Rita Cusimano,, et al., Respondents,v.Andrew V. Schnurr, CPA, et al., Appellants. Bernard V. Strianese, et al., Intervenors-Appellants.BriefN.Y.November 18, 2015To Be Argued By: PATRICK MCCORMICK Time Requested: 30 Minutes APL-2014-00287 New York County Clerk’s Index No. 652429/11 Court of Appeals STATE OF NEW YORK RITA CUSIMANO, individually, and derivatively as a Shareholder, Officer, Partner and Member of BERITA REALTY CORP., BERITA REALTY CO., and BERITA REALTY, LLC, and a Partner of the STRIANESE FAMILY LIMITED PARTNERSHIP and DOMINIC J. CUSIMANO, Plaintiffs-Respondents, —against— ANDREW V. SCHNURR, CPA, MICHAEL GERARD NORMAN, CPA, P.C. and MICHAEL GERARD NORMAN, CPA, individually, Defendants-Appellants, —and— BERNARD V. STRIANESE and BERNADETTE STRIANESE, Third-Party Intervenors-Appellants. REPLY BRIEF FOR THIRD-PARTY INTERVENOR-APPELLANT BERNADETTE STRIANESE Co-Counsel: PETER J. TERRACCIANO, ESQ. JANINE T. LYNAM, ESQ. JOSEPH, TERRACCIANO & LYNAM LLP 2 Roosevelt Avenue, Suite 200 Syosset, New York 11791 Telephone: (516) 496-0202 Facsimile: (516) 921-7785 Lead Counsel: PATRICK MCCORMICK, ESQ. CHRISTINE MALAFI, ESQ. CAMPOLO, MIDDLETON & MCCORMICK, LLP 4175 Veterans Memorial Highway, Suite 400 Ronkonkoma, New York 11779 Telephone: (631) 738-9100 Facsimile: (631) 738-0659 April 6, 2015 Attorneys for Third-Party Intervenor-Appellant Bernadette Strianese i Table of Contents POINT I ........................................................................................................................................................ 1 THE FEDERAL ARBITRATION ACT IS NOT APPLICABLE BECAUSE THE EXECUTION OF CORPORATE GOVERNANCE DOCUMENTS AND AN AGREEMENT TO TRANSFER OWNERSHIP OF A NEW YORK CORPORATION ARE NOT AGREEMENTS EVIDENCING TRANSACTIONS THAT AFFECT OR INVOLVE INTERSTATE COMMERCE .................................. 1 THE BERITA OPERATING AGREEMENT .......................................................................................... 5 THE FLIP PARTNERSHIP AGREEMENT ............................................................................................ 7 THE SEAVIEW AGREEMENT .............................................................................................................. 8 THE RELEVANT CASE LAW REQUIRES REVERSAL ..................................................................... 9 POINT II ..................................................................................................................................................... 15 RESPONDENT WAIVED HER RIGHT TO ARGUE THAT THE STATUTE OF LIMITATIONS SHOULD BE DECIDED BY AN ARBITRATOR AND THE DOCTRINE OF WAIVER SHOULD NOT BE MADE INAPPLICABLE UNDER NEW YORK LAW ............................................................. 15 POINT III .................................................................................................................................................... 25 THE CLAIMS ASSERTED BY RESPONDENT ARE BARRED BY THE STATUTE OF LIMITATIONS ........................................................................................................................................... 25 CONCLUSION ........................................................................................................................................... 26 ii Table of Authorities CASES Advest, Inc. v. Wachtel, 253 A.D.2d 659 (2d Dep't 1998) ............................................................................................... 20 Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265 (1995) ........................................................................................................ 3, 4, 7, 9 Ayzenberg v. Bronx House Manual Campus, Inc., 93 A.D.3d 607 (1st Dep't 2012) ................................................................................................ 11 Bar-Ayal v. Time Warner Cable, Inc., 2006 U.S. Dist. LEXIS 75972; 2006 WL 2990032 (S.D.N.Y. 2006) ....................................... 12 Bowen v. Sec. Pest Control, Inc., 879 So. 2d 1139 (2003) ............................................................................................................. 13 California Suites, Inc. v. Russo Demolition, Inc., 98 A.D.3d 144 (1st Dep't 2012) ................................................................................................ 19 Caplin Enters., Inc. v. Arrington, 145 So. 3d 675 (2013) ............................................................................................................... 13 Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) ...................................................................................................................... 1 Com-Tech Assocs v. Computer Assocs Internat'l, Inc., 938 F.2d 1574 (2d Cir. 1991) .................................................................................................... 18 Cotton v. Slone, 4 F.3d 176 (2d Cir. 1993) .......................................................................................................... 18 Diamond Waterproofing Systems, Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247 (2005) ....................................................................................................... 9, 17, 19 Doctor's Assocs, Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997) ...................................................................................................... 19 EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) .................................................................................................................. 