Court Opinion

ID: 9489071
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:04:55.752464+00
Date Added: 2024-06-11T17:53:18.128661
License: Public Domain

VAN GRAAFEILAND, Circuit Judge,
dissenting:
The eight-line decision of the court below is not simply “pithy,” as my colleagues generously describe it. It fails completely to discuss the parties’ expressed intent and the effect of such expressed intent on arbitrability. As a result, this Court has been forced to make this determination, a task that should have been performed by the district court. Unfortunately, our de novo undertaking has not left, us in unanimous accord.
In Volt Info. Sciences v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 1256, 103 L.Ed.2d 488 (1989), the Court instructed us as follows:
Arbitration under the [FAA] is a matter of consent, not coercion, and parties are gen*1203erally free to structure their arbitration agreements as they see fit. Just as they may limit by contract the issues which they will arbitrate, so too may they specify by contract the rules under which that arbitration will be conducted. Where, as here, the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the [FAA] would otherwise permit it to go forward. By permitting the courts to “rigorously enforce” such agreements according to their terms, we give effect to the contractual rights and expectations of the parties, without doing violence to the policies behind by [sic] the FAA. (citations omitted)
The “CLIENT’S AGREEMENT” at issue herein provides under the heading “Jurisdiction”:
All transactions made for my accounts) shall be governed by the terms of this agreement. This agreement and its enforcement shall be construed and governed by the laws of the State of New York, and shall be binding upon my heirs, executors, administrators, successors, and assigns.
I find no ambiguity in this provision. It is determinative of the issue as to whether arbitration should be held. The provisions quoted at page 1199 of the majority opinion are contained in a paragraph headed “ARBITRATION.” They govern the nature of any issues that may be passed upon; i.e., controversies between the Bybyks and Paine-Webber concerning any account, transaction, dispute, etc., the resolution of which shall be governed by the FAA and shall be conducted before a designated arbitration panel.
These provisions are very similar to the ones contained in the agreement at issue in Smith Barney, Harris Upham & Co. v. Luckie, 85 N.Y.2d 193, 623 N.Y.S.2d 800, 647 N.E.2d 1308, cert. denied, - U.S. -, 116 S.Ct. 59, 133 L.Ed.2d 23 (1995). There, the New York Court of Appeals said:
Undeniably, in the absence of an explicit choice of law provision, governing Federal law would have precluded the courts in the appeals before us from addressing the Statute of Limitations issue (see, Conticommodity Servs. v. Philipp & Lion, 613 F.2d 1222, 1224-1225 [2d Cir.1980]) or from issuing stays under our arbitration act (see, Matter of Rederi [Dow Chem. Co.], 25 N.Y.2d 576, 585, 307 N.Y.S.2d 660, 255 N.E.2d 774). However, the parties’ choice that New York law would govern “the agreement and its enforcement ” (emphasis added) indicates their “intention to arbitrate to the extent allowed by [this State’s] law,” even if application of the State law — and an adverse ruling on a Statute of Limitations claim — would relieve the parties of their responsibility under the contract to arbitrate (Armco Steel Co. v. CSX Corp., 790 F.Supp. 311, 318 [(D.D.C.1991)]; see also, Saturn Distrib. Corp. v. Williams, 905 F.2d 719 [4th Cir.1990] [parties are entitled to incorporate State law restrictions into their arbitration agreement that would otherwise be preempted by the FAA], cert denied 498 U.S. 983, 111 S.Ct. 516, 112 L.Ed.2d 527; Flight Sys. v. Paul A Laurence Co., 715 F.Supp. 1125 [D.D.C. 1989]). Although the parties broadly agreed to arbitrate “any controversy” arising from the customer agreements, that clause — like all other provisions in the contract — was subject to the parties’ additional qualification that New York State law provides the basis of decision for questions concerning not only the agreement, but more critically, its enforcement. Accordingly, we conclude that under this agreement the parties agreed to refer questions of timeliness to the courts by incorporating New York law. In other words, when the parties chose to apply New York law, “without excluding its arbitration rules” from that general condition (Mastrobuono v. Shearson, Lehman Hutton, 20 F.3d 713, 717 [7th Cir.1994], cert. granted 514 U.S. -, 115 S.Ct. 305 [130 L.Ed.2d 218 (1994)]), the parties adopted as binding New York’s rule that threshold Statute of Limitations questions are for the courts.
Id. at 202, 623 N.Y.S.2d at 805.
My colleagues’ rejection of Luckie as binding New York authority is unwarranted, and their reliance upon Mastrobuono v. Shearson Lehman Hutton, Inc., — U.S. -, 115 *1204S.Ct. 1212, 131 L.Ed.2d 76 (1996), in support of this rejection is misplaced. The issue in Mastrobuono was not, as here, whether arbitration would be barred by the passage of time; it was whether arbitrators in a timely conducted arbitration could award punitive damages. It is significant that Mastrobuono did not interpret the “any controversy” language at issue herein, and the choice-of-law provision did not contain the critical phrase “and its enforcement.” It also is significant that the New York Court of Appeals denied a motion for reargument in Luckie that was based in part upon the Supreme Court’s decision in Mastrobuono, 85 N.Y.2d 193, 623 N.Y.S.2d 800, 647 N.E.2d 1308 (1995). In short, under New York law, the timeliness of arbitration is substantially different from the resolution of the issues to be arbitrated.
It also is well established under New York law that the courts, not arbitrators, decide whether claims sought to be arbitrated are barred by limitations of time. See, e.g., Paver & Wildfoerster v. Catholic High School Ass’n, 38 N.Y.2d 669, 674, 382 N.Y.S.2d 22, 345 N.E.2d 565 (1976); Caudill, Rowlett, Scott v. Board of Educ., 47 A.D.2d 610, 364 N.Y.S.2d 7 (1975)(mem.); Buck Creek Indus., Inc. v. Beattie Mfg. Co., 96 Misc.2d 812, 815, 409 N.Y.S.2d 575 (1978). It cannot be gainsaid that in bringing the instant proceeding, PaineWebber was seeking compliance with the provision in the Claim Agreement that actions to enforce it “shall be governed by the laws of New York.” Under the circumstances, I find the following excerpt from Chief Judge Kaye’s concurring opinion in Luckie most compelling:
I concur in the Court’s opinion and conclusion that because the form arbitration agreements at issue plainly provide that New York law governs the “agreement and its enforcement” (emphasis added), the parties can fairly be understood to have agreed that all of New York arbitration law (including the provisions of CPLR article 75 which allow a party to first litigate Statute of Limitations issues in court) would apply.
85 N.Y.2d at 207, 623 N.Y.S.2d at 808.
I believe that the matter should be remanded to the district court with instructions to determine whether the claims the Bybyks seek to enforce in arbitration are timely.