Court Grants Motion To Compel Arbitration

Posted: May 23, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Commercial, Arbitration

Court Grants Motion To Compel Arbitration

On May 5, 2025, Justice Andrew Borrok granted defendants’ motion to compel arbitration in Suncroft Capital, LLC v. Local.House International, Inc., Index No. 659060/2024. The Court explained:

Each of the Hotel Agreements contains a broad arbitration clause requiring that all disputes relating to the Hotel Agreements, except for two narrow exceptions, be submitted to arbitration:

17.2.1 Disputes Subject to Arbitration. Except for (i) those matters subject to resolution by an Expert described in Section 17.1 above, and (ii) any Litigation Claims, the parties shall resolve all disputes that may arise in connection with this Agreement through final and binding arbitration (without appeal or review), which shall be administered by an independent arbitration tribunal comprised of three (3) arbitrators selected in accordance with Section 17.2.2 below (the “Arbitration Tribunal”). The arbitration shall be administered by the American Arbitration Association and the arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except to the extent inconsistent with this Agreement.

(e.g., NYSCEF Doc. No. 13 § 17.2.1). The parties do not dispute that the claims asserted do not involve clause (i) of Section 17.2.1. Previously, the fifth cause of action seeking injunctive relief did however invoke clause (ii).[]

Litigation Claims is defined as follows:

“Litigation Claims”: Any claims solely relating to: (i) preserving or protecting proprietary or confidential information, (ii) emergency or injunctive relief, (iii) the enforcement of the dispute resolution provisions of this Agreement, or (iv) the enforcement of the decision and/or award by any Expert or Arbitrator hereunder.

…

As discussed above, significantly, the Plaintiffs do not allege a breach of the Stipulation or otherwise continue to seek injunctive relief. Thus, it is irrelevant that they have not voluntarily dismissed the fifth cause of action. The Plaintiffs take the view that Suncroft and Auerbach (who are not signatories to the Hotel Agreements) were fraudulently induced to enter those agreements. Having taken that view that they were induced to enter those agreements (but not that they were fraudulent induced to agree to arbitrate), they cannot simply disavow those agreements for the purpose of avoiding arbitration. In other words, they can not have it both ways.

In addition, on the record before the Court, Suncroft and Auerbach (i) failed to object to the Hotel Agreements, (ii) offer no persuasive reason for their inaction, and (iii) knowingly accepted the benefits of the Hotel Agreements (see Deloitte Noraaudit A/S v Deloitte Hasins & Sells, U.S., 9 F3d 1060, 1064 [2d Cir. 1993]). The record thus establishes that Life House’s services were engaged and delivered with the understanding that disputes between the parties as to Life House’s services under the Hotel Agreements would be arbitrated such that the Plaintiffs are bound by the Hotel Agreements’ mandatory arbitration provisions (see Deloitte Noraaudit, 9 F3d 1060; Arrowhead Golf Club, LLC v Bryan Cave, LLP, 59 AD3d 347 [1st Dept 2009]; Glover v Bob’s Discount Furniture, LLC, 621 F Supp 3d 442 [SDNY 2022]). As such, the motion to compel arbitration is granted.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning arbitration.