12 Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623 (1993) ............................................................................................................... 22 iii Gonzalez v. Raich, 545 U.S. 1 (2005) ...................................................................................................................... 12 Gov't Emples. Ins. Co. v. Grand Med Supply, Inc., 2012 U.S. Dist. LEXIS 92469; 2012 WL 2577577 (E.D.N.Y. 2012) ....................................... 12 Grigsby & Assocs., Inc. v. M Securities Investment, 664 F.3d 1350 (11th Cir. 2011) ................................................................................................. 17 Hart v. Tri-State Consumer, Inc., 18 A.D.3d 610 (2d Dep't 2005) ................................................................................................. 21 Imclone Sys. v. Walksal, 22 A.D.3d 387 (1st Dep't 2005) ................................................................................................ 11 Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20 (2d Cir., 1995) ......................................................................................................... 23 Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd's, 66 A.D.3d 495 (1st Dep't 2009) ................................................................................................. 17 Louisiana Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 626 F.3d 156 (2d Cir. 2010) ...................................................................................................... 18 LZG Realty, LLC v. H.D.W. 2005 Forest, LLC, 71 A.D.3d 643 (2d Dep't 2010) ................................................................................................. 16 N.J.R. Associates v. Tausend, 19 N.Y.3d 597 (2012) ......................................................................................................... 10, 22 Nissan v. Hurt, 2013 WL 5592372 (2013) ......................................................................................................... 13 Pest Mgmt., Inc. v. Langer, 369 Ark. 52 (2007) .................................................................................................................... 14 Petrie v. Clark Moving and Storage, Inc., 2010 U.S. Dist. LEXIS 48460; 2010 WL 1965801 (W.D.N.Y. 2010) .................................... 11 Ping v. Beverly Enters. 376 S.W.3d 581 (2012) ............................................................................................................. 13 PPG Industries, Inc. v. Webster Auto Parts, Inc., 128 F.3d 103 (1997) ............................................................................................................ 23, 24 iv Stark v. Molod Spitz DeSantis & Stark, 9 N.Y.3d 59 (2007) ................................................................................................................... 16 Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002) ...................................................................................................... 20 STATUTES 9 U.S.C. §2 ...................................................................................................................................... 4 C.P.L.R. §§7502(b), 7503(b) .......................................................................................................... 5 C.P.L.R. 7502................................................................................................................................ 21 C.P.L.R. 7503(b) ........................................................................................................................... 22 1 POINT I THE FEDERAL ARBITRATION ACT IS NOT APPLICABLE BECAUSE THE EXECUTION OF CORPORATE GOVERNANCE DOCUMENTS AND AN AGREEMENT TO TRANSFER OWNERSHIP OF A NEW YORK CORPORATION ARE NOT AGREEMENTS EVIDENCING TRANSACTIONS THAT AFFECT OR INVOLVE INTERSTATE COMMERCE The question presented here is whether the parties’ corporate formation/governance agreements and the agreement governing the sale of interests in a New York corporation by one sister to another sister are contracts “evidencing a transaction involving commerce within the meaning of the Federal Arbitration Act (FAA).” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 53 (2003). They are not. There is no nexus between the relevant agreements and interstate commerce that would “make enforceable, pursuant to the FAA, an arbitration provision included in th[ose] agreement[s].” Id. Accordingly, the FAA is not applicable to the arbitration agreement at issue and Appellants are entitled to an order reversing the Appellate Division Decision and Order from which this appeal was taken and reinstating the Judgment and Order of the trial Court (Ramos, J.) (R. 63-68).1 As discussed below, (i) the corporate formation/governance agreements dictate the rights and obligations of the individual parties to those agreements and do not evidence any business transactions involving interstate commerce; (ii) the 1 Numerical references preceded by “R.” refer to the designated page of the Record on Appeal. 