Garthon Business Inc., et al., Respondents,v.Kirill Ace Stein, et al., Appellants.BriefN.Y.September 12, 2017To be Argued by: PIETER VAN TOL (Time Requested: 30 Minutes) APL-2016-00097 New York County Clerk’s Index No. 653715/14 Court of Appeals of the State of New York GARTHON BUSINESS INC. and CRESTGUARD LIMITED, Plaintiffs-Respondents, – against – KIRILL ACE STEIN and AURDELEY ENTERPRISES LIMITED, Defendants-Appellants. BRIEF FOR PLAINTIFFS-RESPONDENTS PIETER VAN TOL DARYL L. KLEIMAN HOGAN LOVELLS US LLP Attorneys for Plaintiffs-Respondents 875 Third Avenue New York, New York 10022 Tel.: (212) 918-3000 Fax: (212) 918-3100 December 8, 2016 i CORPORATE DISCLOSURE STATEMENT Plaintiff-Respondent Garthon Business Inc. (“Garthon”) is a wholly-owned subsidiary of Caelum SARL. Garthon has one subsidiary, Plaintiff-Respondent Crestguard Limited (“Crestguard”), and Garthon is also affiliated with Quennington Investments Limited (“Quennington”) and Chaussey Holdings Limited (“Chaussey”). Crestguard is Garthon’s wholly-owned subsidiary. Crestguard has one subsidiary, SBS Steel LLP (“SBS Steel”), and Crestguard is also affiliated with Quennington and Chaussey. ii TABLE OF CONTENTS Page(s) PRELIMINARY STATEMENT ............................................................................... 1 QUESTIONS PRESENTED ...................................................................................... 5 STATEMENT OF FACTS ........................................................................................ 7 I. The Agreements at Issue ....................................................................... 7 II. Garthon and Crestguard’s Claims in the Complaint ........................... 13 III. Proceedings Below .............................................................................. 15 IV. English Proceedings Involving Chodiev (Among Others) and Stein ..................................................................................................... 17 Argument.................................................................................................................. 19 I. The Abuse of Discretion Standard of Review Allows for Reversal Only in Cases Involving “Extraordinary Circumstances” .................................................................................... 19 II. The Appellate Division Order Should Be Affirmed ........................... 20 A. The Majority Correctly Applied the Standard for Determining Whether the Arbitrability Issue Was Delegated to the Arbitrator ....................................................... 20 1. As the Majority Properly Concluded, There Is No Clear and Unmistakable Evidence That the Parties Delegated the Decision on the Arbitrability Issues to the Arbitrator .............................................................. 22 2. The Dissent Is Contrary to the Evidence and the Law ................................................................................. 25 3. The Additional Cases Cited by Stein and Aurdeley on This Appeal Are Inapplicable Here ........................... 31 iii B. The Majority Correctly Held That the Claims in This Case Should Be Litigated .......................................................... 32 1. Stein and Aurdeley Cannot Raise the Argument Regarding English Law for This First Time on Appeal ............................................................................. 33 2. New York Courts Apply New York Law to Forum Selection Clauses ............................................................ 35 3. An Application of English Law to the Post-June 30, 2009 Agreements Would Not Warrant Reversal .......................................................................... 38 (a) The Parties Did Not Intend to Make the Arbitration Clauses as Broad as the Forum Selection Clause in the Quennington Agreement ............................................................ 39 (b) Fiona Trust Only Relates to the Scope of the Arbitration Clauses and Does Not Address the Other Grounds for the Majority’s Conclusion ............................................................ 42 4. The Majority Properly Found, as a Matter of New York Law, That the Forum Selection Clause in the Quennington Agreement Applies to All the Claims in This Case .................................................................... 44 (a) There Was No “Clear Manifestation” of the Parties’ Intent to Terminate the Forum Selection Clause in the Quennington Agreement ............................................................ 44 (b) The Integration Clause in Agreement 4 Does Not Negate the Forum Selection Clause in the Quennington Agreement ................................ 51 iv (c) The Releases in Agreement 4 and the Termination Agreement Have No Effect on the Forum Selection Clause in the Quennington Agreement ...................................... 56 (d) Because the Claims in This Case Originated Under the Quennington Agreement and/or Are Inextricably Linked, They Should Be Litigated in Court ................................................. 61 C. Stein’s and Aurdeley’s Public Policy Arguments Are Misplaced .................................................................................. 63 CONCLUSION ........................................................................................................ 66 v TABLE OF AUTHORITIES Page(s) Cases AGR Financial, L.L.C. v. Ready Staffing, Inc., 99 F. Supp. 2d 399 (S.D.N.Y. 2000) .................................................................. 44 American BroadcastingParamount Theatres, Inc. v. American Mfrs. Ins. Co., 48 Misc.2d 397 (Sup. Ct., N.Y. County 1965), aff’d, 24 A.D.2d 851 (1st Dep’t 1965), aff’d, 17 N.Y.2d 849 (1966) ............................................ 50 Anselmo v. Univision Station Grp. Inc., No. 92 CIV. 1471 (RLC), 1993 WL 17173 (S.D.N.Y. Jan. 15, 1993) ................................................................................................................... 47 Bank Julius Baer & Co., Ltd. v. Waxfield Ltd., 424 F.3d 278 (2d Cir. 2005) ................................................................... 52, 53, 55 Basis Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128 (1st Dep’t 2014) ....................................................................... 63 Bingham v. New York City Tr. Auth., 99 N.Y.2d 355 (2003) ................................................................................... 34, 35 Blair & Co. v. Carlos Otto V., 5 A.D.2d 276 (1st Dep’t 1958) ........................................................................... 50 Brennan v. A.G. Becker, Inc., 127 A.D.2d 951 (3d Dep’t 1987) ........................................................................ 62 Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530 (1996) ................................................................................... 36, 37 Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 76 A.D.3d 310 (1st Dep’t 2010), aff’d, 17 N.Y.3d 269 (2011) .......................... 59 vi Contec Corp. v. Remote Solution, Co., 398 F.3d 205 (2d Cir. 2005) ............................................................................... 29 Dovin Const., Inc. v. C. Raimondo & Sons Const. Co., Inc., 29 A.D.3d 364 (1st Dep’t 2006) ......................................................................... 36 Dow Kim v. Dukhon, 89 A.D.3d 470 (1st Dep’t 2011) ......................................................................... 32 Dysal, Inc. v. Hub Props. Trust, 92 A.D.3d 826, 827 (2d Dep’t 2012) ................................................................. 41 Education Resources Inst., Inc. v. Piazza, 17 A.D.3d 513 (2d Dep’t 2005) .................................................................... 35–36 Fili Shipping Co. Ltd. v. Premium Nafta Prods. Ltd., [2007] UKHL 40 (“Fiona Trust”) ...............................................................passim First Options of Chicago, Inc. v Kaplan, 514 U.S. 938 (1995) ................................................................................ 20, 63–64 Gadelkareem v. Blackbook Capital LLC, 46 Misc.3d 149(A), 2015 N.Y. Slip Op. 50265(U) (Sup. Ct., App. Term, 1st Dep’t Mar. 4, 2015) ............................................................. 51, 52 Gambar Enters. v. Kelly Servs., 69 A.D.2d 297 (4th Dep’t 1979) ......................................................................... 36 Gen. Motors Corp. v. Fiat S.p.A., 678 F. Supp. 2d 141 (S.D.N.Y. 2009) .............................................. 29, 30, 31, 55 Gerling Global Reins. Corp. v. Home Ins. Co., 302 A.D.2d 118 (1st Dep’t 2002) ................................................................. 21–22 Getty Props. Corp. v. Getty Petroleum Mktg., Inc., 106 A.D.3d 429 (1st Dep’t 2013) ................................................................. 44, 45 Gibson v. Seabury Transp. Advisor LLC, 91 A.D.3d 465 (1st Dep’t 2012) ......................................................................... 32 vii Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) ............................................................................................ 22 Icdas Celik Enerji Tersance Ve Ulasim Sanayi A.S. v. Travelers Ins. Co., 81 A.D.3d 481 (1st Dep’t 2011) ................................................................... 31–32 Innospec Ltd. v. Ethyl Corp., No. 3:14-cv-158-JAG, 2014 WL 5460413 (E.D. Va. Oct. 27, 2014) ................................................................................................................... 32 In re Am. Express Fin. Advisors Sec. Litig. (AMEX Financial), 672 F.3d 113 (2d Cir. 2011) ............................................................................... 31 JF Capital Advisors, LLC v. Lightstone Group, LLC, 25 N.Y.3d 759 (2015) ......................................................................................... 34 Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd’s, 66 A.D.3d 495 (1st Dep’t 2009), aff’d, 14 N.Y.3d 850 (2010) .............. 27, 28, 29 Martinez v. Bloomberg LP, 740 F.3d 211 (2d Cir. 2014) ............................................................................... 38 Matter of Marlene Indus. Corp. (Carnac Textiles), 45 N.Y.2d 327 (1978) ......................................................................................... 21 Matter of Minkin (Halperin), 279 A.D. 226, 227 (2d Dep’t 1951) ................................................................... 57 Matter of Monarch Consulting Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 26 N.Y.3d 659 (2016) ..................................................................................passim Matter of NYC C.L.A.S.H., Inc. v. New York State Off. of Parks, Recreation & Historic Preserv., 27 N.Y.3d 174 (2016) ......................................................................................... 34 Matter of Primex Int’l Corp. v Wal-Mart Stores, 89 N.Y.2d 594 (1997) ..................................................................................passim viii Matter of Schlaifer v. Sedlow, 51 N.Y.2d 181 (1980) ....................................................................... 55, 56, 57, 58 Matter of Smith Barney Shearson v. Sacharow, 91 N.Y.2d 39 (1997) ........................................................................................... 20 Matter of Waldron (Goddess), 61 N.Y.2d 181 (1984) ................................................................................... 21, 63 Metropolitan Steel Indus. v. Fidelity & Deposit Co. of Md., 68 A.D.2d 935 (2d Dep’t 1979) .................................................................... 49–50 New York Trans Harbor LLC v. Derektor Shipyards Conn., LLC, 19 Misc.3d 1134(A), 862 N.Y.S.2d 809, 2008 N.Y. Slip Op. 50998(U), (Sup. Ct., Kings Co. May 9, 2008) ............................................. 36, 37 Patron v. Patron, 40 N.Y.2d 582 (1976) ......................................................................................... 20 Pictet Funds (Europe) S.A. v. Emerging Managers Grp., L.P., No. 14-cv-6854 (SAS), 2014 WL 6766011 (S.D.N.Y. Dec. 1, 2014) ....................................................................................................... 29, 30–31 Production Resource Grp., L.L.C. v. Martin Prof’l, A/S, 907 F. Supp. 2d 401 (S.D.N.Y. 2012) ................................................................ 44 Sears, Roebuck & Co. v. Enco Assoc., 43 N.Y.2d 389 (1977) ......................................................................................... 35 Sebastian Holdings Inc. v. Deutsche Bank AG, [2010] EWCA (Civ) 998 ..................................................................................... 43 Sec. Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369 (6th Cir. 1999) .............................................................................. 47 Sempra Energy Trading Corp. v. Algoma Steel, Inc., No. 00 CIV. 9227 (GEL), 2001 WL 282684 (S.D.N.Y. Mar. 22, 2001), aff’d, 300 F.3d 242 (2d Cir. 2002) ................................ 46–47, 50 ix Steigerwald v. Dean Witter Reynolds, 84 A.D.2d 905 (4th Dep’t 1981), aff’d on other grounds, 56 N.Y.2d 621 (1982) ......................................................................................... 62 Sterling Nat’l Bank v. Eastern Shipping Worldwide, Inc., 35 A.D.3d 222 (1st Dep’t 2006) ......................................................................... 64 TAPCO Underwriters, Inc. v. Catalina London Ltd., No. 14-CV-8434 (JSR), 2014 WL 7228711 (S.D.N.Y. Dec. 8, 2014) ....................................................................................................... 31, 47, 50 Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009) .......................................................................... 47 Tradecomet.com LLC v. Google, Inc., 435 F. App’x 31, 2011 WL 3100388 (2d Cir. July 26, 2011) ...................... 47–48 USA-India Export-Import, Inc. v. Coca-Cola Refreshments USA, Inc., 46 Misc.3d 1215(A), 9 N.Y.S.3d 596, 2015 N.Y. Slip Op. 50091(U), (Sup. Ct. Westchester Co. Jan. 30, 2015) ......................................... 36 Wachovia Bank N.A. v. Schmidt, 445 F.3d 762 (4th Cir. 2006) .............................................................................. 