Opinion
19639-07.
Decided on February 29, 2008.
Morrison Cohen LLP, Meyer, Suozzi, English Klein, P.C., New York, New York, Meyer, Suozzi, English Klein, P.C., Garden City, New York, Counsel for Plaintiff.
Rosenberg Calica Birney, LLP, Garden City, New York, Counsel for Defendants.
Plaintiff, Spectrum Glen Cove Corp., moves, pursuant to CPLR 7503(b), for an order permanently staying an arbitration commenced by the Defendants Legend Yacht Beach Club Homeowners Association, Inc. and the Board of Directors of Legend Yacht Beach Club Homeowners Association, Inc. upon the ground that their claims fall outside the scope of the parties' arbitration agreement.
Defendants cross-move, pursuant to CPLR 3211 (a)(1) and (3) for an order dismissing the complaint and thereby allowing the matter to proceed to arbitration.
BACKGROUND
By demand dated October 12, 2007, Defendant, Legend Yacht Beach Club Homeowners Association, Inc. ("Legend"), has sought arbitration arising out of a settlement agreement it entered into with the Plaintiff, Spectrum Glen Cove Corp. ("Spectrum") the entity which developed and constructed the "Legend Yacht Beach Club" a luxury, waterfront residential community and marina located in Glen Cove, New York (Arbitration Demand, ¶¶ 16-19; Cmplt., ¶¶ 5-8). The settlement agreement is dated September ___, 2005 ( sic).
In sum, Legend asserts that Spectrum breached various affirmative warranties set forth in the settlement agreement, pursuant to which Spectrum agreed, inter alia, to perform work on the community's 47-slip marina and docking system and to make certain additional renovations and repairs, as more particularly identified in the settlement agreement were made (Settlement Ag., ¶¶ 4-7, 9, 11-12).
Paragraph 13 of the settlement agreement contains an arbitration clause which provides, in part, that, "[a]ll disputes relating to Spectrum's warranties as provided in this Agreement shall be resolved by resort to binding arbitration in the manner set forth herein"(Settlement Ag., ¶ 13).
In response to Legend's arbitration demand and, by order to show cause dated November 1, 2007, Spectrum has moved for an order, pursuant to CPLR 7503(b), to permanently enjoin the requested arbitration. A temporary restraining order staying the arbitration pending the determination of this motion was granted.
Simultaneous with this motion, Spectrum commenced this action alleging various causes of action predicated on the theories that: (1) the claims advanced are not covered by any express warranties and are not arbitrable; (2) certain claims were released as part of the settlement (Cmplt., ¶¶ 20, 27, 32); and (3) the arbitration demand violates provisions of the settlement agreement which precludes Legend from initiating any action, litigation or claim unless based on obligations actually arising out of the settlement agreement itself (Settlement Ag., ¶¶ 16, 19, 20, 32).
Legend opposes Spectrum's application and moves for an order dismissing the complaint pursuant to CPLR 3211 (a)(1) and (3). In so doing, it seeks to pursue the arbitration ir has noticed.
DISCUSSION
The Court of Appeals has "repeatedly recognized New York's long and strong public policy favoring arbitration." Stark v. Molod Spitz DeSantis Stark, P.C. , 9 NY3d 59 , 65 (2007); and Matter of Smith Barney Shearson v. Sacharow, 91 NY2d 39, 49 (1997). See also, State v. Philip Morris Inc. , 30 AD3d 26 , 30 (1st Dept.), affd, 8 NY3d 574, 581 (2007); and Nationwide Gen. Ins. Co. v. Investors Ins. Co. of America, 37 NY2d 91, 96 (1975).
Accordingly, "New York courts interfere as little as possible with the freedom of consenting parties to submit disputes to arbitration." ( Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 NY2d 88, 93; and Matter of Siegel v. Lewis, 40 NY2d 687, 689. See, Stark v. Molod Spitz DeSantis Stark, supra) and "[a]ny doubts as to whether an issue is arbitrable will be resolved in favor of arbitration." State v. Philip Morris Inc., supra at 31.