2 transfer from one sister to another of ownership interests of a New York corporation does not involve interstate commerce; and (iii) Respondents do not argue that those transactions are governed by or subject to federal regulation. Id. at 56-57. Instead, Respondents’ arguments are based on a misinterpretation and misstatement of the FAA’s applicability: when Respondents’ arguments are extrapolated to their inevitable conclusion, the result is that the law governing the same arbitration clause can change based on changing circumstances that did not exist at the time of the transaction. Another result of Respondents’ analysis is the C.P.L.R. Article 75 Arbitration provisions being rendered inapplicable to commercial entities. Neither case law nor sound policy supports these results. Article 75 of the C.P.L.R. grants certain rights. Parties (including non-controlling parties) to business governance/formation agreements should not be deprived of those statutory rights because of events that unfolded years later, including a New York resident subsequently moving out of state to create the appearance of an interstate transaction. Respondents spend pages of their brief discussing the intricacies of the underlying claims – throwing around words like “fraud” and “malpractice” as if the merits of these claims were presented to and decided by the lower Courts. 3 Besides the fact that these intentionally inflammatory and gratuitous comments have no bearing on the issues before this Court, what makes them even more inappropriate is that the lower Court (Ramos, J.) opined that Respondents’ claims were “spite litigation” (R. 311) and a panel of arbitrators (R. 398) and a Nassau County judge (Warshawsky, J.) (R. 414) found Respondent Rita Cusmano’s “fraud accusation” is “not credible.” Respondents make these incredible and hackneyed accusations as a smokescreen to prevent this Court from seeing the true issues presented. Obviously Appellants deny the alleged facts underlying Respondents’ claims. The day will come when the merits of those non-time barred claims are presented and decided, but that day is not today. Similarly, Respondents spend an exorbitant amount of time discussing the real property, acquired or sold pursuant to other agreements, entered into years after the entity formation documents, between the entities and third parties, that are not parties to the arbitration agreements at issue here. This discussion is not on point. The business entities are not the parties to the arbitration agreements at issue and conduct of the business of those entities with third parties under separate contracts are not the transactions/contracts to be examined here under Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265 (1995) and the other relevant case law. 4 Appellants do not dispute the analysis mandated by Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265 (1995), and the other relevant cases in determining the applicability of the FAA. This analysis requires the application of the “commerce in fact” test, in which a court determines whether “the ‘transaction’ in fact ‘involv[es]’ interstate commerce, even if the parties did not contemplate an interstate commerce connection.” Id. at 281. The Court in Allied-Bruce Terminix Companies, Inc. made clear that the transaction to be examined in the analysis is the specific arbitration contract at issue. Indeed, the language of the FAA compels this analysis. The statute requires an analysis to determine whether the contract at issue evidences a transaction involving interstate commerce. Id. at 267, 276; 9 U.S.C. §2. The Court in Allied-Bruce explained that the application of this analysis ensures uniformity of application and enforceability of arbitration provisions which does not result from application of Respondents’ analysis. Id. at 279. Analyzing the contracts at issue here leads to only one conclusion: the FAA is not applicable to the transactions evidenced by those contracts. The three agreements/transactions at issue are: a) the Operating Agreement of Berita Realty, LLC (“Berita”) entered into between sisters and New York residents Appellant Bernadette Strianese and Respondent Rita Cusimano (R. 165); b) the partnership agreement of a New York partnership: The Strianese Family Limited Partnership (“FLIP”) entered into between New York resident Appellant 5 Bernard V. Strianese and his wife Carmella Strianese (R. 183); and, c) the agreement involving the sale/purchase of interests in 60 Seaview Corp., a New York corporation (“Seaview”) between New York residents Bernadette Strianese and her sister, Respondent Rita Cusimano (R. 204). The transactions complained of (i.e., these specific agreements) all involve the formation, governance and ownership of New York entities and the relationship of the individual New York resident signatories to those agreements. Respondents do not claim, as they cannot, that the contracts involve the sale, transfer, or purchase of goods or services involved in interstate commerce (R. 120- 164). Rather, Respondents point only to subsequent transactions under separate agreements between the business entities and third parties for the supposed interstate commerce connection. But, interstate commerce is not implicated by the subject agreements. The FAA therefore does not govern the agreements containing the relevant arbitration clauses and the statutes of limitations claims were properly before and decided by the trial Court. C.P.L.R. §§7502(b), 7503(b). THE BERITA OPERATING AGREEMENT The stated purpose of the Berita operating agreement executed by Bernadette Strianese and Rita Cusimano was “to establish their respective rights and obligations in connection with the limited liability company” (R. 165). That 6 agreement between New York resident individuals did not involve or affect interstate commerce. It is not disputed, and the finding of