47 Young v. Jaffe, 282 A.D.2d 450 (2d Dep’t 2001) ........................................................................ 62 Young Women’s Christian Ass’n of U.S.A., Nat’l Board v. HMC Entertainment, Inc., No. 91 CIV. 7943 (KMW), 1992 WL 279361 (S.D.N.Y. Sept. 25, 1992) ................................................................ 44–45 Zachariou v. Manios, 68 A.D.3d 539 (1st Dep’t 2000) ............................................................. 27, 28, 29 Statutes C.P.L.R. 4511(b) ...................................................................................................... 35 x Other Authorities Arthur Karger, THE POWERS OF THE NEW YORK COURT OF APPEALS, § 16.4 (Sept. 2016) ........................................................................................ 19–20 23 CARMODY–WAIT 2D § 141:59 (Dec. 2016) .................................................. 62–63 2 N.Y. PRAC., COM. LITIG. IN NEW YORK STATE COURTS § 13:11 (4th ed. Sept. 2016) .................................................................................................... 45 2 N.Y. PRAC., COM. LITIG. IN NEW YORK STATE COURTS § 13:19 (4th ed. Sept. 2016) .............................................................................................. 36–37 P. Sherwin & A.F. Stach, First Department Finds Forum Selection Clause in Earlier Agreement Valid Despite Later Agreement Providing for Arbitration, MINDING YOUR BUSINESS (May 4, 2016), available at http://www.mindingyourbusinesslitigation.com/2016/05/first- department-finds-forum-selection-clause-in-earlier-agreement- valid-despite-later-agreement-providing-for-arbitration/ ................................... 49 1 Garthon and Crestguard respectfully submit this brief in response to the briefs submitted in support of the appeal by Defendant-Appellant Kirill Ace Stein (“Stein”) and Defendant-Appellant Aurdeley Enterprises Limited (“Aurdeley”) from the Decision and Order of the Appellate Division, First Department, dated April 26, 2016 (the “Appellate Division Order”), insofar as the Appellate Division Order reversed the orders of the Supreme Court, New York County (Justice Shirley W. Kornreich) entered on April 1, 2015 (the “Supreme Court Orders”) granting Stein’s and Aurdeley’s motions to compel arbitration.1 Garthon and Crestguard respectfully request that this Court affirm the Appellate Division Order. PRELIMINARY STATEMENT Stein and Aurdeley have not carried — and cannot carry — their substantial burden on this appeal. As conceded by Stein (see Stein Br., 22), the standard of review here is “abuse of discretion,” which means that the Appellate Division Order must be affirmed unless it was arbitrary or without rational basis or the 1 The First Department also (1) reversed the Supreme Court Orders to the extent they (i) granted the motions to stay discovery and (ii) dismissed the action; (2) reinstated the Complaint; and (3) modified the Supreme Court’s denial of Garthon and Crestguard’s motion for limited discovery on personal jurisdiction and alter ego issues. (R. 579–80.) This Court dismissed Stein’s and Aurdeley’s appeal from those portions of the Appellate Division Order on August 25, 2016. Garthon Business Inc. v. Stein, 27 N.Y.3d 1182 (2016). 2 result would shock the conscience. There was no abuse of discretion here and, as shown below, the majority correctly decided all of the issues on appeal. First, the majority properly held that the court should determine the arbitrability of the claims in this case and that there was no clear and unmistakable evidence — as required by precedent from this Court — of the parties’ intent to delegate the decision on arbitrability to the arbitrator. Stein and Aurdeley urge the Court to adopt the dissent in the Appellate Division Order, which found that the reference to the London Court of International Arbitration Rules (the “LCIA Rules”) in the arbitration clauses in the post-June 30, 2009 agreements is clear and unmistakable evidence of delegation. The majority, however, noted that the forum selection clause in the agreement between Quennington and Stein (the “Quennington Agreement”) broadly designated the courts as the sole forum for dispute resolution and the later agreements did not nullify this designation. Because the forum selection clause remained in effect, the majority concluded that it could not state “with any degree of certainty” that the parties intended for the arbitrator to decide the arbitrability of all claims. (R. 592.) The majority pointed out that the narrow arbitration clauses in the post-June 30, 2009 agreements (which expressly limit their application to those contracts), when compared to the broad forum selection clause in the Quennington Agreement 3 (which relates to disputes under the contract or arising out of the parties’ relationship), provide further support for the conclusion that the parties did not intend for the arbitrator to decide the arbitrability of all claims in the case. The majority’s holding follows from the language of the agreements, the strict standard under New York law and federal cases involving similar facts. The dissent, by contrast, misconstrues New York law and is at odds with the arbitration clauses, which do not in any way reflect the parties’ intent to nullify the broad forum selection clause in the Quennington Agreement. On this appeal, moreover, Stein and Aurdeley have failed to cite a single case supporting the dissent’s theory that there is clear and unmistakable evidence of intent here. Second, the majority properly determined, as a matter of New York law, that the claims in the Complaint should be litigated rather than arbitrated. Stein and Aurdeley contend — for the first time in this case — that the majority should have applied English law in deciding the forum selection issues, but this Court has held that such new arguments cannot be raised for the first time on appeal. In addition, the New York courts uniformly apply New York law in interpreting forum selection clauses, even where those provisions call for the application of different law. Furthermore, even if the Court were to hold that English law applies to the forum selection issue, the sole English decision cited by Stein and Aurdeley is 4 distinguishable from this case and its application here would not have any effect on the majority’s conclusion. Under New York law, there must be “clear manifestation” of the parties’ intent to terminate a forum selection clause and replace it with another dispute resolution provision. That evidence is missing here. Stein and Aurdeley argue that, in amending the pre-July 1, 2009 agreements through the post-June 30, 2009 agreements, the parties intended to replace the earlier contracts in their entirety, including the forum selection clauses. However, in order to effect the replacement of a dispute resolution clause, New York law requires a complete cancellation of all the terms in the prior agreement, ab initio, and an “obliteration” of the earlier provision regarding the resolution of disputes. Nothing in the pre-July 1, 2009 agreements supports such a cancellation of the post-June 30, 2009 contracts. Third, in an effort to overcome the shortcomings in their arguments, Stein and Aurdeley invoke the New York public policy in favor of arbitration. That policy, however, only applies where there is unequivocal evidence of an agreement to arbitrate, which is not the case here. There is also a strong public policy in New York requiring the enforcement of forum selection clauses in agreements, unless there is clear manifestation that the parties terminated the provision. Because Stein and Aurdeley have not shown that there is clear evidence of termination, the Court 5 should enforce the forum selection clause in the Quennington Agreement. Under New York law, the survival of the forum selection clause means that it also applies to the claims under subsequent agreements because all of the claims in the Complaint are inextricably linked. Stein and Aurdeley have already delayed this case for two years (i.e., since its filing in early December 2014) through their ill-founded motions to compel. In the course of these proceedings, Stein and Aurdeley have also repeated the false claim that they are separate entities. The First Department, however, started to rectify the situation by reversing the Supreme Court Orders and holding that Garthon and Crestguard may take discovery on alter ego and related issues. This Court should affirm the Appellate Division Order so Garthon and Crestguard may finally move forward with their claims. QUESTIONS PRESENTED 1. Did the First Department abuse its discretion in finding that the court should decide the issue of whether all the claims in this case are arbitrable where (a) there is no clear and unmistakable evidence of the parties’ intent to delegate the arbitrability issue to the arbitrator for determination and the sole argument in favor of delegation is based on a reference to the LCIA Rules in the arbitration clauses in 6 the three post-June 30, 2009 agreements (which is missing from the two earlier contracts); (b) there is a broad forum selection clause in the original contract (the Quennington Agreement) requiring the parties to litigate all disputes relating to the agreement or their relationship; (c) the claims in the litigation arise out of the Quennington Agreement as well as the parties’ relationship, span the entire period at issue and are inextricably linked with the claims relating to the post-June 30, 2009 agreements; (d) the reference to the LCIA Rules appears in narrow arbitration clauses restricting the scope of arbitration to disputes under the particular contract; and (e) the arbitration clauses do not even mention, let alone expressly nullify, the forum selection clause in the Quennington Agreement? No. The majority correctly concluded that, under such circumstances, there is no clear and unmistakable evidence demonstrating the delegation of the arbitrability issue to the arbitrator. 2. Did the First Department abuse its discretion in applying New York law to interpret the forum selection clause in the Quennington Agreement and concluding that all the claims in this case must be litigated? No. Assuming that choice of law is at issue on this appeal, New York law applies to the interpretation of forum selection clauses and it requires “clear 7 manifestation” of the parties’ intent to terminate such provisions. As discussed below, Stein and Aurdeley have not made the showing required by New York law. 3. Does the Appellate Division Order violate the public policy of New York in favor of arbitration? No. New York’s public policy favoring arbitration only applies where there is “clear, explicit and unequivocal” evidence of an agreement to arbitrate the claims at issue. Stein and Aurdeley have failed to meet this exacting standard. Moreover, New York has an equally strong public policy in favor of forum selection clauses and they must be enforced where, as in this case, there is no “clear manifestation” of the parties’ intent to terminate the provision. STATEMENT OF FACTS I. The Agreements at Issue Beginning in January 2009, Stein provided financial consulting services to Garthon and Crestguard, which are companies affiliated with Patokh Chodiev (“Chodiev”) and his family, pursuant to a series of related consulting agreements. (R. 62, ¶ 16.) The first of these agreements, effective January 1, 2009, is the Quennington Agreement between Quennington and Stein. (See R. 75–82.) At the time of the 8 contract, Quennington was another Chodiev company and an affiliate of Garthon and Crestguard, as defined in the Quennington Agreement. (R. 63, ¶ 18.) The Quennington Agreement contains a broad and mandatory forum selection clause stating that the “agreement shall be governed by, construed and take effect in accordance with the laws of the United States of America,” and that “[t]he courts of the United States of America shall have exclusive jurisdiction to settle any claim, dispute or matter of difference which may arise out of or in connection with this Agreement . . . or the legal relationship established by this Agreement.” (R. 81, § 12.1; see also R. 580–81.)2 The Quennington Agreement has no expiration date. Following the Quennington Agreement, there were three related agreements that set forth the provision of similar consulting services and are properly viewed as a continuation of the Quennington Agreement, which is the primary contract here and establishes the terms of the parties’ overall relationship. (See, e.g., R. 62– 64, ¶¶ 17, 21–23.)3 Those agreements are described below. 2 Garthon and Crestguard demonstrated below that, under the relevant case law, the foregoing references to the “United States” as the forum and applicable law means that New York would be the forum and New York law would apply if the Court affirms the majority’s conclusion that the forum selection clause in the Quennington Agreement governs the claims here. (See Brief for Plaintiff-Appellants, 2015 WL 11921459, at *29–31 (1st Dep’t 2015).) Stein and Aurdeley did not challenge this assertion in the lower courts. 3 As discussed below, there is also a fifth agreement that only relates to the termination of the Quennington Agreement and does not involve the provision of consulting services. 9 (i) Chodiev and Aurdeley entered into an agreement, also effective January 1, 2009 (“Agreement 2”), which is identical to the Quennington Agreement (see R. 83–90), but provides that it is governed by the law of England and Wales, and that the courts of England have exclusive jurisdiction over disputes. (R. 89, § 12.1; see also R. 581.)4 The purpose of Agreement 2 was to increase Stein’s compensation and direct a portion of the payments for his consulting services to Aurdeley. Like the Quennington Agreement, Agreement 2 has no expiration date. (ii) On September 30, 2009, Mounissa Chodieva (“Chodieva”), who is Chodiev’s daughter, entered into a similar consulting agreement with Aurdeley (“Agreement 3”). Agreement 3 was effective as of July 1, 2009 and continued until March 10, 2010. (See R. 91–101.) Agreement 3 provides that “[a]ny dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the 4 In the Appellate Division Order, the majority refers to Agreement 2 as the “First Aurdeley Agreement.” We have adopted the terminology for the agreements that is used in the dissent, but have provided a table below with the references used by the majority and the dissent. 