In Elul Diamonds Co. Ltd. v. Z Kor Diamonds, Inc., Z Kor Diamonds asked a court to confirm an $185,226 arbitration award which had been issued in its favor.

Arbitration awards are usually upheld as long as the arbitrator can offer a "barely colorable justification" for the outcome. Here, Elul Diamonds contested the arbitrator's "jurisdiction" -- or authority -- to entertain the dispute.

Both the New York County Supreme Court and Appellate Division, First Department, found the arbitrator's conclusion the dispute arose from a New York consignment transaction -- and was thus empowered to hear the case -- reasonable.

In any event, Elul lost the ability to object to the arbitrators' authority since it appeared in the case, "advanced substantive legal arguments," and interposed non-jurisdictional claims.

Was Elul stoned?

For a copy of the Appellate Division's decision, please use this link: Elul Diamonds Co. Ltd. v. Z Kor Diamonds, Inc.

Posted by Lucas A. Ferrara, Esq. at 3:25 PM | Permalink | TrackBacks (0) | Comments (3)

In Matter of Progressive Northeastern Ins. Co. v. Scalamandre, Progressive wanted to stop the arbitration of an uninsured motorist claim.

Maria Scalamandre was injured when she was hit by the driver of an uninsured all-terrain vehicle or ATV. When Scalamandre submitted a demand for arbitration seeking uninsured motorist benefits from her insurer, Progressive countered with a lawsuit  claiming that an ATV wasn't an "uninsured motor vehicle."

After the Suffolk County Supreme Court sided with the company's position, Scalamandre appealed to the Appellate Division, Second Department, which found that the policy excluded ATVs from the definition of "motor vehicles."

Had the ATV been a three wheeler, it might have been considered a "motorcycle" entitling Scalamandre to coverage. However, this particular ATV was a four-wheeled vehicle which didn't fit within the law's definition or the policy's coverage parameters.

No pay dirt there.

To download a copy of the Appellate Division's decision, please use this link: Matter of Progressive Northeastern Ins. Co. v. Scalamandre

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (1)

In Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. v. Torino Jewelers, Ltd, a jewelry company retained the law firm of Eiseman, Levine Lehrhaupt, & Kakoyiannis (ELLK) to represent it, as counsel, in a federal lawsuit.

To that end, Torino signed a retainer agreement which provided for an initial payment of $25,000 and monthly payments which were not “anticipated” to exceed a total of $60,000 for the preliminary representation and the preparation and filing of a motion to dismiss a case which had been filed against the jeweler.

The parties’ retainer agreement provided, in pertinent part, as follows:

Should a fee or cost dispute arise between us concerning an amount between $1,000 and $50,000, you may select to resolve the dispute through arbitration proceedings in New York City in accordance with 22 NYCRR 137.

Torino signed the agreement and, on March 22, 2006, the underlying federal court case was dismissed. On that day, ELLK met with the jeweler and agreed that, as of that date, Torino owed ELLK some $49,424.80 in fees. (While Torino asserted that it had instructed the firm to stop all work, ELLK contended to the contrary.)

On March 31, 2006, ELLK faxed Torino an invoice for $60,404.60. The additional $10,979.80 was incurred from March 22 to March 29, 2006, and the charges were itemized in a three-page breakdown which Torino refused to pay. When ELLK filed a lawsuit in the New York County Supreme Court to recover those monies, Torino moved for an order compelling the parties to arbitrate the dispute.

The Supreme Court granted Torino’s motion, finding that arbitration is strongly favored and the parties had agreed to resolve any billing dispute in that manner.

On appeal, the Appellate Division, First Department, was of the opinion that since $60,404.60 was the total in dispute, and that sum exceeded the $50,000 cap contained in the parties’ retainer agreement, arbitration was unavailable.

The AD1, relying on Primavera Labs. v. Avod Prods., 297 AD2d 505, 505 [2002], would not order ELLK to submit to arbitration without evidence of some prior agreement, or an unequivocal intent, to do so. Since no such understanding existed, the AD1 reversed the lower court and remanded the matter to the New York County Supreme Court for further proceedings.

