| Estate of Castellone v JP Morgan Chase Bank, N.A. |
| 2009 NY Slip Op 01608 [60 AD3d 621] |
| March 3, 2009 |
| Appellate Division, Second Department |
| 13—Estate of Jerry Castellone, Also Known as Gennaro J.Castellone, Appellant, v JP Morgan Chase Bank, N.A., et al.,Respondents. |
—[*1] Simmons, Jannace & Stagg, Syosset, N.Y. (Thomas E. Stagg and Andrew Kazin of counsel),for respondents.
In an action to recover damages, inter alia, for breach of contract and fraud, the plaintiffappeals from an order of the Supreme Court, Suffolk County (Pitts, J.), dated March 24, 2008,which granted the motion of the defendants to dismiss the complaint and compel the plaintiff toarbitrate and denied its cross motion to compel discovery.
Ordered that the order is modified, on the law, by (1) deleting the provision thereof grantingthat branch of the defendants' motion which was to dismiss the complaint, and substitutingtherefor a provision denying that branch of the motion, (2) deleting the provision thereofgranting that branch of the defendants' motion which was to compel the plaintiff to arbitrate andsubstituting therefor a provision granting that branch of the motion to the extent of directing theplaintiff to arbitrate its claims against the defendant JP Morgan Chase Bank, N.A., and itspredecessors Chase Investment Services Corp., and JP Morgan Chase & Co., and otherwisedenying that branch of the motion, and (3) adding thereto a provision staying the action againstall of the defendants pending arbitration of the plaintiff's claims against the defendant JP MorganChase Bank, N.A., and its [*2]predecessors Chase InvestmentServices Corp., and JP Morgan Chase & Co.; as so modified, the order is affirmed, without costsor disbursements.
In February 1994 the plaintiff's decedent, Jerry Castellone, also known as Gennaro J.Castellone, opened an investment account with Chemical Investment Services Corp. (hereinafterCIS), a corporate predecessor of the defendant JP Morgan Chase Bank, N.A. (hereinafter Chase).Castellone signed a customer agreement (hereinafter the agreement), which provided that "anycontroversy" between him and CIS "shall" be submitted to arbitration. The agreement alsocontained a waiver of the parties' respective rights to seek remedies "in court." Certaintransactions that are the subject of this action were made concerning Castellone's account in orabout July 2000. Castellone died in July 2001. In January 2006 his estate, by LimitedAdministrators of the Property, commenced this action against Chase and the individualdefendants, who are alleged to be current and former employees of Chase, seeking damages,inter alia, for breach of contract and fraud. The defendants asserted in their answer that theclaims were subject to arbitration, notified the plaintiff's counsel of their position, and neverwavered in asserting that the claims must be arbitrated. Although the defendants served adeposition notice, they never sought to take depositions, and compliance with the plaintiff'snotice for discovery and inspection was repeatedly extended by stipulation. Eventually, thedefendants moved to dismiss the complaint and to compel the plaintiff to arbitrate. The plaintiffcross-moved to compel discovery. The Supreme Court granted the motion and denied the crossmotion. We modify.
Inasmuch as the plaintiff acknowledges that Castellone signed the agreement, its argumentthat it is not bound by the agreement is without merit. Similarly, the plaintiff's contention that thedefendants waived their right to arbitration by availing themselves of the benefits of litigation iswithout merit. A defendant in an action who has the right to arbitrate a claim may indeed forfeitor waive that right by acts inconsistent with the intention to arbitrate (see Stark v Molod Spitz DeSantis & Stark,P.C., 9 NY3d 59, 66 [2007]; Flores v Lower E. Side Serv. Ctr., Inc., 4 NY3d 363, 372 [2005])." 'The courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow aparty to create his own unique structure combining litigation and arbitration' " (Roggio vNationwide Mut. Ins. Co., 66 NY2d 260, 263 [1985], quoting De Sapio vKohlmeyer, 35 NY2d 402, 406 [1974]). Thus, a defendant who utilizes the tools oflitigation, or participates in litigation for an unreasonable period without asserting the right toarbitrate, may lose the right to compel arbitration (see Sherrill v Grayco Bldrs., 64 NY2d261, 272-273 [1985]; De Sapio v Kohlmeyer, 35 NY2d at 405-406; Fein v General Elec. Co., 40 AD3d807, 808 [2007]). Here, however, the [*3]defendants neveracted in a manner inconsistent either with their intent to arbitrate the claims or with their right todo so pursuant to the agreement. They asserted, in their answer, the right to arbitrate, repeatedlymade clear to opposing counsel their position that the claims were subject to arbitration, andnever availed themselves of discovery in the litigation (see Les Constructions Beauce-Atlas vTocci Bldg. Corp. of N.Y., 294 AD2d 409, 410 [2002]; cf. Flores v Lower E. Side Serv.Ctr., Inc., 4 NY3d at 372; St. PaulTravelers Cos., Inc. v Joseph Mauro & Son, Inc., 36 AD3d 891, 892 [2007]).
The individual defendants, however, were not parties to the agreement, which requiredarbitration only between Castellone and CIS. Consequently, the plaintiff is not obligated toarbitrate its claims against the individual defendants.
Thus, the Supreme Court should have granted that branch of the defendants' motion whichwas to compel arbitration of the plaintiff's claims against Chase and its predecessors ChaseInvestment Services Corp. and JP Morgan Chase & Co. (hereinafter collectively Chase and itspredecessors). Upon granting that branch of the motion, the court should have stayed, notdismissed, the plaintiff's action as against Chase (see CPLR 7503 [a]; Crawford vMerrill Lynch, Pierce, Fenner & Smith, 35 NY2d 291, 300 [1974]; Rosenblum vSteiner, 55 AD2d 867, 868 [1977]). Moreover, inasmuch as the issues to be decided in thearbitration against Chase and its predecessors are in many respects identical to those to bedecided against the individual defendants (see Brown v V&R Adv., 112 AD2d 856, 861[1985], affd for reasons stated below 67 NY2d 772 [1986]; cf. Hirschfeld Prods. vMirvish, 88 NY2d 1054, 1055-1056 [1996]), the action insofar as asserted against theindividual defendants should have been stayed as well pending the arbitration of the plaintiff'sclaims against Chase and its predecessors (see Marcus v Millwork Trading Co., 208AD2d 448 [1994]). In light of these circumstances, we modify the order by staying, rather thandismissing, the action, pending arbitration of the plaintiff's claims against Chase and itspredecessors (see CPLR 7503 [a]; De Sapio v Kohlmeyer, 35 NY2d 402, 404[1974]; Crawford v Merrill Lynch, Pierce, Fenner & Smith, 35 NY2d at 300; Brownv V&R Adv., 112 AD2d at 861; Rosenblum v Steiner, 55 AD2d at 868).
The plaintiff's remaining claims are without merit. Fisher, J.P., Dillon, Belen and Chambers,JJ., concur.