Commercial Division Blog

Posted: November 4, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Categories Arbitration Mediation and Other ADR, Commercial

Arbitration Permanently Stayed by Order to Show Cause After JAMS Was Ready to Proceed to the Selection of Arbitrator

In a Decision and Order, dated August 24, 2022, in Allyance Media Grp., Inc. v. Acker Family 2016 Gift Trust (2022 NY Slip Op 32888(U)), Justice Chan of the New York County Commercial Division held that CPLR 7503 did not bar a party whose counsel submitted letters to JAMS from applying for a stay more than twenty days after it received notice of the intention to arbitrate because the letters to JAMS stated its position that JAMS is not empowered to determine the threshold issue of arbitrability and the notice of intention to arbitrate did not include the requisite language of CPLR 7503(c).  The Court explained:

 

Participation

Allyance maintains that it did not participate in the arbitration under the meaning of CPLR 7503. Respondents disagree citing in support Infinity Ins. Co. v Daily Med. Equip. Distribution Ctr., Inc., which held that letter submissions opining as to the inapplicability of arbitration and also submitting a police report and explanation of benefits documents constituted participation in arbitration (39 Misc 3d 582, 587, 964 N.Y.S.2d 401 [Supt Ct, Kings County 2013]). However, Allyance's situation is more akin to Matter of Blamowski (Munson Transp. ) (91 NY2d 190, 690 N.E.2d 1254, 668 N.Y.S.2d 148 [1997]) in which the Court of Appeals found that the submission of six letters over the course of several months did not constitute "participation" where the initial letter stated that there was no obligation to arbitrate and the subsequent letters reiterated this position. The Court considered the final letter which contained citations to case law and determined that the legal arguments in the last letter only maintained the party's position not to participate in arbitration (id at 196).

 

Respondents' reliance on JJF Assocs., LLC v Joyce (59 AD3d 296, 874 N.Y.S.2d 45 [1st Dept 2009) and Flintlock Constr. Servs., LLC. v Weiss (122 AD3d 51, 991 N.Y.S.2d 408 [1st Dept 2014]) is unavailing (NYSCEF # 41 at 8-9). In JJF Assocs., the party seeking a stay in that case had in fact originally compelled arbitration and its participation involved attending a prehearing conference and motion to dismiss, far beyond the involvement of Allyance here (59 AD3d at 297). Likewise in Flintlock, the party seeking the stay had participated for eight months and made a motion to dismiss before the arbitrator (122 AD3d at 56).

 

Timeliness

Allyance's application for a stay is not time-barred. "[T]he validity of the 20-day limitation period depends upon the sufficiency of the notice" and when the "notice of arbitration [does] not contain the requisite language of CPLR 7503 (c)" it cannot be said that one has "been 'served with a notice of intention to arbitrate' within the meaning of CPLR 7511 (b) (2)" (Blamowski, 91 NY2d at 195). Here, respondents admit they did not include the requisite language of CPLR 7503 (c) respecting the preclusive effect of failing to apply to stay arbitration within twenty days (NYSCEF # 42 at 26:19-20). But they argue that such language was not necessary "since we filed through JAMS [by] acceptable JAMS procedure" (id. at 26:20-22). Respondents rely on New Brunswick Theological Seminary v Van Dyke for the idea "that parties to an arbitration agreement may prescribe a method of service different from that set forth in the CPLR.... either-by stipulating the manner in the arbitration clause or, more generally, by adopting the arbitration rules of an arbitration agency" (184 AD3d 176, 179-180, 125 N.Y.S.3d 153 [internal quotation marks and citations omitted], appeal dismissed 36 NY3d 937, 135 N.Y.S.3d 667, 160 N.E.3d 326 [2020], lv denied 36 NY3d 912, 144 N.Y.S.3d 684, 168 N.E.3d 857 [2021]). Respondents are mistaken.

 

Even accepting for arguments sake that service of the notice of intention to arbitrate satisfied the rules and procedures of JAMS, nonetheless that would not make up for the notice's lack of the requisite language of CPLR 7503 (c), and New Brunswick, relied upon by respondents, does not find otherwise.  Respondents fail to identify whether the specific rules of JAMS authorize such an abbreviated notice nor do respondents point to any authority confirming the preclusive effect of such an abbreviated notice. The other cases respondents rely upon do not involve allegations of a party purporting to commence

arbitration with a notice missing the requisite language of CPLR 7503 (c).

 

The attorneys at Schlam Stone & Dolan frequently litigate whether a dispute is subject to arbitration. Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding arbitration.