10 [LCIA Rules], which Rules are deemed to be incorporated by reference . . . .” (R. 98, Clause 12.2; see also R. 597.) The dispute resolution clause in Agreement 3 is much narrower than the broad provision in the Quennington Agreement; the former relates to disputes arising under Agreement 3 only, while the latter applies to disputes concerning the Quennington Agreement and/or the parties’ relationship. (iii) By agreement dated September 30, 2009, Chodiev and Aurdeley entered into another consulting agreement (“Agreement 4”) with an effective date of July 1, 2009. (See R. 102–13.) Agreement 4 is a continuation of the Agreement 2 and the services provided under the two contracts are the same, with the main change being a decrease in the compensation for Stein/Aurdeley. (R. 102.) Because Agreement 2 has an indefinite term, Agreement 4 terminates Agreement 2 as of July 1, 2009. (R. 111.) Agreement 4 has the same narrow arbitration clause as Agreement 3, and it too calls for arbitration under the LCIA Rules. (R. 111, Clause 12.2; see also R. 582.) 11 (iv) Finally, there was a separate agreement dated September 30, 2009 between Quennington and Stein (the “Termination Agreement”) terminating the Quennington Agreement as of July 1, 2009. (See R. 116–18.) The Termination Agreement contains the same termination language found in Agreement 4, and it also provides for the arbitration of disputes under the LCIA Rules. (R. 116; see also R. 582.) As with Agreement 3 and Agreement 4, the arbitration clause is expressly limited to disputes arising under the Termination Agreement. Thus, the effective dates for the five agreements at issue fall into two categories: (1) pre-July 1, 2009 (the Quennington Agreement and Agreement 2); and (2) post-June 30, 2009 (Agreement 3, Agreement 4 and the Termination Agreement). A table listing the agreements is below: Majority Dissent Parties Effective Dispute Resolution Reference Reference Date Quennington Quennington Quennington 111/09 Exclusive jurisdiction of Agreement Agreement and Stein U.S. courts for any disputes "which may arise out of or in connection with this Agreement ... or the legal relationship established by this Agreement" First Agreement 2 Chodiev and 111/09 Exclusive jurisdiction of Aurdeley Aurdeley English courts for same Agreement type of disputes listed in Quennington Agreement Undefined Agreement 3 Chodieva 711/09 "Any dispute arising out of and or in connection with this Aurdeley Agreement" shall be referred to the LCIA (emphasis added) Second Agreement 4 Chodiev and 711/09 "Any dispute arising out of Aurdeley Aurdeley or in connection with this Agreement Agreement" shall be referred to the LCIA (emphasis added) Quennington Termination Quennington 711/09 "Any dispute arising out of Termination Agreement and Stein or in connection with this Agreement agreement" shall be referred to the LCIA (emphasis added) As discussed below, the claims in the Complaint arose under the Quennington Agreement and the same acts and omissions continued thereafter under the related agreements. The Appellate Division recognized that "one could 12 13 argue that all of the claims in the complaint arose under the Quennington Agreement” (R. 590) and found that “even if some of the claims could be said to arise out of the Quennington Agreement, and others out of [Agreement 4], they are cut from the same cloth, and are, unquestionably, inextricably bound together . . . .” (R. 591.) II. Garthon and Crestguard’s Claims in the Complaint Garthon and Crestguard’s claims relate to three loans, beginning in June 2009 and totaling $16 million, which Stein urged Garthon and Crestguard to extend in connection with a contractual arrangement between SBS Steel and Hares Engineering GmbH (“Hares Engineering”) for the construction of a steel project in Kazakhstan. (R. 58, ¶¶ 1–2.) Stein’s advice was that Garthon and Crestguard should extend the loans personally to Yousef Hares, the owner of Hares Engineering, even though it was the company, and not Hares himself, that was the counterparty to the contract for the construction of the steel project. The loans were also unsecured and interest-free, which are highly unusual and non- commercial terms for loans. (R. 67–68, ¶¶ 32–39.) Despite concerns raised about the terms of these loans, Stein insisted that they were structured properly, that they would resolve outstanding financial issues with Hares Engineering, that they were integral to the steel project, and that they 14 would be payable immediately. (R. 67, ¶ 34.) Ultimately, Hares did not repay the loans nor were they credited toward outstanding debts that SBS Steel allegedly owed Hares Engineering with respect to the steel project, which amounted to a substantial loss for Garthon and Crestguard. (See R. 68, ¶¶ 36–39.) In advising Garthon and Crestguard to extend loans to Hares, Stein failed to (i) structure the loans properly; (ii) protect the financial interests of Garthon and Crestguard; and (iii) conduct himself in accordance with his obligations under the relevant contracts and other extra-contractual duties that he owed to Garthon and Crestguard. (R. 69–73, ¶¶ 40–61.) Stein provided financial advice personally and through his alter ego, Aurdeley, and he acted pursuant to the related consulting agreements which imposed upon him the contractual obligation to exercise a high degree of competence and skill. (Id.) On December 3, 2014, Garthon and Crestguard filed the Complaint in this action. The causes of action in the Complaint fall into four categories: 1) pre-July 1, 2009 claims for breach of contract; 2) pre-July 1, 2009 claims for tort arising out of the parties’ fiduciary relationship; 3) post-June 30, 2009 claims for breach of contract; and 4) post-June 30, 2009 claims for tort arising out of the parties’ fiduciary relationship. Garthon and Crestguard sued under the four consulting agreements that were in effect both before and after July 1, 2009 because Stein’s 15 acts and omissions occurred both before and after this date, meaning that his acts and omissions occurred under all four contracts. Stein’s acts and omissions also arose from an ongoing fiduciary relationship that began before July 1, 2009 and continued afterwards. This last fact is key because forum selection clause of the Quennington Agreement applies to all disputes arising out of, or in connection with, the parties’ legal relationship, whereas the narrower arbitration clauses of Agreement 3 and Agreement 4 only apply to disputes arising out of, or related to, those two agreements, which were not in effect until July 1, 2009. III. Proceedings Below Garthon and Crestguard anticipated that Stein and Aurdeley would interpose personal jurisdiction defenses to the Complaint so, in December 2014, they served document requests and subpoenas limited to the alter ego and jurisdictional issues. (See R. 121–32; R. 133–48; R. 149–67; R. 168–77.) Additionally, in January 2015, Garthon and Crestguard served a subpoena for the deposition of a third-party witness, Thomas Ram, Esq., who has knowledge relating to the alter ego and personal jurisdiction allegations in the Complaint. (R. 178–81.) Those alter ego allegations and related discovery requests were based on evidence that Garthon and Crestguard had adduced in other proceedings in England, which are described below. (See infra pp. 17–19.) The evidence shows 16 that Stein dominated and controlled Aurdeley at all relevant times, using it as a shell company to accumulate, transfer and conceal his personal wealth. Thus, the purpose of the discovery sought in this case was to provide additional information in support of the alter ego allegations, which in turn relate to personal jurisdiction. On February 9, 2015, Stein and Aurdeley moved the Supreme Court to compel arbitration and grant a protective order regarding discovery. (R. 53–54; R. 182–83.) Garthon and Crestguard moved to compel discovery on the limited issues of alter ego, personal jurisdiction and forum selection, asking the Supreme Court to defer a ruling on the motion to compel arbitration until after limited discovery could be taken. (R. 316–17.) Following a hearing on March 31, 2015, Justice Kornreich entered the Supreme Court Orders granting Stein’s and Aurdeley’s motions to compel arbitration, denying Garthon and Crestguard’s motion to compel discovery, and dismissing the case. (See R. 14–16.) The Appellate Division reversed the Supreme Court Orders, holding that the claims in the Complaint are not subject to arbitration. Instead, the Appellate Division held that the forum selection clause in the Quennington Agreement controls and that all the claims must be litigated. (See R. 586–93.) The Appellate Division also held that Garthon and Crestguard are entitled to discovery on “whether Stein and/or Aurdeley are alter egos of each other, such that Aurdeley is 17 a proper defendant here notwithstanding its not being a party to the Quennington/Stein agreements, and whether Stein and Aurdeley are subject to personal jurisdiction in New York.” (R. 593.) IV. English Proceedings Involving Chodiev (Among Others) and Stein Chodiev (and others) were involved in proceedings in England against Stein relating to a dispute over separate consulting work. Stein and Aurdeley have alleged several times that this action was brought so Garthon and Crestguard could obtain discovery in support of the English proceedings; however, those unsubstantiated allegations are undercut by the fact that the English proceedings concluded in November 2015, but this case continues. If anything, the English proceedings have supported this case because the findings by the court in England lend credence to the claims here that Stein and Aurdeley are alter egos. The English proceedings consist of (i) an original action brought by Stein (the “Original Stein Proceedings”), which resulted in an April 2014 judgment in his favor in the amount of $18.4 million (before interest and costs) (the “April 2014 Judgment”); and (ii) a challenge to the April 2014 Judgment by Chodiev and the other defendants in the Original Stein Proceedings on the grounds that the April 2014 Judgment was based on false evidence submitted by Stein (the “New Stein Proceedings”). The claimants in the New Stein Proceedings asserted, among other 18 things, that Stein lied in the Original Stein Proceedings about his relationship with Aurdeley by saying he was an arms-length employee at the relevant times. In the New Stein Proceedings, the claimants presented documentary and witness evidence showing that Stein traded securities and accumulated his personal wealth through Aurdeley, which was Stein’s own piggy bank. At the same time, Stein concealed the true nature of his relationship with Aurdeley from the outside world, even going so far as to lie in the English proceedings about his control of Aurdeley. In a judgment dated May 20, 2015 (the “May 2015 Judgment”), the English Court dismissed the New Stein Proceedings, deciding that Stein’s lies went to a collateral issue and would not have altered the April 2014 Judgment. Mr. Justice Burton also held that much of the evidence relied upon by the claimants was available to them with reasonable diligence during the course of the Original Stein Proceedings and so could not be relied upon during the New Stein Proceedings. Nevertheless, Mr. Justice Burton found that “there is an arguable case that, contrary to what [Stein] said in cross-examination at the trial, he is the beneficial owner of Aurdeley.” Chodiev & Ors. v. Stein [2015] EWHC (Comm) 1428 at 19 ¶ 36, available at http://www.bailii.org/ew/cases/EWHC/Comm/2015/1428.html.5 Mr. Justice Burton further concluded in the May 2015 Judgment that Stein had concealed Aurdeley’s funding of his English litigation, stating that “[Stein’s] lie, as such it appears to have been, was obviously an affront to the Court, particularly when repeated.” (Id., ¶ 81.) Thus, the May 2015 Judgment (1) demonstrates that Stein’s and Aurdeley’s repeated denials in this case about Stein’s ownership of Aurdeley are false; and (2) provides additional evidence that Garthon and Crestguard have a good-faith basis for their discovery requests in this case relating to the intertwined issues of alter ego and personal jurisdiction over Aurdeley. Argument I. The Abuse of Discretion Standard of Review Allows for Reversal Only in Cases Involving “Extraordinary Circumstances” Garthon and Crestguard agree that the Appellate Division exercised its discretion in reversing the Supreme Court Orders and that an abuse of discretion standard applies to this appeal. (See Stein Br., 22–23.) Accordingly, the test for reversal of a lower court order is “whether the particular exercise of discretion is so 5 Garthon and Crestguard provided a copy of the May 15 Judgment to the Court earlier as Exhibit 3 to the Affirmation of Pieter Van Tol dated August 25, 2016. 20 arbitrary and without rational basis as to amount to abuse as a matter of law or whether ‘the result reached is so outrageous as to shock the conscience.’” Arthur Karger, THE POWERS OF THE NEW YORK COURT OF APPEALS, § 16.4 (Sept. 2016) (quoting Matter of Von Bulow, 63 N.Y.2d 221, 225–226 (1984); Patron v. Patron, 40 N.Y.2d 582, 585 (1976)). A holding of abuse is reserved for cases involving “extraordinary circumstances.” Patron, 40 N.Y.2d at 585. As shown below, Stein and Aurdeley have not met this exceedingly high standard for the reversal of the Appellate Division Order. II. The Appellate Division Order Should Be Affirmed A. The Majority Correctly Applied the Standard for Determining Whether the Arbitrability Issue Was Delegated to the Arbitrator Under New York law, there is a well-established and strong presumption that the courts will decide arbitrability, unless there is evidence that the parties have “clearly and unmistakably” delegated this issue to the arbitrator for determination. E.g., Matter of Smith Barney Shearson v. Sacharow, 91 N.Y.2d 39, 45–46 (1997); Matter of Primex Int’l Corp. v Wal-Mart Stores, 89 N.Y.2d 594, 598 (1997). This rule is derived from similar case law on arbitrability in the federal context. See Sacharow, 91 N.Y.2d at 46 (citing First Options of Chicago, Inc. v Kaplan, 514 U.S. 938, 944 (1995)). 