SUPREME COURT OF NEW YORK, NASSAU COUNTY
2009 N.Y. Misc. LEXIS 2639; 241 N.Y.L.J. 70
April 6, 2009, Decided
THE LEXIS PAGINATION OF THIS DOCUMENT IS SUBJECT TO CHANGE PENDING RELEASE OFTHE FINAL PUBLISHED VERSION. THIS OPINION IS UNCORRECTED AND SUBJECT TOREVISION BEFORE PUBLICATION IN THE PRINTED OFFICIAL REPORTS.
COUNSEL: For Plaintiff: Blodnick & Baum, PC.
For Defendant: Kirschenbaum & Kirschenbaum, PC.
JUDGES: Justice William R. LaMarca.
OPINION BY: William R. LaMarca
Defendant, NEW YORK MERCHANTS PROTECTIVE CO. INC., (hereinafter referred toas "NYMP"), moves for an order, pursuant to CPLR Â§ 7503(a), compellingarbitration of the disputes between NYMP and plaintiff, CUSTOM METAL INC.(hereinafter referred to as "CUSTOM METAL") and STEVE PRATT. Counsel forplaintiff opposes the motion, which is determined as follows:
The complaint alleges that NYMP is licensed to install and/or maintain alarmsystems and that CUSTOM METAL is a customer of NYMP since 1990 when it leasedand installed an alarm/security system at its principal place of business.Plaintiff alleges that, over the years, in 1998, 2002 and again in 2008, whenCUSTOM METAL moved to a new location, NYMP would remove the security system andreinstall it at the new location. At the time of its last move, in 2008, acontract for the leased equipment was in place, signed by CUSTOM METAL'sPresident, STEVE PRATT, on January 19, 2003, with an initial term of ten (10)years, automatically renewable for five (5) years and then for successiveperiods of one (1) year, subject to cancellation by written notice of eitherparty thirty (30) days prior to the expiration of any term. The complaintalleges that CUSTOM METAL houses government equipment and costly metal productsand requires a high level of security to conduct business with the governmentand private entities.
In essence, CUSTOM METAL asserts that, in 2008, it experienced numerous andrecurring problems with the security system which NYMP attempted to remedy. Itis alleged that, when a repairmen was sent to repair and update the equipment,the workman required that PRATT sign what was purported to be an authorizationfor the installation and repairs, and that he was not advised that the documentwas actually a new contract, with an increased monthly cost and which boundCUSTOM METAL for a period of ten (10) years. CUSTOM METAL claims that saidcontract, dated August 27, 2008, is the contract in dispute herein, that itcontains unconscionable language, that it was executed under fraudulentpretenses and that it should be declared null and void. The complaint alsocontends that NYMP fraudulently represented that certain features, such as aback up system, were in place, and that CUSTOM METAL later learned that was notthe case when the security of their property was breached and their property wasstolen. No dates are provided as to the alleged theft of property or breach ofsecurity. CUSTOM METAL claims damages for the the complaint falls within thebroad arbitration agreement and that an order compelling arbitration should begranted.
In opposition to the motion, counsel for CUSTOM METAL argues that it isseeking to vitiate the entire contents of the Agreement and the Court should notenforce the arbitration provision of said Agreement which is the product offraud in the inducement and misrepresentations. In reply, counsel for NYMPpoints out that, even if the 2008 contract is deemed to be invalid, the 2003contract is enforceable, which includes an agreement to arbitrate.
The Court of Appeals in Weinrott v. Carp, 32 NY2d 190, 344 NYS2d 848, 298NE2d 42 (C.A 1973), instructs:
...CPLR 7503 (subd.(a)) (sic) states: "A party aggrieved by failureof another to arbitrate may apply for an order compelling arbitration.When there is no substantial question whether a Valid Agreement wasmade or complied with--the court shall direct the parties toarbitrate...
The "valid agreement" referred to concerns a valid agreement toarbitrate
...Since we now hold that an arbitration provision of a contract isseparable, the agreement to arbitrate would be "valid" even if thesubstantive portions of the contract were induced by fraud (citationsomitted).
In Weinrott, the Court of Appeals held that a broad arbitration clause shouldbe given full effect of its wording in order to implement the intention of theparties and, unless the alleged fraud permeated the entire agreement, thearbitration provision should be upheld. Indeed, all of the cases cited byplaintiff for the proposition that the Court must separately examine thesubstantive agreement and the agreement to arbitrate, upheld the arbitrationclause of the agreement and, despite the claims of fraud, sent the matter toarbitration. (See, O'Neil v. Krebs 16 AD3d 144 [2nd Dept. 2005]; RiversideCapital Advisors, Inc. v. Winchester Global Trust Co., 21 AD3d 887 (2nd Dept.2005); Stellamack Air Conditioning & Refrigeration Corp. v. ContractorsManagement Systems of NH, Inc., 293 AD2d 956 (3rd Dept. 2002).
After a careful reading of the submissions herein, it is the judgment of theCourt that NYMP is entitled loss of its property, for the costs of a newsecurity system and for the "negligent" installation of the alarm system byNYMP.
On the instant motion, counsel for NYMP, points out that both the January 19,2003 and the August 27, 2008 Agreements, contain broad arbitration clauses atP18, as follows:
18. LEGAL ACTION...Any action or dispute between the parties,including issues of arbitrability, shall, at the option of eitherparty, be determined by arbitration administered by the NationalArbitration Association under its Commercial Arbitration Rules...
Counsel for NYMP states that the National Arbitration Association (NAA) nolonger exists and has been succeeded, by merger, by Arbitration Services, Inc.,which has jurisdiction over all matters previously referred to the NAA. NYMP hasdemanded arbitration and moving counsel claims that every allegation in to therequested relief enforcing the arbitration provision of the parties contract. Inthe case at bar, the contracts contained a Severability Clause ( Â§ 26) and theCourt finds that fraud does not permeate the whole agreement so as to make thearbitration clause unenforceable. The parties' disputes arose under the subjectcontracts and should be determined by the Arbitrator. It is therefore
ORDERED, that NYMP's motion to compel arbitration is granted and the partiesare directed to proceed to arbitration at Arbitration Services, Inc.; and it isfurther
ORDERED, that the instant action is stayed pending the conclusion ofarbitration on those disputes deemed by the Arbitrator to be referable toarbitration (CPLR Â§ 7503[a]). All further requested relief not specificallygranted is denied.
This constitutes the decision and order of the Court.