Will a New York court send this dispute to arbitration, and what does the other side have to do to resist it?
Under CPLR 7503(a), where there is no substantial question whether a valid agreement was made or complied with, and the claim is not barred by limitation under CPLR 7502(b), the court SHALL direct the parties to arbitrate; where such a question is raised, it is tried forthwith, and where the arbitrable issue is already involved in a pending action the application is made by motion in that action and a granted order operates to stay the action so far as it is referable to arbitration. CPLR 7502(b) is the limitation provision that subdivision points at: a party may assert, on an application under § 7503 or § 7511(b), that the claim would have been barred by limitation of time had it been asserted in a court of this state, but failing to assert the bar by such an application does not preclude asserting it before the arbitrators, who may in their sole discretion apply it or not, and except as § 7511(b) provides their exercise of that discretion is not reviewable by a court. But the threshold showing is higher than for ordinary contract terms: the agreement to arbitrate must be clear, explicit and unequivocal and must not depend upon implication or subtlety, and, absent clear language to the contrary, it is not extended to a nonparty (Waldron). Procedure then does most of the work: under CPLR 7503(c) a party served with a demand or notice of intention to arbitrate that specifies the agreement, names and gives the address of the serving party, states the twenty-day warning, and is served in the same manner as a summons or by registered or certified mail with return receipt, must apply to stay arbitration within twenty days after that service or be precluded from objecting that a valid agreement was not made or has not been complied with and from asserting in court the bar of a limitation of time, and any provision in an arbitration agreement or arbitration rules waiving the right to apply for a stay is null and void. Separately, GBL § 399-c(2)(a) forbids a written contract for the sale or purchase of consumer goods to which a consumer is a party to contain a 'mandatory arbitration clause', and § 399-c(2)(b) declares the provisions of such a clause null and void while preserving the enforceability of the rest of the contract, which the section defines as a clause that BOTH requires arbitration before any legal action AND provides that the arbitrator's decision is final as to the consumer and not subject to court review. The defined terms narrow it further: a 'consumer' is a natural person RESIDING IN NEW YORK, and 'consumer goods' are goods, wares, paid merchandise or services purchased or paid for by a consumer for personal, family or household purposes, so the section reaches services as well as goods, but only for a resident natural person buying for household purposes. And § 399-c(2)(a) carries a proviso of its own: nothing in it prohibits a NON-consumer party from putting in the same contract a provision that the arbitrators' decision shall be final, and not subject to court review, in its application to that non-consumer party.
The trap
The twenty-day clock in CPLR 7503(c) is the New York trap: a party who ignores a CONFORMING demand or notice of intention to arbitrate loses the very defence it was saving, no valid agreement, and loses the right to assert the limitations bar IN COURT with it, and the agreement or the arbitration rules cannot take that stay right away. The limitations bar is not extinguished altogether: CPLR 7502(b) says that failing to assert it by such an application does not preclude asserting it before the arbitrators, but they may apply it or not in their SOLE DISCRETION, and except as CPLR 7511(b) provides that choice is not reviewable by a court. A party who sleeps on the twenty days is left with a defence nobody is obliged to honour. The clock starts only on the notice the section describes: one that specifies the agreement, states the twenty-day warning and is served as a summons or by registered or certified mail; a demand by ordinary mail or email without the warning does not start it. Running the clock the other way, notice of the stay application is served the same way (as a summons or by registered or certified mail, return receipt requested, on the adverse party or on his attorney if the attorney's name appears on the demand), and service by mail is timely if the application is posted within the twenty days. Under 7503(b), subject to (c), a party who has not participated in the arbitration and has not made or been served with an application to compel arbitration may apply to stay on the grounds that no valid agreement was made or complied with or that the claim is time-barred. The second trap is the mirror image: because the agreement must be clear, explicit and unequivocal, Waldron refused to let a co-employee who was not a party to an employer's employment contract compel arbitration under it, and held that 'the mere continuation of her employment did not operate to extend the arbitration agreement of the expired employment contract', because 'the threshold for clarity of agreement to arbitrate is greater than with respect to other contractual terms'; the stay was granted and the cross motion to compel denied. The third trap is § 399-c's definition, which is narrower than its heading: a consumer arbitration clause that does not make the award final and unreviewable as to the consumer is not a 'mandatory arbitration clause' within the section; and § 399-c yields to federal law where the Federal Arbitration Act reaches the transaction: in Ayzenberg the Appellate Division, First Department, in a unanimous memorandum decision, held that the purchase of the services there was a transaction 'involving commerce' within the meaning of the FAA and that, to the extent § 399-c might prohibit the arbitration clause, it was preempted by federal law, so for a consumer contract touching interstate commerce the section may buy the consumer nothing. No Court of Appeals decision settling that question was found.
