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United States District Court, S.D. New York

April 24, 2004.


The opinion of the court was delivered by: JOHN KOELTL, District Judge


This case arises out of a dispute over the validity of a collective bargaining agreement between the petitioner 36 Convent Avenue HDFC and the respondent Service Employees International Union, Local 32B-32J, centering specifically on the enforceability of an arbitration clause in the agreement. The petitioner moves for summary judgment for a determination that there is no valid agreement between the parties and for a permanent stay of arbitration between the parties. The respondent counterclaims for summary judgment to compel the petitioner to arbitrate the underlying grievance.


  The following facts are undisputed except where specifically noted. The petitioner is a housing development fund corporation incorporated in New York. It is the owner of a 25-unit apartment building in New York. (Joint St. of Undisputed Material Facts ("JSOF") ¶¶ 1-2.) On June 8, 1999, Isaac Foye, Desiree Dyson, Kim Joyner, and Elizabeth Lewis were elected as members of the Board of Directors of the petitioner 36 Convent Avenue HDFC ("the Employer"). (Id. ¶ 3.) On August 5, 1995, the Board of Directors signed an agreement with Nathaniel Curry ("the Employee"), retaining him as the building superintendent. (Id. ¶ 5.) On June 28, 2001, Desiree Dyson, then Vice President of the Employer, signed a collective bargaining agreement with the respondent, Services Employees International Union, Local 32BJ ("the Union"), providing that the Employee would be covered by the Union and that the Employer would deduct monthly dues from the Employee's paycheck and forward those amounts to the Union. (Id. ¶¶ 6-7.) The agreement also included an arbitration clause, providing in relevant part:

Any dispute or grievance between the Employer and the Union which cannot be settled directly by them shall be submitted to the Office of the Contract Arbitrator.
(Id. ¶ 10; Working Superintendent Agreement ("Union Agreement") attached as Ex. C to Aff. of Edward Filemyr dated May 28, 2003 ("Filemyr Aff.")) Dyson signed the agreement under the line for "Employer," which was filled in with the words "36 Convent Ave. HDFC." (Union Agreement) Ms. Dyson added after her name the title "V Pres" (sic). (Id.) On the next line, which prompted "As Agent For," Dyson filled in the Employee's name, Nathaniel Curry. (Id.)

  In April 2002, the Employer, through its managing agent, sent the Union two checks to cover the Employee's union dues. (JSOF ¶¶ 8-9.) On February 14, 2003, the Union sent the Employer a copy of its notice of intent to arbitrate the issue of whether the Employer was violating its agreement with the Union by failing to make proper wage payments, failing to pay the Employee for holidays, requiring the Employee to perform work outside his duties, and harassing the Employee. (Id. ¶ 11.) On February 25, 2003, the Office of the Contract Arbitrator sent the parties a Notice of Hearing for an arbitration regarding this dispute. (Id. ¶ 12.)

  The Employer asserts that it is not bound by the collective bargaining agreement with the Union because the agreement was not signed with the proper authority. (Id. ¶ 13.) The Employer's By-Laws provide in relevant part:

With the prior authorization of the Board, all notes and contracts, including Proprietary Leases, shall be signed on behalf of the Corporation by two officers, including the President or the Vice President and by the Secretary or Treasurer. . . . Such Board authorization may be general or confined to specific instances.
(Id. ¶ 14; By-Laws attached as Ex. A to Filemyr Aff.) Desiree Dyson was not given specific or general authorization by the Board of Directors to enter into an agreement with the Union. (Petitioner's Rule 56.1 St. ¶ 3; Aff. of William Landers dated Oct. 30, 2003 ("Landers Aff.") ¶ 11.) The agreement with the Union was not discussed or formally ratified by the Employer at a subsequent meeting of the Board of Directors. (Petitioner's Rule 56.1 St. ¶ 2; Landers Aff. ¶¶ 9-10.) The Employer did not provide the Union with a copy of its By-Laws until after the commencement of this litigation. (JSOF ¶ 15.)


  The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Gallo v. Prudential Residential Servs. Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994). "The trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo, 22 F.3d at 1224. The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323. The substantive law governing the case will identify those facts that are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

  In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994). If the moving party meets its burden, the burden shifts to the nonmoving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The nonmoving party must produce evidence in the record and "may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible." Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993); see also Scotto v. Almenas, 143 F.3d 105, 114-15 (2d Cir. 1998) (collecting cases).


