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How New York Courts Determine Whether an Arbitration Clause is Enforceable


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1/1/2016
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When your contract has been breached, your first reaction might very well be to bring a lawsuit in State or Federal Court. But that course of action may not be available, particularly if your written contract contains a clause mandating that all disputes be resolved by arbitration. So, you ask, under what circumstances are those clauses enforceable? Well, first, and as a threshold matter, the question as to whether the parties agreed to arbitrate should be decided by a court, not an arbitrator. That said, and while "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit" Merrill Lynch Inv. Managers v. Optibase, Ltd., 337 F.3d 125, 131 (2d Cir.2003) (per curium), the preference for arbitration is so strong that, “under the FAA, ‘any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.’ “ JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 171 (2d Cir.2004) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). So, what are the factors that a court looks to in deciding whether a case must go to arbitration? The longstanding rule in New York is as follows: "In deciding whether any part of an action should be directed to arbitration, [the] Court must determine: (i) whether the parties had an agreement to arbitrate; (ii) the scope of that agreement; (iii) if federal statutory claims are asserted, whether Congress intended those claims to be non-arbitrable; and (iv) if some, but not all, of the claims are subject to arbitration, whether to stay the balance of the proceedings pending arbitration. See JLM Indus., 387 F.3d at 169; Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 75-76 (2d Cir.1998)."



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