FILED: NEW YORK COUNTY CLERK 10/25/ :19 PM INDEX NO /2017 NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 10/25/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK THE CITY OF NEW YORK, - against - Plaintiff, Index No /2017 Mot. Seq. No. 002 FC 42 ND STREET ASSOCIATES, L.P., Defendant. MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT S MOTION BY ORDER TO SHOW CAUSE AND APPLICATION FOR A TEMPORARY RESTRAINING ORDER 1 of 9

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT...1 ARGUMENT...2 I. PERMITTING PLAINTIFF S CROSS-MOTION FOR SUMMARY JUDGMENT TO PROCEED AT THIS TIME WOULD IMPROPERLY SUBVERT DEFENDANT S RIGHT TO ARBITRATION AND REQUIRING DEFENDANT TO ANSWER PLAINTIFF S CROSS-MOTION FOR SUMMARY JUDGMENT WOULD PREJUDICE DEFENDANT S RIGHTS BY REQUIRING DEFENDANT TO ACTIVELY LITIGATE THE ACTION...2 A. THE REQUESTED STAY IS NECESSARY AND APPROPRIATE UNDER CPLR ARTICLE 75 AND CPLR B. THE CROSS-MOTION FOR SUMMARY JUDGMENT VIOLATES PRACTICE RULE 5(F)(II)...5 CONCLUSION...6 i 2 of 9

3 TABLE OF AUTHORITIES Cases Page(s) Cunningham v. Horning Constr., 309 A.D.2d 1187, 765 N.Y.S.2d 295 (4th Dep t 2003)...3 Esquire Indus., Inc. v. East Bay Textiles, Inc., 68 A.D.2d 845, 414 N.Y.S.2d 336 (1st Dep t 1979)...3 Johnson v. Brooklake Assocs., 271 A.D.2d 382, 707 N.Y.S.2d 826 (1st Dep t 2000)...3 Soloway v. Morgan Stanley Smith Barney LLC, No /2011, 2012 N.Y. Misc. LEXIS 320 (Sup. Ct. N.Y. County Jan. 25, 2012)...3 State v. Philip Morris, Inc., 8 N.Y.3d 574, 838 N.Y.S.2d 460 (2007)...2 Other Authorities Article 75, CPLR , 2, 4 CPLR Rule 5(f)(ii)...1, 5 ii 3 of 9

4 Defendant FC 42 nd Street Associates, L.P. ( Defendant ) respectfully submits this memorandum of law in support of its motion by order to show cause and application for a temporary restraining order to stay and hold in abeyance Plaintiff s cross-motion for summary judgment in this action pending the Court s determination of Defendant s motion to compel arbitration and stay this action that is returnable on November 9, PRELIMINARY STATEMENT This action arises out of Plaintiff s claim for a declaratory judgment seeking this Court s interpretation of certain contract provisions of the parties Ground Lease, despite the fact that a broad arbitration clause in the Ground Lease provides for arbitration of such issues. For this reason, Defendant has already moved to compel arbitration and stay this action. In opposition, Plaintiff contends that the requested judicial declaration is needed to force the arbitrator to be bound by judicial interpretation, rather than giving full effect to the parties heavily negotiated and bargained-for arbitration clause. In addition to opposing Defendant s motion to compel arbitration and stay this action, on October 4, 2017, Plaintiff cross-moved for summary judgment in direct contravention of the policy behind CPLR, Article 75, CPLR 2201, and this Court s Practice Rule 5(f)(ii). As set forth herein, requiring Defendant to respond to Plaintiff s cross-motion for summary judgment would force Defendant to immediately engage in active litigation of the claims raised by the complaint in this action and would subvert Defendant s rights under the arbitration clause of the Ground Lease, and under Article 75 of the CPLR. Moreover, this hasty and premature motion was made in violation of this Court s local rules. For these reasons, Defendant respectfully requests that this Court stay and hold in abeyance Plaintiff s cross-motion 1 4 of 9

5 and suspend the time for filing Defendant s opposition to Plaintiff s cross-motion for summary judgment pending resolution of Defendant s motion to compel arbitration and stay this action. ARGUMENT I. PERMITTING PLAINTIFF S CROSS-MOTION FOR SUMMARY JUDGMENT TO PROCEED AT THIS TIME WOULD IMPROPERLY SUBVERT DEFENDANT S RIGHT TO ARBITRATION AND REQUIRING DEFENDANT TO ANSWER PLAINTIFF S CROSS-MOTION FOR SUMMARY JUDGMENT WOULD PREJUDICE DEFENDANT S RIGHTS BY REQUIRING DEFENDANT TO ACTIVELY LITIGATE THE ACTION A. The Requested Stay is Necessary and Appropriate Under CPLR Article 75 and CPLR 2201 Article 75 of the CPLR is intended to give full effect to parties agreements to arbitrate by requiring courts to compel arbitration where it is clear that a valid agreement was made and prohibits a court from passing upon the merits of a dispute that is covered by a valid arbitration clause. Section 7503(a) states that: [w]here there is no substantial question whether a valid agreement was made or complied with... the court shall direct the parties to arbitrate. Because the arbitration clause contained in Section 3.01(c)(iii) of the Ground Lease clearly covers any dispute regarding the determination of the Fair Market Value, the parties arbitration clause covers the present dispute, even if one were to accept the Plaintiff s characterization of the parties dispute as being one regarding what to value rather than how to value Fair Market Value for arriving at a Fair Market Value determination under the Ground Lease. Pl. s Opp. to Def. s Mot. to Compel 3, NYSCEF Doc. No. 38. The dispute plainly regard[s] the Fair Market Value determination and is subject to arbitration pursuant to the parties arbitration agreement. Mac Avoy Affirm., NYSCEF Doc. No. 7, Ex. B, Ground Lease, Section 3.01(c)(iii); see, e.g., State v. Philip Morris, Inc., 8 N.Y.3d 574, , 838 N.Y.S.2d 460, (2007) (noting that any and related to phrases are expansive and, though the arbitration clause was limited to 2 5 of 9

