SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK --------------------------------------------------------------------)( 332 EAST 66TH STREET, INC. and 167 BLEECKER HOLDING CORP. -against- Plaintiffs, MARCO WALKER, OCRAM, INC. and OCRAM HOLDING INC., Defendants, Index No. 654850/2017 las Part 43 (Robert R. Reed, J.S.C.) AFFIDAVIT OF RICHARD WOLTER IN SUPPORT OF CROSS-MOTION TO COMPEL ARBITRATION (Mot. Seq. 001) --------------------------------------------------------------------)( STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) RICHARD WOLTER, being duly sworn, deposes and says: 1. I am Senior Counsel with the law firm of Davidoff Hutcher & Citron LLP, attorneys for Defendants Marco Walker, Ocram, Inc., and Ocram Holding Inc. ("Defendants"). As such, I am fully familiar with the facts and circumstances set forth herein. 2. I respectfully submit this affidavit in support of Defendants' cross-motion pursuant to CPLR 7503(a) to stay this action and compel arbitration.' I. Introduction 3. Plaintiffs commenced this action against Defendants "for damages, injunctive relief and declaratory relief against the long-time, and now terminated, property manager of Plaintiffs, and its principal, Marco Walker." Amended Complaint ("AC") ~ 1. However, each of 1 Defendants' opposition papers to Plaintiffs' pending motion for attachment and/or preliminary injunction will be filed separately on September 12, 2017, pursuant to the Court's order to show cause, entered July 18,2017. 1 of 9
Plaintiffs' claims is subject to the broad arbitration provisions contained m the governmg Management Agreements. 4. First, each of Plaintiffs' four causes of action (for conversion, breach of fiduciary duty, return of books and records, and a declaration that Defendants have been duly terminated) arises out of Defendants' alleged conduct as manager of Plaintiffs' buildings (the "Buildings"). 5. Defendants' role as building manager is governed by two substantively identical "Management Agreements." The Management Agreements contain broad arbitration provisions that require arbitration of "any unresolved controversy or claim arising out of or relating to this Agreement, or a breach thereof." As such, there can be no dispute that these broad arbitration provisions encompass each of Plaintiffs' four causes of action. 6. Second, although none of the named Defendants is a signatory to the Management Agreements, Defendants are entitled to compel arbitration against the signatory Plaintiffs. New York law is clear that a signatory to an arbitration agreement is estopped from avoiding arbitration with a non-signatory when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed. It IS indisputable that Plaintiffs' claims against Defendants (each arising out of Defendants' alleged wrongful conduct as manager of the Buildings) are indisputably "intertwined with" the Management Agreements. 7. Furthermore, there is a very close connection between Defendants and the actual signatory to the Management Agreements. Along with the Plaintiffs, the signatory to each of the Management Agreements is a joint venture called Zanocram Partners ("Zanocram"). Zanocram is a joint venture between Zanoras Management LTD and Defendant Ocram, Inc. (The last five letters of "Zanocram" is Defendant Marco Walker's first name spelled backwards.) Walker, as 2 2 of 9
principal of Ocram, Inc., undertook actual management of the Buildings pursuant to the Management Agreements. Under New York law, Plaintiffs may not avoid their obligation to arbitrate claims arising out of the Management Agreements by intentionally suing the individual non-signatory actors instead of the signatories. 8. In light of the interconnection between the parties, the causes of action, and the Management Agreements, Defendants are entitled to enforce Plaintiffs' broad obligation to arbitrate claims "arising out of or relating to" the Management Agreements. 9. Third, Plaintiffs' cynical attempt to avoid arbitration by sidestepping the Management Agreements and disguising their claims in the parlance of fraud and tort is similarly unavailing. The broad language of the arbitration provisions encompasses Plaintiffs' fraud and tort claims, which are merely incidental to the parties' contractual relationship. 10. Thus, as further detailed below, Plaintiffs should be compelled to arbitrate their claims against Defendants. II. The Management Agreements Contain a Broad Agreement to Arbitrate 11. Defendants' management of Plaintiffs' Buildings is governed by two substantively identical "Management Agreements." 12. True and correct copies of the Management Agreements are attached hereto as Exhibits A (Bleecker Street) and B (East 66 111 Street). 13. The Management Agreements set forth the broad scope of Defendants' management responsibilities: "[Plaintiffs] desire[] to retain Manager in connection with the provision of certain management services relating to real estate investments made by [Plaintiffs], managing such investments for [Plaintiffs], paying costs, expenses and obligations of [Plaintiffs] with respect to each such Investment, keeping books and records relating to each such 3 3 of 9