the trial Court was not disturbed on appeal, that “Berita owns only one asset—a 19% ‘passive investment’ in Greenbriar, an entity that owns a Marriott hotel property in Plainview, New York” (R. 28, 133). Thus, Respondents’ attempt to paint a picture of Berita being involved in “very substantial commercial activity” (Respondents’ Brief p. 35) is revisionist history. But, even if the entity was involved in any commercial activity, such would have no bearing here because the transactions at issue are not with/by Berita and do not involve Berita’s purchase of its interest in Greenbriar, but instead involve the individual rights and obligations of the individual parties to the operating agreement. Thus, the relevant transaction in no way involves the sale, purchase or transfer of goods or services and does not involve interstate commerce in any way. Further, the parties to the operating agreement were New York residents. Respondent Rita Cusimano’s attempt to allege she is currently a Florida resident must be seen as nothing more than posturing to further her forum shopping and to save her doomed argument. The August 31, 2011 Complaint alleges that Rita Cusimano is a resident of New York (R. 90); the Seaview stock transfer agreement 7 recites that as of January 1, 2000 she was a New York resident (R. 204); and, the trial Court recognized that she was a New York resident (R. 28). Even if Respondent Rita Cusmano’s claim that, after commencing the action, she moved to Florida was credible, what would happen if Rita moved back to New York tomorrow? Would Respondents concede the FAA would not then apply? This rhetorical question demonstrates the flaw in Respondents’ claims. The arbitration clauses in the agreements cannot be subject to separate meanings and require application of different law depending on where someone moves or claims to reside, and what the entities may have done, years after the agreements were executed. The point made by the Court in Allied-Bruce regarding uniformity of application of the FAA compels rejection of this result. THE FLIP PARTNERSHIP AGREEMENT As with Berita, the FLIP partnership agreement (R. 183-203) involves New York residents and spells out the rights and obligations of the partners. As the trial Court found in an undisturbed finding (R. 28-29), and as conceded by Respondents (R.143), FLIP’s business is “entirely passive.” Further, while Respondents’ brief makes claims about certain real estate owned by FLIP, that real estate was never owned by the individual partners or signatories to the agreements. It was at all times owned by FLIP, having been 8 acquired through a different contract nearly two years after the partnership agreement with the arbitration clause was executed (R. 409). Thus, the individuals subject to the transaction contained in the contract containing the arbitration clause (the FLIP partnership agreement) did not involve interstate commerce. Further evidencing the fact that the transaction did not involve interstate commerce is the fact that the agreement itself provides that it is “governed by the laws of the State of New York applicable in the case of agreements made and to be performed entirely within such state” (R. 200). THE SEAVIEW AGREEMENT The Seaview agreement at issue is dated January 1, 2000, between Rita, a New York resident, and her sister Bernadette, also a New York resident (“Seaview Agreement”) (R. 204). As alleged in the arbitration Statement of Claim, Rita claims that 15 years ago, certain facts were concealed from her and the fair market value and equity of her interests were misrepresented to her and, she now claims, as a result she sold her interests in Seaview to Bernadette for less than fair market value (R. 146-149). As also alleged in the Arbitration Statement of Claim, the sale transaction memorialized by the Seaview Agreement involved a single transaction that did not involve the sale, transfer or purchase of goods or services involved in interstate 9 commerce (R. 146-149). In addition, there is no claim that the Seaview Agreement was subject to Federal law or regulation. In short, Respondents’ claims, as they relate to the Seaview Agreement, do not involve economic activity involving interstate commerce but instead involve the transfer of interests in a New York corporation between two New York resident sisters, and is certainly not subject to Federal oversight. THE RELEVANT CASE LAW REQUIRES REVERSAL This Court’s decision in Diamond Waterproofing Systems, Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247 (2005), which cites with approval Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995), compels reversal. Diamond Waterproofing instructs that “where a contract containing an arbitration provision ‘affects’ interstate commerce, disputes arising thereunder are subject to the FAA.” Diamond Waterproofing Systems, Inc., v. 55 Liberty Owners Corp., 4 N.Y.3d at 252. In determining that the contract at issue in that case affected interstate commerce and therefore was subject to the FAA, the Court looked at the transaction involved in the contract (the repair and reconstruction of a facade and roof of a building located in Manhattan), and noted that the project that was the subject of the contract involved an engineering firm located in Illinois and material suppliers from New Jersey, Oklahoma, Maryland, Kansas and Massachusetts. 