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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 31, 2018

Litigant Sanctioned for Seeking to Arbitrate Previously-Litigated Claims

On October 9, 2018, Justice Schecter issued a decision inĀ Gladstein v. Keane, 2018 NY Slip Op. 32562(U), sanctioning a litigant for seeking to arbitrate previously-litigated claims, explaining:

It is well settled that the right to arbitration may be modified, waived or abandoned. The question of whether parties waived their right to arbitrate by their litigation-related conduct is for the court to decide. A litigant who fails to seek to arbitrate a claim and, instead, fully litigates a claim on the merits, cannot later change his mind and insist the claim be arbitrated. Once waived, the right to arbitrate cannot be regained. By raising issues related to compliance with the Purchase Agreement-including the amounts, if any, that Gladstein was obligated to pay Keane and the Firm–in this forum as opposed to proceeding with arbitration, Keane waived his right to arbitrate.

Additionally, Keane’s claim that he is entitled to value based on the artwork, which was raised before this court, is precluded by res judicata regardless of how Keane seeks to recast it. Under res judicata, or claim preclusion, a valid final judgment bars future actions between the same parties on the same cause of action. As a general rule, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy. This rule applies not only to claims actually litigated but also to claims that could have been raised in the prior litigation.

It is clear that Keane’s artwork claim arises from the same transactions addressed at trial. Keane tried to attack the amount of the Note based on the artwork and was unable to do so not only because he waited too long but because his defense was decided to be without merit. If Keane wanted to make any affirmative claims related to the Purchase Agreement, he had plenty of time to properly raise them in advance of trial in this action in the forum that he chose to litigate other issues related to amounts Gladstein potentially owed pursuant to the Purchase Agreement. He did not do so. He cannot now litigate or relitigate issues that he either could have properly pursued or were rejected or that would effectively undermine determinations made after trial (namely, that Keane owed $174,000 on the Note and was not entitled to reduce that amount by the value of the, artwork and that Gladstein did not owe Keane any money based on the Purchase Agreement and the Employment Agreement). Thus, even though Keane may not have asserted the precise claim concerning the artwork that he now seeks to arbitrate, that such claim arises from the Purchase Agreement (and, moreover, according to defendants is related to the value of the Note) means that it is barred. To be sure, that Keane was denied leave to amend a related, meritless claim concerning the artwork is of no moment. Even if the denial was purely due to lack of timeliness, res judicata would still apply with equal force.

Consequently, the arbitration is frivolous and plaintiff is awarded reasonable attorneys’ fees incurred in responding to the arbitration demand and in making thisĀ motion.

(Internal quotations and citations omitted).

Part of being a good litigator is thinking of winning arguments other lawyers miss. However, as this decision shows, courts have little patience for lawyers who cross the line from creative to making frivolous arguments. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding whether an argument has crossed the line from creative to sanctionable.

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