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Language in the Arbitration Agreement Supported the Applicability of the New York Law Reserving the Determination of a Statute of Limitations Defense to the Court, Even Though the Controlling Federal Arbitration Act Presumptively Reserves the Determination of a Statute of Limitations Defense to the Arbitrator

The First Department determined that an arbitration agreement which specifically incorporates “the arbitration laws of New York State” incorporates the New York rule that the resolution of a statute of limitations defense is for the court, not the arbitrator, even where the matter is controlled by the Federal Arbitration Act [FAA] (which presumptively reserves resolution of a statute of limitations defense to the arbitrator):

Under the FAA, the “resolution of a statute of limitations defense is presumptively reserved to the arbitrator, not a court” … . “[A]n exception to this rule exists where parties explicitly agree to leave timeliness issues to the court” (Matter of Diamond Waterproofing Sys., Inc. v 55 Liberty Owners Corp., 4 NY3d 247, 253 [2005]). This is in keeping with the FAA policy by which private arbitration agreements are to be enforced according to their terms (id. at 252). Unlike the FAA, New York law “allows a threshold issue of timeliness to be asserted in court” even absent an agreement to do so (…CPLR 7502 [b]; 7503 [a]).

The arbitration clause of the agreement before us provides that “the arbitration laws of New York State” shall govern the parties’ arbitration. In Matter of Smith Barney, Harris Upham & Co. v Luckie (85 NY2d 193 [1995]…), the Court held that a choice of law provision which states that New York law shall govern both “the agreement and its enforcement” incorporated New York’s rule that threshold statute of limitations questions are for the courts (id. at 202). In Diamond Waterproofing, the Court held that an agreement that merely provided that it “shall be governed by the law of [New York]” did not express an intent to have New York law govern enforcement (4 NY3d at 253). The Court reasoned that “[i]n the absence of more critical Language concerning enforcement . . . all controversies, including issues of timeliness, are subjects for arbitration” (id.).

The question arises as to whether the specific incorporation of “the arbitration laws of New York State” in the instant arbitration clause itself constitutes the needed “more critical language concerning enforcement” within the contemplation of Diamond Waterproofing. We hold that it does and, under the agreement, the arbitration laws of New York State include article 75 of the CPLR.  Matter of ROM Reins Mgt Co Inc v Continental Ins Co Inc, 2014 NY Slip Op 01546, 1st Dept 3-11-14

 

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