  The petition was originally filed in the New York State Supreme Court, New York County, and removed to this Court pursuant to 28 U.S.C. § 1441 and 1446 on the grounds that this Court has original jurisdiction because the lawsuit arose under § 301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185 (a) ("Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . . may be brought in any district court of the United States having jurisdiction of the parties. . . . "). See Mason Tenders Dist. Council v. JNG Constr. Ltd., No. 00 Civ. 1032, 2003 WL 22999453, at *3 (S.D.N.Y. Dec. 19, 2003) (district court has requisite jurisdiction under § 301 of the LMRA to determine validity of collective bargaining agreements). "Although federal law generally governs disputes arising under section 301, the Second Circuit has recognized that state law, if compatible with the purpose of § 301, may be resorted to in order to find the rule that will best effectuate the federal policy." Id. (internal citations and quotation marks omitted).

  In a dispute to enforce an arbitration provision, "the Court must satisfy itself that the parties' agreement to arbitrate is not in issue. The Court may not order arbitration unless and until it is satisfied that a valid arbitration agreement exists." Prop. Advisory Group v. Beyona, 718 F. Supp. 209, 211 (S.D.N.Y. 1989) (citation omitted).

  The Employer alleges that the contract with the Union signed by Desiree Dyson is unenforceable because Dyson did not have the actual authority to bind the Employer to a contract. It argues that at least two signatures of the Board of Directors were necessary to make a binding agreement. The Union argues that the By-laws are unclear as to whether Dyson had actual authority to bind the Employer. It further argues that even if Dyson did not have actual authority, she had apparent authority sufficient to create an enforceable contract.

  "An employer is bound by the acts of its agents." JNG Constr. Ltd., 2003 WL 22999453, at *3 (citing 29 U.S.C. § 185(b)). Federal common law and New York State law are consistent with respect to the relevant determinations of agency relationships. See Prop. Advisory Group, 718 F. Supp. at 211 n.4. An agent's authority to bind an employer may be actual or apparent, C.E. Towers Co. v. Trin. & Tobago Airways Corp., 903 F. Supp. 515, 523 (S.D.N.Y. 1995). The scope of apparent authority is defined by the principal's manifest acts; an agent cannot create apparent authority in himself. See Minskoff v. Am. Express Travel Related Servs. Co., 98 F.3d 703, 708 (2d Cir. 1996) ("Apparent authority . . . is normally created through the words and conduct of the principal as they are interpreted by a third party, and cannot be established by the actions or representations of the agent."); Richardson Greenshields Sec. Inc. v. Lau, 819 F. Supp. 1246, 1257 (S.D.N.Y. 1993) ("The law in New York is quite clear that one who wishes to rely on an agent's apparent authority must be able to point to particular instances of misleading conduct by the principal which gives a false impression that the putative agent had authority to act for him." (internal citations and quotation marks omitted)); see also Itar-Tass Russian News Agency v. Russian Kurier, Inc., No. 95 Civ. 2144, 1999 WL 165706, at *1 (S.D.N.Y. Mar. 25, 1999). "A principal may be estopped from denying apparent authority if (1) the principal's intentional or negligent acts, including cicts of omission, created an appearance of authority in the agent, (2) on which a third party reasonably and in good faith relied, and (3) such reliance resulted in a detrimental change in position on the part of the third party." Trs. of the Am. Fed'n of Musicians and Employers' Pension Fund v. Steven Scott Enters., Inc., 40 F. Supp.2d 503, 508 (S.D.N.Y. 1990) (quoting Minskoff, 98 F.3d at 708).

  In this case, the Employer is bound by Dyson's actions because she was acting with apparent authority. The principal's affirmative actions in sending two checks to the Union in April 2002 in response to invoices for the Employee's union dues, coupled with its failure to repudiate Dyson's allegedly unauthorized actions until February 2003 created the appearance of authority on which the Union reasonably relied. See id. at 511 (holding that the cashing of settlement checks and a failure to repudiate an agent's unauthorized actions after receiving notice of the actions by way of the payments created the appearance of authority). The Employer was on notice of the contract at least when its managing agent sent the Union a check to pay the Employee's union dues. See id.

