Court Opinion

ID: 6098400
Source: CourtListenerOpinion
Date Created: 2022-01-13 20:41:41.626449+00
Date Added: 2024-06-11T08:53:29.354466
License: Public Domain

Gonzalez, J.
(dissenting). The issue on this appeal is whether the IAS court properly enjoined respondent Edgar H. Garza-Morales from continuing with the proceeding he commenced before a Mexican labor tribunal in view of the parties’ agreement to arbitrate “any dispute” arising out of their partnership agreement. Because the majority’s holding has sanctioned an injunction against foreign litigation while simultaneously dispensing with the rigorous showing required by this State’s courts for such extraordinary relief, and in doing so, has undermined the integrity and authority of that foreign tribunal, I respectfully dissent.
The facts underlying the dispute are briefly stated. Garza-Morales is a Mexican-born lawyer who was admitted to practice in both Mexico and New York. He joined Curtis in 1977 as an associate, working in the New York office. In 1991, Garza-Morales became an “agreed payment partner,” or contract partner, of Curtis, with the understanding that he would assist the law firm in its efforts to establish a Mexican branch. In that year, the Mexican law firm of Diez, Garza-Morales y Brida, *271S.C. (S.C.) was established under Mexican law, and, after Curtis purchased 49% of the equity of S.C. in 1995, its name was changed to Curtis, Mallet-Prevost, Colt & Mosle, S.C. (Curtis S.C.).
The parties disagree on one significant point. According to Garza-Morales, after 1991 he spent “roughly half’ his time in Mexico working for clients of Curtis and Curtis S.C., and the other half working in Curtis’s New York office. Garza-Morales also asserts that he maintains residences in both New York and Monterrey, Mexico. Curtis counters that Garza-Morales has always been based in its New York office during his tenure with the firm, and he never spent any extended time in the Mexico office of Curtis S.C. or any other Curtis office outside of New York. Curtis further implies that Garza-Morales does not actually have a residence in Mexico, but merely has family there.
The governing partnership agreement executed by Garza-Morales in his capacity as a Curtis agreed payment partner provided for arbitration in New York City of “any dispute or claim arising out of or in any way relating to this agreement or the Partnership.” Partners are defined in the agreement as including agreed payment partners.
In late 2001, a dispute arose between Garza-Morales and the law firm. According to Curtis, Garza-Morales’s productivity fell off to the point where his nonbillable hours far outnumbered the billable hours; he spent firm time working on personal matters for which the firm received no payment; he ceased coming to the office in November 2001; and he attempted to transfer firm files and office furniture to his New York City home, but was prevented from doing so. As a result of this conduct, Curtis’s partners voted him out of the partnership in December 2001.
In contrast, Garza-Morales contends that the law firm dismissed him as a result of his legal argument in an unrelated malpractice suit that he should not be held liable because he was only a “contract partner” of Curtis. Garza-Morales further asserted that his low billable hours were due to a health problem, about which the law firm was aware.
In December 2001, Garza-Morales filed the complaint in the Mexican proceeding, alleging claims against Curtis, its partners, Curtis S.C. and two of its partners, seeking reinstatement and payment of earned compensation. Although acknowledging that he was a contract partner of Curtis, Garza-Morales’s complaint alleges that he was essentially an employee of Curtis.
*272On April 12, 2002, immediately after receiving the complaint in the Mexican proceeding, Curtis filed a demand for arbitration with the American Arbitration Association alleging that Garza-Morales had breached his fiduciary duties and sought, inter alia, damages and the return of firm files. Curtis also commenced the instant special proceeding against Garza-Morales to compel him to arbitrate the dispute pursuant to the arbitration provision of the partnership agreement and to enjoin him from prosecuting the Mexican proceeding. Curtis alleged irreparable harm if the Mexican proceeding were not enjoined, namely, the expense of defending in a foreign jurisdiction and the possibility of disparate results in the two forums.
