Whether Non-Signatory of Arbitration Provision Bound By it is Question for Court, Not Arbitrator

On November 14, 2019, the First Department issued a decision in Matter of 215-219 W. 28th St. Mazal Owner LLC v. Citiscape Bldrs. Group Inc., 2019 NY Slip Op. 08281, holding that whether a party that did not sign an arbitration agreement was bound by the agreement was a question for the court, not the arbitrator, explaining:

The issue of whether a party is bound by an arbitration provision in an agreement it did not execute is a threshold issue for the court, not the arbitrator, to decide. The case is remanded to the IAS court for an evidentiary hearing and further factual development on whether the non-signatory petitioners were bound to the arbitration clause.

The cases respondent relies upon in opposition do not change the result. Respondent's cases do not involve situations where there was a dispute as to whether the party sought to be bound to arbitrate had signed the agreement containing the arbitration clause.

While respondent makes extensive arguments as to why the non-signatory petitioners were effectively parties to the agreement and thus bound by the arbitration clause, these arguments are not relevant. The IAS court did not come to a definitive ruling as to whether the non-signatory petitioners were bound by the arbitration agreement, and instead denied the petition without prejudice so that it could be decided by the arbitrator. Absent a ruling on the issue, the only question to be addressed by this Court is whether the IAS court properly declined to do so.

(Internal citations omitted).

Commercial litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.