Opinion
18757/08.
Decided July 22, 2011.
The following papers numbered 1 to 6 read on this Order to Show Cause by defendant to compel arbitration and to stay the instant action pursuant to CPLR 7503(a).
Papers Numbered
Order to Show Cause — Affidavits — Exhibits..............1 — 3 Affirmation in Opposition — Exhibits.........................4 — 6 Defendant's Memorandum of Law Defendant's Reply Memorandum of Law Upon the foregoing papers it is ordered that this Order to Show Cause by defendant is decided as follows:This action arises out of an alleged breach of a franchise agreement dated November 10, 2005, whereby plaintiff became a franchisee of the defendant. Pursuant to the agreement, plaintiff was to use its vehicles and drivers to transport defendant's customers, who were crews of major national and international airline carriers. Under the agreement, the franchisee would receive 65% of voucher payments as a service fee.
The complaint herein alleges two causes of action. The first cause of action alleges that defendant breached the franchise agreement by failing to pay plaintiff the 65% service fee. In the second cause of action, plaintiff alleges that defendant breached the franchise agreement by terminating plaintiff, without cause.
Defendant now seeks to compel arbitration pursuant to CPLR 7503(a) and stay the remainder of the action on the ground that the franchise agreement provides for arbitration of all disputes relating to voucher payments. Defendant further asserts that although the second cause of action is not governed by the arbitration clause in the agreement, it should be stayed pending the resolution of the arbitration of the first cause of action since the two claims are inextricably interwoven.
Plaintiff, in opposition, argues that there is no valid agreement to arbitrate inasmuch as it is unreasonably harsh by substantially shortening the statute of limitations. The agreement requires plaintiff to file a claim, in writing, with defendant's Director of Franchise Relations within 60 days after the claim arose. Thereafter, plaintiff must file a claim for arbitration within 180 days of the findings of the Director. Plaintiff maintains that this time period is unreasonably short and unconscionable. Further, plaintiff contends that the arbitration clause is ambiguous on certain material terms.
It is well settled that arbitration is favored by New York Courts, as a matter of public policy. ( TNS Holdings, Inc. v MKI Sec. Corp., 92 NY2d 335, 339.) On a motion to stay or compel arbitration, there are three threshold questions to be resolved by the courts: (i) whether the parties made a valid agreement to arbitrate, (ii) whether such agreement, if made, has been complied with, and (iii) whether the claim sought to be arbitrated would be barred by limitation of time had it been asserted in a court of the State. ( Rockland County v Primiano Constr. Co., 51 NY2d 1, 7; Da Silva v Savo , 35 AD3d 647 , 647; County of Nassau v Civil Serv. Empls. Assn., Inc. , 14 AD3d 509, 509.)
The court's first inquiry here is to determine whether the parties entered into a valid agreement to arbitrate. Paragraph 20 of the franchise agreement provides, in pertinent part, that "[t]he sole and exclusive method of resolving any claim or
controversy whatsoever between the parties herein . . .unless otherwise specified in this agreement . . . shall be binding arbitration. Disputes which shall be subject to binding arbitration shall include but shall not be limited to:(i)the amount of payment for or deduction from Franchisee's or Franchisee's driver's voucher payments. . ." Plaintiff asserts, as noted above, that notwithstanding this clause, the arbitration provision is not valid because of the unreasonable limitation of the time period to seek arbitration.
The court finds that the 60-day time period to submit a claim to the Director of Franchise Relations and subsequent 180-day period to submit the claim to arbitration are not unreasonable. Indeed, other courts have upheld arbitration clauses with a much shorter time period. ( see Lakeland Fire Dist. v East Area General Contrs., Inc. , 16 AD3d 417 [21-days to submit claim to architect]; Matter of Calvin Klein, Inc. v G.P. Winter Assocs., 204 AD2d 149[21 days to refer all claims to project architect].) Further, plaintiff is a sophisticated business that was well aware of the terms of the agreement.
The court further finds that the subject arbitration clause is not ambiguous. Whether a writing, including an arbitration clause, is ambiguous is a question of law to be determined by the court. ( W.W.W. Assoc. v Giancontieri. 77 NY2d 157, 162.) A contract is considered to be ambiguous when the provisions in controversy are reasonably or fairly susceptible to different interpretations or may have two or more different meanings. ( Bana Elec. Corp. v Bethpage Union Free School Dist. , 76 AD3d 987 , 988.) Contrary to plaintiff's argument, the arbitration clause is clear and unambiguous. Indeed, the section clearly sets forth the types of claims which are not governed by the arbitration provision.
Inasmuch as there is a valid agreement to arbitrate, the court finds that the first cause of action of the complaint is clearly subject to arbitration. As noted above, the first cause of action alleges that defendant failed to pay the 65% of the voucher payments to the defendant. Disputes regarding voucher payments are specifically listed in the arbitration clause of the franchise agreement. Thus, the first cause of action of the complaint must be resolved by arbitration.
With respect to the second cause of action, the defendant concedes that it is not governed by the arbitration provision. However, "[w]here arbitrable and non-arbitrable claims are inextricably interwoven, the proper course is to stay judicial proceedings pending completion of the arbitration, particularly where the determination of issues in arbitration may well dispose of non-arbitrable matters." ( Anderson Street Realty Corp. v New Rochelle Revitalization, LLC , 78 AD3d 972 , 975; County Glass Metal Installers, Inc. v Pavarini McGovern, LLC , 65 AD3d 940 , 940; see RAD Ventures Corp. v Gotthilf , 6 AD3d 415 , 416; Cohen v Ark Asset Holdings, Inc., 268 AD2d 285, 286.) Here, both claims relate to a breach of the franchise agreement and are "inextricably interwoven." It is in the interest of judicial economy to stay the second cause of action while the first cause of action is being arbitrated.
Accordingly, this Order to Show Cause by defendant is granted, and the issues set forth in the first cause of action of the complaint shall proceed to arbitration.
The second cause of action of the complaint is stayed pending the outcome of the foregoing arbitration.