Mouli v. Stern
2025 NY Slip Op 01872
| N.Y. App. Div. | 2025Background
- Pravin Mouli sued Michael Stern regarding the repayment of certain funds, seeking court intervention.
- The parties had previously entered into an assignment agreement that included a broad arbitration clause.
- The arbitration clause explicitly incorporated AAA rules and delegated the issue of arbitrability to the arbitrator.
- Stern moved to compel arbitration and to stay Mouli's court action based on this agreement.
- The Supreme Court, New York County, granted Stern's motion to compel arbitration and issued a stay.
- Mouli appealed, challenging the enforceability and scope of the arbitration provision and arguing fraudulent inducement of the assignment agreement.
Issues
| Issue | Mouli's Argument | Stern's Argument | Held |
|---|---|---|---|
| Who decides arbitrability: court or arbitrator | Court should decide; arbitration clause not broad | Arbitrator should decide; clause delegates issue | Arbitrator decides, per agreement's delegation |
| Relationship of assignment & guaranty agreements | Assignment is independent of the guaranty | Agreements are intertwined, assignment covers dispute | Agreements are interwoven; assignment governs |
| Fraudulent inducement of assignment agreement | Arbitration clause unenforceable if agreement tainted | Arbitration clause is severable, no fraud alleged as to it | Arbitration clause severable; no fraud alleged with clause |
| Merit of arbitrability and substantive claims | Disputes arbitration’s applicability and merits | Arbitrability and merits for arbitrator, not court | Merits are for arbitrator, court abstains |
Key Cases Cited
- Contec Corp. v. Remote Solution Co., Ltd., 398 F.3d 205 (2d Cir. 2005) (incorporation of rules empowering arbitrator is clear evidence of intent to arbitrate arbitrability)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019) (court cannot decide arbitrability if parties delegated it to arbitrator)
- Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co. of Am., 37 N.Y.2d 91 (N.Y. 1975) (court's inquiry ends when dispute bears reasonable relationship to contract)
- Matter of Weinrott [Carp], 32 N.Y.2d 190 (N.Y. 1973) (fraudulent inducement concerning contract, not arbitration clause, does not prevent arbitration)
- Rinaolo v. Berke, 188 A.D.2d 297 (N.Y. App. Div. 1st Dep’t 1992) (assignment agreements intertwined with underlying obligations)