NONSIGNATORY WHICH RECEIVED A DIRECT BENEFIT FROM AN AGREEMENT WITH AN ARBITRATION PROVISION IS SUBJECT TO ARBITRATION (FIRST DEPT).

The First Department determined defendant, Gordon, was entitled to compel arbitration with an entity which was not a party to the document with the arbitration provision. Plaintiff, BGC Notes, loaned $700,000 to Gordon as part of an employment arrangement with another related entity, BGC Financial. The employment agreement contained the arbitration clause and the note for the loan required resolution of any disputes in the courts. Although BGC Notes was not was not a party to the employment agreement, it was deemed to receive a direct benefit from the employment agreement. Therefore BGC Notes was subject to the arbitration clause in the agreement:

Although BGC Notes was not a signatory to the employment agreement, which is the document actually containing the arbitration provision, BGC Notes nonetheless received a “direct benefit” directly traceable to the employment agreement … . Specifically, section 3(d) of the employment agreement provides that BGC Financial would “cause” BGC Notes to make a loan to Gordon by way of the very note that BGC Notes sues upon in this action, and BGC Notes received all the benefits that an entity ordinarily receives upon the giving of a loan … . Thus, BGC Notes derived benefits from the employment agreement, and BGC Notes’ contention that section 3(d) conferred a benefit only to Gordon, and at most an “indirect” benefit to BGC Notes itself, belies the terms of the employment agreement … . BGC Notes, LLC v Gordon, 2016 NY Slip Op 05775, 1st Dept 8-11-16

ARBITRATION (NONSIGNATORY WHICH RECEIVED A DIRECT BENEFIT FROM AN AGREEMENT WITH AN ARBITRATION PROVISION IS SUBJECT TO ARBITRATION)/CONTRACT LAW (ARBITRATION, NONSIGNATORY WHICH RECEIVED A DIRECT BENEFIT FROM AN AGREEMENT WITH AN ARBITRATION PROVISION IS SUBJECT TO ARBITRATION)