Parties Bound by Agreement to Beth Din Arbitration

On December 11, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Fein v. Berger, 2020 NY Slip Op. 34148(U), holding that litigants were required to arbitrate their dispute before a Beth Din, explaining:

The parties dispute whether arbitration of disputes before the Beth Din is mandatory or merely permissive. The respondents argue that because the word "may" is used, the arbitration provision is permissive only and that they are, therefore, not required to participate in the Beth Din. The argument fails.

The Arbitration Provision in the Realty Agreement clearly states that the parties shall, in good faith, use their reasonable best efforts to resolve any dispute. In the event that such best efforts are unsuccessful after 10 days, either party may submit to final and binding arbitration before Rabbi Eytan Feiner of Congregation Kneseth Israel in Rockaway, New York (the 'Beth Din'), The respondents are correct that this language is permissive. However, it is permissive in that either party may demand the Beth Din without further consent of the other party- i.e., no further agreement is required. Once demanded by either party, arbitration is mandatory. This is in stark contrast to the language set forth in the balance of the provision as it relates to other kinds of arbitration, which indicates that the parties may upon mutual agreement submit to final and binding arbitration before any other recognized alternative dispute resolution company or organization. Stated differently, the provision provides that the parties must first meet and confer as to any dispute, and then either party may demand a Beth Din with Rabbi Feiner, or both parties may agree to an alternative forum for arbitration. Critically, as it relates to this dispute, the parties agreed that once arbitration is demanded or agreed upon, the arbitration is grounds for dismissal of any court action: this paragraph shall be grounds for dismissal of any court action commenced by any party with respect to a dispute arising out of such matters.

For the avoidance of doubt, the Jurisdiction Provision, which provides for venue in Maricopa County, Arizona, is not inconsistent with this result because (i) the Jurisdiction Provision provides for venue in Arizona "EXCEPT AS PROVIDED OTHERWISE IN THIS AGREEMENT" (i.e., in the event of arbitration under the Arbitration Provision set forth in Paragraph 1 0.4), (ii) because, in the absence of a demand for the Beth Din or an agreement to arbitrate with another alternative dispute resolution company, litigation is permitted, and (iii) because the Arbitration Provision, itself, expressly provides that, The provisions of this Section 10.4 with respect to judgment before the Beth Din may be enforced by any court of competent jurisdiction, and the parties seeking enforcement shall be entitled to an award of all costs, fees and expenses, including fees, to be paid by the parties against whom enforcement is ordered.

In other words, whereas the Jurisdiction Provision requires litigation of disputes between the parties to be held in Phoenix, Arizona, the Arbitration Provision carves out an exception with respect to enforcement of the Arbitration Provision itself, permitting that Arbitration Provision to be enforced by any court of competent jurisdiction. Because the petitioners have clearly demanded Beth Din arbitration (and, indisputably, by their letter to Rabbi Feiner dated December 9, 2020), this court finds that they have demonstrated a likelihood of success on the merits as to their entitlement to compel arbitration with respect to all disputes, problems or claims arising out of or in connection with the Realty Agreement and all other agreements or other instruments in connection therewith. For the avoidance of doubt, it is of no moment that the demand for the Beth Din may have occurred after the Arizona Action was filed as this is clearly contemplated by the Realty Agreement.

(Internal quotations and citations omitted).

Commercial litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.