  The Employer asserts that the Union cannot claim apparent authority because it had a duty of inquiry that would have revealed that Dyson did not have actual authority to enter into a binding agreement. "In the apparent authority context, the duty to inquire only arises when the facts and circumstances are such as to put him on inquiry, the transaction is extraordinary, or the novelty of the transaction alerts the third party to the danger of fraud." Herbert Constr. Co. v. Cont'l Ins. Co., 931 F.2d 989, 996 (2d Cir. 1991) (internal citations and quotation marks omitted). The Employer asserts that Dyson's signature indicating the title of Vice President and also indicating that she was acting as an agent of the Employee put the Union on notice to inquire further because it created an unusual circumstance. Dyson's signature, indicating that she was acting as Vice President of the Employer and as an agent of Curry is insufficient to put the Union on notice that further inquiry was required. The transaction was hardly extraordinary, and Dyson plainly indicated that she was acting as Vice President for the Employer. The fact that she also indicated that she was an agent for the Employee for whose benefit the union agreement was entered was not so unusual as to have undercut her authority to act as Vice President for the Employer. In Trustees of the American Federation of Musicians and Employers' Pension Fund, the settlement agreement was signed by an agent who was both a Pension Fund Trustee and a Union President. 40 F. Supp.2d at 509, Although the signature block only referred to the agent's position as a Union president, the Court found that the only reasonable interpretation was that the agent was acting in his dual capacities as Pension Fund Trustee and Union President. Id. In this case, the only reasonable interpretation of the signature block is that Dyson was acting in her capacity as Vice President of the Employer and that the contract concerned the Employee Curry. Therefore, the signature on the contract does not create an unusual circumstance that created a duty of inquiry for the Union.

  The Union reasonably relied on the contract signed by Dyson. Dyson signed the contract indicating her position as Vice President of the Employer. See C.E. Towers Co., 903 F. Supp. at 524 (finding that the employer's actions in giving the agent the title of Vice President and the agent's actions under that title contributed to reasonable reliance by a third party). The Union also acted in good faith because it did not have notice, constructive or otherwise, that Dyson's signature was insufficient to bind the Employer to the contract until the initiation of litigation of this matter. See Trs. of the Am. Fed'n, 40 F. Supp.2d at 511 (holding that agreements entered into before the third party had documentation of an agent's insufficient authority were reasonable and enforceable).

  The Union relied to its detriment on Dyson's apparent authority. It proceeded to represent the Employee and indeed initiated an arbitration to resolve disputes for the Employee. The Union alleges that if it had thought that Dyson's signature was insufficient to create a binding agreement, it would have used its economic weapons such as strikes and pickets to place pressure on the Employer. Its belief that the Employer had entered into a valid agreement conferred a benefit on the Employer, ensuring labor harmony. See Prop. Advisory Group, Inc., 718 F. Supp.2d at 214. The Union also points to the injury that Union member Curry, the Employee, has suffered by the Employer's failure to comply with the terms of the agreement. The failure of an employer to apply the terms of a Union agreement results in damage to the Union because its members are damaged by such acts. See id.

  The arbitration clause is enforceable because Dyson was acting under apparent authority when she entered into the contract with the Union. Therefore, the Court does not reach the issue of actual authority.


  In addition to reasons of apparent authority, the arbitration clause is also enforceable because the principal's subsequent actions ratified the contract. "Ratification of the acts of an agent only occurs where the principal has full knowledge of all material facts and takes some actions to affirm the agent's actions." Trs. of the Am. Fed'n, 40 F. Supp.2d at 511 (quoting Prisco v. New York, 804 F. Supp. 518, 523 (S.D.N.Y. 1992)). Ratification may also be inferred from "knowledge of the principal coupled with a failure to timely repudiate, where the party seeking a finding of ratification has in some way relied on the principal's silence." Id. (quoting Monarch Ins. Co. of Ohio v. Ins. Corp. of Ir., Ltd., et al., 835 F.2d 32, 36 (2d Cir. 1987)).

  While the Board of Directors did not formally ratify the agreement at a meeting, the Employer's actions in sending the Union two checks to pay the Employee's union dues ratified the contract. The payment in response to the Union invoices also put the Employer on notice if it was not before. See Trs. of the Am. Fed'n, 40 F. Supp.2d at 512. The Employer's subsequent failure to repudiate the contract within the next ten months was also sufficient to ratify the contract.*fn1


  For the reasons explained above, the respondent's motion for summary judgment is granted, and the parties will proceed to arbitration in accordance with the terms of the agreement. The petitioner's motion for summary judgment and permanent injunction of the arbitration proceedings is denied. The Clerk is directed to enter Judgment and to close this case.


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