United States: The Commercial Decision Reviews Arbitrations: Three Recent Decisions Clarify Standards For Actions Brought Pursuant To Article 75 Of The CPLR

Several recent decisions by Commercial Division Justices, two of them affirmed by the First Department, have clarified the limitations and standards applied in actions brought pursuant to Article 75 of the CPLR.  Article 75 permits participants in binding arbitration, irrespective of what arbitral forum they are in, to seek assistance from New York State Supreme Court judges under certain circumstances.

First, in Morgan Keenan & Co., Inc. v. Rote, 2014 NY Slip Op 01678 (1st Dep't March 13, 2014), the First Department unanimously affirmed the dismissal by Justice Eileen Bransten of a petition to vacate an arbitration award.  In this case, the petitioner, which brought the petition to vacate under CPLR 7501 and CPLR 7511, lacked personal jurisdiction over the respondents.  The First Department found that the arbitration, which was conducted using the rules of the Financial Industry Regulatory Authority ("FINRA"), set the hearing location in Memphis, Tennessee.  Therefore, even though a few days of the hearing occurred in New York pursuant to a request of the arbitrators for their convenience, that limited contact with New York was insufficient to establish personal jurisdiction.  Further, the petition to vacate the arbitration did not arise out of the fact that respondents travelled to New York to accommodate the arbitrators' request.

Next, in Matter of Colorado Energy Mgt., LLC v. Lea Power Partners, LLC, 2014 Slip Op 01253 (1st Dep't Feb. 20, 2014), the First Department unanimously affirmed the vacatur of an arbitration award to Lea Power Partners, LLC ("LPP") against petitioner Colorado Energy Management, LLC ("CEM") by Justice Charles E. Ramos.  CEM petitioned for vacatur pursuant to CPLR 7511.  In this arbitration, conducted before the American Arbitration Association ("AAA"), CEM moved to dismiss LPP's claim for gross negligence based on nine breaches of the Engineering, Procurement and Construction ("EPC") Agreement between them – CEM argued that absent gross negligence, LPP's claims for damages were barred by the EPC Agreement's terms.  The original arbitrator assigned to the dispute denied CEM's motion to dismiss, finding that the claim for gross negligence, "if proven, could form the basis for the recovery of causally related damages nothwithstanding the limitations on liability and damages in the EPC contract."  The original arbitrator passed away after issuing the decision and before the hearing itself took place.

The successor arbitrator ultimately found that there was no gross negligence.  However, the successor arbitrator went one step further and then found that CEM breached the EPC Agreement and therefore caused cost overruns that were awarded to LPP as damages, even though there was no claim submitted by LPP for breach of contract.  Judge Ramos vacated the award to LPP on the grounds that the successor arbitrator exceeded his authority under the Federal Arbitration Act, and the First Department affirmed, finding "[t]he arbitration demand, the pre-hearing motion practice and [the original arbitrator's] decision make it clear that gross negligence was the only claim by LPP ... therefore, [the successor arbitrator] exceeded his authority by finding that CEM breached the EPC Agreement...."

Finally, in Rice Securities, LLC v. Nevel, Index No. 651054/13, on February 26, 2014, Justice Melvin Schweitzer granted a petition brought pursuant to CPLR 7503(b) and the Federal Arbitration Act to permanently stay arbitration claims pending before FINRA with respect to a non-FINRA member firm.  Petitioner Rice Securities, LLC ("Rice") moved to stay on the basis that the dispute being arbitrated was not subject to FINRA's jurisdiction.  Rice argued there are actually two entities – Rice and Rice Derivative Holdings, L.P. ("RDH") – that do business under the name of Rice Financial Products Company.  Rice is a FINRA member firm, while RDH is not.  According to Rice, the dispute articulated in Nevel's statement of claim before FINRA, which arose out of Nevel's work for Rice Financial Products Company, was unrelated to Rice's business, and only related to RDH's business.  Therefore, the claim was not arbitrable in the FINRA forum.  Respondent Nevel argued that because FINRA's rules permitted him to "request binding arbitration to resolve disputes arising out of their actions associated with a FINRA member," FINRA was the appropriate forum.

Judge Schweitzer found that Nevel's dispute with Rice Financial Products Company arose out of his employment by, and partnership interest in, RDH – the non-FINRA member firm.  Rice was not a signatory to the agreement between Nevel and RDH that was being arbitrated.  Because "to bind a non-signatory to an arbitration agreement under principles of estoppel, the benefits of the agreement to the non-signatory must be direct – that is, flow directly from the agreement," Rice's FINRA member firm status was not sufficient to force RDH to arbitrate within the FINRA forum because Rice had no relationship to the claims Nevel was arbitrating against Rice Financial Products Company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
18 Oct 2018, Other, Los Angeles, United States

The World Wide Web was invented in 1990 by computer scientist Tim Berners-Lee. As of July 2018, out of a total population of 7.7 billion people on earth, 4.1 billion people were active on the Internet and 3.3 billion people were social media users, with China, India and the United States leading the way.

21 Oct 2018, Other, New York, United States

Partner Samantha Hardy will present on a panel titled, "Now You See It, Now You Don't - Keeping Up with California's Ever-Changing Wage and Hour Laws" on Monday, October 22 from 8:30 - 9:30 a.m.

24 Oct 2018, Seminar, Orange, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series. 2018 presents significant developments in California labor and employment laws that will affect the way you run your day-to-day business operations.

Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions