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Posted: March 16, 2017

Attorney Release in Agreement Insufficient to Bind Attorney to Agreement’s Arbitration Clause

On March 2, 2017, the First Department issued a decision in Matter of Kramer Levin Naftalis & Frankel LLP v. Cornell, 2017 NY Slip Op. 01643, holding that an attorney release in a separation agreement was insufficient to bind that attorney to the agreement’s arbitration clause, explaining:

Respondents failed to demonstrate that the parties agreed to arbitrate the subject dispute. The potential future benefit, if any, flowing to petitioners from the attorney release in the separation agreement containing the arbitration clause is too attenuated to justify an exception to the usual rule that nonsignatories cannot be compelled to arbitrate. There is no evidence that petitioners knowingly exploited the benefits of the agreement. The allegations against petitioners show, if anything, that they may have exploited the contractual relation of the parties, but not the agreement itself.

Nor is there evidence to support respondents’ contention that petitioners used the signatories as their agents to obtain the attorney release. Moreover, while an agent may bind its nonsignatory principal to an arbitration agreement where the nonsignatory seeks to compel arbitration with another signatory, this is not a case in which a nonsignatory seeks to compel arbitration with a signatory.

(Internal quotations and citations omitted).

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