On March 8, 2024, Justice Crane of the New York County Commercial Division issued a decision in Slifka v. Slifka, 2024 NY Slip Op. 30753(U), holding that a lack of standing is not a basis for staying an arbitration, explaining:
Barbara’s principal argument in favor of a stay of arbitration is that Randy lacks standing to bring a derivative proceeding on behalf of Alan’s trust . . . . However, the court does not determine whether standing exists in this matter because lack of standing is not a basis for a motion to stay arbitration pursuant to CPLR 7502 and 7503. Under CPLR 7503(b), a party who has not
participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement was not made or has not been complied with or that the claim sought to be arbitrated is barred by limitation under subdivision (b) of section 7502. Conversely, under CPLR 7502(b), if, at the time that a demand for arbitration was made or a notice of intention to arbitrate was served, the claim sought to be arbitrated would have been barred by limitation of time had it been asserted in a court of the state, a party may assert the limitation as a bar to the arbitration.Therefore, the sections of the CPLR under which Petitioner seeks a stay of arbitration generally limit the bases for a stay to (1) that the parties did not enter into or comply with a valid agreement to arbitrate or (2) that the substantive claims are barred by an applicable statute of limitations. Additionally, while not specifically enumerated in the statute, the court may determine whether public policy precludes arbitration of the subject matter of a particular dispute. Generally, it is for the courts to make an initial determination as to whether the dispute is arbitrable, while leaving the ultimate disposition of the merits to the arbitrators.
Thus, Barbara’s arguments that Randy lacks standing to pursue these derivative claims or that other members of his family previously released the claims are to be determined by the arbitrator, not the court. The cases that Barbara cites in opposing this argument are distinguishable. In Factory Mut. Liab. Ins. Co. of Am. v Comfort (37 AD2d 416 [2d Dept 1971]), respondents served a demand for arbitration related to a car accident under an insurance policy’s uninsured motorist provisions, and the insurance company sought a stay of arbitration. The court stayed the arbitration, finding that the issue of whether the automobile involved in the accident was an uninsured automobile under the insurance policy had to be resolved as a condition precedent to arbitration. This is distinguishable because in Factory Mut., the court had to determine the issue of whether the automobile was uninsured to determine whether the provision of the policy allowing for arbitration applied in the first place. Thus, the issue the trial court had to decide was tied directly to the contours of the agreement to arbitrate, which is a proper area for trial court evaluation under CPLR 7503. Here, on the contrary, no one can plausibly dispute that the parties agreed to arbitrate disputes related to the Property under the Madave Partnership Agreement.
The case Ciao Europa v Silver Autumn Hotel (N.Y.) Corp. (290 AD2d 216 [1st Dept 2002]), that Barbara cites in favor of her argument that Respondents have waived arbitration, is also distinguishable. There, the court found that the lower court had properly granted a defendant’s motion to dismiss where the plaintiff had made two prior attempts to litigate the claim, reflecting a preference clearly inconsistent with its present claim that the parties are obligated to arbitrate such claim. Here, the situation is precisely the opposite. The parties have displayed a prior preference in favor of arbitration by engaging in the first arbitration pursuant to the Madave Partnership Agreement. Similarly, in Sherrill v Grayco Bldrs. (64 NY2d 261 [1985]), the Court of Appeals affirmed an order permanently staying arbitration, finding that the party seeking arbitration had waived their right to arbitrate by previously electing to litigate. Barbara has failed to present any argument that suggests that Respondents have lost their right to arbitrate this dispute by electing to litigate previously.
(Internal quotations and citations omitted).