6 disputes connected with the auditor s calculations and determinations, the arbitration clause was broad enough to cover the dispute at issue). Further, CPLR 7501, provides that: [i]n determining any matter arising under this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute. Any opposition to or order, judgment, or decision deciding Plaintiff s cross-motion for summary judgment would clearly pass upon the merits of the dispute and deprive Defendant of its rights under Article 75, set out more fully in Defendant s motion to compel arbitration and stay this action and supporting documents (NYSCEF Doc. Nos. 4-17). Under New York caselaw and the CPLR, requiring Defendant to actively litigate the action prejudices Defendant s right to have the claims at issue arbitrated. See Cunningham v. Horning Constr., 309 A.D.2d 1187, 765 N.Y.S.2d 295 (4th Dep t 2003) (finding that the defendant had waived its right to arbitrate by asserting a cross claim against the plaintiff in which it sought recoupment of the same funds sought in its demand for arbitration); Johnson v. Brooklake Assocs., 271 A.D.2d 382, 382, 707 N.Y.S.2d 826, 827 (1st Dep t 2000) (holding that [d]efendant waived any right to arbitrate the claim by affirmatively participating in [the] lawsuit ); Esquire Indus., Inc. v. East Bay Textiles, Inc., 68 A.D.2d 845, 414 N.Y.S.2d 336 (1st Dep t 1979) (plaintiff waived arbitration by serving a summons); Soloway v. Morgan Stanley Smith Barney LLC, No /2011, 2012 N.Y. Misc. LEXIS 320, at *12 (Sup. Ct. N.Y. County Jan. 25, 2012) (finding that [a] crucial question is the degree of participation in the litigation when determining whether a litigant s right to arbitration is waived or not) (citation omitted). 3 6 of 9

7 For similar reasons, permitting Plaintiff s cross-motion for summary judgment to proceed before disposition of Defendant s motion to compel arbitration and stay this action subverts the policy and purpose of Article 75 which is to give full effect to sophisticated parties valid, negotiated, and bargained-for arbitration clauses and to resolve litigation in a judicially efficient manner. Determination of Defendant s motion to compel arbitration and stay this action will likely obviate any need to consider Plaintiff s cross-motion for summary judgment. Order of operations and logic dictates that whether the parties shall be compelled to arbitrate shall be decided first, before a motion for summary judgment on the merits of the case. Because permitting Plaintiff s cross-motion for summary judgment to proceed at this time would deprive Defendant of its right to arbitrate the Plaintiff s claim as provided under the parties arbitration clause and would be a poor use of judicial economy and resources, granting the requested stay would be consistent with the purpose and plain meaning of CPLR 2201, which provides that a court may grant a stay of pending proceedings in a proper case, upon such terms as may be just. First, granting a stay in this case is not otherwise prescribed by law. Indeed, the Plaintiff, in its cross-motion for summary judgment, points to no caselaw suggesting that a cross, or any, motion for summary judgment should or can be decided before disposition of a motion to compel to compel arbitration and stay the proceedings. Pl. s Opp. to Def. s Mot. to Compel 21-24, NYSCEF Doc. No. 38. In fact, as noted above, requiring the Defendant to actively litigate this action could potentially waive, and would undoubtedly prejudice and subvert, Defendant s right to have the present dispute decided by an arbitrator. Defendant should receive the full contractual benefits that it is entitled to under the arbitration clause. One such benefit is that disputes, such as this one, are determined by an arbitrator and not a court. Thus, to grant the stay Defendant respectfully requests would be just under CPLR of 9

8 B. The Cross-Motion for Summary Judgment Violates Practice Rule 5(f)(ii) Additionally, the Plaintiff s cross-motion for summary judgment subverts this Court s Practice Rule 5(f)(ii) requiring that summary judgment motions be initiated within 30 days after the filing the Note of Issue, unless otherwise directed. (emphasis added). Part 53 Practices Rules, R. 5(f)(ii), at 3 (Feb. 2016), available at No note of issue has been filed, and even if the underlying issues were to be litigated rather than arbitrated (which they are not), no pretrial proceedings have occurred. Thus the City s cross-motion for summary judgment is not only in violation of the Court s rules but also is premature, inefficient, and inappropriate. No prejudice can result from granting the requested stay. Plaintiff can fully address all of its arguments to the arbitrator. And, should the Court ultimately determine that any of Plaintiff s claims may be litigated, Plaintiff can proceed with motion practice at that time. 5 8 of 9

9 CONCLUSION For all the foregoing reasons, this Court should grant Defendant s motion to stay Plaintiff s cross motion for summary judgment and Defendant s time to respond pending the Court s determination of Defendant s motion to compel arbitration and stay this action. Dated: New York, New York October 24, 2017 Respectfully submitted, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP By: s/ Janice Mac Avoy Janice Mac Avoy Helene Gogadze Shannon N. Doherty One New York Plaza New York, New York (212) janice.macavoy@friedfrank.com helene.gogadze@friedfrank.com shannon.doherty@friedfrank.com Attorneys for Defendant FC 42nd Street Associates, L.P of 9