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Posted: September 15, 2017

Parties Waived Right to Arbitrate By Participating in Litigation

On September 6, 2017, Justice Bransten of the New York County Commercial division issued a decision in Primer Construction Corp. v. Empire City Subway Co., Ltd., 2017 NY Slip Op. 31909(U), holding that the parties to a litigation had waived their right to arbitrate their dispute, explaining:

[T]he governing Interference Agreement contains a binding arbitration provision. The Court will address the issue of the arbitration provision first. The governing Interference Agreement contains a binding arbitration clause, which states that “[a]ny and all disputes arising out of this Agreement or a breach thereof shall be submitted to arbitration in accordance with Section U.” The Interference Agreement also contains a binding written modification clause, which states that the agreement “shall not be modified or rescinded, except by a writing signed by a duly authorized representative of both parties.” Defendants did not address the Arbitration Clause in its Answer or motion to dismiss. In addition, both parties have orally expressed their willingness to waive the right to arbitration.

Like contract rights generally, a right to arbitration may be modified, waived or abandoned. When a plaintiff chooses to take the course of litigation, the party has waived the right to submit the question to arbitration. Where the defendant’s participation in the lawsuit manifests an affirmative acceptance of the judicial forum, his actions are then inconsistent with a later claim that only the arbitral forum is satisfactory. Although there is a written modification provision at issue, a party to a written agreement may orally waive enforcement of one of its terms despite a provision to the contrary. Therefore, an oral waiver of the arbitration clause is enforceable.

Plaintiff has waived the right to arbitration by choosing to litigate the dispute in this Court. Defendants have waived the right to arbitration by participating in the instant litigation. Since both parties have mutually waived the right to arbitration, this Court has proper subject matter jurisdiction to hear the claims in this matter.

(Internal quotations and citations omitted).

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