21 The delegation principle also follows from this Court’s precedent on whether a party may be compelled to arbitrate any issue. “It is settled that a party will not be compelled to arbitrate and, thereby, to surrender the right to resort to the courts, absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes. . . . The agreement must be clear, explicit and unequivocal[,] . . . and must not depend upon implication or subtlety.” Matter of Waldron (Goddess), 61 N.Y.2d 181, 183–84 (1984) (internal citations omitted). See also id. at 185 (noting that “the threshold for clarity of agreement to arbitrate is greater than with respect to other contractual terms” (internal citations omitted)); Matter of Marlene Indus. Corp. (Carnac Textiles), 45 N.Y.2d 327, 333– 34 (1978) (“The reason for this requirement, quite simply, is that by agreeing to arbitrate a party waives in large part many of his normal rights under the procedural and substantive law of the State, and it would be unfair to infer such a significant waiver on the basis of anything less than a clear indication of intent.”); Gerling Global Reins. Corp. v. Home Ins. Co., 302 A.D.2d 118, 123 (1st Dep’t 2002) (“It is well settled that a party cannot be compelled to submit to arbitration 22 unless the agreement to arbitrate expressly and unequivocally encompasses the subject matter of the particular dispute.”).6 Thus, New York law requires clear and unmistakable evidence of delegation in order to protect the inherent rights of parties to litigate their disputes, including any disputes on whether certain claims are subject to arbitration. 1. As the Majority Properly Concluded, There Is No Clear and Unmistakable Evidence That the Parties Delegated the Decision on the Arbitrability Issues to the Arbitrator This case involves the question of whether all of the claims in the Complaint must be litigated pursuant to the forum selection clause in the Quennington Agreement or arbitrated pursuant to the arbitration clauses in the later contracts. (See Stein Br., 1–2; Aurdeley Br., 4; R. 584–86.) Stein and Aurdeley, therefore, can only prevail on their argument if there is clear and unmistakable evidence — in the three post-June 30, 2009 agreements themselves — that the parties wanted the arbitrator to decide whether the causes of action for (1) breach of contract and (2) 6 The U.S. Supreme Court has similarly noted that because arbitration is strictly a matter of consent, it applies to “only those disputes [] that the parties have agreed to submit to arbitration.” Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 299 (2010) (internal citation and quotation marks omitted; emphasis in original). Accordingly, “courts should order arbitration of a dispute only where the court is satisfied that neither the formation of the parties’ arbitration agreement nor (absent a valid provision specifically committing such disputes to an arbitrator) its enforceability or applicability to the dispute is in issue.” Id. (emphasis in original). 23 tort arising out of the fiduciary relationship established in the Quennington Agreement (which pre-date July 1, 2009 and continue thereafter) are arbitrable. The majority found that no such evidence exists. Stein and Aurdeley argued below (as they do on this appeal) that the mere reference to the LCIA Rules in Agreement 3, Agreement 4 and the Termination Agreement constitutes clear and unmistakable evidence of delegation for all of the five agreements at issue, even those that do not call for arbitration or refer to the LICIA Rules. In rejecting this argument, the majority pointed out that: [T]he Quennington Agreement designated the courts as the sole forum for dispute resolution, and the subsequent agreements, notwithstanding their arbitration clauses, did not nullify that designation. Since that is the case, we cannot state with any degree of certainty that the parties clearly and unmistakably intended for the chosen arbitral body to decide the particular issue [of arbitrability] presented to us. To hold otherwise would be to completely ignore the existence of the forum selection clause in the Quennington Agreement, which the parties never abrogated. (R. 592.) The majority also noted that the dissent could not rely on Matter of Monarch Consulting Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA., 26 N.Y.3d 659 (2016), because the arbitration agreements in that case “did not, like here, directly clash with an enforceable forum selection clause in a separate agreement relevant to the parties’ dispute.” (R. 592–93.) 24 In addition, the majority cited the relative scope of the dispute resolution clauses, stating that: “[T]he arbitration clauses [in the post-June 30, 2009 Agreement], in relation to the forum selection clause contained in the Quennington Agreement, are far narrower, since, as mentioned earlier, they apply to the agreements themselves, whereas the forum selection clause applies to disputes arising not only out of the Quennington Agreement, but also ‘the legal relationship established by’ the agreement.” (R. 593; see also R. 587 (“Indeed, the arbitration clauses are of much narrower scope than the forum selection provision in the Quennington Agreement. In addition to disputes related to the Quennington Agreement itself, the forum selection clause in the Quennington Agreement applied to the ‘legal relationship established by’ the agreement.”).) The stark difference between the broad forum selection clause in the Quennington Agreement and the far narrower arbitration clauses in the later agreements is important because, as noted above, this case involves claims which pre-date July 1, 2009 and/or arise out of the parties’ legal relationship.7 In other words, if the parties had wanted an arbitrator to decide the disputes arising out of 7 The First Department noted that: “Of course, if plaintiffs had presented claims that unquestionably and wholly originated after the termination of the Quennington Agreement, the issue of arbitrability would have been for the arbitrators, who most likely would have found that the claims were subject to arbitration. That, however, is not the case.” (R. 593; emphasis in original.) 25 the pre-July 1, 2009 agreements or the parties’ legal relationship (including whether such claims are arbitrable), they would have specifically nullified the earlier forum selection provision and used arbitration clauses in the post-June 30, 2009 Agreements that were as broad as or even broader than the forum selection clause in the Quennington Agreement. The majority’s conclusion on the arbitrability issue reflects a proper and straightforward reading of the contract language. Moreover, as discussed below, there are no cases where a New York court has held that the reference to arbitral rules in a narrow, subsequent arbitration clause provides clear and unmistakable evidence of (i) intent to nullify a broad, earlier clause requiring litigation of disputes; and (ii) delegation of the arbitrability issue to the arbitrator. 2. The Dissent Is Contrary to the Evidence and the Law According to the dissent, the arbitration clauses and their references to the LCIA Rules are “sufficiently broad to have the arbitrator decide in the first instance whether the parties’ dispute falls within its jurisdiction.” (R. 601.) When the dissent referred to the “parties’ dispute,” it meant all the claims in this case and it was opining that the reference to the LCIA Rules in the post-June 30, 2009 agreements should allow the arbitrator to determine whether disputes arising under any of the agreements are arbitrable. For example, the dissent relied on this 26 Court’s decision in Monarch Consulting, noting that the arbitration clause in that case applied to the “entire matter in dispute.” (R. 600.) The dissent criticizes the majority by asserting that the majority’s conclusion that the arbitration clauses do not apply to the disputes arising under the pre-July 1, 2009 agreements “necessarily interprets” those arbitration clauses “as being prospective only.” (R. 601–02.) The dissents states that: “In doing so, [the majority] decides the issue of jurisdiction under the arbitration provisions, even though the arbitration clauses reserved to the arbitrator the right to determine the issue of arbitrability.” (R. 602.) What the dissent fails to recognize, however, is that its interpretation — which results in a retroactive application of the arbitration clauses to the pre-July 1, 2009 agreements — would override the forum selection clause in the Quennington Agreement, even though that provision reserves the determination of jurisdiction to the court. Such a nullification of the pre-existing forum selection clause can only occur if there is clear and unmistakable evidence of the delegation of all arbitrability issues to the arbitrator. The arbitration clauses here, however, contain no delegation language stating the arbitrator is empowered to decide whether the dispute under the pre- existing Quennington Agreement is arbitrable, let alone “clear and unmistakable” language to that effect. In fact, the evidence shows that there was no intent to have 27 the arbitrator determine the arbitrability of disputes under the Quennington Agreement because the arbitration clauses in the post-June 30, 2009 agreements expressly state that they are limited to disputes arising out of or in connection with “this Agreement” or “this agreement.” The case law cited by the dissent does not lend any support to its argument. In addition to Monarch Consulting (which the majority correctly and readily distinguished from this case), the dissent primarily relies on two other cases: Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd’s, 66 A.D.3d 495, 495–96 (1st Dep’t 2009), aff’d, 14 N.Y.3d 850 (2010); and Zachariou v. Manios, 68 A.D.3d 539, 539 (1st Dep’t 2000). (See R. 599–601.) These cases acknowledge the rule that New York courts must decide the threshold issues of arbitrability unless the parties to the arbitration agreement “clearly and unmistakably” delegate such a decision to the arbitrator. (R. 599–600.) Here, however, there is no “clear and unmistakable” delegation by the parties with respect to their disputes, which span over four agreements having several different types of forum selection clauses. By contrast, two of the three cases cited by the dissent, Monarch and Life Receivables, involve one agreement with an arbitration clause (Life Receivables) or multiple agreements with the same clause (Monarch). In Monarch and Life Receivables, there was no question that 28 the parties’ disputes (or the parties themselves) fell within the arbitration clauses at issue. In this case, unlike Monarch and Life Receivables, there is a forum selection clause in the Quennington Agreement that broadly requires litigation of any disputes arising under the contract or the parties’ relationship, and it pre-dates the arbitration clauses in the Termination Agreement and Agreement 4. Therefore, Monarch and Life Receivables are distinguishable from this case on their facts. The third case cited by the dissent, Zachariou, in fact supports the majority’s conclusion. In Zachariou, the First Department held that the court should decide the arbitrability issue because the parties had not clearly and unmistakably delegated the task to the arbitrator. 68 A.D.3d at 539. The First Department noted that the arbitration clause in Zachariou was narrow and it was unclear whether certain disputes between the parties should be decided by the arbitrator. See id. at 539–40. Here, the arbitration clause is narrow when compared to the broad forum selection clause in the Quennington Agreement and, as in Zachariou, the parties did not make it clear that the entirety of the dispute fell within the scope of the arbitration clause. To the contrary, the evidence in this case shows that (1) the arbitration clause in the post-June 30, 2009 agreements was unequivocally limited to disputes arising under the particular contracts containing the provision; and (2) 29 the arbitration clause, by its express terms, did not apply to disputes arising under the Quennington Agreement or the parties’ relationship.8 Federal cases are consistent with the majority opinion in the Appellate Division Order. As an initial matter, it is commonplace for New York state courts to rely on cases from the federal courts regarding arbitration issues. New York and federal law are the same on the issue of arbitrability, see Contec Corp. v. Remote Solution, Co., 398 F.3d 205, 208 n.1 (2d Cir. 2005), and, indeed, Monarch, Life Receivables and Zachariou all cite federal cases. Two federal cases — Gen. Motors Corp. v. Fiat S.p.A., 678 F. Supp. 2d 141 (S.D.N.Y. 2009), and Pictet Funds (Europe) S.A. v. Emerging Managers Grp., L.P., No. 14-cv-6854 (SAS), 2014 WL 6766011 (S.D.N.Y. Dec. 1, 2014) — are instructive here. In General Motors, the plaintiffs and the defendants had entered into a Master Separation Agreement with a dispute resolution clause that, among other things, allowed the parties to submit disputes to the U.S. District Court for the Southern District of New York. The parties also entered into a European Powertrain Cross Supply Agreement (“ECSA”) containing a provision calling for 8 The dissent characterizes the arbitration clause in the agreements as “broad,” (R. 601.), but that is only with respect to disputes arising under those particular agreements. It cannot be disputed that the arbitration clause is narrow vis-à-vis the broad forum selection clause in the Quennington Agreement. (See R. 593.) 