We're guessing this was one gem Torino didn't treasure.

To view a copy of the Appellate Division’s decision, please us this link: Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. v. Torino Jewelers, Ltd 

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To view our related posts on this topic, please use this link: Arbitration

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

While courts usually favor and encourage arbitration -- since it is perceived as a way to expedite the resolution of disputes in a cost-effective manner -- that doesn’t mean arbitration is appropriate in all instances.

In D’Agostino v. Forty-Three East Equities Corp., Peter D’Agostino commenced a Housing Part (HP) proceeding to compel his landlord to repair the building’s roof and to address water damage to his apartment (caused by alleged roof and window defects). The landlord moved to stay or dismiss the HP proceeding, based on an arbitration clause that was contained in a prior settlement agreement reached by the parties.

The New York County Civil Court denied the landlord’s motion to compel arbitration, since enforcement of an arbitration clause in this context would violate public policy. On appeal, the Appellate Term, First Department, concurred.

While arbitration undoubtedly has its virtues, courts continue to play the role of “gatekeeper,” and must decide whether the contested issues are appropriately arbitratable. In this instance, the AT1 concluded that HP disputes are “beyond the reach of an arbitrator’s discretion.”

An HP proceeding is not your typical landlord-tenant case. It's a process which involves both the Housing Part of the Civil Court and the New York City Department of Housing Preservation and Development (HPD). The Housing Part recommends and employs any appropriate legal remedy to enforce housing laws and codes, while HPD investigates building conditions, issues violations, and levies fines and penalties. By compelling the maintenance and preservation of our City’s housing stock, both the impacted tenants and the public-at-large benefit.

The AT1 was of the opinion that if enforcing housing standards were left to an arbitrator -- who is not bound by substantive law -- “critical decisions carrying potentially adverse consequences” would result. While the parties would secure a decision in the matter, the Housing Part of the Civil Court and HPD would lack input and thus be prevented from safeguarding the public interest.

Ultimately, the appellate court found that these kind of cases belonged in a judicial forum.

In an interesting twist, Justice William P. McCooe dissented. McCooe was of the opinion that the public policy favoring arbitration should have been applied and that the majority’s stated rationale for preventing the dispute from proceeding in a manner which the parties had contractually selected lacked precedential support.

Looks like the Appellate Division, First Department, will be arbitrating this one in the near future.

For a copy of the Appellate Term’s decision, please use this link: D’Agostino v. Forty-Three East Equities Corp.

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

For the employees of the Department of Homeless Services (DHS), hot summer days from 2000 to 2003 lead to bitter complaints thanks to a malfunctioning air conditioner.

Once considered an extravagance, air conditioning is now regarded by some as a “fundamental right” rather than a luxury.  That explains the grievance filed by the DHS employees who, upon learning that “similarly placed employees” had been paid for “heat days,” believed they were also entitled to such compensation.

The employees’ gripe was not well received by the City, which challenged an arbitrator’s determination that each claimant receive “heat day” pay for the three-year period in question.

On review, New York County Supreme Court Justice Michael J. Stallman chose to limit the employees’ compensation to those “heat days” that arose in 2000.  According to Justice Stallman, the original outcome was unsupportable because it had not been determined whether the “similarly placed employees” had also been paid for those days in other years.

On appeal, the Appellate Division, First Department, reversed and confirmed the arbitrator’s full award.  While the appellate court acknowledged that payment for these “heat days” would ultimately prove to be an “unjustified windfall regrettably com[ing] out of the public fisc,” such was the price of the City’s failure to competently rebut the claimants’ evidence during the course of the arbitration process.

Once again, it looks like the City’s taxpayers are the ones left reeling from the heat.

For a copy of the Appellate Division's decision Matter of Haynes v. New York City Dept. of Homeless Servs., please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_02273.htm

Posted by Lucas A. Ferrara, Esq. at 3:25 PM | Permalink | TrackBacks (0) | Comments (0)

New York's "Lemon Law" compels car manufacturers to repair or replace vehicles which have warrantied defects during the first 18,000 miles or within the first two years of ownership (whichever first occurs).  If, within those parameters, there have been a "reasonable number of attempts," or the vehicle has been out-of-service for a prolonged period of time, the consumer may request a replacement vehicle or refund of the purchase price.

