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Connecticut Superior Court Judicial District of Stamford-Norwalk at StamfordJun 28, 2005
2005 Ct. Sup. 11521 (Conn. Super. Ct. 2005)
2005 Ct. Sup. 1152139 CLR 587

No. FST CV 05 4003953 S

June 28, 2005



Plaintiff has sought a pendente lite order, in the nature of an attachment, pursuant to Conn. General Statutes § 52-422, in a setting where arbitration is pending, per contract, in New York.


The plaintiff, Kenneth R. MacArtney, commenced this contract action on March 21, 2005, against the defendants, GCG SBIC Management Corporation, Greyrock Capital Group, LLC, GCG General Partner LLC, GCG SBIC General Partner Corporation, GCG Investors LP, GCG SBIC Investors LP, Mark Shufro, Stephen Etter, Todd Osburn, and Tracy Perkins. Pursuant to General Statutes § 52-278a et seq., the plaintiff sought a prejudgment remedy. On April 18, 2005, the defendants invoked the contractual right to commence an arbitration before the American Arbitration Association in New York. Then, on April 19, 2005, the defendants moved to stay the Connecticut proceedings and compel arbitration pursuant to General Statutes §§ 52-409 and 52-410, and the Federal Arbitration Act, 9. U.S.C. §§ 3 and 4. In response, noting the pending arbitration, the plaintiff moved for an "order pendente lite" pursuant to General Statute § 52-422. On May 2, 2005, the court heard the parties in oral argument. On May 5, 2005, the defendants filed a motion to dismiss the plaintiff's action, the application for prejudgment remedy and the request for an order pendente lite on the grounds that this court lacks subject matter jurisdiction and the venue is improper. (The points raised in defendant's May 5 Motion to Dismiss are those argued on May 2 when defendants sought to stay plaintiff's request for an order pendente lite.)

The plaintiff filed a nine-count complaint, sounding in breach of contract, breach of covenant of good faith and fair dealing, conspiracy, tortious interference with plaintiff's contract with Management Company, tortious interference with plaintiff's contract with Greyrock, tortious interference with business expectancy, payments withheld of New York labor law, wrongful detention of monies, and declaratory judgment.

General Statutes § 52-409 provides: "Stay of proceedings in court. If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement, shall, on motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in compliance with the agreement, provided the person making application for the stay shall be ready and willing to proceed with the arbitration."
General Statutes § 52-410 provides in relevant part: "Application for court order to proceed with arbitration. (a) A party to a written agreement for arbitration claiming the neglect or refusal of another to proceed with an arbitration thereunder may make application to the superior court for the judicial district in which one of the parties resides . . . for an order directing the parties to proceed with the arbitration in compliance with their agreement."

General Statutes § 52-422 provides in relevant part: "Order pendente lite. At any time before an award is rendered pursuant to an arbitration under this chapter, the superior court for the judicial district in which one of the parties resides . . . upon application of any party to the arbitration, may make forthwith such order or decree, issue such process and direct such proceedings as may be necessary to protect the rights of the parties pending the rendering of the award and to secure the satisfaction thereof when rendered and confirmed."

CT Page 11522

The issue raised in these motions is whether an arbitration to take place in New York can be an arbitration of the kind contemplated by § 52-422, such that a Connecticut court may issue an order pendente lite. The plaintiff seeks such an order to secure the sum of six million dollars pending the outcome of the arbitration. The defendants argue that the court lacks subject matter jurisdiction because the arbitration is taking place in New York before the American Arbitration Association. They also note that the contract which includes the arbitration clause also includes a "choice of law" provision which provides that Delaware law governs the agreement and rights and obligations of the parties. For these reasons, the defendants argue, Connecticut law including the statute allowing the order pendente lite, does not apply. As explained, infra, the court finds that there is no lack of subject matter jurisdiction and that General Statutes § 52-422 is applicable.

