Cusimano v. Schnurr
991 N.Y.S.2d 400
N.Y. App. Div.2014Background
- Cusimano plaintiffs sue accountants and related parties for aiding and abetting fraud, accounting malpractice, and fiduciary breaches tied to entities owning commercial real estate.
- The entities include FLIP (Deer Park, NY and Florida property leased to CVS), Berita Realty, LLC (Marriott hotel interest), and Seaview corporations (two NY properties).
- Initially, the motion court in 2012 dismissed some malpractice claims as time-barred and allowed repleading for fraud/breach claims; discovery was stayed after leave to replead.
- In September 2012, the Cusimanos demanded arbitration with AAA, asserting similar claims in arbitration; defendants moved to stay, arguing statute of limitations barred arbitration.
- The motion court held FAA does not apply and retained power to decide timeliness; it stayed time-barred arbitration and directed arbitration on non-time-barred claims; judgment followed.
- On appeal, the First Department held FAA applies to the agreements and issues of statute of limitations should be decided by arbitrator; waiver analysis against arbitration was addressed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does FAA apply to the agreements at issue? | Arbitration clause under FAA governs; transactions affect interstate commerce. | No interstate commerce connection; FAA inapplicable. | FAA applies; broad effect on commerce. |
| If FAA applies, should arbitrator decide statute of limitations? | Timeliness issue belongs in arbitration under FAA. | Court should decide timeliness if FAA applies, or if choice-of-law provisions require court determination. | Yes, arbitrator decides statute-of-limitations issue. |
| Did plaintiffs waive their right to arbitrate by litigating in court? | Litigation posture did not constitute waiver; limited motions and lack of discovery. | Prolonged litigation and discovery conflicts show prejudice and waiver. | No waiver; not protracted and prejudice minimal. |
| Should the action be stayed pending arbitration and the arbitration proceed on non-time-barred claims? | Directing arbitration on non-time-barred claims aligns with FAA; stay on time-barred claims. | Arbitration should be permanently stayed for time-barred claims. | Action stayed pending arbitration; arbitration to proceed on non-time-barred claims. |
Key Cases Cited
- Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (Sup. Ct. 1995) (broad interpretation of 'involving commerce' under FAA)
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (Sup. Ct. 2003) (FAA covers transactions affecting commerce; broad scope)
- Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247 (N.Y. 2005) (FAA applies where contract has effect on interstate commerce)
- Matter of Advest, Inc. v. Wachtel, 253 A.D.2d 659 (1st Dept 1998) (waiver analysis in arbitration context)
- Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20 (2d Cir. 1995) (prejudice as key factor in waiver of arbitration)
- Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002) (three-factor test for waiver; prejudice central)
- Kramer v. Hammond, 943 F.2d 176 (2d Cir. 1991) (delay and litigation costs insufficient alone for waiver)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (Sup. Ct. 2002) (arbitrability questions; role of courts vs. arbitrators)