Arbitration is favored where "the arbitration provision occurs in a settlement agreement, * * * [since] it is the nature of a settlement to eliminate unpredictable litigation." State v. Philip Morris Inc., supra at 581. However, whether a controversy is properly subject to arbitration is initially one for the courts to determine. Smith Barney Shearson Inc. v. Sacharow, supra at 45-46; Matter of Primex Intl. Corp. v. Wal-Mart Stores, 89 NY2d 594, 598 (1997); and Nationwide Gen. Ins. Co. v. Investors Ins. Co. of America, supra at 95.
On the other hand, and while strongly favored, arbitration will not be required absent evidence establishing that the parties agreed to arbitrate their disputes. Waldron v. Goddess, 61 NY2d 181, 183 (1984). See, Thomas Crimmins Contracting Co., Inc. v. City of New York, 74 NY2d 166, 171 (1989); In re Miller, 40 AD3d 861, 862 (2nd Dept.); and Riverside Capital Advisors, Inc. v. Winchester Global Trust Co. Ltd. , 21 AD3d 887 , 888 (2nd Dept.).
Once it is determined that the parties have agreed to arbitrate the subject matter in dispute, the court's role has ended and it may "not stay arbitration by deciding on the merits whether or not the claim is tenable." Nationwide Gen. Ins. Co. v. Investors Ins. Co. of America, supra at 96; Rockland County v. Primiano Const. Co., Inc., 51 NY2d 1, 8 (1980); M.H. Kane Const. Corp. v. URS Corp. Group Consultants , 42 AD3d 512 (2nd Dept.); Dazco Heating and Air Conditioning Corp. v. C.B.C., 225 AD2d 578 (2nd Dept.).
In determining whether a particular dispute is encompassed within an arbitration clause, the court must consider whether there is "a reasonable relationship between the subject matter of the dispute and the general subject matter of the underlying contract." Nationwide Gen. Ins. Co. v. Investors Ins. Co. of America, supra at 96; M.H. Kane Const. Corp. v. URS Corp. Group Consultants, supra; and Dazco Heating and Air Conditioning Corp. v. C.B.C., supra.
Significantly, "[o]ne way to encourage the use of the arbitration forum'" is to "prevent parties to such agreements from using the courts as a vehicle to protract litigation * * * [since such] conduct has the effect of frustrating both the initial intent of the parties as well as legislative policy." Nationwide Gen. Ins. Co. v. Investors Ins. Co. of America, supra at 95, quoting from Matter of Weinrott (Carp), 32 NY2d 190, 199 (1973).
Here, Legend has carried its burden of demonstrating that the various claims set forth in its October, 2007 demand are properly subject to arbitration. Put another way, Legend has established that its claims as articulated in its demand "relate" to the express settlement warranties and, therefore, fall within scope of the subject arbitration clause (Settlement Ag., ¶ 13). See, e.g., M.H. Kane Const. Corp. v. URS Corp. Group Consultants, supra at 513; and Cooper v. Bruckner , 21 AD3d 758 , 759 (1st Dept. 2005).
With respect to Legend's "Marina Reconstruction" claims, the applicable settlement language provides that Spectrum warranted that it was in possession of DEC and/or Army Corps of Engineering permits which were needed to perform the reconstruction in accord with the parties' plans and specifications and, more broadly, that it would perform the required marina work in substantial compliance with "any and
all rules," regulations and requirements imposed by any other governmental body have jurisdiction over the work (Settlement Ag., ¶ 4).
Moreover, Spectrum also expansively warranted that the marina work would be constructed in a "competent and workmanlike manner"; that it would be completed and designed in accordance with proper engineering standards and specifications with suitable and appropriate materials; that the work would be performed within "a commercially reasonable time frame"; and, no less broadly, that the marina reconstruction would be "suitable and appropriate" for its "intended purpose" (Settlement Ag., ¶¶ 5, 7).
