12 Misc. 2d 913 | N.Y. Sup. Ct. | 1958
This is a motion to stay a proposed arbitration. The arbitration clause in the agreement between the parties provides for arbitration of 11 any controversy or claim arising out of or relating to this contract, or the breach thereof, including all questions arising in the ascertainment of the value of shares as herein provided.” The agreement, by its terms, covers such matters as the election and continuation of the parties as directors of the corporation, the officers for the first
Respondents seek to have the arbitrators (1) remove petitioner as a director and as president, (2) find that he left the corporate employ as of the date of his earlier dereliction in his duties, (3) enjoin petitioner from soliciting business in violation of the agreement, and (4) require petitioner to account and make restitution.
Since the agreement provides that petitioner shall continue as a director for the duration of the agreement, Ms removal as a director would entitle Mm to arbitrate the propriety of his removal. Arbitration may not, however, be resorted to in order to accomplish petitioner’s removal, for a dispute, to be arbitrable, must be one “ which may be the subject of an action ” (Civ. Prac. Act, § 1448), and no action may be brought to remove a director, except by the Attorney-General (Matter of Burkin [Katz], 1 N Y 2d 570). In the cited case, the Court of Appeals held that the removal of a director for alleged misconduct could not be effected through arbitration, although the propriety of an accomplished removal (by stockholders or others) could be arbitrated.
The removal of petitioner as president may likewise not be accomplished by arbitration for the agreement provides merely that the presidency of petitioner shall continue for the first year, wMch expired prior to the demand for arbitration. The removal of petitioner as president after the first year would, therefore, constitute no breach of the agreement and would present no question within the scope of the arbitration clause, quoted above.
The other matters sought to be arbitrated also relate to matters not covered by the agreement and therefore not within the ambit of the arbitration clause.
The prohibition in the agreement against solicitation of corporate customers is not applicable, since no charge is made in the arbitration demand that petitioner solicited orders from such customers. The charge is only that he appropriated to himself orders wMch the corporation had received. It is, accordingly,
For the reasons indicated the motion to stay arbitration is granted. Settle order.