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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 19, 2021

Broadly-Worded Arbitration Provision Leaves Decision on Whether a Claim is Arbitrable to the Arbitrators

On June 4, 2021, Justice Ostrager of the New York County Commercial Division issued a decision in Ashland Global Holdings, Inc. v. Speedway LLC, 2021 NY Slip Op. 31899(U), holding that a broadly-worded arbitration provision leaves the decision on whether a claim is arbitrable to the arbitrators, explaining:

In light of the above facts and recent developments, the threshold issue on this motion is whether this Court, or the Arbitration Panel, should determine the issue of the arbitrability of the parties’ dispute. Speedway urges that the Arbitrators should determine the issue based on the briefing they received and argument held in the Arbitration that Speedway insists it properly commenced pursuant to the Sublease. Ashland urges that this Court must first determine whether the Sublease or the Master Agreement controls because, if the Master Agreement controls, the parties are not required to arbitrate their dispute. Should this Court proceed to determine which agreement controls, the Court would need to determine, among other things, which parties are bound to which agreement and the effect of the Master Agreement on Speedway as a nonsignatory. Ashland argues a fuller record is needed before such a determination can be made.

Pursuant to both Delaware and New York law, arbitrability is an issue for the court to decide unless it is delegated to the arbitrators, such as when the arbitration clause broadly states that any claim or controversy arising out of or relating to the parties’ agreement is subject to arbitration.

The arbitration clause in this case is extremely broad. As indicated above, the arbitration requirement is set forth in the 11-page Appendix B to the ATCA, which solely addresses the dispute resolution procedures and which the parties agree is incorporated into the Sublease in relevant part. Section 1 expressly provides that the arbitration provision applies not only to disputes related to the Agreement, but also to disputes relating to the commercial, economic, or other relationship of the parties, stating that:

Except as otherwise expressly set forth in the Agreement, all controversies, claims or disputes that arise out of or relate to the Agreement or the construction, interpretation, performance, breach, termination, enforceability or validity of the Agreement, or the commercial, economic or other relationship of the parties thereto, whether such claim is based on rights, privileges or interests recognized by or based upon statute, contract, tort, common law or otherwise and whether such claim existed prior to or arises on or after the date of the Agreement (a “Dispute”) shall be resolved in accordance with the provisions of this Appendix…

Further, Section 7G)(v) of Appendix B expressly empowers the arbitrators to grant the following relief: “interpretation, including declaratory interpretation, of the provisions of the Agreement,” which would include interpreting the provisions in the Agreement governing the purchase and conveyance of the Sites and declaring whether the Sublease or the Master Agreement governs the parties’ dispute. Based on this very broad grant of power to the arbitrators, this Court finds that the issue of which agreement – the Sublease or the Master Agreement – governs the parties’ dispute as to the 24 Sites was delegated to the arbitrators and should be determined in the Arbitration presently pending in Ohio.

(Internal 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.

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