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First Department Holds That Arbitration Provision in Later-Signed Form U-4 Supersedes Dispute Resolution Provision in Earlier-Signed Employment Agreement

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  • Posted on: Oct 22 2018

In March, this Blog wrote (here) about Hyuncheol Hwang v. Mirae Asset Sec. (USA) Inc., 2018 N.Y. Slip Op. 30368(U) (here). Hwang involved an employment dispute in which Hyuncheol Hwang (“Hwang”) sought to stay the arbitration of his claims on the grounds that his employment agreement with Mirae Asset Securities (USA) Inc. (“Mirae”), a broker-dealer firm registered with FINRA, contained a forum selection clause directing the parties to litigate their disputes under the agreement in a New York court, notwithstanding his later signed Form U-4, which contained a mandatory arbitration provision.

The trial court granted the motion to stay arbitration, finding that the evidence presented “demonstrate[d] that the parties intended to be bound by the forum selection clause in the employment agreement.” The court noted that “Mirae present[ed] no evidence to show that the parties intended the arbitration clause in the U4 to supplant the forum selection clause in the employment agreement.”

On October 2, 2018, the Appellate Division, First Department, “unanimously reversed” the trial court’s decision, holding that because the U-4 Form “encompasses the same employment-related disputes as were addressed in the employment agreement,” the “forum selection clause” in the employment agreement “was effectively extinguished” by the U-4 Form. A copy of the decision can be found here.

In so holding, the Court noted that its decision was governed by state contract law principles, even though federal law and FINRA rules permeated the questions presented on appeal. Slip Op. at *1 (stating, “This dispute is governed by state contract law principles”) (citing Credit Suisse First Boston Corp. v. Pitofsky, 4 N.Y.3d 149, 158 n.2 (2005)). Under New York law, where a “subsequent contract regarding the same matter” exists, it “will supersede the prior contract.” Id. (citing Applied Energetics, Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522, 526 (2d Cir. 2011)).

Though not discussed by the First Department, the courts in New York look to the parties’ intention to determine whether a subsequent agreement involving the same subject matter supersedes their earlier agreement: “where the parties have clearly expressed or manifested their intention that a subsequent agreement supersede or substitute for an old agreement, the subsequent agreement extinguishes the old one and the remedy for any breach thereof is to sue on the superseding agreement.” Northville Indus. Corp. v. Fort Neck Oil Terms. Corp., 100 A.D.2d 865, 867 (2d Dept. 1984), aff’d, 64 N.Y.2d 930 (1985); see also Citigifts, Inc. v. Pechnik, 67 N.Y.2d 774, 775 (1986); Madey v. Carman, 51 A.D.3d 985, 986 (2d Dept. 2008). As the First Department noted, “[t]he determination whether a subsequent agreement is superseding is fact-driven.” Slip Op. at *1 (citing Blumenfeld Dev. Group, Ltd v. Forest City Ratner Cos., LLC, 50 Misc. 3d 1221[A], 2016 N.Y. Slip Op. 50188[U], *6 (Sup. Ct., Nassau County 2016). Thus, courts consider the following factors: (1) whether there is an integration and merger clause that explicitly indicates that the prior provision is superseded; (2) whether the two provisions have the same general purpose or address the same general rights; and (3) whether the two provisions can coexist or work in tandem. Long Side Ventures, LLC v. Adarna Energy Corp., 2014 WL 4746026, at *6 (S.D.N.Y. 2014) (internal quotation marks and citation omitted).

However, “the fact that a subsequent contract contains provisions which are of the same subject matter as those in an earlier agreement is not sufficient to supersede the entire contract; rather, a subsequent agreement supersedes only those terms of the earlier contract that are of the same subject matter.” CreditSights Inc. v. Ciasullo, 2007 WL 943352, at *6 (S.D.N.Y. 2007); see also Globe Food Servs. Corp. v. Consolidated Edison Co. of N.Y., 184 A.D.2d 278, 279 (1st Dept. 1992).


In the original takeaway about Hwang, this Blog said: “Hwang … highlights the point that courts use state-law principles of contract interpretation to decide whether a contractual obligation to arbitrate exists.”  The First Department’s decision reinforces this point.  The First Department’s ruling also highlights the point that where the parties’ intent is clear, courts will enforce it.

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