Bernstein v. Gramercy Mills, Inc.

• Decision Date: 28 July 1983
• Citation: 16 Mass.App.Ct. 403,452 N.E.2d 231
• Parties: Harold BERNSTEIN v. GRAMERCY MILLS, INC.
• Court: Appeals Court of Massachusetts

Page 231

452 N.E.2d 231

16 Mass.App.Ct. 403

Harold BERNSTEIN v. GRAMERCY MILLS, INC.

Appeals Court of Massachusetts,

Suffolk.

Argued March 18, 1983.

Decided July 28, 1983.

Edward T. Dangel, III, Boston (Michael K. Mattchen and Charles W. Rankin, Jr., Boston, with him), for defendant.

Edward P. Leibensperger, Boston, for plaintiff.

Before BROWN, KAPLAN and DREBEN, JJ.

KAPLAN, Justice.

The defendant Gramercy Mills, Inc. (Gramercy), appeals from a judgment of the Superior Court confirming an arbitration award in favor of the plaintiff Harold Bernstein, and thereby dismissing the defendant's purported counterclaim which sought to vacate the award.

Statement. Bernstein acted as Boston-based sales representative of Gramercy, a New Jersey corporation, under a long-term contract entitling Bernstein to commissions for sales of Gramercy products to designated customers. About September, 1979, Bernstein claimed commissions of some $200,000. Gramercy refused to pay. By the terms of the contract, disputes thereunder were to be submitted to arbitration under the rules of the American Arbitration Association (A.A.A.). Bernstein commenced arbitration proceedings in January, 1980. Mr. Paul G. Roberts, a Boston attorney, serving as sole arbitrator, heard the parties on dates between April 28 and August 21, 1980, and on June 3, 1981, made an award of $104,766.68 in favor of Bernstein, served on the parties on June 8, 1981. (A clarification of the award was dated June 29, 1981.)

As Gramercy did not comply with the award, Bernstein on July 17, 1981, commenced an action in the Superior Court under our uniform arbitration act to confirm and enforce it (G.L. c. 251, § 11). Gramercy filed its answer on August 6, 1981. This set forth a counterclaim praying vacation of the award on the ground that Mr. Roberts had failed, improperly, to disclose his connections with the attorneys for Bernstein; a rule of the A.A.A. was cited (see the text at "Merits" below). According to the allegations of the counterclaim, knowledge of these connections had first come to Gramercy's attention on July 15, 1981. Bernstein's reply put in issue the substance of the counterclaim, and also alleged that Gramercy's attempt to vacate the award came too late, since more than thirty days had elapsed between the effective date of the award, June 8, 1981, and the date of the answer. See G.L. c. 251, § 12(b ). After pretrial maneuvers and a nonjury trial, the judge, pretermitting without discussion the question of timeliness, found for Bernstein on the substance, and on February 11, 1982, entered the judgment confirming the award.

Upon consideration, we think Gramercy's effort to vacate the award was time-barred. Were it not so, we would agree with the judge that Gramercy failed on the merits. (We leave to the end a cross-appeal by Bernstein from the denial of his application for attorney's fees.)

Evidence. The A.A.A. offered to the parties a list of fifteen names from which they might select the arbitrator. Bernstein through his counsel Mr. Irving J. Helman of the Boston firm of Nutter, McClennen & Fish chose seven as acceptable, Mr. Roberts being the first of these in order of preference. Gramercy did not indicate on the record just how it responded to the list, but, to account for the selection of Mr. Roberts in accordance with A.A.A. practice, we may assume that Gramercy either agreed (expressly or by default) with Bernstein's first choice of Mr. Roberts, or put Mr. Roberts in such a place among its own approved names that he turned out the name with proper joint approval. ¹ The notice of appointment as arbitrator, mentioning the names of the parties and their counsel (Mr. Helman for Bernstein and Mr. Brett J. Meyer of the New York firm of Ruben Schwartz, Meyer & Schnall for Gramercy), carried a reminder of a duty of disclosure conforming to the A.A.A. rule; Mr. Roberts accepted appointment without more. Mr. Helman did not appear for Bernstein in the arbitration proceeding proper; Mr. Edward P. Leibensperger of the Nutter firm did so. Mr. Meyer appeared for Gramercy.

The award, as noted, came down on June 8, 1981. The record does not disclose just what Gramercy learned on July 15, 1981, because, according to Gramercy, it consisted of a communication to Gramercy's president that was protected by an attorney-client privilege.

