The parties agreed to arbitrate plaintiff’s action for personal injuries arising from a car accident. Prior to agreeing to arbitrate, defendant’s insurance carrier informed plaintiff’s counsel that the policy bodily injury limits were 100,000/300,000. The arbitration agreement included a high-low provision that would restrict any award to an amount of nothing to $50,000. Thereafter (presumably after realizing that term), plaintiff’s counsel refused to arbitrate claiming that he had been mistaken about the policy’s limitations. Supreme Court refused to compel arbitration.

In reversing, the Second Department reiterated the well-settled rule that arbitration agreements are governed by ordinary contract rules. For plaintiff to vitiate the arbitration agreement based on unilateral mistake would require a showing of fraud or wrongful conduct by the other party. To rescind the agreement would require to demonstrate that ordinary care was used.

Finding neither element in this case, the Second Department mandated arbitration.

The patient of a plastic surgeon posted negative reviews on multiple review sites. The doctor filed suit, alleging a number of claims. The poster moved to dismiss and sought damages under what is commonly called New York’s anti-SLAPP law. Before agreeing, the First Department provided some background to this law:

SLAPP suits—strategic lawsuits against public participation—[ ] are characterized as having little legal merit but are filed nonetheless to burden opponents with legal defense costs and the threat of liability and to discourage those who might wish to speak out in the future (600 W. 115th St. Corp. v Von Gutfeld, 80 NY2d 130, 137 n 1 [1992], cert denied 508 US 910 [1993]). In 1992, as a response to rising concern about the use of civil litigation, primarily defamation suits, to intimidate or silence those who speak out at public meetings against proposed land use development and other activities requiring approval of public boards, New York enacted legislation aimed at broadening the protection of citizens facing litigation arising from their public petition and participation. The New York anti-SLAPP statute initially limited its application to instances where speech was aimed toward “a public applicant or permittee,” i.e. an individual who applied for a permit, zoning change, lease, license, or other similar document from a government body (L 1992, ch 767, § 3). As applied, the statute was “strictly limited to cases initiated by persons or business entities [ ] embroiled in controversies over a public application or permit, usually in a real estate development situation” (Sponsor’s Mem, Bill Jacket, L 2020, ch 250).

In 2020, the legislature amended New York’s anti-SLAPP statute to “broaden the scope of the law and afford greater protections to citizens” beyond suits arising from applications to the government (Mable Assets, LLC v Rachmanov, 192 AD3d 998, 1000 [2d Dept 2021], citing L 2020, ch 250). Among other changes, Civil Rights Law § 76-a was amended to expand the definition of an “action involving public petition and participation” to include claims based upon “any communication in a place open to the public or a public forum in connection with an issue of public interest” (Civil Rights Law § 76-a[1][a][1]). The amended law further provides that “public interest” “shall be construed broadly, and shall mean any subject other than a purely private matter” (Civil Rights Law § 76-a[1][d]). Additionally, Civil Rights Law § 70-a was amended to mandate, rather than merely permit, the recovery of costs and attorneys’ fees upon demonstration “that the action involving public petition and participation was commenced or continued without a substantial basis in fact and law and could not be supported by a substantial argument for extension, modification or reversal of existing law” (Civil Rights Law § 70-a[1][a]).

As outlined by the United States Supreme Court, the petitioner, Robyn Morgan, worked at a Taco Bell franchise owned by respondent Sundance. When applying for a job, Morgan signed an agreement to arbitrate any employment dispute. Despite that agreement, Morgan filed a class action asserting that Sundance had violated federal law regarding overtime payment. Sundance initially defended against the lawsuit as if no arbitration agreement existed, filing a motion to dismiss and engaging in mediation. Some eight months after Morgan filed the lawsuit, Sundance moved to stay the litigation and compel arbitration under the Federal Arbitration Act (FAA). Morgan opposed, arguing that Sundance had waived its right to arbitrate by litigating for so long. “The courts below applied precedent, under which a party waives its right to arbitration if it knew of the right; ‘acted inconsistently with that right’; and ‘prejudiced the other party by its inconsistent actions.’”

The Supreme Court held that the FAA made no provision for prejudice. From the decision’s syllabus—“Section 6 of the FAA provides that any application under the statute—including an application to stay litigation or compel arbitration—“shall be made and heard in the manner provided by law for the making and hearing of motions” (unless the statute says otherwise). A directive to treat arbitration applications ‘in the manner provided by law’ for all other motions is simply a command to apply the usual federal procedural rules, including any rules relating to a motion’s timeliness. Because the usual federal rule of waiver does not include a prejudice requirement, Section 6 instructs that prejudice is not a condition of finding that a party waived its right to stay litigation or compel arbitration under the FAA.” Waiver is the “intentional relinquishment or abandonment of a known right” and in considering that, “the court focuses on the actions of the person who held the right” not the actions of the opposing party. As such, prejudice would be irrelevant. “Stripped of its prejudice requirement, the Eighth Circuit’s current waiver inquiry would focus on Sundance’s conduct. Did Sundance, as the rest of the Eighth Circuit’s test asks, knowingly relinquish the right to arbitrate by acting inconsistently with that right?”