30 arbitration under the rules of the International Chamber of Commerce (“ICC”). See 678 F. Supp. 2d at 142–44. The General Motors court rejected the defendants’ argument that the ICC should decide whether a dispute between the parties was arbitrable because the ECSA had a broad arbitration provision. Id. at 146. The court noted the dispute resolution clause in the Master Separation Agreement was also broad and held that, in light of the conflicting provisions, there was no clear and unmistakable evidence that the parties intended for the ICC to determine the question of arbitrability. See id. In this case, the decision is even easier because the forum selection clause in the Quennington Agreement is far broader than the arbitration clauses in the later agreements. Pictet involved two clauses in one agreement, but it applied the same principle from General Motors. In Pictet, the parties entered into a Relationship Management Agreement, which contained a provision stating that the parties would litigate disputes in Switzerland, but that disputes relating to the payment of fees would be subject to FINRA arbitration. 2014 WL 6766011 at *2. Following a dispute over the termination of the contract, the defendants commenced arbitration and the plaintiffs brought an action to enjoin the arbitration. One of the issues was whether the defendants’ claim should be considered arbitrable because it fell within the arbitration carve-out. Pictet held that the court, rather than the 31 arbitrators, must decide the question of arbitrability because the FINRA Rules (which gave the arbitrators the power to decide jurisdictional issues) only applied after it was determined that a dispute fell with the arbitration carve-out. See id. at *4–5. Thus, in Pictet, there was no clear and unmistakable evidence that the parties delegated arbitrability of all issues to the arbitrators.9 As in the above cases, there is no evidence here — let alone the requisite clear and unmistakable evidence — that the parties intended for the arbitrator to determine whether the disputes arising under the pre-existing Quennington Agreement or the parties’ relationship are arbitrable. 3. The Additional Cases Cited by Stein and Aurdeley on This Appeal Are Inapplicable Here Stein and Aurdeley try to buttress the dissent by relying on four cases that were not cited below: Icdas Celik Enerji Tersance Ve Ulasim Sanayi A.S. v. 9 General Motors and Pictet are in accord with an analogous decision from the Second Circuit in In re Am. Express Fin. Advisors Sec. Litig. (AMEX Financial), 672 F.3d 113 (2d Cir. 2011) and TAPCO Underwriters, Inc. v. Catalina London Ltd., No. 14-CV-8434 (JSR), 2014 WL 7228711 (S.D.N.Y. Dec. 8, 2014). AMEX Financial involved an arbitration clause that was arguably revoked by a settlement agreement, so the question was “whether there was a surviving agreement, following the settlement, to arbitrate those claims at all.” AMEX Financial, 672 F.3d at 131. The Second Circuit held that the question of whether the claims were arbitrable, in light of the conflicting provisions, should be decided by the court rather than an arbitrator. Id. TAPCO involved an arbitration clause limited to disputes arising under “this Agreement.” The court held that, given the narrow clause, there was no clear and unmistakable intent to arbitrate the arbitrability issue. See TAPCO, 2014 WL 7228711 at *2, *3 n.2. Stein and Aurdeley do not even attempt to distinguish the foregoing cases, all of which were cited in the proceedings below. 32 Travelers Ins. Co., 81 A.D.3d 481, 483 (1st Dep’t 2011) (Stein Br., 20); Gibson v. Seabury Transp. Advisor LLC, 91 A.D.3d 465, 465 (1st Dep’t 2012), and Dow Kim v. Dukhon, 89 A.D.3d 470, 471 (1st Dep’t 2011) (Stein Br., 26); and Innospec Ltd. v. Ethyl Corp., No. 3:14-cv-158-JAG , 2014 WL 5460413 *3–4 (E.D. Va. Oct. 27, 2014) (Aurdeley Br., 20). All of these cases are easily distinguishable because they involve only one agreement with an arbitration clause and a finding of clear and unmistakable intent to arbitrate, whereas this case involves multiple contracts with differing clauses. * * * * * In sum, Stein and Aurdeley cannot satisfy the “clear and unmistakable” standard for arbitrability because their argument is contrary to the language in the arbitration clauses and they have failed to cite any relevant cases supporting their theory. Furthermore, the relevant cases all undercut the notion that there is evidence of clear and unmistakable intent under these circumstances. B. The Majority Correctly Held That the Claims in This Case Should Be Litigated Stein and Aurdeley argue that, even assuming the First Department had the authority to determine whether the claims in the Complaint should be litigated or arbitrated, this Court should nonetheless reverse the Appellate Division Order because (1) English law, not New York law, applies to the issue of forum 33 selection; or (2) in the alternative, the First Department misapplied New York law in interpreting the dispute resolution clauses in the agreements. (See Stein Br., 26– 39; Aurdeley Br., 21–34.) As discussed below, these arguments are meritless. 1. Stein and Aurdeley Cannot Raise the Argument Regarding English Law for This First Time on Appeal In the proceedings before the First Department, Stein and Aurdeley relied exclusively on New York law in discussing the interplay among the dispute resolution clauses in the five agreements and, in particular, whether the arbitration clause in the post-June 30, 2009 agreements superseded the forum selection clause in the Quennington Agreement. (See Brief for Defendant-Respondent Kirill Ace Stein, 2015 WL 11077900, at *9–13 (1st Dep’t 2015) (citing New York law for the proposition that Agreement 4 replaced the Quennington Agreement); Brief for Defendant-Respondent Aurdeley Enterprises Limited, 2015 WL 11077898, *11–12 (1st Dep’t Aug. 12, 2015) (citing New York law on the alleged effect that Agreement 4 had on prior contracts).) Stein and Aurdeley did not cite any English case law in their appellate briefs, nor did they argue that the First Department should apply English law to the forum selection issues. Likewise, Stein and Aurdeley did not claim in the proceedings before the Supreme Court that English law applied to the interpretation of forum selection issues. (See Garthon Business 34 Inc. et al. v. Stein et al., Index No. 653715/2014, NYSECF Nos. 39, 66, 100 and 110.) Stein and Aurdeley instead relied exclusively on New York law. (See id., NYSCEF No. 110, 8–9; NYSCEF No. 100, 7.) On this appeal, however, Stein and Aurdeley make the new argument that the Court should apply English law to the forum selection provisions of the agreements.10 It is well settled that this Court does not review questions raised for the first time on appeal. Bingham v. New York City Tr. Auth., 99 N.Y.2d 355, 359 (2003). Bingham noted that “this Court best serves the litigants and the law by limiting its review to issues that have first been presented to and carefully considered by the trial and intermediate appellate courts.” Id. This Court has disregarded new arguments under similar circumstances. See id. at 360 (declining to express a view on the new issue); see also Matter of NYC C.L.A.S.H., Inc. v. New York State Off. of Parks, Recreation & Historic Preserv., 27 N.Y.3d 174, 181 (2016) (same); JF Capital Advisors, LLC v. Lightstone Group, LLC, 25 N.Y.3d 759, 767 (2015) (stating that the court had no power to review an unpreserved argument). 10 Although Stein and Aurdeley argued below that the arbitrator should apply the law of England and Wales in any arbitration, they never made the same argument with regard to a court’s determination of forum selection issues. Moreover, Stein and Aurdeley did not cite or discuss any English cases on forum selection in their lower court briefs. 35 There is a “rare exception” to this prohibition under which the Court will consider a new issue only if it could not have been addressed by a factual showing or legal counter-arguments below. Bingham, 99 N.Y.2d at 355. This exception does not apply here. If Stein and Aurdeley had raised the English law issue below, Garthon and Crestguard could have made their counter-arguments to the trial and/or intermediate courts and they could have submitted evidence of English law pursuant to Rule 4511(b) of the New York Civil Practice Law and Rules.11 Accordingly, the Court should refuse to consider the new English law arguments raised by Stein and Aurdeley for the first time on this appeal. 2. New York Courts Apply New York Law to Forum Selection Clauses Stein and Aurdeley also cannot rely on English law because the New York courts uniformly apply New York law to forum selection clauses. This Court has held that choice of law provisions in a contract only import the substantive law of a particular jurisdiction and not its procedural law. Sears, Roebuck & Co. v. Enco Assoc., 43 N.Y.2d 389, 397–98 (1977); see also Education Resources Inst., Inc. v. Piazza, 17 A.D.3d 513, 513 (2d Dep’t 2005) (stating that 11 The record on appeal does not contain any evidence of English law in accordance with C.P.L.R. 4511(b). Instead, Stein and Aurdeley rely on discussions of Fili Shipping Co. Ltd. v. Premium Nafta Prods. Ltd., [2007] UKHL 40 (the “Fiona Trust” case) by the U.S. federal courts. (See Stein Br., 36; Aurdeley Br., 23–25.) 36 procedural matters are governed by the law of the forum, despite choice of law provision selecting different substantive law); Gambar Enters. v. Kelly Servs., 69 A.D.2d 297, 304 (4th Dep’t 1979) (same). Under New York law, forum selection clauses are procedural in nature. See, e.g., Dovin Const., Inc. v. C. Raimondo & Sons Const. Co., Inc., 29 A.D.3d 364, 365 (1st Dep’t 2006) (noting that forum selection is a matter of procedure); New York Trans Harbor LLC v. Derektor Shipyards Conn., LLC, 19 Misc.3d 1134(A), 862 N.Y.S.2d 809, 2008 N.Y. Slip Op. 50998(U), *2 (Sup. Ct., Kings Co. May 9, 2008) (same). Because forum selection clauses involve procedural issues, the New York courts have applied New York law in construing such provisions. See Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530, 532–34 (1996) (applying New York law to forum selection clause, even though the contract called for the application of English law); USA-India Export-Import, Inc. v. Coca-Cola Refreshments USA, Inc., 46 Misc.3d 1215(A), 9 N.Y.S.3d 596, 2015 N.Y. Slip Op. 50091(U), *7 (Sup. Ct., Westchester Co. Jan. 30, 2015) (applying New York law, rather than the law set forth in the contract, “in determining the enforceability and scope of the forum selection clause”); New York Trans Harbor, 2008 N.Y. Slip Op. 50998(U) at *2 (same). See generally 2 N.Y. PRAC., COM. LITIG. IN NEW YORK STATE COURTS § 13:19 (4th ed. Sept. 2016) (noting that “New York courts apply New York law in 37 determining the enforceability and the interpretation of the scope of a forum selection clause.”). In Brooke Group, an insurance policy stated that “‘all disputes’ concerning the interpretation, validity and performance of the policy or relating to ‘the determination of the amount of loss’ compensable would be governed by the law of England and submitted to arbitration at the London Court of International Arbitration in accordance with its rules.” 87 N.Y.2d at 532. Nevertheless, this Court construed a forum selection clause elsewhere in the policy under New York law rather than English law. See id. at 533–34. New York Trans Harbor is also instructive. In that case, the contract was governed by English law and the parties agreed to the English courts as the forum. 2008 N.Y. Slip Op. 50998(U) at *1. The court rejected the argument that, given the choice of law provision, “the law of England must determine the interpretation and enforceability” of the forum selection clause. Id. The court instead interpreted the forum selection clause under New York law. See id. at *2–3. Stein and Aurdeley ignore the foregoing authority and, indeed, they do not cite a single New York case regarding choice of law for forum selection clauses. Stein and Aurdeley rely solely on federal cases. (See Stein Br., 36; Aurdeley Br., 23–25.) In those cases, however, the courts applied federal common law and the 38 standard established by the Second Circuit for matters involving forum selection clauses. See, e.g., Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014) (“The overriding framework governing the effect of forum selection clauses in federal courts, therefore, is drawn from federal law.”) Thus, it was the application of the Second Circuit “framework,” not New York law, which caused the courts in the federal cases cited by Stein and Aurdeley to interpret the forum selection clauses in accordance with Fiona Trust. Second Circuit law, however, does not govern here and the Court should apply New York law to interpret all of the dispute resolution clauses. 3. An Application of English Law to the Post-June 30, 2009 Agreements Would Not Warrant Reversal Even if this Court were to consider the newly raised argument and apply English law to the arbitration clauses, it would not affect the majority’s conclusions in the Appellate Division Order. As discussed below, there is no evidence that the parties sought to broaden the arbitration clauses or apply the Fiona Trust interpretation of arbitration clauses here. In any event, an application of Fiona Trust to this case would still fail to address several other points on which the majority relied in the Appellate Division Order. 39 (a) The Parties Did Not Intend to Make the Arbitration Clauses as Broad as the Forum Selection Clause in the Quennington Agreement Stein and Aurdeley cite Fiona Trust to support an argument that the arbitration clauses in the post-June 2009 agreements are equal in scope to the forum selection clause in the Quennington Agreement. Fiona Trust involved the issue of whether the validity or enforceability of a contract fell within the scope of the arbitration clause. See [2007] UKHL 40 at ¶¶ 7, 10 and 15. In dicta, the Lord Hoffman added that: “In my opinion the construction of an arbitration clause should start from an assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter be decided by the same tribunal.” Id. at ¶ 13.12 Based on the foregoing statement in Fiona Trust, Stein and Aurdeley argue that the reference to “this Agreement” and “this agreement” in the various arbitration clauses should be amended to include the phrase “or the legal relationship established by this Agreement/this agreement” so that the arbitration clauses equal the scope of the forum selection clause in the Quennington Agreement. 