The Court agrees that the specific claims advanced in Legend's arbitration demand ("first claim for relief") fairly allege that Spectrum failed to comply with or breached the foregoing warranties; namely, that Spectrum has failed to timely perform the marina reconstruction as contemplated by the settlement and annexed plans; that it has not procured the required permits so as to authorize the marina reconstruction as specified by the parties; and that the marina and dock, to date, remain unsafe, unusable and have "fallen into disrepair in that the Marina reconstruction is incomplete, unsuitable, and inappropriate for its intended purpose (Arbitration Demand, ¶¶ 67-73).
Although the demand for damages flowing therefrom is broad it includes repair, replacement, restoration costs as well as diminution in home values (See, Matter of We're Associates Co., 163 AD2d 393, 395 [2nd Dept. 1990]), the Settlement Agreement does not specify or limit the range of damages which may be awarded by the arbitrator upon finding breach of an applicable warranty. See, Silverman v. Benmor Coats, Inc., 61 NY2d 299, 309 (1984); and Gangel v. DeGroot, 41 NY 840, 841 (1977).
Legend's second, third, fourth and fifth claims for relief are similarly subject to arbitration since these "Common Area" claims for relief, state allegations asserting that Spectrum has: (1) failed and/or refused to undertake required common area roadway renovations and/or improperly constructed the roadways; (2) failed perform stated "Drain Retention" renovations, installations and plantings; and (3) failed to perform and/or complete repairs and/or renovations to the Community's well and irrigation systems (Arbitration Demand, ¶¶ 67-82).
Correspondingly, the settlement agreement expansively provides that Spectrum "warrants, represents and agrees that all Common Area Renovations will be performed, constructed and installed in a competent and workmanlike manner"; that the contemplated work will be designed in accordance with proper engineering standards; and that it will be "fit, suitable and appropriate for their respective and intended purposes (Arbitration Demand, ¶¶ 9, 11-12). The so-called electrical conduit claim alleging improper, code-violative, installation of conduit within the common area roadways (Arbitration Demand, ¶¶ 83-85) also relates to, and falls within the scope of, Spectrum's common area warranties.
Further, while formally captioned and denominated as a separate claim for "declaratory relief", Legend's final and "sixth claim for relief" (Arbitration Demand ¶¶ 86-88), is no more than a recapitulation of the preceding five claims, which identifies, merely repeats and summarizes the same substantive claims and then effectively specifies the relief Legend claims it is entitled in connection with each pleaded theory. Silverman v. Benmor Coats, Inc., supra at 309 ("An application for a stay [of arbitration] will not be granted * * * even though the relief sought is broader than the arbitrator can grant, if the fashioning of some relief on the issue sought to be arbitrated remains within the arbitrator's power").
To the extent that the parties dispute whether the claims made were presented or objected to in accord with the contractual time frames imposed by the settlement agreement, these conflicting assertions are properly for the arbitrator to resolve as provided in 913 of the settlement agreement. County of Nassau v. Civil Service Employees Ass'n, Inc., 14 AD3d 509 (2nd Dept. 2005); and Rockland County v. Primiano Const. Co., Inc., supra at 8.
Lastly, since the Court has concluded that the claims advanced by Legend are properly subject to arbitration, Legend's motion to dismiss Spectrum's complaint pursuant to CPLR 3211(a)(1) must be granted.
The theories pleaded by Spectrum rely exclusively upon the opposing, assertion that Legend's claims are not arbitrable which are defeated by the documentary proof submitted by Legend. CPLR 3211(a)(1). See gen'lly, Beal Sav. Bank v. Sommer , 8 NY3d 318 , 324 (2007); and Goldman v. Metropolitan Life Ins. Co. , 5 NY3d 561 , 571 (2005).
The Court does not need to reach Spectrum's remaining contentions based upon its determination herein.
Accordingly, it is,
ORDERED that Plaintiff's motion for an order permanently staying the arbitration
demanded by the Defendants is denied, and it is further,
ORDERED, that the temporary restraining order staying arbitration is hereby vacated. The parties are directed to proceed forthwith to arbitration; and it is further,
ORDERED that Defendants' motion to dismiss the complaint herein is granted without prejudice to prosecution of such claims in the arbitration, as it deems appropriate.
The foregoing constitutes the decision and Order of the Court.