On March 28, 2023, Justice Cohen of the New York County Commercial Division issued a decision in FFS Data Corp. v. The Olb Group, Inc., 2023 NY Slip Op. 30968(U), holding that even though an agreement referred to arbitration, it did not require the parties to arbitrate except in limited circumstances, explaining:
Two sections of the APA are central to resolution of OLB’s motion. First, Section 6.9 provides as follows:
6.9 Choice of Law; Venue. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to its choice of law principles. In the event of any legal or equitable action arising under this Agreement, the parties hereto hereby agree that jurisdiction and venue for such action shall lie exclusively within either [sic] the state courts of New York located in New York County, New York. The parties hereby specifically waive any and all objections to venue in such courts, including without limitation any objection based on a claim of inconvenient forum. The parties also agree that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The parties agree to enter into mediation prior to trial in any suit, action, or proceeding arising out of or relating to this agreement. Purchaser and Seller each irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any litigation or proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby. Any and all disputes may be resolved by means of mediation between the parties. Foregoing [sic] this or in the absence of reaching an agreement through mediation, the parties shall agree to binding arbitration with the prevailing party entitled to recovery of all cost including but not limited to attorney fees. Venue shall be New York.Second, Paragraph 6.15 provides:
6.15 Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY OF ANY CLAIMS OF
ANY KIND ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARTIES HERETO ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT AND REPRESENT TO EACH OTHER THAT THESE WAIVERS ARE MADE KNOWINGLY AND VOLUNTARILY AFTER CONSULTATION WITH COUNSEL OF THEIR CHOICE. EACH OF THE PARTIES HERETO AGREES THAT ALL SUCH CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING JURISDICTION WITHOUT A JURY.(APA §6.15) [emphasis added; capitalization in original]).
The threshold question in assessing a motion to compel arbitration is whether there is a valid and binding arbitration agreement, which is a question for the Court to decide. In this case, that threshold question is determinative.
Although arbitration is favored as a matter of public policy, equally important is the policy that seeks to avoid the unintentional waiver of the benefits and safeguards which a court of law may provide in resolving disputes. Indeed, unless the parties have subscribed to an arbitration agreement it would be unfair to infer such a significant waiver on the basis of anything less than a clear indication of intent. Thus, a party will not be compelled to arbitrate absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes. The agreement must be clear, explicit and unequivocal and must not depend upon implication or subtlety. Although this standard is often invoked when assessing whether non-signatories are bound to an otherwise clear arbitration agreement, it is not limited to those instances. Accordingly, where, as here, the parties dispute not the scope of an arbitration clause but whether an obligation to arbitrate exists, the general presumption in favor of arbitration does not apply. in the end, the proponent of arbitration (here, OLB) has the burden of demonstrating that the parties agreed
to arbitrate the dispute at issue.There is no clear, explicit and unequivocal agreement to arbitrate. Dissection of the relevant language of Section 6.9 of the AP A is not for the squeamish. First, it provides that “[i]n the event of any legal or equitable action arising under this Agreement, the parties hereto hereby agree that jurisdiction and venue for such action shall lie exclusively within either [sic] the state courts of New York located in New York County, New York.” Putting aside that the word “either” is not joined by its typical companion “or,” the sentence certainly suggests an intention that “any” action arising under the agreement would be litigated in court. Although it is possible in some cases to read such exclusive jurisdictional language as narrowly applying only to ancillary proceedings in aid of arbitration, to avoid conflicting with an otherwise clear arbitration provision, that is made more difficult here by three succeeding sentences in Section 6.9. Those sentences provide that a “final judgment in any such [state court] action shall be conclusive,” that the parties “agree to enter into mediation prior to trial in any suit, action, or proceeding arising out of or relating to this agreement,” and that the parties waive the right to a jury trial “in connection with any litigation or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.” The most natural reading of those sentences is that they envision a proceeding on the merits of the dispute, rather than simply an ancillary proceeding in aid of arbitration.
It is at this point, however, that Section 6.9 seems to make a U-turn. First, it states the option that “[a]ny and all disputes may be resolved by means of mediation between the parties” (emphasis added). That is followed by the curious sentence upon which OLB’s hopes for arbitration turn: “Foregoing [sic] this or in the absence of reaching an agreement through mediation, the parties shall agree to binding arbitration with the prevailing party entitled to recovery of all cost including but not limited to attorney fees.” OLB’ s efforts to read this sentence (which does not make clear which “this” the parties might be “foregoing/forgoing” or
whether “shall agree to binding arbitration” is an agreement or an agreement to agree), in isolation, as an unequivocal selection of arbitration as the exclusive and mandatory dispute resolution mechanism is unavailing.Sound principles of contract construction require that all terms of an agreement to be read together and harmonized whenever reasonably possible. Here, in addition to the dispute resolution language contained elsewhere in Section 6.9, which points directly to a court proceeding on the merits, there is this clear statement all capital letters in Section 6: 15: “EACH OF THE PARTIES HERETO AGREES THAT [ANY CLAIMS OF ANY KIND ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY] SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING JURISDICTION WITHOUT A JURY.” Although this language is not contained in a “dispute resolution” paragraph per se, it would be difficult to square its express terms with a reading of Section 6.9 that would prohibit bringing an action to a bench trial in New York State court.
Pulling together the various provisions cited above, and seeking to avoid negating any unequivocal contractual language, the Court finds that the most natural and harmonious reading is that the arbitration sentence at the end of Section 6.9 is triggered if, and only if, the parties first elected the option of pursuing mediation in lieu of a court proceeding. Such a procedure would be similar to that set forth in the contractual provision at issue in Ed of Managers of 825 W End Condominium v Grunstein (192 AD3d 500, 500 [1st Dept 2021]), in which the court found there was no binding agreement to arbitrate absent an election by the board of managers to mediate the dispute.
(Internal quotations and citations omitted) (emphasis added).