Opinion
104974/05.
Decided July 13, 2005.
Both of these proceedings were brought to stay arbitrations of a corporate contract dispute demanded by respondent Surpina Limited ("Surpina") at the International Center for Dispute Resolution of the American Arbitration Association. In both proceedings, Surpina cross-moves to compel the arbitration.
The dispositive question here is whether Surpina can compel arbitration where it is not direct party to a contract, either because that contract incorporates by reference an agreement, to which Surpina was a party, that contains a broad arbitration provision, or because the issues are so intertwined with matters that are being arbitrated. The answer is yes.
The contract in question is a merger agreement dated February 15, 1999, among Nokia Holding Inc. ("Nokia"), its wholly owned subsidiary DL Acquisition Corp. ("DL"), Diamond Lane Communications Corporation ("Diamond Lane") and Chester J. Stephens ("Stephens"), as stockholders' agent, pursuant to which DL purchased Diamond Lane. In April 1999, Surpina submitted its Diamond Lane stock for exchange in accordance with the terms specified in the merger agreement. Chase Bank of Texas, N.A., appearing here as JP Morgan Chase Bank, N.A. ("Chase"), the petitioner in proceeding 2, was Nokia's exchange agent. Thereafter, Surpina claimed it was not paid for its stock "in full on a timely basis," and demanded arbitration of its claim for damages pursuant to the merger agreement. Nokia (proceeding 1) and Chase (proceeding 2) now seek to permanently stay the arbitration on the ground that Surpina's claims are not arbitrable. Stephens does not appear to have objected to the arbitration and is not a party to either proceeding before this court.
Proceeding 1 petitioners move to stay the arbitration arguing that since Surpina was not a party to the merger agreement, it cannot evoke that agreement's arbitration provisions. Surpina counters that the Nokia offer to buy Diamond Lane stock which Surpina accepted expressly included the terms of the merger agreement, and at any rate Surpina, as a Diamond Lane stockholder, was a party to the merger agreement because Stephens, as stockholders' agent, was a party. Based on these arguments, Surpina contends that arbitration of its claim against Nokia must be compelled.
While noting the provisions precluding enforceability by third parties (§ 9.9 — no rights or remedies afforded by merger agreement are to be conferred on third parties; § 8.8[b] — losses by third parties are to be determined through litigation, not arbitration), the merger agreement does not stand alone. The real contract on which Surpina relies is the "summary of transactions" for the merger, which sets forth the terms on which Nokia offered to buy back Diamond Lane stock. That offer explicitly annexes and incorporates by reference the merger agreement, and is silent on the subject of arbitration. Surpina accepted the terms of that offer through the transmittal form provided for that purpose, thereby creating a binding contract consisting of the summary of transactions and all the provisions of the merger agreement — including arbitration — not explicitly recanted by the summary of transactions (cf. Peter Scalamandre Sons, Inc. v. Village Dock, Inc., 187 AD2d 496, 497 [2nd Dept 1992], lv den 81 NY2d 710 — contractual provision "validly incorporated by reference" into another agreement is enforceable by and against the parties to that agreement).
The merger agreement, incorporated into the summary of transactions, contains a broad arbitration clause:
"Any controversy or claim arising out of or relating to this Agreement or a breach hereof shall be finally settled by arbitration in New York, New York, under the commercial rules then in effect of the American Arbitration Association and shall be determined in accordance with the laws of the State of New York, applicable to contracts to be wholly performed therein" (§ 9.9[b]).
Under this clause, the arbitration commenced by Surpina is proper.
Although the outcome herein might differ if Nokia were the party trying to enforce the arbitration clause against Surpina (see, e.g., In re Continental Stock Transfer Trust Company v. Sher-Del Transfer Relocation Services, Inc., 298 AD2d 336 [1st Dept 2002]), Nokia cannot show prejudice by being held to a contract crafted by it. While the result may not be what Nokia now wants, it drafted the summary of transactions, the language is clear on its face and it is bound by it (see Application of Von Steen [Musch], 3 Misc 3d 207, 214-215 [Sup Ct, NY Co, Kornreich, J, 2004], citing Matter of Smith Barney Shearson [Sacharow], 91 NY2d 39, 50); the court cannot rewrite the contract.