12 Notably, the arbitration clause in Fiona Trust also referred to “the relations between the parties.” [2007] UKHL 40 at ¶ 3. 40 This case turns on the parties’ intent regarding the various agreements at issue. It strains credulity past the breaking point to suggest that the parties to the post-June 30, 2009 agreements intended to make the arbitration clauses in those contracts as broad as the forum selection clause in the Quennington Agreement or sought to apply the Fiona Trust presumption to the arbitration clauses. First, as Stein admits (see Stein Br., 28), the best evidence of the parties’ intent is the plain language in the agreements. If the parties wanted the arbitration clauses to cover the “relationship” between them, they would have expressly said so in the provisions themselves. Indeed, in the forum selection clause in Agreement 2, Chodiev and Stein selected the laws of England and Wales, but nonetheless stated that the provision related to disputes under the agreement and “the legal relationship established by this Agreement.” (R. 89, § 12.1; see also R. 504, § 12.1 (draft 2007 agreement between Chaussey and Aurdeley governed by laws of England and Wales and referring to “legal relationship established by this Agreement”).)13 Such language is conspicuously missing from the post-June 30, 13 The forum selection clause in Agreement 2 does not apply to the pre-July 1, 2009 claims because the forum selection clause in the earlier Quennington Agreement already established the forum for the resolution of any disputes among Garthon, Crestguard, Stein and Aurdeley (as Stein’s alter ego), including any disputes arising out of the “legal relationship” among those parties. Agreement 2 was nothing more than a means through which Stein improperly used Aurdeley to shelter income from U.S. taxation. Neither Stein nor Aurdeley asked the Supreme Court to order that any claims should be decided by the English courts. 41 2009 agreements. In essence, Stein and Aurdeley are asking the Court to read new terms into an unambiguous clause, which is impermissible. (See Stein Br., 28 (citing Dysal, Inc. v. Hub Properties Trust, 92 A.D.3d 826, 827 (2d Dep’t 2012) for the proposition that “courts may not by construction add or excise terms”).) Second, there is no evidence that the parties intended to rely upon the Fiona Trust case to make the arbitration clauses as broad as the forum selection clause in the Quennington Agreement. To the contrary, the terms of the arbitration clauses suggest that the parties were unaware of the developments under English law. The clauses state that they apply to “[a]ny dispute arising out of or in connection with this Agreement [or “agreement”], including any question regarding its existence, validity or termination.” (See R. 98, R. 111; R. 116.) As discussed above, Fiona Trust involved the very issue of whether an arbitration clause could extend to questions about the existence or validity of the contract. If the parties in fact had been relying on Fiona Trust, they would have not included the references to the existence or validity of the agreements. Third, the phrase “including any question regarding its existence, validity or termination” also shows that the parties considered the scope of the arbitration clauses, but intentionally omitted any reference to the relationship established by the agreements. The most plausible explanation is that the parties intended to 42 narrow the scope of the arbitration clauses in the post-June 30, 2009 agreements when they omitted any reference to the “legal relationship” established by the contracts, in stark contrast to the pre-July 1, 2009 agreements. Fiona Trust recognizes that the presumption regarding an expansive reading of arbitration clauses does not apply when “the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.” [2007] UKHL 40 at ¶ 13. As discussed above, the language in the arbitration clauses in the post-June 30, 2009 agreements reveals the parties’ intent to exclude disputes regarding their relationship. Unlike the provisions in Fiona Trust, which refer to “the relations between the parties,” the arbitration clauses here omit the previously used phrase “the legal relationship established by this Agreement.” Moreover, Agreement 3 and Agreement 4 narrowly limit the term “this Agreement” to the contract itself as opposed to the legal relationship created by the contract. (See R. 92, Clause 1.2(a); R. 103, Clause 1.2(a).) Therefore, the presumption established in Fiona Trust is inapplicable here. (b) Fiona Trust Only Relates to the Scope of the Arbitration Clauses and Does Not Address the Other Grounds for the Majority’s Conclusion In discussing Fiona Trust, Stein argues that the majority’s finding that the forum selection clause in the Quennington Agreement is broader than the 43 arbitration clauses is “the basis” (i.e., the only basis) for the conclusion that the forum selection clause in the Quennington Agreement governs all the claims in this case. (Stein Br., 38.) That is incorrect. While the majority cited the scope of the dispute resolution clauses as a factor, it relied on several other grounds in deciding that the forum selection clause in the Quennington Agreement controls, including (1) the lack of clear evidence that the forum selection clause was terminated by the arbitration clauses; and (2) a finding that the integration clause and limited release in Agreement 4 do not, as a matter of New York law, result in a termination of the forum selection clause. (See R. 586–92.) Those points are discussed in further detail below (see infra pp. 44– 61), but the key for this discussion is that Fiona Trust does not address any of the additional grounds for the majority’s conclusion. That is because Fiona Trust only involved an arbitration clause in a single agreement between two parties, not conflicting dispute resolution clauses in several agreements among different parties. Indeed, the Court of Appeal in England has stated that “the decision in Fiona Trust has limited application to the questions which arise where parties are bound by several contracts which contain jurisdiction agreements for different countries.” Sebastian Holdings Inc. v. Deutsche Bank AG, [2010] EWCA (Civ) 998 at ¶ 49, available at http://www.bailii.org/ew/cases/EWCA/Civ/2010/998.html. 44 Therefore, even if it applies here, Fiona Trust relates to only one issue and it does not alter the majority’s holding in the Appellate Division Order. 4. The Majority Properly Found, as a Matter of New York Law, That the Forum Selection Clause in the Quennington Agreement Applies to All the Claims in This Case (a) There Was No “Clear Manifestation” of the Parties’ Intent to Terminate the Forum Selection Clause in the Quennington Agreement It is well established that forum selection clauses survive the termination of the agreements in which they are contained, unless there is a specific statement that the forum selection clause has been terminated. See Getty Props. Corp. v. Getty Petroleum Mktg., Inc., 106 A.D.3d 429, 430 (1st Dep’t 2013) (termination of lease “does not prevent enforcement of its forum selection clause”); Production Resource Grp., L.L.C. v. Martin Prof’l, A/S, 907 F. Supp. 2d 401, 412 (S.D.N.Y. 2012) (stating that “there is nothing in the Consultancy Agreement that explicitly neuters the forum selection clause upon termination of that agreement”) (emphasis added); AGR Financial, L.L.C. v. Ready Staffing, Inc., 99 F. Supp. 2d 399, 401 (S.D.N.Y. 2000) (forum selection clause “would still be effective” even if the agreement had been terminated); Young Women’s Christian Ass’n of U.S.A., Nat’l Board v. HMC Entertainment, Inc., No. 91 CIV. 7943 (KMW), 1992 WL 279361, *4 (S.D.N.Y. Sept. 25, 1992) (expiration of contract did not affect the forum 45 selection clause). The rationale for these rules is evident: “[G]iven the purpose of a forum selection clause, it would make little commercial sense to suppose that the parties intended it to lapse while claims might still arise under the contract.” 2 N.Y. PRAC., COM. LITIG. IN NEW YORK STATE COURTS § 13:11 (4th ed. Sept. 2016). The majority cites Getty (R. 586), and Stein and Aurdeley have not contested this basic principle regarding the survival of forum selection clauses. The majority also relied on Primex, for the corollary that there must be a “clear manifestation” of the parties’ intent to terminate a forum selection clause. (See R. 586.)14 Once again, Stein and Aurdeley do not challenge this statement of the applicable New York law, but they claim that the majority abused its discretion in holding that there was no “clear manifestation” of an intent to terminate. The majority focused on the arbitration clauses, noting that each provision is limited to disputes under “this Agreement.” (R. 587; emphasis in original.) Then majority stated that: “At best, this language indicates that the parties intended only 14 In Primex, this Court stated that “absent a clear manifestation of contrary intent, it is presumed that the parties intended that the arbitration forum for dispute resolution provided in the agreement will survive termination as to subsequent disputes arising thereunder, whether its cessation was the result of the expiration of its term, exercise of a unilateral termination option, or breach.” 89 N.Y.2d at 602 (emphasis in original). There is no dispute among the parties that the rule from Primex also applies to dispute resolution clauses calling for litigation. 46 to arbitrate disputes that arose after July 1, 2009, the effective date of those agreements. It does not indicate a clear manifestation that the forum selection clause in the Quennington Agreement had been abandoned.” (Id.) The majority also noted that the arbitration clauses are narrower than the forum selection clause in the Quennington Agreement because the latter applied to the legal relationship established by the contract: “That relationship survived the Quennington Agreement. Since the complaint asserts that Stein breached the fiduciary duty born out of that relationship, the forum selection clause should apply to the complaint.” (Id.) Stein and Aurdeley do not specifically attack these findings (at least in connection with the termination of the forum selection clause), and the majority’s conclusions are well supported by the law and the language in the provisions. First, if the parties wanted to replace the forum selection clause in the Quennington Agreement, they would have used equally broad language in the arbitration clauses in the post-June 30, 2009 agreements. In Sempra Energy Trading Corp. v. Algoma Steel, Inc. No. 00 CIV. 9227 (GEL), 2001 WL 282684 (S.D.N.Y. Mar. 22, 2001), aff’d, 300 F.3d 242 (2d Cir. 2002), one party argued that the forum-selection clause in a later agreement applied to disputes under an earlier agreement. The court stated: “[W]e must look to the language of the forum clause itself, which refers to ‘any action or proceeding relating to this agreement.’ . . . 47 This would be odd language to use in order to supplement or amend [the earlier agreement].” Id. at *6 (emphasis in original). Second, the courts have uniformly refused to apply dispute resolution provisions (requiring arbitration and/or litigation) retroactively where the clause is limited to claims under “this Agreement.” See, e.g., Thomas v. Carnival Corp., 573 F.3d 1113, 1117–19 (11th Cir. 2009) (clause applied to “[a]ny and all disputes arising out of or in connection with this Agreement ”); Wachovia Bank N.A. v. Schmidt, 445 F.3d 762, 767–69 (4th Cir. 2006) (same); Sec. Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 372 (6th Cir. 1999) (finding arbitration clause inapplicable to disputes under previous agreements where it applied to all claims “arising out of or relating to the [p]roducts furnished pursuant to this Agreement or acts or omissions under this Agreement”); TAPCO, 2014 WL 7228711 at *4 (holding that arbitration clauses and forum selection clause calling for litigation that are restricted to “this Agreement” did not apply retroactively or to the other related contracts in a series of agreements); Anselmo v. Univision Station Grp. Inc., No. 92 CIV. 1471 (RLC), 1993 WL 17173, *2 (S.D.N.Y. Jan. 15, 1993) (“[T]he forum selection clause by its terms applies only to litigation relating to ‘this Agreement,’ so it was not intended to govern disputes arising under the terms of earlier contracts or agreements.”). Cf. Tradecomet.com LLC v. Google, Inc., 435 F. 48 App’x 31, 2011 WL 3100388, *3–4 (2d Cir. July 26, 2011) (applying forum selection clause calling for litigation retroactively because it was not limited to “this Agreement”). Here, the arbitration clauses cannot be applied retroactively because, as in the above cases, they narrowly refer to disputes arising out of or in connection with “this Agreement” or “this agreement.” Stein and Aurdeley argue that there is a “clear manifestation” of the parties’ intent to terminate the forum selection clause in the Quennington Agreement because (among other things) a “WHEREAS” clause in Agreement 4 states that Chodiev and Aurdeley “wish to amend the terms of engagement of [Aurdeley and Stein].” (See Stein Br., 26; Aurdeley Br., 27.) Stein and Aurdeley cite this provision as unambiguous evidence that Agreement 4 completely replaced and superseded the pre-July 1, 2009 agreements, including the forum selection clause in the Quennington Agreement. This argument cannot be squared with the language in the arbitration clauses and it defies basic logic. If the parties wanted to arbitrate any disputes arising under the pre-July 1, 2009 agreements, the arbitration clauses would have referred to such claims or the earlier dispute resolution clauses. At a minimum, the parties would have made the arbitration clauses broader, rather than including language limiting arbitration to disputes under the particular contract. Instead, the parties 49 preserved the forum selection clause in the Quennington Agreement because a dispute under that contract could arise in the future (which it did).15 It is also inaccurate to describe Agreement 4 as wholly supplanting the earlier agreements. Pursuant to Agreement 4, Stein provided the same services that he did under the prior contracts. (Compare R. 113 with R. 82 and R. 90.) The only thing that changed was the compensation for those services (see R. 102; R. 106), so the “terms of engagement” mentioned in the “WHEREAS” clause in Agreement 4 refers to the decrease in compensation listed immediately above. (See R. 102.) In sum, Agreement 4 was merely a continuation of the Quennington Agreement, with substantially the same terms, and there is no evidence that the parties sought to replace the forum selection clause in the Quennington Agreement. In his brief (see Stein Br. 27–28), Stein also relies on cases holding that a subsequent agreement extinguishes an older agreement and provides the basis for a claim where the parties have “clearly” manifested their intent that the subsequent agreement supersedes, or substitutes for, the older one. See Metropolitan Steel 15 An article on the Appellate Division Order summarized this issue well, noting that it turns on the specific language used by the parties in the arbitration clauses and practitioners seeking to arbitrate claims should “make sure that the arbitration clause expressly applies to the entire relationship or to prior versions of the parties’ agreement.” P. Sherwin & A.F. Stach, First Department Finds Forum Selection Clause in Earlier Agreement Valid Despite Later Agreement Providing for Arbitration, MINDING YOUR BUSINESS (May 4, 2016), available at http://www.mindingyourbusinesslitigation.com/2016/05/first-department-finds-forum-selection- clause-in-earlier-agreement-valid-despite-later-agreement-providing-for-arbitration/. 50 Indus. v. Fidelity & Deposit Co. of Md., 68 A.D.2d 935 (2d Dep’t 1979); Blair & Co. v. Carlos Otto V., 5 A.D.2d 276 (1st Dep’t 1958); American Broadcasting- Paramount Theatres v. American Mfrs. Ins. Co., 48 Misc.2d 397 (Sup. Ct., N.Y. County 1965), aff’d, 24 A.D.2d 851 (1st Dep’t 1965), aff’d, 17 N.Y.S.2d 849 (1966). Those cases are inapplicable because they do not involve forum-selection clauses.16 In the context of forum selection clauses, a later clause may supersede the earlier clause (depending on other factors) only when they both cover the same subject matter. TAPCO, 2014 WL 7228711 at *3. Here, however, the clauses cover different subject matter because the forum selection clause in the Quennington Agreement is broader than the arbitration provisions, which are limited to “this Agreement” or “this agreement.” Therefore, the arbitration clauses do not supersede the forum selection clause because (among other things) the subject matter is different. See id. at *4. Cf. Sempra Energy, 2001 WL 282684 at *6 (holding that forum selection clause limited to disputes under “this agreement” did not apply retroactively to claims under an earlier agreement). 16 The cases cited by Stein are also easily distinguished from this case. Both Metropolitan Steel and Blair involved settlements of disputes under the earlier agreement. See 68 A.D.2d at 935; 5 A.D.2d at 278–79. Here, there was no settlement of any dispute under the Quennington Agreement. (See infra p. 59 n. 21.) American Broadcasting does not support Stein’s arguments because, in that case, the court found that there was no specific intent to discharge the relevant obligations under the earlier agreement. See 48 Misc.2d at 402–04. The same is true here. 51 This conclusion is consistent with analogous case law. In most cases, the issue is the converse of the situation here and the courts are deciding whether an earlier arbitration clause was superseded by a subsequent clause requiring litigation. The courts in those cases hold that an earlier, broad agreement to arbitrate controls and applies to later claims unless the subsequent forum-selection clause “specifically precludes” arbitration. E.g., Gadelkareem v. Blackbook Capital LLC, 46 Misc.3d 149(A), 2015 N.Y. Slip Op. 50265(U), *1 (Sup. Ct., App. Term, 1st Dep’t Mar. 4, 2015) (per curiam) (arbitration agreement was not negated by forum selection clause where the latter contained no express denial of the agreement to arbitrate). By the same token, there is no evidence that the arbitration clauses here specifically preclude litigation and, instead, the limiting language makes it clear that there is no such preclusion. (b) The Integration Clause in Agreement 4 Does Not Negate the Forum Selection Clause in the Quennington Agreement In the Appellate Division Order, the majority rejected the argument by Stein and Aurdeley (and the finding by the Supreme Court) that the integration clause in Agreement 4 negates the forum selection clause in the Quennington Agreement. (See R. 587–89.) The majority relied on Primex, in which this Court specifically held that standard integration clauses are “insufficient to establish any intent of the 52 parties to revoke retroactively their contractual obligations to submit disputes arising thereunder to arbitration.” 89 N.Y.2d at 599. See also Bank Julius Baer & Co., Ltd. v. Waxfield Ltd., 424 F.3d 278, 283 (2d Cir. 2005) (same); Gadelkareem, 2015 N.Y. Slip Op. 50265(U) at *1 (same). The majority explained that Primex turned on the purpose of integration clauses. An integration clause gives “full effect to the parole evidence rule, which bars extrinsic evidence tending to vary the terms of the agreement in which the merger clause is included.” (R. 588–89 (citing Primex, 89 N.Y.2d at 599–600).) “Thus, an antecedent agreement that does not modify the terms of the agreement with the merger clause continues to stand on its own.” (R. 589 (citing Primex, 89 N.Y.2d at 599–600).) The majority found that, as in Primex, “the forum selection clause in the Quennington Agreement did not alter the arbitration clause in [Agreement 4 or the Termination Agreement].” (R. 589.) The majority’s conclusion is a correct application of the law and facts. The forum selection clause in the Quennington Agreement does not modify the arbitration clauses in the post-June 30, 2009 agreements. Instead, the forum selection clause in the Quennington Agreement stands on its own and was not terminated by the later arbitration clauses. 53 The majority also noted the similarities between the integration clause in Primex and the one in Agreement 4. (R. 588.)17 The integration clause in the latter two agreements is also similar to the one in Bank Julius, where the court likewise found that there was no termination of the earlier dispute resolution clause. The relevant integration clauses are as follows: Primex: “All prior discussions, agreements, understandings or arrangements, whether oral or written, are merged herein and this document represents the entire understanding between the parties.” 89 N.Y.2d at 596–97. Bank Julius: “This Agreement supersedes all prior agreements and understandings between [the parties]. It constitutes the entire agreement of the parties.” 424 F.3d at 282. Agreement 4: “This Agreement contains the entire agreement and understanding of the parties and supersedes all prior arrangements, agreements or understandings (both oral and written) relating to the subject matter of this Agreement.” (R. 109, Clause 9.1; emphasis added.) If anything, the integration clauses in Primex and Bank Julius are even broader than the one in Agreement 4 (since they cover all prior agreements regardless of the subject matter), but this Court and the Second Circuit found that those provisions did not affect the forum selection clauses in earlier agreements. 17 The majority referred to the integration clause in the Termination Agreement (R. 588.), but this appears to be a typographical error because the Termination Agreement does not contain such a clause. The majority must have intended to refer to Agreement 3, which has an integration clause that is identical to the one in Agreement 4. 54 Indeed, if standard integration clauses like the one in Agreement 4 had the effect that Stein and Aurdeley urge on this appeal, they would always alter prior forum selection provisions. That is not the law. Stein and Aurdeley ignore the similarity among the integration clauses, and they also fail to address the majority’s finding that the antecedent forum selection clause in the Quennington Agreement does not modify the arbitration clauses in the post-June 30, 2009 agreements. Instead, Stein and Aurdeley argue that Primex is distinguishable from this case because it allegedly did not involve different dispute resolution clauses or the termination of dispute resolution clauses. (See Stein Br., 29–32; Aurdeley Br., 26–28.) Stein and Aurdeley misconstrue Primex. First, there is no basis for Stein’s and Aurdeley’s claim that Primex differs from this case because the first two agreements in Primex had arbitration clauses whereas the third agreement lacked a dispute resolution clause. (See Stein Br., 29; Aurdeley Br., 28.) According to Stein and Aurdeley, Primex only applies when the latter agreement is missing a dispute resolution clause. (See Stein Br., 29; Aurdeley Br., 28.) Primex, however, clearly states that the omission of an arbitration clause in the third agreement indicated an intent to allow for the litigation of disputes under that contract. See 89 N.Y.2d at 600. Moreover, in other cases following Primex, there were expressly different dispute resolution 55 clauses. See, e.g., Bank Julius, 424 F.3d at 282–83 (involving arbitration provisions in two contracts followed by a forum selection clause in a later contract calling for litigation); General Motors, 678 F. Supp. 2d at 142–44, 148–49 (involving forum selection clause in a contract calling for litigation and an arbitration provision in another contract). Second, Stein incorrectly contends that Primex did not involve the termination of an earlier clause. (See Stein Br., 30–31.) Aurdeley make a similar argument, claiming that the last agreement in Primex was “unconnected” with the prior contracts. (Aurdeley Br., 27.) In Primex, however, one of the parties argued that the last agreement’s termination of the substantive provisions in the earlier agreements also constituted a termination of the arbitration agreements in those contracts. Primex, 89 N.Y.2d at 601. This Court rejected such an argument, citing Matter of Schlaifer v. Sedlow, 51 N.Y.2d 181, 184–85 (1980) (per curiam) and other precedent (which are discussed further below). 89 N.Y.2d at 601.18 Thus, the agreements in Primex were in fact connected and the case involved an alleged termination of dispute resolution clauses. 18 Primex and Schlaifer involved arbitration clauses, but their holdings are applicable to forum selection clauses generally. In Schlaifer, for example, this Court referred to the arbitration clause at issue as a “choice of forum” and forum-selection clause. See 51 N.Y.2d at 184–85. 56 In sum, despite Stein’s and Aurdeley’s attempts to distinguish Primex from this case, it applies with full force here. (c) The Releases in Agreement 4 and the Termination Agreement Have No Effect on the Forum Selection Clause in the Quennington Agreement As with the integration clause, the majority rejected the argument by Stein and Aurdeley that the releases in Agreement 4 and the Termination Agreement negate the forum selection clause in the Quennington Agreement. It held that: “To the extent that [Agreement 4 and the Termination Agreement] contained language releasing the parties from liability arising out of their predecessor agreements, that language only served to alter the substantive rights of the parties; absent express language to the contrary, it cannot be interpreted as having altered the forum selection provisions contained in the Quennington Agreement.” (R. 589.) The majority cited this Court’s decision in Schlaifer (id.), which is exactly on point.19 In Schlaifer, one of the parties argued that a release of claims under two prior agreements “operated to wipe out” a dispute resolution clause (calling for arbitration) in those contracts. 51 N.Y.2d at 184. This Court stated that this argument “ignores the separability of provisions as to forum selection from the 19 We are assuming here, for purposes of discussing Schlaifer, that the releases in Agreement 4 and the Termination Agreement are general releases. As shown below, however, the releases are in fact limited rather than general. 