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DISPUTES INVOLVING COMMERCIAL REAL ESTATE WERE SUFFICIENTLY RELATED TO INTERSTATE COMMERCE TO FALL UNDER THE JURISDICTION OF THE FEDERAL ARBITRATION ACT; PLAINTIFFS’ RESORT TO LITIGATION AND THE RESULTING PREJUDICE TO DEFENDANTS CONSTITUTED A WAIVER OF ARBITRATION.

The Court of Appeals, in a full-fledged opinion by Judge Lippman, determined that the intrafamilial contractual disputes involving commercial real estate fell under the jurisdiction of the Federal Arbitration Act (FAA), but that the plaintiffs, by litigating the disputes in the courts and thereby prejudicing the rights of the defendants, had waived arbitration:

… [T]he Supreme Court has made it abundantly clear that the FAA's reach is expansive. The idea that the intrafamilial nature of the agreements has some bearing on whether the FAA is applicable finds no support in the caselaw. Nor does the fact that these agreements do not themselves evidence the commercial transactions appear to be significant. The ultimate purpose of the agreements was to authorize participation in the business of commercial real estate and that is, in fact, what the entities did. In determining whether the FAA applies, the emphasis is meant to be on whether the particular economic activity at issue affects interstate commerce — and, here, it does.

Nonetheless, plaintiffs have waived their right to arbitrate this dispute. “'[L]ike contract rights generally, a right to arbitration may be modified, waived or abandoned.' Accordingly, a litigant may not compel arbitration when its use of the courts is 'clearly inconsistent with [its] later claim that the parties were obligated to settle their differences by arbitration'” … . While it is true that “[n]ot every foray into the courthouse effects a waiver of the right to arbitrate,” we are satisfied that the totality of plaintiffs' conduct here establishes waiver… .

Generally, when addressing waiver, courts should consider the amount of litigation that has occurred, the length of time between the start of the litigation and the arbitration request, and whether prejudice has been established … . The majority of federal courts have taken the position that waiver cannot be established in the absence of prejudice … .  * * *

Here, … prejudice … [has] been established. After vigorously pursuing their litigation strategy for approximately one year, plaintiffs moved to compel arbitration. Even more telling, the desire for arbitration only arose after Supreme Court made plain its view that plaintiffs' claims were vexatious and largely time-barred. Indeed, plaintiffs had expressly represented to Supreme Court that they did not want to go to arbitration. Plaintiffs' behavior is indicative of blatant forum-shopping and, under these circumstances, prejudice has clearly been established. Therefore, plaintiffs have waived the right to arbitration and the issue of timeliness should be determined by the court … . Cusimano v Schnurr, 2015 NY Slip Op 09232, CtApp 12-16-15

ARBITRATION (DISPUTES RE: COMMERCIAL REAL ESTATE FELL UNDER JURISDICTION OF FEDERAL ARBITRATION ACT)/FEDERAL ARBITRATION ACT (DISPUTES INVOLVING COMMERCIAL REAL ESTATE)/ARBITRATION (WAIVER BY INVOLVEMENT IN LITIGATION AND PREJUDICE TO OPPOSING PARTY)/WAIVER OF ARBITRATION (INVOLVEMENT IN LITIGATION AND PREJUDICE TO OPPOSING PARTY)

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