United States Court of Appeals Second Circuit.: No. 104, Docket 24220
United States Court of Appeals Second Circuit.: No. 104, Docket 24220
2d 511
63 A.L.R.2d 1350
In March 1956 this proceeding was commenced in the Supreme Court of the
State of New York, County of Richmond, by Robert W. Davenport, as
president of a labor union with which the respondent had made a collective
bargaining agreement, to compel arbitration in accordance with the terms of the
agreement. It was brought pursuant to Article 84 of the New York Civil
Practice Act, C.P.A. 1448-1469. After removal to the federal court on the
ground of diversity of citizenship, Davenport presented a motion to remand,
which was denied on May 31, 1956. A subsequent motion to compel
respondent to proceed to arbitration was denied on July 12, 1956. Notice of
appeal from both orders was filed July 31, 1956.
The appellee questions our appellate jurisdiction. On the assumption that the
order of May 31st denying a remand was directly appealable, the notice of
appeal on July 31st was filed too late.1 But the order was not directly
appealable. It was neither a final judgment,2 nor was it an interlocutory order of
a character immediately reviewable.3 However, the appellee concedes that if
the order of July 12th denying the motion to require arbitration is properly
before us, the interlocutory order denying a remand may also be reviewed.
Cray, McFawn & Co. v. Hegarty, Conroy & Co., 2 Cir., 85 F.2d 516, 517. But
it argues that the July 12th order was not appealable as a final order, because no
order has been entered dismissing the proceeding. The point is not well taken.
The only relief sought by petitioner was an order to require arbitration. The
order denying the motion to require it was a final order, for purposes of appeal,
since nothing further was to be done by the court.4 Dismissal of the complaint
would be a pure formality without effect upon the rights of the parties. We hold
that both orders are before the court for review.
The first question is the propriety of the order denying the motion to remand.
The case was removed to the federal court on the ground that there was
diversity of citizenship and the amount in dispute exceeded $3,000, exclusive of
interest and costs.5 Upon the motion to remand the movant, now the appellant,
conceded diversity, but denied the amount in controversy, its position being
that the controversy has no ascertainable money value since it is a demand
solely to compel arbitration. The motion was heard upon affidavits. Judge
Inch's decision is printed in the margin.6
The appellant's contention that a state court suit to compel arbitration is not
removable finds support in the case of In re Red Cross Line, D.C.S.D.N.Y., 277
F. 853, 856. There a petition to remand was granted on the theory that the
matter in dispute was 'solely the right of specific performance of the agreement
to arbitrate'; and 'No pecuniary value can be given to it, and a breach can only
result in nominal damages' because, 'If the arbitration is ordered, the function
of the court, so far as the proceeding instituted goes, ceases.' But the view that
each step in the state court suit is 'a separate proceeding' within the meaning of
the removal statute was repudiated in Marchant v. Mead-Morrison Mfg. Co., 2
Cir., 29 F.2d 40, certiorari denied 278 U.S. 655, 49 S.Ct. 179, 73 L.Ed. 565. At
page 43 of 29 F.2d the court said:
'* * * What transpired from the application to state Supreme Court, and the
entry of an order appointing an arbitrator, to and including the application for
confirmation of the award made by the arbitrators, was a suit for the specific
performance of the contract. It was all one arbitration proceeding, to settle the
controversies which had arisen between the parties. They were not separable
controversies. * * *
6
'The proceeding from the outset had all the elements of a judicial controversy *
* * capable of pecuniary estimation, * * *. The appointment of the arbitrator
was but a step in the relief sought by the plaintiff from the damages inflicted by
the breach of the contract.' (Italics added.)
10
The collective bargaining agreement made in 1954 and effective to January 27,
1957 covers employees in the employer's Staten Island factory. Article III of the
agreement entitled 'Wages' provides the 'the Employer shall continue its policy
of paying wages that match the wages paid by leading companies in the
community for similar types of work determined by wage surveys, conducted
in the manner herein set forth.' It then provides that 'the Employer shall
determine the average base rates in the community' by making surveys every
six months of base rates paid by employers in other companies for comparable
work. The Employer's rate is then compared with the average of the five
highest rates 'in the companies used in the wage survey.' 'The companies now
used shall not be changed except after consultation with the Union.' If requested
by the Union a survey shall be made not more frequently than once every three
months. 'The results of such survey shall be furnished to the Union or its
Executive Committee upon request, and wages may be readjusted after
conference with the Union or its Executive Committee subject to the approval
of the proper governmental authority if necessary.' Article XI of the agreement
sets up a Grievance Procedure. Paragraph 1, Step 4, provides:
11
'In the event that a grievance having to do with the interpretation or application
of any provision of this agreement is not settled in the previous steps, such a
grievance may be submitted to a Board of Arbitration.'
Paragraph 5 provides:
12
'The arbitrators shall confine their consideration to the issue or issues submitted
in writing by the Employer and the United before the Board of Arbitration
convenes, and shall neither add to nor subtract from the written provisions of
this agreement in reaching their decision.'
