On November 14, 2022, Justice Knipel of the Kings County Commercial Division issued a decision in Alma Mgt. PTE Ltd v. Shepard Towers LLC, 2022 NY Slip Op. 34036(U), holding that plaintiffs who were relying upon an agreement were bound by the agreement’s arbitration provision, explaining:
Arbitration is favored in New York State as a means of resolving disputes, and courts should interfere as little as possible with agreements to arbitrate. However, by agreeing to arbitrate a party waives in large part many of his or her normal rights under the procedural and substantive law of the State and 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 and, thereby, to surrender the right to resort to the courts, absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes and the agreement must be clear and explicit. Significantly while nonsignatories, like plaintiffs Alma and Swisspath,, are generally not subject to arbitration agreements, the Second Department has held that nonsignatories may be compelled to arbitrate where they knowingly seek to exploit the benefits of an agreement containing an arbitration clause.
Here, the amended complaint alleges that plaintiffs Alma and Swisspath are foreign investors who were scammed by defendant Peyom, an investment and securitization company based in Luxembourg, into providing capital for Peyom and defendants’ own investments in the development of New York and New Jersey properties. The amended complaint alleges that Peyom provided Alma and Swisspath with the Peyom Agreements consisting of the Peyom Credit Facility Agreement, the Subscription Agreement and the Drawdown Prospectus and instructions on how to purchase such securities when it pitched the investment. The amended complaint alleges that on May 19, 2020, Peyom, as the only secured party, filed a UCC Financing Statement reflecting the loan from Plaintiffs as file number 202005198207148 and Plaintiffs have a claim as a third-party beneficiary of the UCC Financing Statement filed by PEYOM. . . .
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[T]he Peyom Credit Facility Agreement and the Subscription Agreement, both of which Peyom admittedly provided to plaintiffs prior to their investment, provide for arbitration in Luxembourg of any dispute regarding the proposed investment; including the validity of the Peyom Agreements. Plaintiffs Alma and Swisspath contend that they are intended third-party beneficiaries of the UCC Financing Statement because they were the ones who loaned the capital to Shepard Towers, rather than Peyom. Essentially, plaintiffs challenge the validity and enforceability of the Peyom Agreements, which they claim were the product of defendants’ fraudulent investment scheme. However, before investing, plaintiffs were admittedly provided with copies of the Peyom Agreements, including the clear and unambiguous arbitration provisions therein requiring arbitration in Luxembourg of any disputes regarding their validity. Importantly, although plaintiffs are nonsignatories under the Peyom Agreements, they are explicitly relying upon the terms of those Agreements to support their claims against defendants, and thus, under these circumstances, plaintiffs should be compelled to arbitrate their claims.(Internal quotations and citations omitted).