Walters v. Harmon

• Decision Date: 01 June 1987
• Citation: 135 Misc.2d 905,516 N.Y.S.2d 874
• Court: New York Supreme Court
• Parties: Norby WALTERS and Lloyd Bloom d/b/a World Sports & Entertainment, Inc., Plaintiffs, v. Ronald HARMON, Defendant.

Page 874

516 N.Y.S.2d 874

135 Misc.2d 905

Norby WALTERS and Lloyd Bloom d/b/a World Sports &amp Entertainment, Inc., Plaintiffs, v.Ronald HARMON, Defendant.

Supreme Court, New York County IAS Part 14.

June 1, 1987.

Shea & Gould, New York City, for plaintiffs.

Rauch & Vella, Springville, for defendant.

MYRIAM J. ALTMAN, Justice:

Plaintiffs, "contract advisors" to athletes, move to stay arbitration on the ground that the arbitration clause of a contract with the defendant, a football player with the Buffalo Bills(Bills), had not yet been triggered at the time the cause of action for agents' fees arose.The underlying facts of the case reveal a pernicious practice of encouraging young college athletes to enter into deceptive agreements which are post dated so they can continue to play college football.The athletes thus act unethically and in violation of the rules of the National College Athletic Association(NCAA) and the National Football League (NFL).

Ronald Harmon was a varsity football player at the University of Iowa.In March 1985, Harmon, then a junior, entered into an agreement with plaintiffs to represent him in connection with any future negotiations with the NFL and he was given $2,500.00, ostensibly as a loan.Although Harmon was not represented by counsel when the agreement was signed, his parents were present.The contract itself is dated January 2, 1986, after the conclusion of Harmon's varsity eligibility.In the spring of 1986 Harmon was the first draft choice of the Bills and in August 1986 was signed to a $1,400,000. contract payable over four years.Plaintiffs seek their agents' fee under the terms of the contract.

Article 4 of the contract provides that any dispute between a player and contract advisor shall be "resolved exclusively through the Arbitration Procedures set forth in Section 7 of the NFLPA (NFL Players Association) Regulations Governing Contract Advisors".Section 7 in turn refers, inter alia, to "[a]ny dispute between an NFL player and a Contract Advisor concerning: (1) the conduct of individual negotiations by a Contract Advisor, (2) the payment of fees due or allegedly due by any player to a Contract Advisor, or (3) other activities of the Contract Advisor within the scope of these Regulations".

Plaintiffs initially sought arbitration and defendant opposed it on jurisdictional grounds relating to fraud and illegality.The assigned arbitrator, John Culver, Esq., a former United States Senator from the State of Iowa, ruled in a preliminary opinion, that jurisdictional issues are, in the first instance, a question for the arbitrator.That ruling comports with the current law of this state.

In 1973the Court of Appeals ruled that "an arbitration provision of a contract is separable", and that therefore an "agreement to arbitrate would be 'valid' even if the substantive portions of the contract were induced by fraud"(Matter of Weinrott v. Carp, 32 N.Y.2d 190, 198, 344 N.Y.S.2d 848, 298 N.E.2d 42).The Court of Appeals had previously held in Matter of Wrap Vertiser Corp. (Plotnick), 3 N.Y.2d 17, 163 N.Y.S.2d 639, 143 N.E.2d 366 that a broad arbitration clause covering any question "as to the validity, interpretation or performance" of an agreement did not extend to the issue of fraud in the inducement.

The basis of the earlier holding was that an arbitration clause could not be separated from the rest of a contract and, if the contract were to fall, then the arbitration clause would fall with it (seeMatter of Weinrott v. Carp, supra, 32 N.Y.2d at p. 197, 344 N.Y.S.2d 848, 298 N.E.2d 42).The change in approach in Matter of Weinrott conformed with the legislative intention (CPLR 7501 et seq.) to encourage arbitration.That intention could no longer be frustrated by parties who raised the defense of fraud in the inducement in order to litigate in the courts and...