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1969 News for Corp. Counsel 1 (1969)

handle is hein.barjournals/nwsccptc1969 and id is 1 raw text is: No. 25, March, 1969 SCOPE OF THE ARBITRATOR'S AUTHORITY: ENTERPRISE REVISITED The United States Court of Appeals for the Tl rd Circuit has recently had occasion to review the div rse standards being applied to judicial review of arbitr tjn awards. In Ludwig Honald Manufacturing Company v. Fletcher (3d Cir. 1969) 59 LC para. 13,201 the court was called upon to review a district court holding which had reversed an arbitrator's award in a grievance in- volving a plant promotion. The grievant claimed that he should have been given the promotion (by virtue of his seniority) rather than the newly hired man who was promoted. The company contended that the contract provided that employees who had applied for new jobs would not be eligible to bid again for a period of six months from the date of transfer. Since the grievant had only recently been made a Sheet Metal Specialist, he was not eligible to bid for the Sheet Metal Leader job in question. Both the arbitrator and the Circuit Court found a flaw in the company's reasoning: the wording of the contract clause seemed to apply to both the grievant and the newly hired man-making both technically ineligible. The arbitrator found, in essence, that since both men were technically ineligible, the remaining por- tions of the contract would govern. On that basis, the job went to the grievant due to his greater seniority. The district court reversed the arbitrator on the basis that the grievant was ineligible. The Circuit Court reviewed the body of case law that has grown up after the Supreme Court decision in United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593 (1960). The Circuit Court noted that: Circuit and District Court decisions have not exuded uniformity in translating the 'essence' test into a pronouncement of the appropriate extent or limitation of judicial review of the arbitrator's inter- pretation. The test which the court finally applied in upholding the original arbitration award seems to leave the arbi- trator's decision in an almost unchallengeable position: We hold that a labor arbitrator's award does 'draw its essence from the collective bargaining agree- ment' if the interpretation can in any rational way be derived from the agreement, viewed in the light of its language, its context, and any other indicia of the parties' intention; only where there is a man- ifest disregard of the agreement, totally unsup- ported by principles of contract construction and the law of the shop, may a reviewing court disturb the award. NEW LOUISIANA CORPORATION CODE At its last session the Louisiana Legislature adopted a new, completely revised Corporation Code. This Code, which took six and one-half years in the making, is believed to be the most modern and effective in the United States. A full program of education on the new features of the Code is planned. XFAMIT TION OF LIABILITY: TH SMELL LINGERS ON Witit inf ming the processor to whom the chem- icals were to sold, a manufacturer introduced con- *ajn~ated ing dients into the chemicals. The resins ade from t chemicals were used by remote cus- tom 'some cases reached ultimate consumers prior to the breakdown of the contaminant. The de- layed and insufferably malodorous chemical reaction was finally traced back to the manufacturer. The disclaimer clauses were found by the Court to be unreasonable both as to the time period and as to amount. Having knowingly undertaken a calculated risk by introducing the contaminant without warning the buyer, the manufacturer cannot now claim that it is protected by the 15 day time limit on its warranty. Section 1-204 of the UCC invalidates any time limita- tion which limits the warranty to any unreasonably short period of time-particularly in view of the latent na- ture of this defect. In addition, says the Court, Section 2-179(2) of the UCC invalidates the limitation on damage liability which was set at recovery of the original purchase price. This limitation was not effective since the product had undergone several manufacturing processes rendering the original purchase price ineffective as a remedy. The Court also notes that the disclaimer of all im- plied warranties was not effective to avoid an express warranty under Section 2-213 of the UCC arising from the furnishing of an uncontaminated sample to the buyer at the beginning of their course of dealings. Neville Chemical Co. v. Union Carbide Corp., 37 U.S.L. Week 2413 (W.D. Pa. December 31, 1968). SECTION 16 (b)-CORPORATE LIABILITY AS A DIRECTOR Feder v. Martin Marietta Corporation and Sperry Rand Corporation, CCH Federal Securities Law Re- ports, paragraph 92,333, 37 L.W. 2425, is interesting on two points of liability under § 16(b) of the Secur- ities Exchange Act of 1934. It held that a corporation (Martin Marietta) could incur § 16(b) liability as a director upon a finding that its chief executive officer was deputized to serve for it on the board of directors of the corporation (Sperry Rand) whose shares were traded. While the deputization question was held to be one of fact, and while there was evidence in the record to support the trial court's findings of no dep- utization, the Court of Appeals for the Second Circuit, although imprisoned by Rule 52(a) of the Federal Rules of Civil Procedure, found that the district court had made an erroneous factual determination. The second point of interest is the holding that § 16(b) applies where stock purchased during the di- rectorship was sold after termination of the directorship but within six months after the purchase. This latter ruling followed the earlier holding by the same court in Adler v. Klawans, 267 F. 2d 840, that a sale by a director within six months after a purchase made before he had become a director was within the short swing profit prohibition of § 16(b). Digitized from Best Copy Available

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