Appellate Court Reverses Denial of Motion to Compel Arbitration

June 30, 2017 -- The Appellate Division, First Department unanimously reversed the lower court's order denying a motion to compel arbitration of a claim by Morrison Cohen client Capital Enterprises Co. against its partner, Alvin Dworman, to enforce the parties' agreement to dissolve the partnership and distribute its assets between the partners.

Enterprises and Dworman are long-time partners in a partnership that owns mixed-use rental properties in Manhattan. Enterprises had moved to compel arbitration of its claim that the partners had agreed to the manner of dissolving the partnership and dividing its assets. The lower court, however, denied Enterprises' motion to compel arbitration, determining that the terms of the agreement and the statute of frauds barred the claim.

The Appellate Division unanimously reversed. Morrison Cohen argued on appeal that the claim was an arbitrable dispute under the parties' broad arbitration agreement that was not barred by either the partnership agreement's terms or the statute of frauds and that, in any event, any decision on the merits, including with regard to defenses, were reserved to the arbitrator. The First Department agreed, reversing the lower court and ruling that “[t]he merits of the claim, such as the potential applicability of the statute of frauds, should be determined by the arbitrator.”

The First Department's decision is an important reminder of New York's policy in favor of enforcing arbitration agreements, and that the resolution of the merits of arbitrable claims must be reserved for the arbitrator. For a copy of the decision, please click here.

The Morrison Cohen team included Y. David Scharf, David A. Piedra, Alvin C. Lin and Thomas B. Gardner.