"Subject matter jurisdiction is the power of the court to hear and determine cases of the general class to which the proceedings in question belong." (Internal quotation marks omitted.) Ambroise v. William Raveis Real Estate, Inc., 226 Conn. 757, 764-65, 628 A.2d 1303 (1993). "[A] motion to dismiss is the appropriate motion for raising a lack of subject matter jurisdiction." St. George v. Gordon, 264 Conn. 538, 545, 825 A.2d 90 (2003). "An application for an order pendente lite pursuant to § 52-422 is a special statutory proceeding. The statute confers a definite jurisdiction upon a judge and it defines the conditions under which such relief may be given . . . In such a situation jurisdiction is only acquired if the essential conditions prescribed by statute are met. . . . By its express terms, § 52-422 allows the trial court to issue an order only upon application of any party to the arbitration . . . Thus, a pending arbitration is an essential condition that must exist before § 52-422 may be invoked." (Citations omitted; internal quotation marks omitted.) Goodson v. State, 232 Conn. 175, 180, 653 A.2d 177 (1995). The parties concede that an arbitration between the parties is currently pending in New York, thus, this essential condition is obviously met.

The defendants urge the court to adopt the position that the language of § 52-422, which may be utilized as a basis for an attachment of funds, "before an award is rendered pursuant to an arbitration under this chapter," refers to arbitration taking place in Connecticut under chapter 909 of the General Statutes. (Emphasis added.) Therefore, the defendants argue, § 52-422 is not applicable to an arbitration pending in New York. The defendants' argument is unpersuasive.

This judicial officer has also come to conclude that the defendants have attached far more significance upon the phrase "under this chapter" than is justified. While one does not readily suggest that some legislative phrases are loosely employed, and some principles of construction obviously suggest otherwise, it should be noted that in the Connecticut statutes alone the phrase "under this chapter" is said, via computerized research, to appear 882 times. "In this chapter" appears on 568 occasions and "pursuant to this chapter" is found in 265 places.

First, the only express requirement provided for in § 52-408, is that the arbitration must be pursuant to a written agreement between the parties. See Bennett v. Meader, 208 Conn. 352, 359, 545 A.2d 553 (1988) ("it is clear from this latchkey provision that only written agreements to arbitrate are valid"). It is undisputed that the pending arbitration is pursuant to a written agreement between the parties.

The defendants also argue that this court lacks subject matter jurisdiction because their agreement provides a specific forum for settling all disputes, which is "New York City . . . in accordance with the rules then obtaining of the American Arbitration Association." It is a well-established principle . . . that parties cannot by consent confer jurisdiction upon courts where the law has not given it or take it away where the law has given it . . . The [arbitration] provision in the [parties'] agreement cited by the defendant[s] neither confers exclusive subject matter jurisdiction over disputes arising out of the [parties'] agreement . . . nor divests this court of subject matter jurisdiction . . . Even if the parties could . . . divest this court of jurisdiction by way of their agreement, the [parties'] agreement fails to evidence such an intent." (Citations omitted; internal quotation marks omitted.) Saxe v. Anderson Kill Olick Oshinsky, Superior Court, judicial district of New Haven, Docket No. CV 96 0385479 (July 23, 1996, Meadow, S.T.R.) ( 17 Conn. L. Rptr. 386). This rule is, of course, applicable here.

The arbitration clause, section 10.1(a) of the parties' agreement, provides in relevant part: "To the fullest extent permitted by law, any dispute, controversy or claim arising out of or relating to this Agreement or to the Company's affairs or the rights or interests of the Members or the breach or alleged breach of this Agreement . . . shall be settled by arbitration in New York City (or, if applicable law requires some other forum, then such other forum) in accordance with the rules then obtaining of the American Arbitration Association."

