship with Reeves was made to Capital.

 David Browoka was listed as a prospective witness for Reeves. He had been employed by Reeves commencing in approximately 1986 and had been Reeves' president until the spring of ...


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