Summary
This New York Appellate Division decision affirms a lower court order compelling arbitration and staying an employment discrimination lawsuit. The court held that the plaintiff, who sued individually but whose wholly owned company signed the arbitration agreement, was bound by the clause under the direct benefits theory of estoppel because she knowingly exploited its benefits. The court also rejected the plaintiff's argument that the defendants waived their right to arbitrate by participating in the state court proceedings.
Topics
Practice areas
Questions Presented
- Whether the arbitration clause is enforceable against the plaintiff under the direct‑benefits theory of estoppel.
- Whether the defendants waived their arbitration defense by defending the action in state court.
Holdings
- The arbitration clause is enforceable against the plaintiff; she is bound by it under the direct‑benefits theory of estoppel.
- The defendants did not waive the arbitration defense; their conduct in defending the action was not inconsistent with the affirmative defense.
Key quotations
“[T]he enforceability of arbitration agreements is governed by the rules applicable to contracts generally (Sablosky v Gordon Co., 73 NY2d 133, 136; see Maynard v Smith, 206 AD3d 900, 901).” ([*2])
“Here, although the plaintiff did not sign the agreement in her individual capacity, she is bound by the arbitration clause in the agreement under the direct benefits theory of estoppel, as the allegations in the complaint show that she knowingly exploited the benefits of the agreement and received benefits flowing directly from that agreement (see Revis v Schwartz, 192 AD3d 127, 144‑145; Matter of Long Is. Power Auth. Hurricane Sandy Litig., 165 AD3d 1138, 1141).” ([*2])
Factual background
In July 2022 the plaintiff filed a discrimination action under the New York State Human Rights Law alleging employment discrimination. Defendants moved to compel arbitration based on an arbitration clause in an agreement between XTP AG Switzerland and the plaintiff's wholly owned company, Dayn Advisors, LLC. The plaintiff did not sign the agreement personally but allegedly received direct benefits from it.
Procedural history
The Supreme Court, Westchester County (Charles D. Wood, J.) entered an order on April 13, 2023 granting the defendants' motion pursuant to CPLR 2201 and 7503(a) to compel arbitration and stay the action. The appellant appealed that order to the Appellate Division, Second Department.