ALAM v. AHMAD (2021)

Order, Supreme Court, New York County (Barry R. Ostrager, J.), entered September 24, 2019, which, to the extent appealed from as limited by the briefs, denied defendants IFG Fund, L.P., IFG General Partner Ltd., Kabir Capital LLC, and Kabir Ahmad's motion to compel arbitration, unanimously affirmed, with costs. Order, same court and Justice, entered on or about August 18, 2020, which, to the extent appealed from as limited by the briefs, denied defendants' motion to dismiss the first, second, and third causes of action in the second amended complaint, unanimously affirmed, with costs.

As the arbitration provisions at issue do not clearly and unequivocally provide that questions about the scope of the arbitration provisions are for the arbitration panel to determine, the threshold question, whether the dispute is encompassed within an agreement to arbitrate, is a question for the courts (CPLR 7503[b]; Matter of Smith Barney, Harris Upham & Co. v. Luckie, 85 N.Y.2d 193, 201–202, 623 N.Y.S.2d 800, 647 N.E.2d 1308 [1995], cert denied 516 U.S. 811, 116 S.Ct. 59, 133 L.Ed.2d 23 [1995]; Henry Schein, Inc. v. Archer & White Sales, Inc., ––– U.S. ––––, ––––, 139 S.Ct. 524, 530, 202 L.Ed.2d 480 [2019]; Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd's, 66 A.D.3d 495, 495–496, 888 N.Y.S.2d 458 [1st Dept. 2009], affd 14 N.Y.3d 850, 901 N.Y.S.2d 133, 927 N.E.2d 553 [2010], cert denied 562 U.S. 962, 131 S.Ct. 463, 178 L.Ed.2d 288 [2010]).

Even assuming, arguendo, that the dispute between the parties arises out of or in connection with the share sale agreements, plaintiffs are not bound by the arbitration provisions contained in the agreements because they are not signatories to the agreements (see Matter of Belzberg v. Verus Invs. Holdings Inc., 21 N.Y.3d 626, 630, 977 N.Y.S.2d 685, 999 N.E.2d 1130 [2013]). Although there is a dispute as to whether plaintiff Alam signed the agreements, there is no dispute that he would have signed it in his representative capacity on behalf of the IFG Fund (Matter of Kummerfeld [Sakai], 186 A.D.2d 90, 588 N.Y.S.2d 154 [1st Dept. 1992], lv dismissed and denied 82 N.Y.2d 682, 601 N.Y.S.2d 570, 619 N.E.2d 648 [1993]).

Defendants' direct benefits theory of estoppel does not apply here to bind plaintiffs to the arbitration provisions. There is no evidence that plaintiffs knowingly exploited the benefits of the share sale agreements or that they received benefits flowing directly from them (see Matter of Belzberg, 21 N.Y.3d at 631, 977 N.Y.S.2d 685, 999 N.E.2d 1130). To the contrary, any benefits plaintiffs may receive as a result of the execution of the share sale agreements will come pursuant to the partnership agreement. Accordingly, defendants' motion to compel arbitration was properly denied.

The motion court also properly denied defendants' motion to dismiss the first, second, and third causes of action. Although generally, as defendants contend, one partner may not maintain an action against another until there has been a full accounting (Simons v. Doyle, 262 A.D.2d 236, 694 N.Y.S.2d 11 [1st Dept. 1999], lv dismissed 94 N.Y.2d 899, 707 N.Y.S.2d 144, 728 N.E.2d 340 [2000]), the requirement of an accounting is a judicial, not a statutory rule, and “was meant to expedite the total settlement of disputes, not hinder them” (Auld v. Estridge, 86 Misc.2d 895, 901, 382 N.Y.S.2d 897 [Sup Ct, Nassau County 1976], affd 58 A.D.2d 636, 395 N.Y.S.2d 969 [2d Dept. 1977], lv denied 43 N.Y.2d 641, 401 N.Y.S.2d 1025, 371 N.E.2d 830 [1977]). Moreover, it exists to prevent courts from intruding on daily operations of the partnership and to avoid piecemeal adjudications (Schuler v. Birnbaum, 62 A.D.2d 461, 463, 405 N.Y.S.2d 351 [4th Dept. 1978]). Under the circumstances of this case, the motion court properly concluded that the first three claims in the second amended complaint should proceed in the interest of judicial economy (see Seiden v. Gogick, Seiden, Byrne & O'Neill, 278 A.D.2d 302, 303–304, 718 N.Y.S.2d 188 [2d Dept. 2000]).