In opposition, Garza-Morales argued that he was not bound by the arbitration clause because his relationship with Curtis was not that of a true partner. He further contended that under Mexican law, workers are not permitted to waive earned compensation or other benefits, and that Mexico had the greater interest in determining this dispute because the firm was actively engaged in business there and it had consented to be governed by Mexican law. Lastly, Garza-Morales argued there was no irreparable harm to Curtis since it had lawyers in Mexico to defend it there.
In its May 7, 2002 order, the IAS court rejected Garza-Morales’s claim that he was not bound by the arbitration clause because he was not a true partner, and compelled him to arbitrate. With respect to the injunctive relief, the IAS court relied on this Court’s decision in Matter of Propulsora Ixtapa Sur (Omni Hotels Franchising Corp.) (211 AD2d 546 [1995], lv denied 85 NY2d 805 [1995]), which held that it was error to stay the arbitration of a dispute, also the subject of a previously commenced Mexican lawsuit, where the parties’ marketing agreement was to be construed in accordance with New York law and required arbitration of all disputes in New York. Although the IAS court in this case acknowledged that Matter of Propulsora did not involve the propriety of enjoining a party from proceeding with foreign litigation,* it nevertheless relied on this Court’s statement in that case that comity is not a rule of law, but only of practice, convenience and expediency (id. at 548) to support its holding that the rule of comity was no bar to enjoining Garza-Morales’s previously commenced Mexican proceeding.
*273The IAS court, in a footnote, distinguished this Court’s decision in Faberge Intl. v Di Pino (109 AD2d 235 [1985]), which held that it was error to enjoin an Italian-born American citizen, who worked in Italy, from commencing a suit against his employer in an Italian labor court, despite the fact that his employment contract contained a clause providing for arbitration in New York. In distinguishing Faberge, the IAS court opined that our decision may have been based on the fact that the employee had been working in Italy for 13 years prior to his termination, while Garza-Morales did not dispute Curtis’s contention that his primary office was in New York and that he billed no time in Mexico during the years 2000 and 2001.
On appeal, Garza-Morales argues that the IAS court ignored the proper standard enunciated by the Court of Appeals for determining whether a New York court may enjoin a litigant from prosecuting claims in a foreign tribunal. Under that correct standard, he contends, the rule of comity requires that Curtis’s motion for injunctive relief prohibiting him from prosecuting the Mexican proceeding be denied.
In Arpéis v Arpéis (8 NY2d 339, 341 [I960]), the Court of Appeals stated: “The use of the injunctive power to prohibit a person from resorting to a foreign court is a power rarely and sparingly employed, for its exercise represents a challenge, albeit an indirect one, to the dignity and authority of that tribunal.” Thus, “an injunction will be granted only if there is danger of fraud or gross wrong being perpetrated on the foreign court” (id.).
In Faberge, this Court applied the Arpéis standard in a context similar to that in the present case. In Faberge, an Italian-born American citizen was terminated by his employer, for whom he worked as an international sales executive in Italy. A written employment agreement provided that it would be governed by New York law and that all controversies relating to the agreement would be arbitrated in New York City. After the employee announced his intention to institute an action before the Italian Labor Court, the employer commenced an action in New York seeking, inter alia, to enjoin the employee from commencing suit in any forum other than New York. The motion court granted the employer’s motion to enjoin any action in the Italian forum and compelled arbitration. On appeal, this Court upheld the direction to arbitrate in New York but reversed that portion of the order “restraining [the employee] from pursuing his Italian statutory rights in an Italian forum.” (Id. at 238.)
*274In addition to quoting the Arpéis standard requiring a fraud or gross wrong, in Faberge we found it significant that the record was devoid of proof “that the arbitration clause was intended to encompass defendant’s Italian statutory rights” so as to infer a waiver of those rights (id. at 240). In addition, we explained that even if such a waiver could be inferred from the arbitration clause, the court “acting pursuant to the principles of comity, should have then weighed the Italian public policy objectives of the affected statutes against New York’s policy in favor of arbitration to determine whether any waiver should be enforced” (id.). Since we found nothing in the record “to indicate that the [employee’s] Italian statutory claims arose out of the agreement or were subsumed or precluded by the agreement” (id. at 241), we concluded that these claims had a validity independent of the agreement and vacated the injunction.