13
The petition alleged that the petitioner, in accordance with the Grievance
Procedure, submitted a grievance, alleging that the employees represented by
the Union 'had been deprived of wage increases due to the refusal of' the
respondent 'to substitute a Wage Survey Company, as requested.' Relying upon
the provision, already quoted, that 'The companies now used shall not be
changed except after consultation with the Union,' the respondent answered that
'the petition did not require the submission of the above grievance to
arbitration.'
14
We agree that the agreement did not provide for arbitration of the alleged
grievance. As appears from the affidavits submitted in opposition to the motion
for an order to compel arbitration, without denial in the supporting affidavits,
the provision that 'the companies now used shall not be changed except after
consultation with the Union,' was inserted at the request of the Union (58a) in
1947. It also appears that the construction placed upon the agreement by the
conduct of the parties in subsequent years shows that a change of survey
companies has always been a subject for collective bargaining, not a matter for
arbitration. This uniform practical construction reinforces the plain words of
the agreement. Moreover, the agreement sets up no standards by which the
arbitrators could select a company to be substituted for one of those 'now used.'
In order to obtain the consent of other companies to submit wage surveys, The
Procter & Gamble Mfg. Co. must work out an arrangement with such
companies for a continuing exchange of wage data and job information. Such
information is confidential. Although the Union knows and has agreed to the
names of the companies to be surveyed, the wage data disclosed to the Union is
identified only by code number. For these reasons alone it is apparent that the
parties to the agreement could not have intended the arbitrators to perform the
delicate task of selecting an appropriate wage survey company to be substituted
for one agreed upon by the parties to the agreement.
15
16
'The clause of the agreement that 'the Company agrees to meet with the Union
early in July 1946 to discuss payment of a bonus for the first six months of
1946' can only mean what it says, that the parties will discuss the subject.
While the contract provides for arbitration of disputes as to the 'meaning,
performance, non-performance or application' of its provisions, the mere
assertion by a party of a meaning of a provision which is clearly contrary to the
plain meaning of the words cannot make an arbitrable issue. It is for the Court
to determine whether the contract contains a provision for arbitration of the
dispute tendered, and in the exercise of that jurisdiction the Court must
determine whether there is such a dispute. If the meaning of the provision of
the contract sought to be arbitrated is beyond dispute, there cannot be anything
to arbitrate and the contract cannot be said to provide for arbitration.'
17
18
'* * * Whether or not a bona fide dispute exists is a question of law, Wenger &
Co. v. Propper Silk Hosiery Mills, 239 N.Y. 199, 202-203, 146 N.E. 203. If
there is no real ground of claim, the court may refuse to allow arbitration,
although the alleged dispute may fall within the literal language of the
arbitration agreement. Such is the situation here.'
19
20
Orders affirmed.
Bender v. Pennsylvania Company, 148 U.S. 502, 13 S.Ct. 640, 37 L.Ed. 537
Cf. Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 2 Cir., 62 F.2d 1004; In
re Canadian Gulf Line, 2 Cir., 98 F.2d 711, 713, relating to appeals from orders
directing arbitration under the United States Arbitration Act, 9 U.S.C.A. 1 et
seq
'Motion to remand this case to the Supreme Court of the State of New York,
County of Richmond. It appears from all the papers that, as actual facts, there is
a diversity of citizenship and the matter in controversy exceeds the sum or
value of three thousand dollars ($3,000.00), exclusive of interest and costs.
Therefore, this motion is denied in all respects (Marchant v. Mead-Morrison
Mfg. Co., 2 Cir., 29 F.2d 40; Crockett v. Overfield (D.C.) D.Idaho, 22 F.Supp.
915, 916; Daland v. Hewitt Soap Co., Inc., (D.C.) S.D.N.Y., 27 F.Supp. 482,
483. Settle Order.'
In Bernhardt v. Polygraphic Company, 350 U.S. 198, 202, 76 S.Ct. 273, 276,
100 L.Ed. 199, the court disagreed with the conclusion that arbitration is
merely a form of trial like a reference to a master or an advisory trial, and said:
'We deal here with a right to recover that owes its existence to one of the States,
not to the United States. * * * The federal court therefore may not 'substantially
affect the enforcement of the right as given by the State."
denied in all respects, Bernhardt v. Polygraphic Co. of America, 350 U.S. 198
(76 S.Ct. 273, 100 L.Ed. 199); International Ass'n of Machinists (Dist. No. 15)
v. Cutler-Hammer, Inc., 271 App.Div. 917 (67 N.Y.S.2d 317), affirmed 297
N.Y. 519 (74 N.E.2d 464); General Electric Co. v. United El. R. & M.
Workers, 300 N.Y. 262 (90 N.E.2d 181); Alpert v. Administration Knitwear
Co., 304 N.Y. 1 (105 N.E.2d 561). Settle Order, July 9, 1956.'