14 authorities
- statuteN.Y. CVP Law § 7503enactment date not established
The words that state the rule
(a) Application to compel arbitration; stay of action. A party aggrieved by the failure of another to arbitrate may apply for an order compelling arbitration. Where there is no substantial question whether a valid agreement was made or complied with, and the claim sought to be arbitrated is not barred by limitation under subdivision (b) of section 7502, the court shall direct the parties to arbitrate. Where any such question is raised, it shall be tried forthwith in said court. If an issue claimed to be arbitrable is involved in an action pending in a court having jurisdiction to hear a motion to compel arbitration, the application shall be made by motion in that action. If the application is granted, the order shall operate to stay a pending or subsequent action, or so much of it as is referable to arbitration.
- statuteN.Y. CVP Law § 7502enactment date not established
The words that state the rule
(b) Limitation of time. If, at the time that a demand for arbitration was made or a notice of intention to arbitrate was served, the claim sought to be arbitrated would have been barred by limitation of time had it been asserted in a court of the state, a party may assert the limitation as a bar to the arbitration on an application to the court as provided in section 7503 or subdivision (b) of section 7511. The failure to assert such bar by such application shall not preclude its assertion before the arbitrators, who may, in their sole discretion, apply or not apply the bar. Except as provided in subdivision (b) of section 7511, such exercise of discretion by the arbitrators shall not be subject to review by a court on an application to confirm, vacate or modify the award.
- statuteN.Y. CVP Law § 7503enactment date not established
The words that state the rule
(c) Notice of intention to arbitrate. A party may serve upon another party a demand for arbitration or a notice of intention to arbitrate, specifying the agreement pursuant to which arbitration is sought and the name and address of the party serving the notice, or of an officer or agent thereof if such party is an association or corporation, and stating that unless the party served applies to stay the arbitration within twenty days after such service he shall thereafter be precluded from objecting that a valid agreement was not made or has not been complied with and from asserting in court the bar of a limitation of time. Such notice or demand shall be served in the same manner as a summons or by registered or certified mail, return receipt requested. An application to stay arbitration must be made by the party served within twenty days after service upon him of the notice or demand, or he shall be so precluded. Notice of such application shall be served in the same manner as a summons or by registered or certified mail, return receipt requested. Service of the application may be made upon the adverse party, or upon his attorney if the attorney's name appears on the demand for arbitration or the notice of intention to arbitrate. Service of the application by mail shall be timely if such application is posted within the prescribed period.
- statuteN.Y. CVP Law § 7503enactment date not established
The words that state the rule
Any provision in an arbitration agreement or arbitration rules which waives the right to apply for a stay of arbitration is hereby declared null and void.
The words that state the rule
It is settled that a party will not be compelled to arbitrate and, thereby, to surrender the right to resort to the courts, absent “evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes.” (Schubtex, Inc. v Allen Snyder, Inc., 49 NY2d 1, 6 ; see, also, Matter of Marlene Inds. Corp. [Carnac Textiles], 45 NY2d 327, 333-334 .) The agreement must be clear, explicit and unequivocal (Matter of Acting Supt. of Schools *184 [United Liverpool Faculty Assn.], 42 NY2d 509, 512 ; Matter of Lehman v Ostrovsky, 264 NY 130, 132 ) and must not depend upon implication or subtlety (Matter of Riverdale Fabrics Corp. [Tillinghast-Stiles Co.], 306 NY 288, 291 ; Matter of Doughboy Inds. [Pantasote Co.], 17 AD2d 216, 220 [Breitel, J.]).