57 substantive provisions of an agreement, fails to recognize the character and function of a general release, and overlooks the significance of our pertinent decisions.” Id. In order to negate a forum selection clause, the Court noted, there must be an “instrument of cancellation” through which the parties “expressly agreed that their prior agreement ‘is hereby cancelled and declared of no further force and effect, and said agreement shall be interpreted as though it had not been executed’ — that is, there was a complete nullification, ab initio, of every provision of the prior agreement, including its arbitration clause.” Id. at 184–85 (citing Matter of Minkin (Halperin), 279 A.D. 226, 227 (2d Dep’t 1951)). Schlaifer contrasted “such an instrument of obliteration” with a general release, which involves a termination of substantive rights under a prior contract. “Unlike a cancellation, … [a general release] falls short of a complete nullification of every provision of the prior agreement both substantive and procedural.” Id. at 185. The Court concluded that: “Thus in the absence of express provision to the contrary, where the differences between the parties relate only to the substantive terms of their agreement, they will be held in releasing claims to have dealt only with such substantive rights and obligations, not with the separate and distinct subject of choice of the arbitration forum for the resolution of disputes.” Id. 58 Stein and Aurdeley contend that this case is unlike Schlaifer because, in addition to a release, the agreements terminating the prior contracts contained arbitration clauses and Agreement 4 included an integration clause as well as a statement that it amended the terms of engagement. (See Stein Br. 34–35; Aurdeley Br. 26–28.) As shown above, the integration clause did not negate the forum selection clause. Furthermore, Agreement 4 falls well short of the Schlaifer standard, which requires a “complete nullification” of every provision in the Quennington Agreement, including the forum selection clause. Agreement 4 was a modification of the compensation terms set forth in the Quennington Agreement, not an obliteration of all the contractual provisions. Agreement 4 made no mention of the forum selection clause in the Quennington Agreement. In fact, the arbitration clause in Agreement 4 presented a perfect opportunity for the parties to nullify the forum selection clause in the Quennington Agreement, if that had been their intent. Instead, the restrictive nature of the arbitration clause demonstrates that the parties preserved the forum selection clause rather than causing its “obliteration.” This case, therefore, is directly controlled by Schlaifer and similar precedent. Even though the majority did not decide the parties’ disagreement on whether the releases in Agreement 4 and the Termination Agreement are limited or 59 general or whether they operated only prospectively, Stein and Aurdeley discussed the nature and scope of the releases in their briefs.20 Stein and Aurdeley argue that the releases are general and that they also relieve Stein and Aurdeley of all liability for the period prior to July 1, 2009. (See Stein Br. 44–48; Aurdeley Br., 31–32.) As an initial matter, the provisions in Agreement 4 and the Termination Agreement are limited releases. General releases typically refer to any and all claims, “past, present or future.” E.g., Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 76 A.D.3d 310, 314–15 (1st Dep’t 2010), aff’d, 17 N.Y.3d 269 (2011). The releases in Agreement 4 and the Termination Agreement are far narrower and they are limited to “further” (i.e., additional) claims in the future for payments due under Agreement 2 and the Quennington Agreement.21 The ban on future requests for payment under the pre-July 1, 2009 agreements is perfectly consistent with the reduction in Stein’s compensation that took place as of July 1, 2009. Indeed, Agreement 4 states for the avoidance of doubt that “the Client shall have no further liability to make any payment of whatsoever nature to the Consultant” pursuant to Agreement 2, while the 20 Aurdeley insists that the majority found that the releases are “prospective,” but it cites the dissent rather than the majority. (See Aurdeley Br., 31 (citing R. 601–02).) 21 Also, general releases tend to accompany a settlement of a dispute by parties. Here, despite the Supreme Court’s erroneous reference to a “settlement” allegedly taking place around July 1, 2009 (R. 33), there is no evidence of a dispute at that time or any settlement. 60 Termination Agreement contains a similar statement with respect to the Quennington Agreement. (R. 111, Clause 13(b); R. 116.) Aurdeley claims that construing the foregoing language as solely a release of the obligation to make payments under the old agreements would be mere surplusage because the termination of the Quennington Agreement and Agreement 2, by itself, already had such an effect. (Aurdeley’s Br., 32.) Aurdeley ignores the fact that the Termination Agreement and Agreement 4 are the very documents in which the parties terminated the Quennington Agreement and Agreement 2, respectively. The reference to “further liability” simply reinforces the termination of the two earlier agreements by pointing out that the future compensation for consulting services would be reduced as of July 1, 2009 and that Stein and Aurdeley should not look for payments under the pre-July 1, 2009 contracts. If the parties instead had sought to release all liability for pre-July 1, 2009 claims — such as claims that there was a breach of contract by Stein and Aurdeley during the period from January 1 through June 30, 2009 or a tort that arose during the same time frame — they would have referred to all “past” claims in Agreement 4 and the Termination Agreement. They did not. Thus, Agreement 4 and the Termination Agreement contain only limited releases aimed solely at payments due under Agreement 2 and the Quennington Agreement 61 Aurdeley relies on the limitations of liability in Agreement 4 as proof that the releases are general and also operate retroactively. (See Aurdeley Br., 29–30 (citing R. 108-09, Clause 8.6).)22 Clause 8.6 provides that the liability under Agreement 3 and Agreement 4 will be limited to the amounts “paid and payable” under the Quennington Agreement, Agreement 2, Agreement 3 and Agreement 4. However, if all liability under the Quennington Agreement and Agreement 2 was extinguished by the releases, as Stein and Aurdeley claim, there would be no need to refer to the liability under the pre-July 1, 2009 agreements. By the same token, Clause 8.6 would not refer to amounts “payable” under those agreements because, accordingly to Stein and Aurdeley, that amount should be zero. Thus, the limitation of liability clause in Agreement 4 is additional proof that the releases do not relate to all claims arising out of the pre-July 1, 2009 agreements. (d) Because the Claims in This Case Originated Under the Quennington Agreement and/or Are Inextricably Linked, They Should Be Litigated in Court The majority accepted Garthon and Crestguard’s argument that the forum selection clause in the Quennington Agreement, which was never terminated, also applies to the post-June 30, 2009 claims in the Complaint. (See R. 589–91.) The 22 Garthon and Crestguard have defenses to the limitation of liability in Agreement 4, but they are not material to this appeal. Garthon and Crestguard do not agree that the limitation applies here, and they reserve all rights. 62 majority cited cases from sister courts holding that “where some of a group of claims are covered by an arbitration agreement, it is appropriate to litigate the entire group in court if all of the claims were already asserted in court and the claims not subject to arbitration would be ‘inextricably bound together’ with the claims that are subject to arbitration.” (R. 590 (citing Steigerwald v. Dean Witter Reynolds, 84 A.D.2d 905, 906 (4th Dep’t 1981), aff’d on other grounds, 56 N.Y.2d 621 (1982); Brennan v. A.G. Becker, Inc., 127 A.D.2d 951, 952–53 (3d Dep’t 1987); Young v. Jaffe, 282 A.D.2d 450, 450–51 (2d Dep’t 2001)).) The majority noted that it is arguable that all the claims arose under the Quennington Agreement because Stein gave his original advice in the pre-July 1, 2009 period (see R. 590– 91), but they added that “even if some of the claims could be said to arise out of the Quennington Agreement, and others out of [Agreement 4], they are cut from the same cloth, and are, unquestionably, inextricably bound together and therefore should be litigated in court.” (R. 591.) Stein and Aurdeley do not question the majority’s conclusion in their briefs, and there are no grounds for such a challenge. The majority characterized the case law accurately and it cannot be doubted that, as the majority found, the claims in this action originated in the pre-July 1, 2009 time period and/or all the claims are “inextricably bound together.” See generally 23 CARMODY–WAIT 2D § 141:59 63 (Dec. 2016) (“[W]here the arbitrable and nonarbitrable claims are inextricably bound together and should be resolved in the same forum, the entire matter should be litigated in the court action which has already been commenced.”). C. Stein’s and Aurdeley’s Public Policy Arguments Are Misplaced Stein and Aurdeley assert that the Appellate Division Order violates the public policy of New York in favor of arbitration. (See Stein Br., 48–51; Aurdeley Br., 28.) That public policy, however, only comes into play when there is a “clear, explicit and unequivocal” agreement to arbitrate all the claims at issue. Matter of Waldron, 61 N.Y.2d at 183–84; see also Basis Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 132 (1st Dep’t 2014) (noting that the standard for compelling arbitration is very strict and the burden on the party moving to compel is a “heavy” one). As discussed above, Stein and Aurdeley have failed to meet the high standard established by this Court’s precedent. Aurdeley contends that “if there was any about whether the parties intended to arbitrate these disputes, the majority should have resolved the question in favor of arbitration.” (Aurdeley Br. 28.) That is contrary to the law. In First Options, the Supreme Court held that ambiguity in an arbitration agreement requires the interpreting court to adopt a presumption against arbitrating the question of arbitrability, as opposed to the usual presumption in favor of arbitration. See 514 64 U.S. at 944–45. Instead, as discussed above, absolute clarity is required before a New York court may order the arbitration of any issue. Furthermore, there is an equally strong New York policy favoring enforcement of forum selection clauses requiring litigation. See Sterling Nat’l Bank v. Eastern Shipping Worldwide, Inc., 35 A.D.3d 222, 222 (1st Dep’t 2006) (“[I]t is the well-settled policy of the courts of this State to enforce contractual provisions for choice of law and selection of a forum for litigation.”) (internal quotation and citation omitted). As a result, there is a presumption that forum selection clauses survive termination of the underlying contract, and such provisions may be superseded by a later clause only where there is a “clear manifestation” of intent that the subsequent provision controls. Such a “clear manifestation” of intent is lacking in this case. Finally, Stein and Aurdeley argue that (i) this action has no connection to New York and its sole purpose is to support the proceedings in England; and (ii) Garthon and Crestguard should be required to arbitrate their claims against Stein because he was purportedly an “agent” of Aurdeley. (See Stein Br., 48–50; Aurdeley Br., 33–34.) In the process, Stein — in particular — engages in false, desperate and unseemly attacks relating to collateral matters. (See Stein Br., 8– 12.) Such accusations have no place in these proceedings, and they only 65 underscore the weakness of Stein’s and Aurdeley’s arguments on the relevant issues.23 The claims regarding the motivation for this action are also demonstrably wrong. Garthon and Crestguard have alleged, with supporting detail, that Stein is domiciled in New York, there is personal jurisdiction over Aurdeley as Stein’s alter ego, and the causes of action in the Complaint arise out of Stein’s activities in New York (personally and through Aurdeley). (See R. 59–61, ¶¶ 5–8, 12–13; R. 68, ¶ 35.) Garthon and Crestguard have made a prima facie showing of connections to New York, which they seek to buttress through the discovery ordered by the First Department. (R. 593.) Moreover, it is illogical to suggest that this action has no purpose except to assist the English proceedings. As discussed above, the English proceedings concluded more than a year ago. Garthon and Crestguard filed the Complaint — and have continued this action well past the end of the English proceedings — to collect damages from Stein and Aurdeley for their breaches of contract and other wrongful acts. 23 Stein’s references to alleged actions by Mr. Chodiev and his business partners, as well as the claims of forgery, are particularly egregious and should be addressed briefly. (See Stein Br. 8, n.2, and 10.) First, the statements regarding Mr. Chodiev and his partners are based on hearsay newspaper articles that are outside the record and should not be considered. Second, Stein has not produced any evidence that Garthon, Crestguard or a Chodiev-related company or individual was responsible for any forged documents. 66 Stein and Aurdeley fare no better with their contention that Stein is merely an “agent” of Aurdeley. The alter ego allegations in the Complaint are supported by Mr. Justice Burton’s statements in the English proceedings, including the fact that Stein lied about Aurdeley’s funding of his litigation. (See supra p. 19.) The Appellate Division Order also described Aurdeley as an “entity controlled by [Stein].” (R. 580.)24 Thus, despite the constant attempts to portray Stein as nothing more than Aurdeley’s agent, Garthon and Crestguard have made a prima facie showing on the alter ego issue and are entitled to further discovery. CONCLUSION In the Appellate Division Order, the majority did not abuse its discretion in identifying the applicable law and concluding that the claims in this case are not arbitrable. There is nothing irrational in the majority opinion and the result is not shocking to the conscience. To the contrary, the majority properly followed well- settled precedent and set forth a rational basis for its findings, which are amply supported by the law and facts. Therefore, Garthon and Crestguard respectfully request that this Court affirm the Appellate Division Order in all respects. 24 Stein moved for a modification of this finding, but that application was denied. See Order Den. Def.-Resp’t Stein’s Mot., No. M-2735, July 21, 2016, available at https://www.nycourts.gov/courts/AD1/calendar/appsmots/2016/July/2016 07 21 mot.pdf (p. 47); http://www.nycourts.gov/reporter/motions/2016/2016_80175.htm. Dated: New York, New York December 8, 2016 HOGAN LOVELLS US LLP 67 Pieter VanTol Daryl L. Kleiman 875 Third Avenue New York, NY 1 0022 Tel. (212) 918-3000 Fax (212) 918-3100 Attorneys for Plaintiffs- Respondents Garthon Business Inc. and Crestguard Limited