Motion To Compel Arbitration Granted, Action Stayed As To Non-Signatory To Agreement to Arbitrate

On July 5, 2024, Justice Margaret A. Chan granted a motion to compel arbitration and elected to stay, rather than dismiss, claims brought by a non-signatory to the arbitration agreement. Berley v. Walter & Samuels, Index No. 653205/2023.

Plaintiff was employed by, and was President of, Walter & Samuels, Inc., a real estate firm where his father was Chairman and majority owner. Plaintiff was terminated shortly after notifying the shareholders that his father had charged the company for approximately $1,200,000 of personal expenses. The termination notice stated that the termination was “for cause”, but did not identify the cause on which it was premised.

Plaintiff brought suit against the company, his father, and Peter Weiss, a minority shareholder who had succeeded plaintiff as President. The complaint alleged that plaintiff’s termination violated whistleblower protections contained in §740 of the New York Labor Law, and that the company had failed to pay him both certain amounts due under his employment agreement in the event of a termination for cause, and additional amounts due him in the event of a termination without cause.

Defendant Weiss moved to dismiss, while the company and plaintiff’s father moved to compel arbitration, citing language by which plaintiff had agreed with them to arbitrate “[a]ny controversy or claim arising out of or relating the [the employment agreement] or the breach thereof.” Slip Op., p. 3 (quoting agreement.)

The Court granted the motion to compel arbitration. “New York courts have defined language that is similar to or the same as that found in the arbitration provision of the Agreement as ‘broad’”, id., p. 4, and plaintiff had failed to show that the legislature intended to exclude claims under Labor §740 from the broad scope afforded arbitration clauses in New York.

The Court stayed the action, rather than granting Weiss’ motion to dismiss. While Weiss was not himself amongst the signatories to the arbitration agreement, he was closely aligned with them and the complaint charged him with substantial complicity in the misconduct of the other defendants. “Given this connection, the motion to dismiss is stayed pending arbitration.” Id., p. 5.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning arbitration, labor law or whistleblower protections.