ImClone Systems Inc. v. Waksal
802 N.Y.S.2d 653
N.Y. App. Div.
2005
Check Treatment

IMCLONE SYSTEMS INCORPORATED, Plaintiff, v SAMUEL D. WAKSAL, Respondent. ROBERT GOLDHAMMER et al., Nonparty Appellants.

Supreme Court, Appellate Division, First Department, New York

October 25, 2005

802 NYS2d 653

Order, Supreme Court, New York County (Helen E. Freedman, J.), entered April 5, 2005, which, inter alia, denied the nonparties’ motion to vacate orders, same court and Justice, entered March 4, 2005, which granted open commissions in aid of arbitration, unanimously affirmed, with costs. Appeals from the March 4 orders unanimously dismissed, without costs, as superseded by the appeal from the April 5 order.

We agree with the conclusion reached by the motion court, but for different reasons (see ). The generic choice of law clause in the subject agreement, which did not provide for the application of New York law to its “enforcement,” did not displace the subject provision of the Federal Arbitration Act ([FAA] 9 USC § 7; see ; ). The parties’ residence and negotiation of the agreement in New York and the lack of a substantial effect on interstate commerce do not require the conclusion that the FAA does not govern. The parties’ agreement affected interstate commerce (see ; ; see also ). Plaintiff is federally regulated, its products are undisputedly distributed nationally and it has investors across the nation; moreover, the restrictive covenant contained in the subject agreement limits plaintiff’s activities throughout the states (see ) and its “golden parachute” financial provisions no doubt would have some effect on interstate commerce. While it is an open question in the Second Circuit whether prehearing nonparty depositions are authorized under the FAA (see ), and there is substantial federal authority that they are not (see e.g. ; ; ), in the absence of a decision of the United States Supreme Court or unanimity among the lower federal courts, we are not precluded from exercising our own judgment in this matter (see , cert denied ). We subscribe to the view that depositions of nonparties may be directed in FAA arbitration where there is a showing of “special need or hardship,” such as where the information sought is otherwise unavailable (see ; , cert denied sub nom. Pacific Eternity, S.A. v Deiulemar Compagnia Di Navigazione, S.p.A., ). This view properly takes into consideration the realities and complexities of modern arbitration. Here, the information sought would plainly be unavailable from other sources, since the crucial issue in plaintiff’s attempt to vitiate the agreement is its claim that it was induced by fraud, and the nonparties defendant seeks to depose are the officers and directors who took part in its drafting and negotiation. It was unnecessary for defendant to state in so many words that such information was otherwise unavailable or that exceptional circumstances, special need or hardship exist.

We have considered appellants’ other contentions and find them unavailing. Concur—Ellerin, J.P., Williams, Catterson and Malone, JJ.

(October 25, 2005)