10 Here, the formation documents of Berita and FLIP do not recite as their purpose any particular business transaction but instead contain typical broadly worded governance provisions permitting the entities to engage in any lawful business activity (R. 165-182, 183-203). Similarly instructive is this Court’s decision in N.J.R. Associates v. Tausend, 19 N.Y.3d 597 (2012). In that case, which is the only case cited and involving a corporate governance agreement, the Court did not reach the question as to whether the agreement at issue was subject to the FAA or New York law. However, the concurring opinion noted that the three partners were residents of New York, Italy, and California respectively and that the agreement implicated a specific transaction in which a Manhattan residential property valued at $1.9 million and financed by Bankers Trust Company was acquired. Contrary to the facts in N.J.R. Associates, in this case, each of the parties at the time the transaction was entered into were New York residents and, with the exception of Respondent Rita Cusimano, who claims to have added Florida as a residence after she commenced this action, all the parties remain New York residents (Rita does not deny being a New York resident). Moreover, no party acquired real property through the subject agreements, nor do those agreements involve the sale or transfer of goods or services. 11 The cases cited by Respondents are inapposite. In Ayzenberg v. Bronx House Manual Campus, Inc., 93 A.D.3d 607 (1st Dep’t 2012) the Court found the FAA applied to a contract for the sale/purchase of services (camp attendance) involved commerce. Here, none of the relevant agreements related to the purchase or sale of goods or services. In Imclone Sys. v. Walksal, 22 A.D.3d 387 (1st Dep’t 2005), the Court found that the parties’ agreement affected interstate commerce despite the fact the negotiation of the agreement occurred in New York between New York parties because the Respondent was federally regulated, its products were distributed nationally, the Respondent had investors from across the country, and a restrictive covenant contained in the agreement restricted Respondents throughout the United States. None of these factors exist in this case. Petrie v. Clark Moving and Storage, Inc., 2010 U.S. Dist. LEXIS 48460, 2010 WL 1965801 (W.D.N.Y. 2010), involved a contract to store and ship household goods. The Court determined that the contract affected interstate commerce because the Respondent’s employer was engaged in business in multiple states, the defendant moving and storage company was used when the Respondent temporarily moved overseas and to Michigan, and the moving and storage business model involved moving between states. No such interstate contracts or business exists in this case. 12 Bar-Ayal v. Time Warner Cable, Inc., 2006 U.S. Dist. LEXIS 75972, 2006 WL 2990032 (S.D.N.Y. 2006), involved an agreement for cable television services which the court found were federally regulated and therefore involved interstate commerce. Gov’t Emples. Ins. Co. v. Grand Med Supply, Inc., 2012 U.S. Dist. LEXIS 92469, 2012 WL 2577577 (E.D.N.Y. 2012), involved a suit to recover for false claims under and automobile insurance policy. The court, without explanation, determined that auto insurance policies affect interstate commerce. This case neither involves an automobile insurance company or automobiles that may travel in interstate commerce. Gonzalez v. Raich, 545 U.S. 1 (2005), involved the use of medical marijuana and claims under, inter alia, the Commerce Clause of the United States Constitution and the federal Controlled Substances Act. The Court held the case involved a valid exercise of federal power that does not exist in this case. EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), involved claims under the Americans with Disabilities Act. The Court determined that the employment contracts at issue were covered by the FAA, and simply stated that employment contracts, except for those covering workers engaged in transportation, are covered by the FAA. No such employment agreement exists in this case. 13 In Ping v. Beverly Enters., 376 S.W.3d 581 (2012) the Supreme Court of Kentucky held that the FAA applied to an agreement involving nursing home care, because healthcare was subject to Federal control. In Caplin Enters., Inc. v. Arrington, 145 So. 3d 675 (2013), the Court of Appeals of Mississippi, in construing a contract involving delayed deposit banking agreements, determined that because the matter involved banking and was subject to the federal Truth and Lending Act, the matter involved interstate commerce. No such facts exist in this case nor do Respondents allege such. In Nissan v. Hurt, 2013 WL 5592372 (2013), the Court of Appeals of Kentucky, in an unpublished decision, determined that interstate commerce was involved and therefore the FAA applied to the purchase of a motor vehicle because the automobile vehicle history report showed that prior to the transaction at issue the car had been transported between Kentucky and Tennessee and then back to Kentucky and that a credit application was completed with an out of state credit application processing entity. No such out of state banking transactions or transportation of goods exist in this case. In Bowen v. Sec. Pest Control, Inc., 879 So. 2d 1139 (2003), the Supreme Court of Alabama confirmed the applicability of the FAA because the defendant operated in two separate states and purchased chemicals from a Connecticut company and equipment from a Tennessee company and the chemicals involved 14 were regulated by the