investment and [Plaintiff] and providing repmis to [Plaintiffs], all on terms and conditions set forth herein." See Management Agreements p. 1. 14. The Management Agreements contain very broad arbitration provisions: If a dispute arises out of or relates to this Agreement or the breach thereof, and if said dispute cannot be settled through direct discussions, the Parties agree to first endeavor to settle the dispute in an amicable manner by mediation administered by the American Arbitration Association under its Commercial Mediation Rules, before resorting to arbitration. Thereafter, any unresolved controversy or claim arising out of or relating to this Agreement, or a breach thereof, shall be settled by arbitration before three neutral arbitrators (selected from a panel of persons having experience with and knowledge of business or real estate, at least one of whom shall be an attorney) in New York City and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules. Any provisional or equitable remedy which would be available from a court of law shall be available from the arbitrators to the Parties. In any such proceeding limited civil discovery shall be permitted for the production of documents, which shall be governed by the Federal Rules of Civil Procedure (without reference to any local rules of a particular court). All issues regarding discovery requests shall be decided by the arbitrators. Judgment upon the award of the arbitrators may be enforced in any court having jurisdiction thereof. In that regard the Parties hereby consent to the jurisdiction of the courts of the State of New York or to any Federal Court located within the State ofnew York for any action to compel arbitration or enforce the award of the arbitrators and to service of process in any such action by registered mail, return receipt requested, or by any other means provided by law. See Management Agreements 12(j) (emphasis added). 15. There can be no dispute that the arbitration provisions are broad enough to encompass Plaintiffs' claims, each of which arises out of Defendants' role as manager of Plaintiffs' buildings, including seeking: (i) the return of unauthorized compensation from the Building accounts, (ii) return of the books and records maintained for each of the Buildings, (iii) damages for mismanagement of the Buildings, and (iv) a declaration that Plaintiffs duly terminated Ocram, Inc. as Plaintiffs' building manager. 16. New York has a "strong public policy favoring arbitration." Hackett v. Milbank, Tweed, Hadley & McCloy, 86 N.Y.2d 146, 157 (1995); Stark v. Molod Spitz DeSantis & Stark, 4 4 of 9
P.C., 9 N.Y.3d 59-66, (2007); Matter o.fsmith Barney Shearson v. Sacharow, 91 N.Y.2d 39,49 (1997). New York courts "favor[] and encourage[] arbitration as a means of conserving the time and resources of the courts and the contracting parties. Therefore, New York courts interfere as little as possible with the freedom of consenting parties to submit disputes to arbitration." Stark, 9 N.Y.3d at 66. 17. "A broad arbitration clause should be given the full effect of its wording in order to implement the intention of the parties." Weinrott v. Carp, 32 N.Y.2d 190, 199 (1973). "As such, there is a presumption of arbitrability - meaning that, so long as there is a reasonable relationship between the subject matter of the claims and the general subject matter of the contract containing the broad arbitration clause, courts will compel arbitration, and leave it to the arbitrators to perform a more 'penetrating definitive analysis of the scope' of the clause." Giannikouros v. Constantinou, 2011 NY Slip Op 33320 (Sup. Ct. Queens Co. 2011) (quoting Matter o.f Nationwide Gen. Ins. Co. v. Investors Ins. Co. o.f Am., 37 N.Y.2d 91, 96 (1975) and citing Silverman v. Benmor Coats, Inc., 61 N.Y.2d 299 (1984)). 18. Because there is much more than "a reasonable relationship" between the subject matter of Plaintiffs' claims and the subject matter of the Management Agreements, this Court should compel Plaintiffs to arbitrate their claims. HI. Non-Signatory Defendants May Compel Arbitration against Signatory Plaintiffs 19. In these circumstances, the fact that none of Defendants is a signatory to the Management Agreements does not bar Defendants from compelling Plaintiffs to arbitrate. 20. "[I]t is not the case that an obligation to arbitrate attaches only to one who has personally signed the written arbitration provision." Merrill Lynch v. Donaldson, 27 Misc.3d 391 (Sup. Ct. N.Y. Co. 2010) (emphasis in original) (citing Denney v BDO Seidman, LLP, 412 F.Jd 5 5 of 9