Discovery began as the pleadings in the action were closed, Gramercy being now represented by the Boston law firm which appears for it on the present appeal. The upshot of the pretrial activity was an arrangement under which information was supplied regarding the contacts of lawyers in the Nutter firm with lawyers in the Boston firm of Lappin, Rosen, Goldberg, Slavet, Levenson & Wekstein, with which Mr. Roberts was associated during the period of the arbitration. These are large firms with active practices; the record indicates that there were 88 lawyers in the Nutter firm. Over the five-year period commencing in 1975, there were nine instances of legal matters in which lawyers of the two firms were mutually involved (Mr. Helman is mentioned in one matter and Mr. Leibensperger in another); and six lawyers at the Nutter firm had social contacts with six lawyers at Lappin, Rosen. Mr. Roberts did not figure in any of these relationships.

Also of record at the trial was the fact that Mr. Roberts had two contacts or associations with Mr. Helman. About 1977, when Mr. Roberts began to practice law in Boston, he encountered Mr. Helman in the latter's capacity as chairman of the corporate law section of the Boston Bar Association. And in a six-month period in 1978, Mr. Roberts, then associated with the Boston firm of Guterman, Horvitz, Rubin & Rudman, served as counsel to a client of Mr. Stanley Rudman in transactions concerning a World Jai Alai corporation. The client had been a member of the board of directors and secretary of the corporation. Mr. Helman represented the corporation. Apparently the interests of these parties, which are not depicted in any detail in the record, were divergent. Mr. Roberts met and talked on the telephone with Mr. Helman, but no detail appears.

Time bar. Section 12 of the Uniform Arbitration Act, inserted into the General Laws as G.L. c. 251, § 12 (as amended by St.1972, c. 200), reproduced in the margin, ² sets out, in subsection (a), five grounds for applications to vacate awards. The first, § 12(a )(1), is that "the award was procured by corruption, fraud or other undue means." Under subsection (b ), an application "predicated upon corruption, fraud, or other undue means" (apparently referring to § 12[a ] ) ³ is to be made "within thirty days after such grounds are known or should have been known"; applications otherwise predicated "shall be made within thirty days after delivery of a copy of the award to the applicant." ⁴

(1) Gramercy first accepts, arguendo, that the present case involves the second statutory ground for vacating an award--"there was evident partiality by an arbitrator appointed as a neutral, or corruption in any of the arbitrators, or misconduct prejudicing the rights of any party." Thus the thirty-day limit appears to attach. Gramercy contends, however, that the limit is avoided because it did not make an application to vacate the award but rather attacked it by means of a counterclaim in the action to confirm the award.

We think the argument is answered by § 11 of c. 251, inserted by St.1960, c. 374, § 1, which states: "Upon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in sections twelve [vacation of awards] and thirteen [correction or modification]" (emphasis supplied). Under this language, it is plain enough that commencement of an action to confirm an award does not postpone or extend the time for making an application to vacate the award. See Trustees of the Boston & Maine Corp. v. MBTA, 363 Mass. 386, 394-395, 294 N.E.2d 340 (1973). Cf. Holmsten Refrigeration, Inc. v. Refrigerated Storage Center, Inc., 357 Mass. 580, 584, 260 N.E.2d 216 (1970). Gramercy appears to be saying that because it made its attack on the award not, nominally, as an application to vacate it, but, nominally, as a counterclaim in the action previously brought to confirm the award, it may escape the thirty-day bar. This would be a perverse surrender to the merest form, and we believe § 11 is adequate to cover the latter situation as it does the former. This conforms to the view of the chairman of the committee of the National Conference of Commissioners on Uniform State Laws which drafted the uniform act. Pirsig, Some Comments on Arbitration Legislation and the Uniform Act, 10 Vand.L.Rev. 685, 707 (1957).

Gramercy next points to G.L. c. 260, § 36, inserted by St.1973, c. 1114, § 341, a statute regarding so-called compulsory counterclaims, which states in part that "a counterclaim arising out of the same transaction or occurrence that is the subject matter of the plaintiff's claim, to the extent of the plaintiff's claim, may be asserted without regard to the provisions of law relative to limitations of actions." Although enacted after the uniform act, G.L. c. 260, § 36 does not override §§ 11 and 12 of that act. On inspection, § 36 seems to be addressed to limitations periods measured from the breach of primary duties, and could apply to the present case only by a distortion of its intent. Further, as a § 36 counterclaim can go only "to the extent of the plaintiff's claim," it corresponds to "recoupment" in the pre-Rules practice. See Bose Corp. v. Consumers Union of United States, Inc., 367 Mass. 424, 427-431, 326 N.E.2d 8 (1975); Smith & Zobel, Rules Practice § 13.31 (1974). The present "counterclaim," however, bears no resemblance to a recoupment. See on this point Chauffeurs, Teamsters, Warehousemen and...