Arbitration Clause in E-Mailed Terms and Conditions to Trading Account Agreement Not Sufficient to Bind Parties to Arbitration

On January 30, 2014, the First Department issued a decision in Basis Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 2014 NY Slip Op. 00587, affirming a trial court's refusal to compel arbitration.

In Basis Yield Alpha Fund, the defendant moved to compel arbitration based on a "document entitled 'General Terms and Conditions' that was attached to a November 10, 2006 email" to the plaintiff. However, the attachment was never signed by the plaintiff. The First Department affirmed the trial court's refusal to compel arbitration, explaining:

[The defendant] . . . fails to satisfy the heavy burden of demonstrating that arbitration should be compelled pursuant to CPLR Article 75. As the Court of Appeals has stated, a party will not be compelled to arbitrate absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes. The agreement must be clear, explicit and unequivocal. An arbitration clause in an unsigned agreement may be enforceable but only when it is evident that the parties intended to be bound by the contract.

Here, there is a substantial question as to whether the parties agreed to arbitrate. In support of its motion to compel arbitration, [the defendant] relied on a mandatory arbitration clause set forth in a document entitled "General Terms and Conditions" that was attached to a November 10, 2006 email. [The defendant] claims to have sent the email to [the plaintiff] in connection with the latter's opening of a trading account with [the defendant]. It is, however, undisputed that the document was never signed by anyone from [the plaintiff]. More importantly, the director of [the plaintiff's] managing entity swore in an affidavit that [the plaintiff] never entered into the arbitration agreement [the defendant] proffers.

(Internal quotations and citations omitted).

This decision is a cautionary tale regarding the need to observe formalities in a world of e-mail and Internet communications. There is a substantial body of law regarding the binding effect of e-mail agreements, electronic agreements and the like. Still, when you need to be sure, get a signature.