Interestingly, when considering issues concerning arbitration, courts across the country routinely discuss how agreements to arbitrate, and arbitration, are favored. Yet, the court here noted that “federal policy is about treating arbitration contracts like all others, not about fostering arbitration.” In that light, contract or procedural rules are not to be modified for arbitrations.

A New York City Commercial Division judge refused to dismiss a host of claims, including unfair competition, alleged by a potential property buyer against a broker. The court held that the broker’s “longstanding business and personal relationship with FCC’s [buyer] principals, during which FCC provided use of its office space, internet, phones, real estate software to Mr. Schwartz [broker] in exchange for his consultation and brokering of various deals which extended up until 2021. Under these facts, it is clear that a special, continuous fiduciary relationship existed between Mr. Schwartz and FFC at the time the information including the price they were negotiating a contract for about the Property was conveyed to him. Instead of keeping this critically sensitive proprietary information private, Mr. Schwartz breached his fiduciary duty to FFC by giving this information to a competitor and encouraging them to purchase the Property for a few hundred thousand dollars more so that he would get paid a substantial commission.”

This case is a bit unusual in that fiduciary relationships are typically found in a special relationship based at least in part on one party’s superior knowledge and the other party’s reliance. Fiduciary duties are not found in run-of-the-mill relationships, including those concerning brokers (not always as we see here). Based on how this decision was written makes clear that the judge was offended by the broker’s conduct.

Four Five Capital LLC v. Schwartz

Private lender, in a series of loans, loaned an entity-borrower more than $6 million. The entity was comprised of a father, Michael Miller, and his son, Brandon Miller. While Michael borrowed the money, Michael had his secretary forge Brandon’s signature, which she then notarized. Michael died before the loans were repaid. Upon default, the lender sued the entity and Brandon.

Brandon argued, among other things, that he never signed the loan documents and his signatures were forged. Michael, claimed Brandon, was the responsible party. The court rejected that argument and held that the lender “had no obligation to perform due diligence so as to protect Brandon from the possibility that his father, Michael, and his assistant, Ms. Frangipane, were forging his name to certain loan documents and notarizing his signature and could rely on the facially valid documents, which were notarized and confirmed as validly executed by opinions of Defendants’ counsel.”

While the decision is intuitively logical, imagine the impact on business transactions had the court agreed with Brandon and required a lender to undertake due diligence for a notarized signature. The impact would be severe—every transaction would require insurance. Part of a court’s job is to create consistent and reliable outcomes among a discrete set of recurring circumstances so that businesses can rely on traditional practices.

Plaintiff, who lives in China, went into contract to purchase a new condominium and associated parking space in New York. The contract contained no financing contingency. Plaintiff made the required deposit but did not provide funds to close. After the contract was signed, China implemented restrictions on money flows out of China for real estate purchases abroad. Unable to locate alternative funding, plaintiff could not fund the closing. Plaintiff canceled the contract and demanded a return of the $162,000 downpayment, suing when the funds were not returned. In response, defendant moved to dismiss for failure to state a cause of action.

Plaintiff argued that its inability to close due to China’s laws made performance under the contract impossible. Defendant denied that and claimed that the terms of the contract permitted it to keep the downpayment. The court agreed with defendant, finding that plaintiff’s inability to close was not excused as impossible. Impossibility only applied where the subject matter of the contract was destroyed or performance became objectively impossible. More, under the terms of the contract, plaintiff waived any financing contingencies, without exception. Under the terms of the contract, therefore, the downpayment need not be returned.

Wang v. 44th Drive Owner LLC

In a case between Northrop Grumman and the Republic of Venezuela, the courts were faced with the issue of compelling arbitration in a venue other than the one the parties had agreed to. The Fifth Circuit affirmed the lower court’s decision to compel arbitration in a venue other than Venezuela.

As relevant to this discussion, the facts involved an agreement between the parties, entered into before Hugo Chavez came to power, that called for the arbitration of any disputes in Caracas, Venezuela. Some time later, in the face of a dispute and believing that it would not get a fair shake in Venezuela, Northrop Grumman sought to compel arbitration in another location. Finding arbitration in Venezuela to be impractical due to the political situation, the arbitration proceeded in Brazil. There, Northrop Grumman was awarded $128 million.

In granting Northrop Grumman’s motion to enforce that award, the court rejected Venezuela’s argument that venue was improperly changed. Its appeal followed.

Plaintiff Cooper worked for a company (“DST”) which offered a profit sharing plain in which Cooper participated. The plan had two pools of funds, one which included contributions of the employee, which were partially matched by DST, and a profit sharing account (the “PSA”), to which only DST contributed. DST’s employees were automatically enrolled in the PSA and were obligate to keep those funds in the account for so long as they remained employees.

DST hired an advisor, Ruane Cunniff & Goldfarb, to manage the PSA funds, with complete investment discretion, but overseen by DST. The PSA was covered by ERISA regulations which required periodic disclosure of summary descriptions of the employees’ rights thereunder. These descriptions made no mention of arbitration in event of any dispute. DST employees also received investment information and updates about the PSA investments.

All of the employees received a handbook which included that all employment related disputes were to be adjudicated in arbitration. That provision excluded, among other things, ERISA relate claims.

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