Federal Environmental Protection Agency. No such out of state contacts or federal regulations exist here. Finally, in Pest Mgmt., Inc. v. Langer, 369 Ark. 52 (2007), the Supreme Court of Arkansas, without explanation, noted that the contract between the parties contained an arbitration clause referencing the applicability of the FAA and specifically recited that the arbitration agreement was made pursuant to a transaction involving interstate commerce. No such admission exists here. Accordingly, each of the cases cited by Respondents, which Respondents believe stand for the proposition that the FAA applies in this case, is readily distinguishable and have no application here. 15 POINT II RESPONDENT WAIVED HER RIGHT TO ARGUE THAT THE STATUTE OF LIMITATIONS SHOULD BE DECIDED BY AN ARBITRATOR AND THE DOCTRINE OF WAIVER SHOULD NOT BE MADE INAPPLICABLE UNDER NEW YORK LAW Can a party choose to litigate for years, arguing that New York law applies to arbitration provisions in various agreements, and, after commencing the third in a series of her own litigations, fully submitting and arguing the issue of the statute of limitations to the trial court, and receiving an adverse decision on that issue, then avoid the adverse trial court decision on the statute of limitations by claiming for the first time that the matter and all statute of limitations issues should be decided by an arbitrator? It is respectfully submitted that this Court should answer this question in the negative, as the trial Court’s order should not be treated as an advisory opinion from which Respondent can simply “opt out” of by demanding arbitration. It is Respondent who chose, after being unsuccessful in earlier lawsuits in the Supreme Court, Nassau County (which she commenced), to commence the New York County lawsuit currently before this Court (R. 90). It was not until the timeliness/statute of limitations issues were fully briefed, argued, and decided against the Respondent by the trial court that she chose to file her demand for arbitration, raise the FAA for the first time, and claim that the same statute of limitations issues already decided by the trial court were for the arbitrator to decide 16 (R. 31). It is settled law that parties to an agreement containing an arbitration clause can waive their rights to arbitrate, and that parties can chart their own procedural course by their conduct. Stark v. Molod Spitz DeSantis & Stark, 9 N.Y.3d 59, 66 (2007); LZG Realty, LLC v. H.D.W. 2005 Forest, LLC, 71 A.D. 3d 643 (2d Dep’t 2010). There can be little doubt that Respondent Cusimano cannot now argue that the arbitrator should decide the timeliness/statute of limitations presented here by her full participation in the motion practice on the issue, without objection, until the court’s decision did not come out in her favor. Respondent Cusimano, having lost all claims of ownership and control of the businesses in the prior related lawsuits and arbitrations, first commenced suits in the Supreme Court, Nassau County (R. 15-18), then resorted to suit against the companies’ accountants (the current suit), leaving Appellant Strianeses out of the suit and traveling to New York County to do so (R. 18). In both the suit that commenced this action, and Respondent’s Arbitration Statement of Claim, she clearly and unequivocally pled that the Strianeses and the accountants worked together to harm the Respondents (R. 118). There can be no other explanation for her failure to include the Strianeses in this lawsuit at the outset other than in an attempt to get around adverse Nassau County court decisions that directed her to arbitration. Respondent Cusimano’s actions here continue her attempt to evade adverse court decisions and should not be condoned by this Court. 17 Respondents have invoked the jurisdiction of the trial court as to the timeliness/statute of limitations issues, not only by her own commencement of this litigation after being warned by the Strianeses that the claims should be arbitrated (R. 443-46), but also by her full participation in the motion practice relative to those issues without objection (R. 19, 25, 31). The trial court’s Order prohibiting the arbitration to proceed as to claims predicated on acts or omissions prior to September 13, 2009 (R. 50) should be given full force and effect, even assuming that the FAA applies to this matter, as Cusimano’s waiver of the right to submit those issues to the arbitrator has been established as a matter of law. The issue of whether a waiver has occurred is one for the court to make in the first instance, not the arbitrator. See Diamond Waterproofing, 4 N.Y.3d at 252; e.g., Grigsby & Assocs., Inc. v. M Securities Investment, 664 F.3d 1350 (11th Cir. 2011) (“it is presumptively for the courts to adjudicate disputes about whether a party, by earlier litigating in court, has waived the right to arbitrate”). Respondent’s reliance upon the case of 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) fails to recognize that the issue of the statute of limitations was not discussed in that case. Further, her interpretation of the Life Receivables case, if adopted, would all but render C.P.L.R. Article 75 meaningless. 