The words that state the rule
Nowhere is the right to compel arbitration extended to a nonparty to the agreement, albeit another employee, and nowhere is a party to the agreement required to submit to the latter’s demand. Absent clear language to the contrary, this arbitration agreement between Waldron and Cross and Brown may not be so “‘extended by construction or implication’” to include an employee not a party to the agreement as Goddess urges.
- statuteN.Y. GBS Law § 399-Cenactment date not established
The words that state the rule
2. a. Prohibition. No written contract for the sale or purchase of consumer goods, entered into on or after the effective date of this section, to which a consumer is a party, shall contain a mandatory arbitration clause. Nothing contained herein shall be construed to prohibit a non-consumer party from incorporating a provision within such contract that such non-consumer party agrees that the decision of the arbitrator or panel of arbitrators shall be final in its application to such non-consumer party and not subject to court review.
- statuteN.Y. GBS Law § 399-Cenactment date not established
The words that state the rule
c. The term "mandatory arbitration clause" shall mean a term or provision contained in a written contract for the sale or purchase of consumer goods which requires the parties to such contract to submit any controversy thereafter arising under such contract to arbitration prior to the commencement of any legal action to enforce the provisions of such contract and which also further provides language to the effect that the decision of the arbitrator or panel of arbitrators in its application to the consumer party shall be final and not subject to court review. d. The term "arbitration" shall mean the use of a decision making forum conducted by an arbitrator or panel of arbitrators within the meaning and subject to the provisions of article seventy-five of the civil practice law and rules.
- statuteN.Y. GBS Law § 399-Cenactment date not established
The words that state the rule
1. Definitions. a. The term "consumer" shall mean a natural person residing in this state. b. The term "consumer goods" shall mean goods, wares, paid merchandise or services purchased or paid for by a consumer, the intended use or benefit of which is intended for the personal, family or household purposes of such consumer.
- statuteN.Y. CVP Law § 7503enactment date not established
The words that state the rule
(b) Application to stay arbitration. Subject to the provisions of subdivision (c), a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement was not made or has not been complied with or that the claim sought to be arbitrated is barred by limitation under subdivision (b) of section 7502.
The words that state the rule
Not only did that contract expire prior to the dispute and no written employment contract was in existence, but also, the mere continuation of her employment did not operate to extend the arbitration agreement of the expired employment contract. Although the conduct of Goddess and Cross and Brown, subsequent to the expiration of the contract, may be construed to imply an agreement to extend some of its provisions, “the threshold for clarity of agreement to arbitrate is greater than with respect to other contractual terms.”
The words that state the rule
There being no clear commitment obligating the parties to compulsory arbitration, the petition to stay arbitration should have been granted and the cross motion to compel the parties to proceed to arbitration denied. Accordingly, the order of the Appellate Division should be reversed, with costs. Chief Judge Cooke and Judges Jones, Wachtler, Meyer and Kaye concur; Judge Simons taking no part. Order reversed, with costs, motion to stay arbitration granted and cross motion to compel arbitration denied.
- statuteN.Y. GBS Law § 399-Cenactment date not established
The words that state the rule
b. Mandatory arbitration clause null and void. The provisions of a mandatory arbitration clause shall be null and void. The inclusion of such clause in a written contract for the sale or purchase of consumer goods shall not serve to impair the enforceability of any other provision of such contract.
- case93 A.D.3d 607Ayzenberg v. Bronx House Emanuel Campus, Inc.N.Y. App. Div.decided 2012read it at the source ↗
The words that state the rule
Contrary to plaintiff’s argument, we find that the sale/ purchase of the services defendant provided constitutes a transaction “involving commerce” within the meaning of the Federal Arbitration Act (see Citizens Bank v Alafabco, Inc., 539 US 52, *608 56 [2003]). Thus, we find that to the extent General Business Law § 399-c may prohibit the subject arbitration clause, it is preempted by federal law.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.