A consumer satisfies this "reasonable number of attempts" standard if the same defect has been subject to repair "four or more times" and "continues to exist," or if the vehicle has been out of service for a total of thirty or more days (also known as the "days-out-of-service presumption").  In response, the manufacturer may demonstrate that the defect "does not substantially impair" the car's value or that the problem was caused by "abuse, neglect or unauthorized modifications or alterations of the motor vehicle."

In Matter of DaimlerChrysler Corp. v. Spitzer, DaimlerChrysler, General Motors, and Saturn objected to the State's interpretation of the law and argued that a purchaser was required to demonstrate that the defect was not corrected after the fourth repair attempt and that the problem continued up to the time the consumer's case was heard. Luckily, the state's highest court didn't buy that analysis:

We do not read the repair presumption as requiring a consumer to establish that the vehicle defect continued to exist until the trial or hearing date. Rather, the plain language of the provision obligates a consumer to demonstrate that the vehicle was subject to repair at least four times and that the same defective condition remained unresolved after the fourth attempt. Therefore, once a consumer has met the four-repair threshold, the presumption arises regardless of whether the manufacturer later remedies the problem. After four attempts, it is presumed that the manufacturer has been given a reasonable number of opportunities to fix the vehicle. The determination of whether a reasonable number of attempts took place for a consumer to recover does not turn on whether the car was ultimately repaired. If the Legislature intended to condition recovery on such a requirement, it easily could have said so.

Clearly, the manufacturers' interpretation of the law would have crippled consumers by requiring them to keep their cars in a defective state in order to preserve their rights.  Since public safety and the interests of innocent purchasers would have not been served by such a reading of the statute, we applaud the outcome of this case.

For a copy of the Court of Appeals's decision in Matter of DaimlerChrysler Corp. v. Spitzer, please click on the following link: http://www.courts.state.ny.us/reporter/3dseries/2006/2006_09322.htm

For additional information about New York's Lemon Law, please click the following link: http://www.oag.state.ny.us/consumer/cars/newcarlemon.html

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*General Business Law § 198-a

By the way, just in case you were wondering, the Online Etymology Dictionary (OED) suggests that the term "lemon" -- normally associated with a yellowy citrus fruit -- may have derived from British slang (from around 1906) meaning "to pass off a sub-standard article as a good one."

For a link to the OED entry, please click here:  http://www.etymonline.com/index.php?term=lemon

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

There's no need to get bent out of shape over arbitration, at least that's what the Appellate Term, 2nd and 11th Judicial Districts, advised the parties in Thomas v. Bally's Total Fitness Corp.

In this particular case, Mr. Thomas sued Bally's over the terms of his employment agreement. On motion, the Kings County Civil Court dismissed Thomas's case, finding that since the parties' agreement provided that all disputes relating to the contract's enforcement needed to be arbitrated, that requirement was enforceable. The Appellate Term affirmed the outcome on appeal and described arbitration as a "favored" dispute-resolution mechanism, as least as far as New York State law was concerned.

To avoid enforcement of an arbitration provision, the appellate court indicated that a party must meet a very high standard--"procedural and substantive unconscionability"--meaning that a party must show the lack of a meaningful choice together with contract terms which are "unreasonably oppressive." Since those elements weren't demonstrated in this case, the appellate court allowed the dismissal to stand.

Remember: "It's not [just] about lifting weights."

For a copy of the Appellate Term's decision in Thomas v. Bally's Total Fitness Corp., please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_51053.htm

Posted by Jonathan H. Newman, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

When is an option to renew, not an option at all? When the language used by the parties is vague or ambiguous.

Typically, outside of rent regulation, tenants are not entitled to automatic lease renewals, unless the extension has been negotiated in advance and the parties' agreement clearly outlines the delineated terms or a procedure to arrive at the rent calculation has been set by the participants.

