D. M. C. Const. Corp. v. A. Leo Nash Steel Corp.

• Decision Date: 22 March 1976
• Parties: In the Matter of D.M.C. CONSTRUCTION CORP., Respondent, v. A. LEO NASH STEEL CORP., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 325

381 N.Y.S.2d 325

51 A.D.2d 1040

In the Matter of D.M.C. CONSTRUCTION CORP., Respondent, v. A. LEO NASH STEEL CORP., Appellant.

Supreme Court, Appellate Division, Second Department.

March 22, 1976.

Falk, Siemer, Glick, Tuppen & Maloney, Buffalo (Edwin H. Wolf, Buffalo, of counsel), for appellant.

Julius Zizmor, New York City, for respondent.

Before GULOTTA, P.J., and MARTUSCELLO, LATHAM, SHAPIRO and MARGETT, JJ.

MEMORANDUM BY THE COURT.

In a proceeding to compel arbitration, the appeal is from an order of the Supreme Court, Kings County, dated October 8, 1975, which granted the petitioner's motion to change the venue of the arbitration proceeding from Buffalo to New York City.

Order affirmed, with $50 costs and disbursements.

We find ample ground for Special Term's appropriate exercise of its discretion to have the arbitration proceeding conducted in the city in which the records are located and to avoid unnecessary hardship and needless expense to parties, witnesses, etc.

MARTUSCELLO, LATHAM and MARGETT, JJ., concur.

SHAPIRO, J., dissents and votes to reverse the order and deny the motion to change the venue of the arbitration proceeding, with the following memorandum in which GULOTTA, P.J., concurs:

The questions on this appeal are (1) whether the Special Term had the power to void the designation of Buffalo by the American Arbitration Association (AAA) as the situs of the arbitration hearings and to change the venue of the arbitration hearings to New York City and (2) if it had such power, whether, in so doing, it abused its discretion.

THE BACKGROUND

The background facts are not in dispute. The petitioner, D.M.C. Construction Corp. (D.M.C.), has its principal place of business in Brooklyn, New York. The appellant, A. Leo Nash Steel Corp. (Nash), a foreign corporation organized in Massachusetts, is qualified to do business in New York State and has designated New York City as its place of business and the place where process may be served upon it.

On September 16, 1974, D.M.C. (the contractor) and Nash (the subcontractor) entered into an agreement for construction work to be performed on a geriatric center in the City of Niagara Falls. That contract contained, Inter alia, a standard arbitration clause which provided that settlement of any disputes were to be determined in accordance with the rules of the AAA. The contract sum was $200,000.

On February 11, 1975 D.M.C. instituted an action against Nash for damages, alleging that the latter had breached the contract. On the following day Nash filed a notice of mechanic's lien in Niagara County for $161,920.82, to cover work assertedly performed by it, and then commenced an action to foreclose the lien. Nash thereafter appeared in the D.M.C. action, and moved to compel arbitration, whereupon D.M.C. moved for a stay of arbitration by reason of the pendency of the Nash foreclosure action. That motion was denied and the denial was sutained by this court (Matter of D.M.C. Constr. Corp. v. A. Leo Nash Steel Corp., 50 A.D.2d 560, 375 N.Y.S.2d 18 (dec. Nov. 3, 1975)).

During that interval the AAA served notice on D.M.C. to select arbitrators and to proceed to arbitration in Buffalo, New York. D.M.C. then moved at Special Term for an order changing the venue of the arbitration hearings to New York City, arguing that the convenience of witnesses and the location of its books and records, when added to the corporate sites, all warranted the change.

Although the record does not contain the applicable rule governing venue hearings, Nash asserts, and D.M.C. does not deny, that, under the AAA rules, if a party objects to the locale requested by his adversary, The AAA has the power to determine the locale, and its decision is final and binding; ^* that here the AAA requested both parties to submit their detailed contentions in favor of a particular locale; that the parties disagreed as to the locale; that two independent regions of the AAA were involved here, and that both regions chose Buffalo, based upon the contentions and upon information supplied by the parties; and that the two regions had considered the location of parties, witnesses, documents, construction site, contract performance, court actions, and costs to Nash and D.M.C., and had then selected Buffalo. Furthermore, D.M.C., in its brief, admits that it requested the AAA to change the venue of the hearings to New York City because none of the parties or the witnesses resided in Buffalo and because none of the records were located there and that the AAA refused so to do.

THE LAW

Where parties to a contract have solemnly and overtly agreed to place the fate of their disputes in arbitration, courts should proceed with great caution, and only upon an affirmative showing of the violation of some applicable legal principles, before interfering with the processes of the tribunal which they themselves have selected. This rule is even more applicable to procedural threshold questions such as venue, etc. Any other course would dissipate the purpose of the arbitration statutes, which is to encourage the expeditious determination of disputes, and would only embroil the courts in decisions intended to be left to the arbitrators, with a concomitant waste of court time and resources. As Judge Wachtler, speaking for a unanimous court, said in Matter of Weinrott (Carp), 32 N.Y.2d 190, 198--199, 344 N.Y.S.2d 848, 855, 298 N.E.2d 42, 47:

'When the parties to a contract have reposed in arbitrators all questions concerning the 'validity, interpretation or enforcement' of their agreement, they have selected their tribunal and no doubt they intend it to determine the contract's 'validity' should the necessity arise.

'The CPLR arbitration provisions (CPLR 7501 Et seq.) evidence a legislative intent to encourage arbitration. Certainly the avoidance of court litigation to save the time and...