18 Federal law favors arbitration, to have disputes resolved without delay and expense of litigation, but where a party turns to litigation “fully aware” of its right to arbitration, as Respondent here, that party has waived its right to arbitration. Cotton v. Slone, 4 F.3d 176, 179 (2d Cir. 1993); Com-Tech Assocs v. Computer Assocs Internat’l, Inc., 938 F.2d 1574, 1577 (2d Cir. 1991) (quotation omitted). The Second Circuit has specifically stated that the “aims” of the FAA “would be defeated if a party could reserve its right to appeal an interlocutory order denying arbitration, allow the substantive lawsuit to run its course . . . and then, if dissatisfied with the result, seek to enforce the right to arbitration….” Cotton, 4 F.3d at 180. The Second Circuit has also stated that “a litigant is not entitled to use arbitration as a means of aborting a suit that did not proceed as planned….” Louisiana Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 626 F.3d 156, 161 (2d Cir. 2010). That is precisely what Respondent has done here—Respondent herself commenced the litigation and fully participated in motion practice regarding the timeliness/statute of limitations issues without objection. It was not until the Court found much of her claims barred (R. 50) that she turned to arbitration in an effort to avoid the court’s decision on the issues. This course of conduct cannot be found to be anything other than a waiver of her right to have those issues decided by an arbitrator rather than the Court. 19 Further, as this Court has stated, even when the FAA applies, the parties to an agreement can explicitly agree to leave issues of timeliness to the Court rather than to an arbitrator. Diamond Waterproofing, 4 N.Y.3d at 253. It submitted that an explicit agreement can be either in writing to that effect, or by clear and explicit acts of waiver. Respondent herein “chart[ed her] own procedural course through the courts [and by so doing] fashion[ed] the basis upon which [this] particular controversy [should] be resolved.” California Suites, Inc. v. Russo Demolition, Inc., 98 A.D.3d 144, 156 (1st Dep’t 2012). Clearly, Respondent explicitly “expressed[ her] intention to have the court determine the statute of limitations” and timeliness issues. Diamond Waterproofing, 4 N.Y.3d at 253. Having so charted her course, Respondent cannot now claim a “do-over” and ignore the trial court’s order on the timeliness/statute of limitations issue. Prejudice has been established by Respondent’s own steps in this litigation. Prejudice establishing a waiver of the right to arbitrate an issue under the FAA occurs “when the party seeking arbitration ‘loses a motion on the merits and then attempts, in effect, to relitigate the issue by invoking arbitration.’” Doctor’s Assocs, Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir. 1997) (quotations and citations omitted). Respondent ignores the fact that she is attempting to relitigate the timeliness issues before the arbitrator, having lost those arguments in the lawsuit she commenced on the very claims she now seeks to arbitrate. The law is clear. 20 Respondent cannot chose to “unfollow” the rules of law and unfavorable decisions of the trial court relative to the timeliness issue. Id. This Court should not permit Cusimano to relitigate the issues decided against them by the trial court in arbitration, and should not permit Cusimano to vitiate the trial court finding against them “by recasting the same [arguments] in a new forum.” Advest, Inc. v. Wachtel, 253 A.D.2d 659, 661 (2d Dep’t 1998). To allow otherwise would substantively prejudice Bernadette Strianese by forcing her to relitigate the same issues in arbitration. Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002). Prejudice is also found by the fact that Bernadette Strianese was compelled to litigate over these agreements in Nassau County for years under New York law. Bernadette Strianese compelled these disputes into arbitration under New York law (while Respondent was contending that the disputes were not arbitable at all). Bernadette Strianese fought to uphold those decisions on appeal, contesting contrary arguments that would have never been available to Respondent if the FAA applied. Respondent served subpoenas in those actions under the C.P.L.R., and was granted substantial discovery by Justice Warshawsky, which would have been manifestly improper had the FAA applied. Having received, for years, the benefits of the application of New York law to the applicable agreements, and discovery from Justice Warshawsky, Respondent cannot now turn to the FAA 21 when it suits her, while depriving Bernadette Strianese of her right to make a C.P.L.R. 7502 motion. Even worse, Respondent’s “lack of prejudice” argument as to Bernadette Strianese is predicated on the fact that Bernadette Strianese was not a party to this action at its commencement. Of course, Bernadette Strianese was only left out as a party because of Respondent’s attempts (through her first forum shopping trip to New York County) to avoid the Nassau County Arbitration Orders by suing only the accountants. In essence, Respondent contends that the facts of her first forum shopping endeavor excuse her second. This simply cannot be countenanced. If this Court finds that the FAA is not applicable to the corporate governance issues at hand, under New York law, Respondent has clearly waived her right to arbitration of the issue by commencing this litigation and participating in motion practice relative to same. Hart v. Tri-State Consumer, Inc., 18 A.D.3d 610 (2d Dep’t 2005). Respondent’s Respondents’ Brief cites to various cases without recognizing that none of those cases dealt with the issue presented here: a Respondent engaging in years of litigation in Nassau County, her commencement of yet another a litigation in New York County and then, when faced with an adverse court decision on an important meritorious issue (here, the statute of limitations), Respondent’s attempt to avoid her third foray into the courtroom to go to arbitration. 