Curtis has failed to meet its burden, as movant, of demonstrating that Garza-Morales should be enjoined from pursuing his claims in the Mexican proceeding. Before the IAS court, Curtis did not even attempt to show that “there is danger of fraud or gross wrong being perpetrated on the foreign court” (Arpéis at 341), and its attempt to do so on appeal is hardly persuasive. Curtis argues that certain “flagrant misstatements of fact” by Garza-Morales suggest a substantial danger of fraud being perpetrated upon the Mexican labor tribunal. Curtis’s characterization is exaggerated. For instance, although Curtis contends that Garza-Morales’s assertions that he maintains a residence in Monterrey, that he was employed in Mexico while at the firm, and that he divided his time between Mexico and New York are outright false, in fact, Garza-Morales offers evidence supporting each of these assertions.
The Faberge decision also requires us to look at whether the arbitration clause in issue here was intended to encompass the Mexican statutory and constitutional employment rights asserted by Garza-Morales in the Mexican proceeding. On this point, Curtis argues that Faberge is distinguishable, since in that case it was uncontested that the Italian employee had certain statutory claims under Italian law and no proof existed that the arbitration clause encompassed such claims. Here, in contrast, Curtis argues that as a nonequity partner of a New York law firm, who resided in New York and rarely performed work in Mexico, Garza-Morales “obviously could have no legitimate claim to any Mexican statutory benefits afforded to employees in Mexico.” Thus, Curtis essentially argues that Garza-*275Morales has no viable claims under Mexican law because he is not an “employee” working in Mexico, and therefore his claims for compensation and reinstatement must be encompassed within the broad arbitration agreement.
The problem with Curtis’s position is that it is based on factual and legal assertions that are hotly contested by Garza-Morales. For instance, while Curtis asserts that the Mexican labor laws cited by Garza-Morales apply only to laborers in Mexico, not law firm partners based in New York City, Garza-Morales disputes this and says that the Mexican labor tribunal has exclusive jurisdiction over his claims. This conflict cannot be resolved in favor of either party on the present record.
A similar factual conflict undermines the IAS court’s attempt to distinguish Faberge from this case. The IAS court relied on the fact that the Italian employee in Faberge had apparently lived and worked in Italy for 13 years in order to find that his Italian statutory fights existed independently of the arbitration agreement. In this case, however, the court summarily concluded that Garza-Morales lacked a sufficient nexus to Mexico to benefit from its labor laws, despite substantial evidence to the contrary. Indeed, the record shows that Garza-Morales was a founding partner of Curtis S.C.; correspondence, including some from Curtis, shows that he spent substantial time working in Mexico; and Curtis’s argument that he did not bill for any time in Mexico during the years 2000-2001 certainly raises a strong inference that he did so for the years 1991-1999. Indeed, given Garza-Morales’s role in establishing Curtis S.C. and Curtis’s holding him out as a “Mexican partner,” it is incongruous for Curtis to argue that his ties to Mexico are weak.
In my view, Curtis has failed to establish that Garza-Morales’s claims under Mexican law are not viable and, more significantly, that they were intended to be encompassed by the parties’ arbitration clause. Additionally, even if Garza-Morales’s Mexican claims were encompassed within the agreement, in order to enforce a waiver of foreign rights, the court must, under the rule of comity, determine whether the public policy objectives of the foreign jurisdiction’s laws are outweighed by New York’s strong policy in favor of arbitration (Faberge at 240). That was not done in this case.
The majority mischaracterizes Garza-Morales’s position and the precedent upon which he relies. Garza-Morales has not argued that the doctrine of comity will invariably override a valid agreement to arbitrate in New York. Nor has the major*276ity provided any support for the premise underlying its holding — that Garza-Morales is attempting to avoid arbitration by resorting to pretextual litigation in a foreign forum.