While Courts are frequently called upon to "interpret" agreements, they will usually not manufacture terms or conditions which were not previously reserved by the parties. A case in point is 188-90 Eighth Ave. HDFC v. Havana Chelsea Luncheonette, Inc. In that dispute, a judge was asked to decide whether a lease agreement--which had language requiring the parties to execute a new lease "with a new rental amount no less than 30 days prior to the end of the term of this lease"--contained an enforceable "option to renew."

After a nonjury trial, Judge Anil C. Singh, of the Civil Court of the City of New York, concluded that the agreement in question did not obligate the landlord to sign a new lease with the tenant (even at fair-market value). The absence of key language (such as a method for determining or calculating the rental amount) worked to the tenant's detriment. On appeal, the Appellate Term, First Department, concurred, noting as follows:

The clause provided no objective basis for determining the rental amount the parties intended tenants to pay upon renewal and thus constituted a "mere agreement to agree"...Contrary to tenants' contention, the "unamplified language" of the provision did not convey a commitment to be bound by the fair market rental value of the commercial premises...nor did it invite recourse to an objective extrinsic event, condition or standard to determine the rental amount....

Thus, when a landlord and tenant are unable to agree (in advance) what the rental rate will be upon the lease's expiration, then some objective means of arriving at the figure should be negotiated. By way of example, if the parties had provided for a dispute-resolution mechanism (such as binding arbitration) to determine or assess the fair-market rental rate, that kind of language would likely have been given deference. [See, e.g., 166 Mamaroneck Ave. Corp. v. 151 East Post Road Corp., 78 N.Y.2d 88 (1991].

So, when it comes to lease renewals, playing it "fast and loose" could leave you optionless.

For a copy of the Appellate Term's decision in 188-90 Eighth Ave. HDFC v. Havana Chelsea Luncheonette, Inc., please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_50806.htm

Posted by Robert Finkelstein, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (2)

In God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Assoc., LLP, the Church was embroiled in a battle with its architect over the enforceability of an unsigned agreement to arbitrate.

In May 1995, God's Battalion engaged Miele Associates, an architectural firm, to renovate and expand Church facilities. Miele forwarded a "Standard Form of Agreement Between Owner and Architect" to the Church, which did not execute the agreement. Despite this omission, Miele performed pursuant to the agreement and hired a general contractor. When a dispute later arose, the Church sued Miele in Kings County Supreme Court, asserting malpractice and breach of contract. In its pleadings, the Church's alleged that Miele "failed to perform the terms, covenants and conditions of the agreement."

Miele moved to stay the action and compel arbitration, based on the Standard Form Agreement's requirement that "[a]ll claims, disputes and other matters in question arising out of, or relating to, this Agreement or the breach thereof shall be decided by arbitration." In opposition, the Church contended that since the underlying agreement was never signed, "there had been no meeting of the minds regarding arbitration."

The Kings County Supreme Court cast asunder the Church's arguments and directed the parties to proceed to arbitration. The Appellate Division, Second Department, affirmed. On appeal, the state's highest court, the New York State Court of Appeals, again affirmed, noting in pertinent part as follows:

Although the Church did not sign the Miele agreement, it is evident that it intended to be bound by it. The Church has not successfully refuted Miele's claim that, after Miele forwarded the contract, both parties operated under its terms. Most tellingly, the Church's complaint alleges that Miele breached their agreement, thereby acknowledging and relying on the very agreement that contains the arbitration clause it seeks to disclaim. Moreover, the Church does not assert that the arbitration clause would be unenforceable even if the agreement were signed. That being so, it may not pick and choose which provisions suit its purposes, disclaiming part of a contract while alleging breach of the rest. A contract "should be read to give effect to all its provisions"...The lower courts therefore correctly ruled that the case go to arbitration.

Thus, when there is unequivocal proof that the parties intend to be bound by an arbitration agreement, its provisions may be enforced, even in the absence of a signature.

For a copy of the Court' decision in God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Assoc., LLP, please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_02232.htm

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)