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Hill v. Mercury Record Corp.

JUNE 29, 1960.




Appeal from the Superior Court of Cook county; the Hon. NORMAN C. BARRY, Judge, presiding. Reversed and remanded with directions.


This appeal is taken from an order entered in the Superior Court of Cook County dismissing plaintiff's complaint on the ground the court lacked jurisdiction in the case since the plaintiff had not exhausted the remedies provided in the bylaws of the American Federation of Musicians, of which the plaintiff was a member, and of which the Mercury Record Corporation was a licensee. By a provision of the contract the bylaws were made a part thereof.

The plaintiff's complaint, in three counts, was filed on August 25, 1956. Count II was dismissed by order of court and is not before us for consideration. The first count of the complaint prays damages for breach of a recording contract entered into between Harry Hill (hereafter referred to as plaintiff) and the Mercury Record Corporation (hereafter referred to as defendant). The third count prayed an accounting of royalties allegedly earned by the plaintiff and due from the defendant. Attached to the complaint was an agreement by which the defendant agreed to employ the plaintiff and certain musicians under his leadership to make a number of phonograph records for the defendant, a phonograph recording manufacturer and sales organization. The defendant agreed to pay plaintiff a sum certain for each phonograph record performed on and produced, and in addition, to pay plaintiff a royalty for each record sold. It was an exclusive contract for two years which prohibited plaintiff from performing for any other phonograph record producer, and guaranteed that at least 32 records would be produced and released on the market during the term of the agreement.

Subsequent to the execution of the agreement only four records were produced. Plaintiff claims that he performed all his obligations under the agreement and that he held himself ready, willing and able to perform as provided in the contract, but that the defendant breached its obligations to the plaintiff's damages.

The defendant filed an answer. The court, on motion of the defendant (together with other defendants named in Count II), struck Count II of the complaint. The plaintiff filed an amended count, which was also stricken. Count II was then abandoned by plaintiff. The defendant filed an answer on September 17, 1956, to Counts I and III of the complaint. On October 16, 1958, the defendant filed a motion to withdraw its answer and to dismiss the suit on the ground that the court had no jurisdiction of the subject matter of the action, and filed an affidavit by one of the attorneys in support thereof, setting up in substance that the agreement between the parties contained a paragraph to the effect that the "rules, laws and regulations" of the American Federation of Musicians and of the Local in whose jurisdiction the musicians performed were made a part of the agreement; that the bylaws of the American Federation of Musicians in part provided as follows:

"Article 9, Section 1. A member of the Federation shall at all times have the right to sue or make claim through his Local Union or the Federation, as the case may be, any leader, agent, employer or whoever it may be, for any amount, resulting from failure to receive his salary, for violation of contract or agreement, or for any difference in price actually received by him for an engagement and the price established by his Local Union or the Federation for same."

"Article 9, Section 7, paragraph (A), sub-section (1) If any such grievance involves or relates to booking agents, traveling bands, recording, radio or television activities, or any other matter within the sole competence of the Federation pursuant to its Constitution, By-Laws, rules or resolutions, as distinguished from matters within the competence of the locals thereof, it shall be adjudicated and determined only by the International Executive Board of said Federation. . . ."

"Article 9, Section 7, paragraph (B), sub-section (1) The adjudication of grievances before the Board under the provisions of this Section 7 shall be the sole and exclusive remedy for breach of contract by employees (or performers of services), employers (or purchasers of services) and booking agents."

(These are the only sections of the bylaws set out in the record.) The affidavit further states that the plaintiff was a member of, and the defendant was duly licensed by, the American Federation of Musicians.

The court on February 20, 1959, entered an order permitting the defendant to withdraw its answer previously filed and dismissing the cause for want of equity. From that order an appeal was taken to the Supreme Court, which transferred it to this court. At the time of entering the order the trial court rendered a written decision, in which he stated:

"The court has concluded that the specific sections of the By-Laws of the American Federation of Musicians which are set forth in the affidavit appended to defendant's motion to dismiss are valid and binding upon the parties hereto. The written contract between these parties specifically incorporates therein all of these By-Laws. Plaintiff has not exhausted the remedies provided in the By-Laws and he has not attempted to utilize the grievance procedure therein provided. As a result, under the doctrine of exhaustion of remedies which has been long adhered to by the courts of Illinois, plaintiff cannot obtain relief from the court at this time."

[1-3] At common law a general agreement in an executory contract to submit to arbitration any controversy which may arise under it is contrary to public policy and void inasmuch as it is an effort to divest the courts of their jurisdiction. Corbin on Contracts, vol. 6, sec. 1433; 6 C.J.S., Arbitration and Award, sec. 29a; 3 Am. Jur., Arbitration and Award, sec. 31; 3 I.L.P., Arbitration and Award, sec. 3; Cocalis v. Nazlides, 308 Ill. 152, 158, 139 N.E. 95, and cases therein cited. It has further been held that at common law, where the parties have actually submitted an existing controversy to arbitrators selected by them, they still may withdraw the matter from arbitration until an award has been made, and under the Illinois statute dealing with arbitration and awards (ch. 10, Ill. Rev. Stat.), before the passage of the amendment (sec. 3) making the submission irrevocable, the common law rule prevailed. Pickrel v. Doubet, 239 Ill. App. 553.

It is not contended by either party that the instant case came under the terms of the Illinois arbitration statute. It is true that the courts at common law approved the submission of controversies to arbitration to avoid the expense, formalities and delay of litigation; but in spite of such approval the courts would not enforce an agreement to arbitrate even a presently existing controversy, and such agreement was revocable by either of the parties until an award was actually made by the arbitrators. It has been held in this state that a binding agreement relating to future controversies may be made requiring that the determination of some fact be made by arbitrators or appraisers as a condition precedent to the bringing of a suit (Cocalis v. Nazlides, supra), and that rule is stated in 6 C.J.S., Arbitration and Award, sec. 29b to be generally prevailing. The rule is criticized in Corbin on Contracts, vol. 6, sec. 1435. It is also the rule that such a provision must make such arbitration a condition precedent to the right of action either expressly or by clear implication, and that if this is not done, the arbitration provision will be considered as merely a collateral matter which cannot be pleaded in bar to an action on the principal contract. 6 C.J.S., Arbitration and Award, sec. 29b; 3 Am. Jur., Arbitration and Award, sec. 35; Corbin on Contracts, vol. 6, sec. 1436; Niagara Fire Ins. Co. v. Bishop, 154 Ill. 9, 39 N.E. 1102.

It is also the rule that "The courts will not interfere with the internal affairs of an unincorporated association so as to settle disputes between the members, or questions of policy, discipline, or internal government, so long as the government of the society is fairly and honestly administered in conformity with its laws and the law of the land, and no property or civil rights are invaded, and, under such circumstances, the decision of the governing body or established private tribunal of the association is binding and conclusive and not subject to review or collateral attack in the ...

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