Sims v. Siegelson

668 N.Y.S.2d 20 (1998)

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Nature of the Case

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Facts

P and D are both members of the DDC, an organization whose members are in the business of buying and selling precious gems. Pursuant to the DDC bylaws and the individual membership agreements, each member agrees to be bound by the bylaws and to arbitrate all disputes with other members arising out of the diamond business before a DDC arbitration panel. The bylaws provide that each member is personally responsible for transactions with other members whether he conducts business personally, as a member of a partnership, or through a corporation, and further require that members withdrawing from a partnership or corporation must immediately notify the DDC executive offices. D sold to Daniel Sims, P's son, who had previously been employed by P's corporation, S & H Diamond Corp. Daniel Sims purchased the diamonds on behalf of his new corporation, Diamond Way Corp. (Diamond Way). D claims that Daniel Sims represented that he was still associated with P's diamond business. Diamond Way's diamond inventory was allegedly stolen, resulting in its filing for bankruptcy. Diamond Way owed substantial amounts to various creditors who were members of DDC. P was notified by letter that claims filed by D and three other members would be heard before an arbitration panel. P appeared at the hearing and testified in opposition to the claims, as did Daniel Sims. The arbitrator ruled in favor of D and the three other claimants, stating in pertinent part: 'After much consideration, the Arbitrators have come to the conclusion that the onus and responsibility fall upon P to make good for his son, Daniel Sims, to … D--$ 37,371.00.' P commenced the instant proceeding to vacate the arbitration award primarily on the ground that the arbitration clause signed by all DDC members did not obligate him to arbitrate disputes between himself and his son's bankrupt corporation, Diamond Way, with which he denied any connection. The court ruled for P and D appealed.