Garza-Morales has simply asked this Court to require Curtis, as the movant seeking the extraordinary relief of enjoining litigation commenced in a foreign country, to satisfy the substantial requirements for such injunctive relief as enunciated by the Court of Appeals and this Court. Specifically, it must show a “danger of fraud or gross wrong being perpetrated on the foreign court,” that the arbitration provision at issue could be read to encompass Garza-Morales’s statutory rights under Mexico’s labor laws so as to infer a waiver of those rights, and that New York’s policy in favor of arbitration outweighs the public policy objectives of Mexico’s labor laws (Arpels, 8 NY2d at 341; Faberge, 109 AD2d at 240-241).
The majority’s attempt to limit Arpéis to nonarbitration cases is unavailing. Nowhere in the broad language used in the Arpéis decision did the Court of Appeals suggest that the caution which must be exercised in enjoining foreign litigation is necessary only in cases that do not involve an arbitration agreement. Indeed, the majority’s contention that Arpéis does not apply in an arbitration context is belied by this Court’s reliance on Arpéis in the Faberge decision, a holding with which the majority apparently disagrees.
The majority’s attempt to distinguish Faberge is not convincing. The Faberge Court’s determination to deny injunctive relief, insofar as the decision itself states, was not based on where the employment relationship was centered or exactly how many days the employee worked in Italy. Rather, the injunction was found improper because Faberge failed to show a danger of fraud being perpetrated on the foreign court, that the arbitration provision could be read to encompass the employee’s Italian statutory rights so as to infer a waiver of those rights, and lastly, that New York’s policy in favor of arbitration outweighed the public policy objectives of the Italian labor laws (Faberge, 109 AD2d at 240-241; Arpels, 8 NY2d at 341). Moreover, although the majority argues that the broad arbitration clause in this case cannot be plausibly read to exclude Mexican statutory claims, the clause in Faberge, no broader in scope in my view than the instant one, was held to exclude similar statutory claims.
Although the majority believes that complying with Faberge’& requirement of weighing the competing public policy objectives “raises more questions than [it] answers,” I respectfully *277disagree. I view this requirement as a valuable means of determining whether the extraordinary relief of enjoining litigation in a foreign jurisdiction, and its concomitant challenge to the authority of that tribunal, is appropriate in these circumstances. While the majority posits that Garza-Morales has not explained how the courts should weigh the competing public policy objectives, courts routinely engage in similar balancing in deciding questions of jurisdiction and choice of law. I also disagree with the majority’s contention that Garza-Morales, the nonmovant, should bear the burden of demonstrating that an injunction against foreign litigation is inappropriate. The movant seeking such extraordinary relief should bear the burden of demonstrating that injunctive relief is appropriate (see Smoothline Ltd. v North Am. Foreign Trading Corp., 2002 WL 273301, 2002 US Dist LEXIS 3123 [SD NY, Feb. 27, 2002]).
Finally, the majority’s argument that the dissent has failed to explain how “Mexico’s policy precluding full enforcement of the parties’ arbitration agreement outweighs New York’s policy favoring full enforcement of that agreement” misses the point. The dissent’s position, as should be clear from the above discussion, is not that the public policy objectives of Mexico’s labor laws necessarily outweigh New York’s policy favoring arbitration. Rather, it is that the IAS court failed to weigh these policies at all, as required by Faberge, and in doing so, failed to hold Curtis to its high burden of proof in obtaining the requested injunctive relief. I would reverse and vacate the injunction.
Buckley, P.J., and Sullivan, J., concur with Friedman, J.; Gonzalez, J., dissents in a separate opinion.
Order, Supreme Court, New York County, entered May 7, 2002, and order, same court, entered June 25, 2002, affirmed, without costs.

 For this reason, Matter of Propulsora is inapposite to this case.