BDO Seidman, LLP v. J.A. Green Development Corp.
327 S.W.3d 852
| Tex. App. | 2010Background
- Green sued BDO for tax advice-related claims following an IRS penalties; consulting agreement with broad NY-arbitration clause; BDO sought arbitration and stay; trial court denied; the agreement governs arbitration in NY law under FAA; distressed debt strategy involved tax planning; services included income tax planning; Green alleges integration with a conspiracy to fraudulently induce the agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which law governs arbitration, NY law or FAA? | Green: NY law governs | BDO: FAA governs | FAA applies |
| Do Green's claims fall within the arbitration provision scope? | Green: claims relate to non-covered investment advice | BDO: broad arbitration clause covers related tax-adviced actions | Yes, within scope; arbitration compelled |
| Is the arbitration provision unconscionable? | Green: provision part of fraud conspiracy; unconscionable | BDO: no unconscionability; arbitrator should decide | Unconscionability not decided; arbitrator to decide |
Key Cases Cited
- Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247 (N.Y. 2005) (choice-of-law language governs enforcement; FAA may apply absent explicit enforcement language)
- All Metro Health Care Servs., Inc. v. Edwards, 25 Misc.3d 863 (N.Y. Sup. Ct. 2009) (New York law not found to apply without enforcement language; FAA discussed)
- Hackett v. Milbank, Tweed, Hadley & McCloy, 86 N.Y.2d 146 (N.Y. 1995) (arbitration governed by NY law when explicitly stated; specifics matter)
- Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (U.S. 1989) (state arbitration rules may apply; FAA preemption discussed)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (fraud in the inducement of arbitration clause goes to court; other contract issues to arbitrator)
- Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1 (N.Y. 1988) (unconscionability requires procedural and substantive elements)
- JA Hosp. Med. Ctr., Inc. v. Oxford Health Plans (N.Y.), Inc., 58 A.D.3d 686 (N.Y. App. Div. 2009) (arbitration scope related to contracts with defendants)