This was originally posted on the SGR Blog.
But Who Is Bound And Is Dispute Arbitrable?
Many commercial agreements contain what appears to be an unambiguous clause mandating the arbitration of all disputes. But, as a recent case illustrates, a Court nevertheless may be called upon to determine who is bound to arbitrate and what issues are covered by that mandate.
On September 1, 2016, Bromberg & Liebowitz entered into an agreement with Pat O’Brien to purchase her accounting practice. The agreement provided that Pat O’Brien would provide consulting services to the practice during a transition period and that Jennifer O’Brien would work for the practice for at least one year. The agreement contained an arbitration clause. It was signed by B&L and Pat O’Brien and had a signature line for Jennifer O’Brien, but she did not actually sign the agreement.
The conventional legal “gospel” with respect to agreements to arbitrate and arbitration proceedings is that such agreements/proceedings are governed by either the New York Civil Practice Law and Rules (the “CPLR”), on the one hand, or, where subject matter jurisdiction exists therefor, the Federal Arbitration Act (the “FAA”), on the other. To the contrary, however, a recent decision by the First Department is a stark reminder that both the CPLR and the FAA can be “trumped” by the rules of the arbitration forum designated by the parties.
In Matter of Flintlock Construction Services, LLC . v. Weiss, 2014 NY Slip Op 05818 (1st Dept. August 14, 2014), Supreme Court denied a petition to stay respondent’s claim for punitive damages. The petition was based upon the “legal sacrament” of Garrity v. Lyle Stuart, Inc., 40 N.Y. 2d 35, 386 N.Y.S. 2d 831 (1976).
By Victor M. Metsch
There is no summary judgment, no appeal except in the most extreme circumstances, and the normative judgments of one person—the arbitrator—can easily overwhelm the rightness of your client’s case or the legal validity of your arguments.
Your client signed the arbitration agreement. But there may still be a way out under New York substantive law. For those cases not within the scope of the Federal Arbitration Act, here are five ways to avoid arbitration.