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WHERE ARBITRABLE AND NONARBITRABLE CLAIMS ARE INTERTWINED, COURT PROCEEDINGS SHOULD BE STAYED PENDING THE ARBITRATION DETERMINATION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that, under the terms of the employment contract, even if the matter involves both arbitrable and nonarbitrable claims, any court procedures should be stayed until the determination of the arbitrable issues:

Paragraph 4(b) of the consulting agreement, which addresses the defendant’s right to terminate the plaintiff’s retention for cause, ends with the following sentence: “Any dispute between the parties shall be resolved first by submitting same for mediation to AAA, and absent a resolution, then by a 3 member panel Arbitration through AAA.” …

The defendant moved pursuant to CPLR 7503(a) to compel arbitration and to stay this action pending completion of the arbitration, invoking the above-quoted arbitration clause. The plaintiff opposed the motion on the grounds, inter alia, that the clause applied only to disputes relating to termination, and not to actions alleging breach of contract. Without conceding that the scope of the arbitration clause was limited to the resolution of disputes involving termination, the defendant argued that the reason the plaintiff was not paid was because it was terminated for cause. The Supreme Court denied the motion, and the defendant appeals. …

“[W]here arbitrable and nonarbitrable claims are inextricably interwoven, the proper course is to stay judicial proceedings pending completion of the arbitration, particularly where the determination of issues in arbitration may well dispose of nonarbitrable matters”… . Even assuming, without deciding, that the only arbitrable dispute is whether the plaintiff was properly terminated for cause, judicial proceedings should be stayed until that issue is resolved, since that determination may also dispose of the plaintiff’s breach of contract cause of action … . Lake Harbor Advisors, LLC v Settlement Servs. Arbitration & Mediation, Inc., 2019 NY Slip Op 06073, Second Dept 8-7-19

 

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