Rita Cusimano v. Andrew v. Schnurr Bernard v. Strianese, 26 N.Y.3d 391

Background

Three family agreements between New York residents (FLIP partnership agreement, Berita LLC operating agreement, and a sale agreement for 60 Seaview) each contained AAA arbitration clauses and involved ownership/management of commercial real estate.
Plaintiffs Rita and Dominic Cusimano sued the family accountants in New York County Supreme Court for fraud and malpractice relating to work from 1991–2009; the complaint did not name Bernard and Bernadette as defendants though they were alleged to have engaged in misconduct.
Prior related state actions: Rita previously sought dissolution of FLIP and Berita; intervenors successfully compelled arbitration in those proceedings and awards were affirmed on appeal.
In the instant case, defendants argued the dispute belonged in arbitration; Supreme Court dismissed parts of the complaint as time‑barred but ordered remaining non‑time‑barred claims to arbitration, finding the FAA inapplicable and concluding plaintiffs waived arbitration.
The Appellate Division reversed, holding the FAA applied because the entities engaged in commercial real estate affecting interstate commerce and that plaintiffs had not waived arbitration; the Court of Appeals granted leave and reversed the Appellate Division.
The Court of Appeals held the FAA applies to these agreements (commercial real estate leased to national chains) but found plaintiffs waived arbitration by prolonged litigation, forum‑shopping, and prejudice to defendants; statute‑of‑limitations issues are for the court to decide.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Applicability of FAA	FAA does not apply because agreements are intrafamily, New York transactions	FAA applies only if transaction affects interstate commerce; these are intrastate, passive family entities	FAA applies: agreements govern commercial real estate activity (leasing to national chains) that in the aggregate affects interstate commerce
Waiver of arbitration by litigation conduct	No waiver; plaintiffs invoked arbitration only after adverse rulings and federal policy favors arbitration	Plaintiffs litigated for ~1 year, sought court discovery, argued they did not want arbitration — conduct inconsistent with right to arbitrate; defendants prejudiced	Waiver found: plaintiffs' prolonged, strategic court use and forum‑shopping caused prejudice; arbitration right waived
Who decides timeliness/statute of limitations	Plaintiffs preferred arbitrator decide issues	Defendants argued courts should decide timeliness due to waiver and prejudice	Court decides timeliness because plaintiffs waived arbitration; statute‑of‑limitations issues are for the court
Effect of prior related arbitration rulings	Prior arbitrations show these disputes belong in arbitration	Prior rulings do not preclude court from finding waiver here	Prior matters do not prevent court from finding waiver based on current litigation conduct

Key Cases Cited

Allied‑Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (FAA "involving commerce" interpreted as "affecting commerce"; broad federal arbitration coverage)
Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) (FAA encompasses transactions whose type, in the aggregate, substantially affects interstate commerce)
Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (commercial real estate leases implicated interstate commerce)
Stark v. Molod Spitz DiSantis & Stark, P.C., 9 N.Y.3d 59 (2007) (a right to arbitration may be waived by inconsistent litigation conduct)
Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20 (2d Cir. 1995) (doubts on waiver resolved in favor of arbitration; waiver analysis considers litigation extent, delay, and prejudice)
Louisiana Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 626 F.3d 156 (2d Cir. 2010) (identifies substantive prejudice and prejudice from delay/costs as bases for finding waiver)