Sales Receipt with Broad Arbitration Clause Sufficient to Compel Arbitration

• Posted on: Dec 13 2021

By:  Jeffrey M. Haber

The “policy of [the State of New York is] to encourage arbitration.”¹ For this reason, “[a]ny doubts as to whether an issue is arbitrable will be resolved in favor of arbitration.”² This is especially so where the agreement to arbitrate incorporates rules that explicitly authorize the arbitrator to resolve all disputes, including those concerning “the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought.”³ 

In Schindler v. Cellco Partnership, “[t]he sole issue before [the] Court [was] whether the issue of arbitrability was properly delegated to the arbitrator.”⁴ As discussed below, the Appellate Division, First Department held “that it was.”⁵

Plaintiff commenced the action against Verizon Wireless and its employees after an altercation between Plaintiff, her husband and Venzon’s employees relating to a trade-in of Plaintiff’s iPhone.

Defendant moved to compel arbitration, pursuant to CPLR § 7503(a) and the Federal Arbitration Act, 9 U.S.C. Sec. 1 et. seq., as required under the Verizon Wireless Agreement (the “agreement”) that Plaintiff signed. The motion court granted the motion.

Defendant argued that Plaintiff’s claims fell within the broad arbitration provision in the Agreement, which provided in bold capitalized letters that the parties agreed “to resolve disputes only by arbitration or in small claims court” including “any dispute that in any way relates to or arises out of this agreement, or from any equipment, products and services … including any disputes you have with our employees or agents ….” For claims that exceeded $10,000, the Agreement provided that the American Arbitration Association’s Consumer Arbitration Rules would apply. 

The court noted that “[p]ursuant to the Consumer Arbitration Rules, the arbitrator has the authority to rule on his or her own jurisdiction, including any objections to the existence, scope or validity of the arbitration agreement or the arbitrability of any claim.” Therefore, held the motion court, “[b]y specifically incorporating the AAA rules into the arbitration clause, the parties expressly agreed to submit the issue of arbitrability to the arbitrators.” 

Accordingly, the motion court granted the motion to compel arbitration.

On appeal, the Appellate Division, First Department affirmed. Schindler v. Cellco Partnership, 2021 N.Y. Slip Op. 06931 (1st Dept. Dec. 9, 2021) (here).

The Court found that since Plaintiff “voluntarily accepted the terms of the Verizon Customer Agreement and the arbitration provision contained within it”, she and Verizon “clear[ly] and unmistakabl[y]” intended to incorporate the AAA rules into the Agreement.⁶ As such, it was for the arbitrator to decide the issue of arbitrability.⁷ 

Takeaway

When parties to a contract, like the parties in Schlinder, delegate the question of arbitrability to an arbitrator, the courts will enforce the agreement as written. This “is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.”⁸ Thus, “if a valid agreement exists, and if the agreement delegates the arbitrability issue to an arbitrator, a court [will] not decide the arbitrability issue.”⁹ 

Courts in New York follow the foregoing principles and will not take the issue of arbitrability away from the arbitrator when the parties clearly and unmistakably provide as such.¹⁰ This approach reflects the “overarching principle of law ‘that arbitration is a matter of contract’” and that “courts must rigorously enforce arbitration agreements according to their terms.”¹¹ Thus, where, as in Schlinder, a contract contains a valid delegation to the arbitrator of the power to determine arbitrability, such a clause will be enforced absent a specific challenge to the delegation clause by the party resisting arbitration.¹²  

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

Footnotes

1. Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39 (1997).
2. State of New York v. Philip Morris Inc., 30 A.D.3d 26, 31 (1st Dept. 2006), aff’d, 8 N.Y.3d 574 (2007).
3. Offshore Expl. & Prod., LLC v. Morgan Stanley Private Bank, N.A., 626 F. App’x 303, 305 (2d Cir. 2015). See also Smith Barney, 91 N.Y.2d at 46 (noting that while there is generally a presumption that the issue of arbitrability will be determined by the courts, the arbitrator decides the issue where the parties evince a “clear and unmistakable agreement to arbitrate arbitrability as part of their alternative dispute resolution choice.”).
4. Slip Op. at *1.
5. Id.
6. Id. (citations omitted).
7. Id.
8. Henry Schein, Inc. v Archer & White Sales, Inc., _____ U.S. at _____, 139 S.Ct. 524, 529 (2019).
9. Id. at 530.
10. Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd’s, 66 A.D.3d 495, 495 (1st Dept. 2009).
11. Monarch Consulting, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 26 N.Y.3d 659, 675 (2016) (citation omitted).
12. Id. at 675-76