- within Cannabis & Hemp topic(s)
- with readers working within the Aerospace & Defence industries
A recent decision from Monroe County Commercial Division Justice Daniel J. Doyle in Stuver v Greenlight Parent, L.P. demonstrates that arbitration clauses cannot be used as an automatic "get-out-of-court-free" card at the pre-answer, motion-to-dismiss stage. While arbitration clauses are enforceable contractual tools, courts still have the authority to determine whether a dispute falls within the scope of the arbitration clause and whether the necessary procedural steps have been followed before dismissing a lawsuit or sending the case to an arbitral forum under such clauses.
In Stuver, Plaintiff served as Defendant Greenlight Parent, L.P.'s ("Greenlight") (collectively, the "Parties") Vice President of IT and Software Development until his resignation in January 2024. Between 2022 and 2023, Plaintiff received fully vested profit and equity interests pursuant to Greenlight's Equity Plan (the "Agreement"). In April 2025, Greenlight notified Plaintiff that his equity interests were forfeited for failure to provide 90 days' written notice of resignation. Plaintiff asserted that he resigned for "good reason" due to intolerable working conditions, making the forfeiture improper under the Agreement.
Plaintiff then filed an action for breach of contract, breach of the covenant of good faith and fair dealing, and constructive discharge. Greenlight moved pre-answer, arguing that the case should be dismissed under CPLR 3211(a)(1) and (a)(2), and claiming that the documentary evidence showed the court lacked subject matter jurisdiction because Plaintiff had not first used the dispute-resolution procedures outlined in the Agreement before commencing the lawsuit.
The court began its analysis by reviewing the arbitration clause:
All disputes between or among any persons arising out of or in any way connected with the Plan, this Agreement or the Awarded Interests (including any interpretation of the LP Agreement as it pertains to the Awarded Interests) shall be solely and finally settled by the Board, and any such determination by the Board shall be final. Any matters not covered by the preceding sentence, but that arise under the LP Agreement shall be solely and finally settled in accordance with the LP Agreement, finally, exclusively, and conclusively resolved by mandatory arbitration conducted by a single independent arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA").
The court noted that "[t]he question of whether the parties agreed to arbitrate is generally one for the courts to decide and not for the arbitrators." Upon review of the arbitration provision, the court found that the provision was broad enough to cover Plaintiff's contractual claims, and that the arbitration provision therefore was binding upon the Parties.
However, the court denied Greenlight's motion to dismiss, making clear that arbitration clauses do not operate as automatic barriers for review by the courts. The court explained that an agreement to arbitrate cannot serve as a basis for dismissing a complaint under CPLR 3211(a)(1) (documentary evidence) and (a)(2) (subject matter jurisdiction). Dismissal under CPLR 3211 (a)(5) (arbitration award) is only appropriate when arbitration has already taken place and an award has been issued, which was not the case here. The court also emphasized that an arbitration clause cannot serve as a standalone defense to a lawsuit.
Although the court acknowledged that staying the case could be an appropriate remedy, it declined to do so on the grounds that neither of the Parties moved to compel arbitration, and both Parties had the option to waive their right to arbitrate and continue with the action.
Takeaway
Stuver highlights that while arbitration clauses are valuable contractual tools, an agreement to arbitrate is not a basis to justify dismissal under CPLR 3211(a)(1) and (a)(2). Dismissal under CPLR 3211 (a)(5) is only appropriate once arbitration has been completed and an award issued. Absent a finalized arbitration award, parties cannot treat an agreement to arbitrate as a shortcut to dismiss a case.
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.
