Collins & Aikman Floor Coverings v. Froehlich

• Decision Date: 12 April 1990
• Docket Number: 89 Civ. 7404 (RWS).,No. 89 Civ. 7403 (RWS),89 Civ. 7403 (RWS)
• Citation: 736 F. Supp. 480
• Parties: COLLINS & AIKMAN FLOOR COVERINGS CORPORATION, f/k/a Collins & Aikman Corporation, Petitioner, v. Robert FROEHLICH, Respondent. Robert FROEHLICH, Petitioner, v. COLLINS & AIKMAN CORPORATION, Respondent.
• Court: U.S. District Court — Southern District of New York

736 F. Supp. 480

COLLINS & AIKMAN FLOOR COVERINGS CORPORATION, f/k/a Collins & Aikman Corporation, Petitioner, v. Robert FROEHLICH, Respondent.

Robert FROEHLICH, Petitioner, v. COLLINS & AIKMAN CORPORATION, Respondent.

Nos. 89 Civ. 7403 (RWS), 89 Civ. 7404 (RWS).

United States District Court, S.D. New York.

April 12, 1990.

Otterbourg, Steindler, Houston & Rosen, P.C. by Bernard Beitel, Terri L. Rudd, of counsel, New York City, for Collins & Aikman.

Webster & Sheffield by Richard A. Mescon, Sandra E. Langs, Valerie J. Watnick, of counsel, New York City, for Robert Froehlich.

OPINION

SWEET, District Judge.

Collins & Aikman Floor Coverings Corporation, f/k/a Collins & Aikman Corporation ("C & A") seeks by petition pursuant to 9 U.S.C. § 10 to vacate an arbitration award directing it to pay Robert Froehlich ("Froehlich") the sum of $152,643.52 for the alleged breach of an employment agreement between C & A and Froehlich dated October 22, 1979 (the "Agreement") and to reimburse Froehlich for the administrative fees he advanced to the American Arbitration Association ("AAA") in the sum of $4,394.62. Froehlich has cross-moved for the confirmation of the Award. For the reasons set forth below, the Award is vacated and a rehearing is directed.

The Parties and the Agreement

C & A is a Delaware corporation with an office and its principal place of business in Dalton, Georgia. It is in the business of, among other things, manufacturing commercial flooring and carpeting. Froehlich is a New York resident who entered into an employment agreement with C & A dated October 22, 1979. The Agreement set out the parties "understanding" as to Froehlich's "engaging in commission sales activities on behalf of C & A" and provided in pertinent part:

(a) Froehlich can sell the C & A products described in Schedule "A" of the Agreement to "customers" and in the "territory described in Schedule B" at a commission rate of "7½%".

(b) Changes in the schedules concerning C & A products, customers, territory and compensation could only be modified "either upon individual written notice to Froehlich or by promulgating such change in a publication generally distributed or made available to sales personnel carrying on sales efforts in Froehlich's general field." (¶ 4).

(c) The Agreement was to continue indefinitely subject to termination: (i) by Froehlich immediately upon the giving of written notice to such effect to C & A; and (ii) by C & A by giving written notice of termination "to become effective at such time (not less than thirty days from the giving of such notice) as may be specified and noticed." (¶ 7).

(d) In the event of termination of this agreement: unless otherwise specifically provided in Schedule C, commissions shall be due only with respect to C & A products which are shipped to the customer prior to the effective date of termination as provided in ¶ 7 of this agreement (and only if such C & A products are subsequently fully paid for by the customer). (¶ 5(b)).

(e) This agreement constitutes the entire agreement of the parties with respect to your Froehlich's promotion of the sale of C & A products and may be changed only by an instrument in writing executed by both parties. (¶ 8(c)).

The Agreement provided for resolution of any "claim or controversy" by arbitration in accordance with the rules of the AAA and also provided in ¶ 8(d) that:

The arbitrator sitting in any such controversy shall have no power to alter or modify any express provision of this agreement or to render any award which by its terms effects any such alteration or modification.

Finally, paragraph 8(f) of the Agreement specifically states:

This agreement shall be governed by and construed in accordance with the laws of the State of New York.

On February 19, 1986, C & A notified Froehlich that his employment with C & A was terminated effective March 21, 1986 and paid him all the commissions due him for C & A products which were shipped to his accounts as determined by C & A prior to the termination date.

Prior Proceedings

In August 1986, Froehlich commenced an arbitration proceeding against C & A before the AAA in New York City pursuant to the arbitration clause in the Agreement. Diana Long Nicholson, Esq. (the "Arbitrator") was appointed.

The initial hearings in this matter took place on February 24, 1987. The record of sales (consisting of copies of invoices produced by C & A at the initial hearing and computerized statements) reflected the following:

(a) Sales made prior to March 21, 1986, Froehlich's effective termination date.

