On May 17, 2023, the Second Department issued a decision in EW Studio, Inc. v. AT&T Mobility, LLC, 2023 NY Slip Op. 02646, holding that when an arbitration is dismissed on procedural grounds, a court must decide the dispute, explaining:
The Supreme Court improperly denied those branches of the plaintiffs’ motion which were, in effect, to vacate the stay of the action and restore the action to the calendar. The court incorrectly determined that the plaintiffs were improperly seeking a second chance at litigating this matter in court. The arbitration was discontinued, without prejudice, by the arbitration panel pursuant to Rule 54 of the Commercial Arbitration Rules of the American Arbitration Association. Notably, the arbitration panel found that the plaintiffs’ inability to pay was genuine and that it had been AT & T that had resisted steps that could have substantially lowered the costs of the case. As AT & T declined to exercise its option to advance the plaintiffs’ arbitration costs, the arbitration panel concluded the arbitration under the AAA’s Commercial Arbitration Rules without a decision on the merits of the outstanding claims.
This action was stayed pending the outcome of arbitration of the dispute. The outcome of the arbitration, due to the plaintiffs’ inability to pay and AT & T’s decision to not advance the plaintiffs’ arbitration costs, is that the matter was concluded without a decision on the merits. Accordingly, the stay is lifted on its own terms, and the matter must proceed in court so that the plaintiffs’ claims can be adjudicated. To find otherwise would prejudice the plaintiffs, who would have no further recourse in either arbitration or litigation, and directly contradict the order of discontinuance of the arbitration panel, which noted that it was far better for the case to proceed in court, based on the extensive record the Parties have established.
(Internal quotations and citations omitted).