Court Grants Motion To Compel Arbitration

In an Opinion, dated May 2, 2023, in Surgical Specialists of Greater N.Y. v. Aetna, Inc., 2023 NY Slip Op 31479(U), Justice Barry R. Ostrager granted defendants’ motion to compel arbitration. The Court explained:

the sole legal issue for the Court to determine on this motion is whether this Court, or the AAA Arbitrator, must determine the issue of arbitrability, including whether SSGNY is a "non-signatory" not bound by the Provider Agreement.

On this motion, Aetna has established that the Provider Agreement incorporates at Section 8.3 the Commercial Rules of the American Arbitration Association ("AAA"). Rule 7 of the AAA Rules specifically delegates the issue of arbitrability to the Arbitrator, stating in relevant part as follows:

(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim, without any need to refer such matters first to a court.

(b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause.

Case law provides that the incorporation of the AAA Rules into an agreement delegates the issue of arbitrability to the arbitrator. See Contec Corp. v Remote Solution, Co., Ltd., 398 F.3d 205 (2d Cir. 2005) (incorporation of AAA Rules delegated arbitrability issue to arbitrator); see also, Skyline Steel, LLC v PilePro LLC, 139 A.D.3d 646, 33 N.Y.S.3d 201 (1st Dep't 2016) ("both the arbitration clause and the JAMS rule incorporated therein confer on the arbitrators the power to resolve arbitrability").

As indicated above, SSGNY vigorously argues that it is a non-signatory to the Provider Agreement and that Dr. Malhotra had no authority to execute the Provider Agreement on behalf of SSGNY. But the Provider Agreement lists SSGNY as the contact person and the billing provider and lists SSGNY's Tax Identification Number as the Tax Identification Number for billing purposes. As such, the parties have a sufficient relationship to each other and to the rights created under the Provider Agreement to allow the dispute to proceed to arbitration. Indeed, under all these circumstances, the Court is constrained to compel arbitration, and the AAA Arbitrators, not this Court, will decide the issue of arbitrability of this dispute. Aetna has a textual basis for its argument that this dispute must be arbitrated. If SSGNY prevails on the arbitrability issue, SSGNY can return to Court.

A party should always be careful about arbitration provisions that incorporate certain rules, as they can often leave to the arbitrator various threshold issues that a party expects to be resolved by a court.

The attorneys at Schlam Stone & Dolan frequently negotiate arbitration provisions, litigate whether cases must be arbitrated, and conduct arbitrations. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.