Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: May 17, 2016

Question of Arbitrability is Issue for Court, Not Arbitrator

On April 26, 2016, the First Department issued a decision in Garthon Bus. Inc. v. Stein, 2016 NY Slip Op. 03102, holding that the question of a dispute’s arbitrability should have been decided by the court in the first instance, explaining:

We disagree with the dissent’s position that the London Court of International Arbitration (LCIA) should decide the issue of arbitrability. As the dissent acknowledges, the general rule is that the question of arbitrability is an issue for the courts. The case on which the dissent relies recognizes that it is appropriate for arbitrators to decide the issue of arbitrability where the agreement to arbitrate incorporated the arbitral body’s rules reserving arbitrability to itself. However, the . . . court declined to hold that the arbitrators should decide the issue in that case, since the arbitration agreement there was a narrow one. Because it was narrow, this Court held, the reference to the arbitration rules did not constitute clear and unmistakable evidence that the parties intended to have an arbitrator decide arbitrability.

Here, as discussed above, the Quennington Agreement designated the courts as the sole forum for dispute resolution, and the subsequent agreements, notwithstanding their arbitration clauses, did not nullify that designation. Since that is the case, we cannot state with any degree of certainty that the parties clearly and unmistakably intended for the chosen arbitral body to decide the particular issue presented to us. To hold otherwise would be to completely ignore the existence of the forum selection clause in the Quennington Agreement, which the parties never abrogated. The Court of Appeals recently reaffirmed that the issue of arbitrability is for the arbitrators only where the parties clearly and unmistakably agreed that the arbitrators should decide that issue. . . . .

Moreover, the arbitration clauses, in relation to the forum selection clause contained in the Quennington Agreement, are far narrower, since, as mentioned earlier, they apply to the agreements themselves, whereas the forum selection clause applies to disputes arising not only out of the Quennington Agreement, but also the legal relationship established by the agreement. Of course, if plaintiffs had presented claims that unquestionably and wholly originated after the termination of the Quennington Agreement, the issue of arbitrability would have been for the arbitrators, who most likely would have found that the claims were subject to arbitration. That, however, is not the case.

(Internal quotations and citations omitted) (emphasis added).

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