58, 71 (2d Cir. 2005)). "Ordinary principles of contract and agency determine which parties are bound by an agreement to arbitrate."!d. (citing Deloitte Noraudit A/S v Deloitte Haskins & Sells, US., 9 F.3d 1060, 1064 (2d Cir. 1993)). 21. The Court of Appeals recognizes that "in certain limited circumstances the need to impute the intent to a non-signatory" is appropriate. TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998). Similarly, "consent to arbitration has been inferred where the nature of the relationship between a signatory and nonsignatory indicates that the agreement to arbitrate should be extended in the interest of fairness." Merrill Lynch, 27 Misc.3d at 396 (quoting Astra Oil Co., Inc. v Rover Nav., Ltd., 344 F.3d 276,280-281 (2d Cir. 2003)). 22. Thus, "the signatory to an arbitration agreement is estopped from avoiding arbitration with a non-signatory when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has sign~d." Merrill Lynch, 27 Misc.3d at 396 (quoting BDO Seidman, 412 F.3d at 70). A party suing under ::;tn agreement containing an arbitration provision "cannot have it both ways... he cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains the arbitration provision, but, on the other hand, deny the arbitration's applicability because the defendant is a non-signatory."!d. (citing JLM Indus., Inc. v Stolt Nielsen SA, 387 F.3d 163, 177-178 (2d Cir 2004)). 23. Because Plaintiffs seek to hold Defendants liable pursuant to duties imposed by the Management Agreements, Plaintiffs are bound by the arbitration provisions in the Management Agreements even as against the non-signatory Defendants. 24. In addition, Plaintiffs may not elude their obligation to arbitrate by exclusively naming non-signatory individuals instead of the signatory entity. Along with the Plaintiffs, the 6 6 of 9
signatory to each of the Management Agreements is a joint venture called Zanocram Partners. A true and correct copy of the Joint Venture Agreement is attached hereto as Exhibit C. Zanocram is a joint venture between Zanoras Management LTD and Defendant Ocram, Inc. (The last five letters of "Zanocram" is Defendant Marco Walker's first name spelled backwards.) Instead of suing Zanocram, Plaintiffs sued Ocram, Inc. (one of Zanocram' s owners) and Marco Walker (Ocram's owner) individually. 25. New York law, under theories of agency and estoppel, does not permit Plaintiffs to avoid arbitration in these circumstances. See Hoffman v. Finger Lakes Instrumentation, LLC., 7 Misc.3d 179, 181 (N.Y. Sup. Monroe Co. 2005) (granting the defendant's cross-motion to compel arbitration despite plaintiffs' attempt to avoid arbitration by naming the LLC itself, a non-signatory, instead of the individual member signatories); c.f Glasser v Price, 35 A.D.2d 98, 101 (2d Dept. 1970) ("A signatory to a contract providing for arbitration may not elude his obligation by masking himself under a corporate identity."). 26. Walker, as principal of Ocram, Inc., undertook actual management of the Buildings (see, e.g., AC ~~ 1, 11, 33-35, 71, 73-75) pursuant to the Management Agreements. Each of Plaintiffs' causes of action (for conversion, breach of fiduciary duty, return of books and records, and a declaration that Defendants have been duly terminated as managers) arises out of Defendant's alleged conduct as manager of the Buildings. As such, Plaintiffs' claims are closely intertwined with the Management Agreements and Plaintiffs should be compelled to arbitrate pursuant thereto. IV. Plaintiffs' Incidental Fraud and/or Tort Claims Are Arbitrable 27. Plaintiffs endeavor to avoid their obligation to arbitrate by seeking damages under various non-contract theories and, in fact, ignoring the Management Agreements entirely. 7 7 of 9
28. However, regardless of the labels attached to Plaintiffs' causes of action (i.e. conversion, replevin, breach of fiduciary duty, and declaratory judgment), they all arise out of the relationship governed by the Management Agreements. And, all of Plaintiffs' causes of action are encompassed by the broad language of the arbitration provisions which require arbitration of "any unresolved controversy or claim arising out of or relating to this Agreement, or a breach thereof." Management Agreements 12(j). 29. It is "[t]he policy of this State... to favor and encourage arbitration as a means of expediting the resolution of disputes and conserving judicial resources." Szabados v. Pepsi-Cola Bottling Co. of NY, 174 A.D.2d 342, 343 (1st Dept. 1991). That policy "dictate[s] that incidental tort claims which are integrally linked to an arbitrable dispute be submitted for resolution in arbitration."!d.; see also Hirschfeld Prods. v. Mirvish, 218 A.D.2d 567, 568 (1st Dept. 1995, aff'd88 N.Y.2d 1054 (1996)). 30. To that end, exclusion of a substantive issue from arbitration "generally requires specific enumeration in the arbitration clause itself." Matter of Silverman (Benmor Coats), 61 N.Y.2d at 308. The arbitration provisions at issue here contain no such exclusion. 31. In addition, that Plaintiffs purport to have terminated Defendants as building managers does not impact the enforceability of the arbitration provisions. AC ~~ 135, 137. "[A] broad arbitration clause in an agreement survives and remains enforceable for the resolution of disputes arising out of that agreement subsequent to the termination thereof and the discharge of obligations thereunder." Matter of Primex Intl. Corp. v. Wal-Mart Stores, 89 N.Y.2d 594, 598-599 (1997). 8 8 of 9
WHEREFORE, for the reasons set forth herein, it is respectfully prayed that the Court grant Defendants' cross-motion to stay this action and compel arbitration. 9 9 of 9