22 For example, Respondent’s reliance upon this Court’s decision in N.J.R. Associates v. Tausend, 19 N.Y.3d 597 (2012), fails to recognize that Bernadette did not demand the arbitration in this matter, and only joined in this lawsuit after the issue of timeliness had been fully made and argued without objection from Respondent at the trial court level. In addition, N.J.R. was precluded by statute (C.P.L.R. 7503(b)) from having the issue of timeliness of counterclaims determined by a court because N.J.R. combined and participated in the arbitration proceeding. C.P.L.R 7503(b) explicitly precludes a court from determining statute of limitations claims in such situations. Here the statute of limitations claims were determined before the Appellants participated in the arbitration Respondent’s reliance on Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623 (1993), is misplaced, as that case did not deal with a situation where the party demanding arbitration was the very party who initiated the lawsuit sought to be stayed pending arbitration and the Fletcher Court was faced with the issue of waiver based upon the signing of an arbitration agreement, not waiver based upon the actions of the party now seeking arbitration of an issue. The same can be said for all of the other cases to which Respondent’s Brief relies upon for the waiver issue. The motion practice on the issues of timeliness and statute of limitations had been made and orally argued by July 2012 (R. 266-313). After Respondent’s 23 September 2012 motion to stay the action pending arbitration, which did not argue that the FAA applied to the matter (R. 115-17), Bernadette Strianese intervened in the lawsuit (R. 902). Thus, at the time of Bernadette’s intervention, no party had ever so much as mentioned the FAA in the years of litigation through two separate courts involving the relevant agreements. After Appellant’s motion was made, Respondent first argued both applicability of the FAA and that an arbitrator should hear and decide the timeliness/statute of limitations issues, further prejudicing Bernadette in this matter. Respondents’ citation to Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20 (2d Cir. 1995), is erroneous and fails to recognize that it was the defendant in that case who sought arbitration and the issue was whether defendant waived its right to arbitration through participation in the lawsuit. Respondent in that case was found to have been prejudiced by defendant’s actions in participation in the lawsuit and delay in demanding arbitration. Here, the same is true. Respondent’s initiation of the lawsuit and participation in the motion practice related to the timeliness and statute of limitations issues without objection or claim of rights of arbitration have prejudiced the defendants and Bernadette, thereby amounting to a waiver of the right to arbitration on those issues. Likewise, Respondent misleadingly cites to the case of PPG Industries, Inc. v. Webster Auto Parts, Inc., 128 F.3d 103 (1997), referencing the need for 24 extensive pre-trial discovery and motion practice in order to waiver to occur. The Court found that PPG had “acted inconsistently” with its attempt to arbitrate the issues brought by defendants on the counterclaims after participating in discovery, and then determined that PPG had waived its right to arbitration. What Respondent fails to mention is that the PPG court specifically stated that “the determination of waiver depends on the particular facts of each case,” PPG Industries, 128 F.3d at 108, and that the Court went on to further state that permitting PPG to go to arbitration “at this point would be unfair as well as a waste of both judicial and arbitral resources.” Id. at 110. The same doctrine clearly applies here—to permit Cusimano to have an arbitrator decide the issues of timeliness/statute of limitations that have been fully briefed, argued, and decided by the trial court without mention of arbitration by Cusimano would be inherently unfair and prejudicial to Respondent, as well as a waste of judicial and arbitral resources. 25 POINT III THE CLAIMS ASSERTED BY RESPONDENT ARE BARRED BY THE STATUTE OF LIMITATIONS Appellant Bernadette Strianese, rather than re-state the arguments related to the merits on the issue of the statute of limitations as barring this lawsuit, and, therefore, the arbitration, rely upon the arguments and reasoning contained in Point III in the Reply Brief of Appellants Schnurr, Norman, and Bernard Strianese. 26 CONCLUSION Because the FAA is not applicable to the arbitration agreements at issue, and Respondent nevertheless waived any right to arbitrate, the Decision and Order appealed from must be reversed and the trial court Judgment and Order reinstated. Dated: Ronkonkoma, New York April 6, 2015 Respectfully submitted, ______________________________ Patrick McCormick, Esq. Christine Malafi, Esq. Campolo, Middleton & McCormick, LLP 4175 Veterans Memorial Hwy., Ste. 400 Ronkonkoma, New York 11779 (631) 738-9100 Attorneys for Third-Party Intervenor- Appellant Bernadette Strianese Joseph, Terracciano & Lynam LLP 2 Roosevelt Avenue, Suite 200 Syosset, New York 11791 (631) 496-0202 Co-Counsel for Third-Party Intervenor- Appellant Bernadette Strianese /s/ Patrick McCormick