(i) Aetna—all commissions on sales made prior to termination were admittedly paid to Froehlich;

(ii) GTE—all commissions on sales made prior to termination were admittedly paid to Froehlich; and

(iii) Cigna—sales of $118,092.53, (if commissionable the amount would be $8,856.94).

(b) Sales made from March 22, 1986 to August 15, 1986, the date of the demand for arbitration.

(i) Aetna—sales of $36,461,52 (if commissionable, the amount would be $2,734.61).

(ii) GTE—sales of $26,520.84 (if commissionable, the amount would be $1,989.06).

(iii) Cigna—sales of $203,720.21 (if commissionable, the amount would be $15,279.01).

(c) Sales made from August 16, 1986 through February 24, 1987, the first date of the hearing.

(i) Aetna—sales of $10,001.62 (if commissionable, the amount would be $750.12);

(ii) GTE—sales of $135.42 (if commissionable, the amount would be $10.15); and

(iii) Cigna—sales of $96,645.75 (if commissionable, the amount would be $7,248.43).

C & A disputed whether or not the Cigna account was assigned to Froehlich or was a house account on which no commissions were due.

According to Cigna records up to the date of the first hearing, February 24, 1987 (which was eleven months after the effective date of termination of employment), damages including the Cigna account would have been $36,868.32.

Hearings were scheduled to resume on April 22 and April 23, 1987, were adjourned to November 23 and November 24, 1987, and again to February 24, 1989, due largely to the Arbitrator's unavailability.

At the second hearing, Froehlich submitted a worksheet with a damage calculation of $1,397,850 based not on any specific transaction or sale but upon his understanding he would be employed by C & A until he decided to retire and his wrongful discharge. Assuming a six-year period of additional employment, Froehlich calculated that he was entitled to $420,000 worth of commissions and $977,850 for Cigna commissions over the same six year period.

C & A then presented witnesses who testified as to the policies of C & A and its total sales records on Froehlich's account which through the date of Froehlich's discharge totalled $118,092.53 with an additional $300,365.96 in sales occurring through the date of the first hearing.

After the hearings concluded, the parties simultaneously exchanged post-hearing briefs and reply briefs on May 12, 1989 and June 9, 1989. Closing arguments took place before the Arbitrator on June 16, 1989. Froehlich urged that he was seeking to recover sales commissions owed to him from the period both prior to his termination (which at most amounted to $8,856.94 on sales to Cigna) and commissions on sales for a reasonable time thereafter.

The Administrative Fee Schedule of the AAA set out in the Commercial Arbitration Rules in effect in August 1986 when this arbitration was commenced provided:

                  Amount of Claim            Fee
                  X X X                      X X X
                  $160,000 to $5,000,000     $1,800 plus ¼% of
                                             excess over $160,000
                

The administrative fee charged by the AAA to Froehlich was $4,894.62 on a claim of $1,397,850.

The Froehlich post-hearing memorandum stated his claim as follows:

According to Respondent's sales invoices, Froehlich is entitled to $4,750.23 as his commission on sales made to Aetna from January, 1986 through January, 1987. He is also entitled to $6,288.17 as commissions on sales to GTE during the period from January, 1986 until the present March, 1989. In addition, Robert Froehlich is entitled to commission on a one million dollar sale claimed to have been made in 1988 of commercial carpet which Respondent made to GTE for GTE's Stamford, Connecticut headquarters. Finally, Froehlich is entitled to $30,826.35 as his commission on sales to Cigna from August, 1985 through the present March, 1989.

No records were adduced with respect to the alleged GTE sale in 1988.

The Arbitrator issued an award on August 8, 1989 (the "Award") which stated that:

1. Within thirty (30) days from the date of transmittal of this Award to the parties, Collins & Aikman Corporation hereinafter referred to as Respondent shall pay to Robert Froehlich, hereinafter referred to as Claimant the sum of One Hundred and Fifty Two Thousand Six Hundred and Forty Three Dollars and Fifty Two Cents ($152,643.52), which includes interest.

* * * * * *

3. The administrative fee of the American Arbitration Association totalling Four Thousand and Eight Hundred and Ninety Four Dollars and Sixty Two Cents ($4,894.62), shall be borne by Respondent in the sum of Four Thousand Three Hundred and Ninety Four Dollars and Sixty Two Cents ($4,394.62).

The Award also stated:

ROBERT FROEHLICH, during the hearing held on February 24, 1989, having disclosed the dollar amount of his previously undetermined claims and COLLINS & AIKMAN CORPORATION having raised no objection to such disclosed claim,....

By letters dated August 17, 1989, C & A requested that the AAA submit to the Arbitrator a letter requesting an explanation as to how she calculated the Award since it was mathematically incapable of being determined based upon the evidence presented at trial. Froehlich, by letter dated August 31, 1989, opposed that application.

By letter dated September 28, 1989, the AAA transmitted to the parties the Arbitrator's Disposition of Application for Modification of the Award of Arbitrator which was dated September...