OPINION OF THE COURT
Petitioners union and its president, in a CPLR article 78 proceeding, seek to compel respondents, the City of New York, the City Office of Labor Relations, and its director, to implement salary increases provided for in a collective bargaining agreement. Following an unsuccessful attempt by the city to perfect removal to Federal court, Special Term denied a motion to dismiss for failure to exhaust administrative remedies, namely the grievance and arbitration procedure in the agreement. A unanimous Appellate Division reversed, dismissed the petition, and directed the parties to proceed to arbitration. The union appeals.
The issue is whether by filing a petition to remove the proceeding to Federal court, and subsequently moving in Federal court for dismissal of the proceeding, the city waived its right to assert that arbitration was the proper and exclusive remedy.
There should be a modification to eliminate the dismissal of the petition and the direction to proceed to arbitration, and the proceeding should be stayed. The city’s right to assert that arbitration was the proper and exclusive remedy was not waived. The petition for removal and the motion to dismiss were directed at the subject matter jurisdiction of the courts, a use of the judicial process not inconsistent with an intention to rely on the arbitration remedy. Nor was that intention asserted with unreasonable delay. Once the issue of subject matter jurisdiction was resolved, and the matter remanded to State court, the city raised its alternative right to rely on the arbitration remedy in another "motion to dismiss”.
The city, assertedly acting under the Economic Stabilization Act of 1970 (see notes under US Code, tit 12, § 1904), refused to implement the full 7.3% second-year wage and salary adjudgments in its collective bargaining agreement with petitioner union. Following the procedures spelled out in the agreement, the union filed a grievance. When the grievance was denied, however, instead of proceeding with the next step of the grievance machinery, which called for "impartial” arbitration, the union, on June 27, 1974, brought this CPLR article 78 proceeding.
The union prevailed. Holding that "exclusive original jurisdiction, in this instance, did not reside in a federal district court”, the district court granted the union’s motion to remand, and denied the city’s motion to dismiss (Allied Bldg. Inspectors Local 211 v Office of Labor Relations, No. 74 Civ. 3237 [CHT], SDNY, June 5, 1975). On August 14, the proceeding was restored to the calendar of Special Term. Within one month, on September 12, 1975, the city, again moving to dismiss, asserted for the first time the union’s failure to proceed with arbitration under the terms of the agreement.
Although the city’s status in the article 78 proceeding is a defensive one, namely, that of respondent, its right to rely on arbitration as the proper remedy is not absolute because it may be waived (see, e.g.,
Matter of Zimmerman v Cohen,
Removal was sought by the city because, based on its interpretation of the Federal law, the State court was preempted. In other words, the city, albeit incorrectly, thought
At no point was the city looking to the courts to justify withholding of the full wage and salary increases. Prior to assertion of the right to rely on the arbitration remedy, its use of the judicial process was limited to a legitimate testing of the subject matter jurisdiction of both the State and Federal courts. Once that issue was resolved, the reliance on the arbitration remedy was raised without unreasonable delay. It cannot be said, therefore, that there had been a waiver.
The city, it is true, did not mention its alternative right to rely on the arbitration remedy until the proceeding was remanded to State court. It would, of course, have been better and timesaving for the litigants and the courts if the city had initially asserted, if only contingently, its right to insist on arbitration. Determinative, however, is that the city’s reasons for seeking removal, and later moving to dismiss in the Federal court, were not inconsistent with an intention to arbitrate. (Cf.
City Trade & Ind. v New Cent. Jute Mills Co.,
Neither the dismissal of the petition nor the direction to proceed to arbitration, however, can stand. An agreement to arbitrate is not a defense to an action
(De Sapio v Kohlmeyer,
Accordingly, the order of the Appellate Division should be
Chief Judge Breitel and Judges Jasen, Gabrielli, Jones, Wachtler, Fuchsberg and Cooke concur in Per Curiam opinion.
Order modified, without costs, in accordance with the opinion herein and, as so modified, affirmed.