Additionally, "[t]he mere agreement to arbitrate, standing alone, does not give rise to the necessary implication that arbitration is a condition precedent to an action in court. For arbitration to be a condition precedent, the agreement to arbitrate must expressly so stipulate, or it must necessarily be implied from the language used." Multi-Service Contractors, Inc. v. Vernon, 181 Conn. 445, 448, 435 A.2d 983 (1980). In short, it would appear that the defendants' invocation of the "under this chapter" phrase in § 52-422 is not a sufficient platform from which one must deem illegitimate an attachment pendente lite on the solitary fact that the slated arbitration will occur in New York.

The defendants also press the fact that their agreement contains a "choice of law" provision that designates Delaware as the governing law. The language contained in this choice of law provision is similar to the language used in provisions that have been held to be generic by courts that have considered such matters. In Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 64, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995), the court held that "the choice-of-law provision covers the rights and duties of the parties, while the arbitration clause covers arbitration; neither sentence intrudes upon the other." Upon consideration, "[n]umerous courts of appeals have concluded that Mastrobuono requires that the intent of the contracting parties to apply state arbitration rules or law to arbitration proceedings must be explicitly stated in the contract and that under Mastrobuono, a general choice of law provision does not evidence such intent." Jung v. Assn. of American Medical Colleges, 300 F.Sup.2d 119, 152 (D.D.C. 2004), and cases cited therein.

The choice of law provision, section 10.2 of the parties' agreement, provides: "This Agreement and the rights and obligations of the Members shall be governed by and construed in accordance with the laws of the State of Delaware."

In Prasad, M.D., Inc. v. Investors Associates, Inc., 82 F.Sup.2d 365, 368-69 (D.N.J. 2000), the United States District Court considered similar choice of law language and found that the agreement "provides that New York law governs the parties' rights under the contract, and that the arbitration shall be governed by [the National Association of Securities Dealers (NASD) rules]. In Prasad, the NASD rules were silent concerning the contested issue. Id., 369. In the present case, however, the AAA rules are not silent. Rule-34 of the AAA's Commercial Arbitration Rules provides for interim measures similar to the relief the plaintiff seeks under § 52-422. Rule-34 provides in relevant part "(a) The arbitrator may take whatever interim measures he or she deems necessary, including injunctive relief and measures for the protection or conservation of property and disposition of perishable goods." More pointedly significant is subsection (c), which provides: "A request for interim measures addressed by a party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate." (Emphasis added.) The very rules which the defendants argue the parties are bound to arbitrate under provide for application to the court for relief pending the outcome of arbitration.

The court finds that the defendants' rather heavy reliance on Macrolease International v. Nemeth, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 99 0364471 (June 9, 2000, Skolnick, J.) ( 27 Conn. L. Rptr. 342), is misplaced. In Macrolease, which concerned General Statutes § 52-278a et seq., Connecticut's PJR statutes, the parties did not contest "the validity of the choice of law clause" and the court did not "analyze the choice of law clause to determine that pursuant to the parties' contracts, New York's substantive law applie[d]." Id., 343, n. 1. Here, the court has analyzed both the arbitration agreement and choice of law provision and has determined that the AAA rules, which apply to the pending arbitration, allow for the application to this court for an order pendente lite pursuant to § 52-422. Moreover, the jurisdiction and action of this court is not inconsistent with "the central purpose of the Federal Arbitration Act [which is] to ensure that private agreements to arbitrate are enforced according to their terms." (Internal quotation marks omitted.) Mastrobuono v. Shearson Lehman Hutton, Inc., supra, 514 U.S. 53-54.

Pursuant to § 52-409, the defendants' motion to stay proceedings, dated April 19, 2005, is granted as to the plaintiff's action and application for prejudgment remedy. Because the parties have voluntarily commenced arbitration, the defendants' motion to compel arbitration pursuant to § 52-410 is moot. The defendants' motion to dismiss, dated May 5, 2005, is denied. The court will consider the plaintiff's application for an order pendente lite, pursuant to § 52-422.