In proceeding 2, Chase argues that it cannot be compelled to arbitrate because it was not a party to any agreement providing for arbitration of Surpina's claims, and even if it were, those claims are time-barred.
Chase executed two agreements in connection with the merger: an escrow agreement with Nokia and Stephens wherein Chase undertook to be the escrow agent, and the exchange agent agreement with Nokia. Surpina was not a party to either document. According to Chase, Surpina's claims against it are governed by the exchange agent agreement, which unlike the merger agreement, does not contain an arbitration provision.
While noting the validity of this argument concerning the agreement, the court finds that Surpina's claims against Chase must be arbitrated because those claims are inextricably intertwined with Surpina's arbitrable claims against Nokia, as well as with any indemnification claims between Nokia and Chase (see Cicchetti v. Davis Selected Advisors, n.o.r., 2003 WL 22723015, at *3 [SDNY 2003]).
Chase's argument that Surpina's claims are time-barred also does not serve to stay the arbitration.
The contracts at issue here are governed by the Federal Arbitration Act ("FAA") (see Nomura Securities International, Inc. v. CIBC World Markets Corporation, ___ Misc 3d ___, 2005 WL 1173561 at *2 [Sup Ct, NY Co, Beeler, J, 2005], citing Allied-Bruce Terminix Cos. v. Dobson, 513 US 265). Generally, when arbitration is governed by FAA, the arbitrator, not the court, gets to decide statute of limitations issue. "However, in recognition of the FAA policy that private arbitration agreements be enforced according to their terms . . . an exception to this rule exists where parties explicitly agree to leave timeliness issues to the court" ( Matter of Diamond Waterproofing Systems, Inc. [55 Liberty Owners Corp.], 4 NY3d 247, 252-253, citations omitted). "A choice of law provision, which states that New York law shall govern both `the agreement and its enforcement,' adopts as `binding New York's rule that threshold Statute of Limitations questions are for the courts.' . . . In the absence of more critical language concerning enforcement, however, all controversies, including issues of timeliness, are subjects for arbitration" ( Id. at 253, citing Matter of Smith Barney, Harris Upham Co. [Luckie], 85 NY2d 193, 202, rearg den 85 NY2d 1033, cert den 516 US 811).
Here, the choice of law provision states that the agreement "shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the law of the State of New York" (merger agreement, § 9.10[a]). It does not provide that enforcement of the agreement shall be under New York law, hence, "[t]he timeliness of respondent's claims is for determination by the arbitators, not the court" ( In re Merritt Engineering Consultants, P.C. v. 55 Liberty Owners' Corp., ___ AD3d ___, 749 NYS2d 340, 341 [1st Dept 2005]).
Accordingly, in both proceedings petitioners' applications are denied. Surpina's cross-motions are granted to the extent that the petitions are dismissed and the parties are directed to proceed to arbitration.
Accordingly, it is
ORDERED that the motion to stay arbitration in Index No. 104974/05 (Seq. 001) is denied; and it is further
ORDERED that the motion to stay arbitration in Index No. 104975/05 (Seq. 001) is denied; and it is
ORDERED that the motion to compel arbitration in Index No. 104974/05 (Seq. 002) is granted, the parties are directed to proceed to arbitration, and the petition is dismissed; and it is
ORDERED that the motion to compel arbitration in Index No. 104975/05 (seq. 002) is granted, the parties are directed to proceed to arbitration, and the petition is dismissed; and it is further
ORDERED that respondents shall serve notice of entry with a copy of this decision and order upon the County Clerk and the Trial Support Office within thirty days of entry.
This constitutes the decision, order and judgment of the court.