On March 16, 2022, the Second Department issued a decision in Matter of Northeast & Cent. Contrs., Inc. v. Quanto Capital, LLC, 2022 NY Slip Op. 01791, staying an arbitration because there was no agreement to arbitrate, explaining:
As a general matter, on a motion to compel or stay arbitration, a court must determine, in the first instance whether parties have agreed to submit their disputes to arbitration and, if so, whether the disputes generally come within the scope of their arbitration agreement. The threshold issue of whether there is a valid agreement to arbitrate is for the court and not the arbitrator to determine.
The party seeking a stay of arbitration has the burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay. Thereafter, the burden shifts to the party opposing the stay to rebut the prima facie showing. Where a triable issue of fact is raised, the Supreme Court, not the arbitrator, must determine it in a framed-issue hearing, and the appropriate procedure under such circumstances is to temporarily stay arbitration pending a determination of the issue.
Here, the petitioners raised a threshold issue regarding the validity of the purported agreement to arbitrate, as they contended that they did not sign, and that neither Graves nor AMF had the authority to sign, any contract on their behalf concerning the purported transaction involving the respondents. Thus, this threshold issue was for the Supreme Court, rather than an arbitrator, to determine.
Moreover, the petitioners’ submissions in support of the petition demonstrated, prima facie, that while NCC and AMF entered into a joint venture private trade agreement in December 2017, it was limited in duration to 90 days, and any authority given to Graves by the petitioners was expressly limited to the transaction encompassed by the joint venture private trade agreement. Thus, the petitioners demonstrated that neither Graves nor AMF had authority to act on the petitioners’ behalf with regard to the transaction at issue involving the respondents or to sign the side letter that included the provision to arbitrate, and, in opposition, the respondents failed to raise an issue of fact. Accordingly, the Supreme Court should have granted the petition to permanently stay arbitration.
(Internal quotations and citations omitted).