SIERRA USA COMMUNICATIONS INC v. INTERNATIONAL TELEPHONE SATELLITE CORP (2006)

At issue is whether newly amended CPLR § 7502(c) ¹ when read together with CPLR § 2004,² allows me the discretion to extend the 30-day time period for commencing arbitration, in order to prevent the expiration of provisional relief pursuant to § 7502(c), after the 30 day time period has expired.   On July 19, 2006, Petitioner, Sierra USA Communications, Inc. (“Sierra” or “Petitioner”), sought a temporary restraining order (TRO) freezing Respondent, International Telephone & Satellite, Corp. (“IT & S” or “Respondent”) assets, until an attachment could be granted, so that a soon to be commenced arbitration against IT & S would not be rendered ineffectual (Sequence No. 001).³

On July 21, I granted the TRO. On August 22, 2006, IT & S moved (sequence # 002) to vacate the TRO on the grounds that, under § 7502(c), Sierra was required to commence arbitration within 30 days of the granting of the TRO, and that since Sierra did not commence the arbitration until August 24 (34 days after the TRO was granted) I was powerless to extend the 30-day time limit, and the provisional relief was therefore no longer effective.   Sierra concedes that it commenced arbitration after 30 days had passed, however, it argues that § 7502(c), read together with § 2004, permitted extension of the 30-day time period, even after it had expired, upon a finding of good cause.   Thus, Sierra has requested that the 30 day deadline under § 7502(c) be extended.

Section 7502(c), which regulates applications for provisional remedies ancillary to arbitration proceedings, authorizes an order of attachment or a preliminary injunction ⁴ pursuant to an arbitrable controversy.   Such relief can be granted where, absent such provisional relief, the award to which the applicant may be entitled could be rendered ineffectual.   See, e.g., H.I.G. Capital Management, Inc. v. Ligator, 233 A.D.2d 270, 271, 650 N.Y.S.2d 124 (1st Dept.1996).

Prior to 2005, § 7502(c) provided that if provisional relief was granted before the commencement of arbitration, the time in which arbitration had to be commenced was to be determined in accordance with CPLR Articles 62 and 63.   In the case of attachment, § 7502(c) incorporated the 60 day deadline to commence arbitration under CPLR § 6213, which required that an “application for extension [be] made before the expiration of the [60 day deadline].” ⁵

In 2005, § 7502(c) was amended to expressly provide that provisional relief is available regardless of whether the arbitration is conducted inside or outside of New York State, and therefore applies to all arbitrations.   See Pt. Brief, Ex. B (N.Y. Comm. CPLR Rpt. No. S.4837).   The 2005 amendment also changed the deadline to commence arbitration once provisional relief was granted, from 60 days pursuant to § 6213, to 30 days as expressly provided in the amended text of § 7502(c).  Under the amended § 7502(c), if arbitration is not commenced within 30 days, the order granting provisional relief “shall expire and be null and void ․” Additionally, the court issuing the provisional remedy has discretion to reduce or expand the 30 day time period for good cause shown.   It is unclear, on the face of § 7502(c), whether the 30 day deadline may be extended after it has expired.   Furthermore, there appears to be no case law regarding discretion to extend the time period under § 7502(c), either before or after the 2005 amendment.   Thus, it is necessary to turn first to § 2004, which governs extension of time generally.   Under § 2004 courts have discretion to extend the time fixed by “any statute,” upon a showing of good cause, “whether the application for extension is made before or after the expiration of the time fixed.” (emphasis added).   See also, 49-50 Associates v. Free-Tan Corp., 248 A.D.2d 128, 669 N.Y.S.2d 556 (1st Dept.1998) (Section 2004 permitted extension of the time to file note of issue, even though the express 90 day deadline under CPLR § 3216 had expired, since plaintiff demonstrated reasonable excuse).

There are three exceptions to the exercise of discretion to extend a deadline under § 2004.   The first is where another law or statute provides that a deadline cannot be extended as expressly stated in the relevant section.  (Except where otherwise prescribed by law, the court may extend ․) (emphasis added).   For example, in In re Sakow, 97 N.Y.2d 436, 741 N.Y.S.2d 175, 767 N.E.2d 666 (2002), the Court of Appeals has held that a notice of pendency could not be extended once its three year time limit had elapsed, since CPLR § 6513 explicitly provides that an extension can only be granted if applied for before expiration.⁶  Unlike § 6513, § 7502(c) does not expressly provide that the 30 day deadline cannot be extended after such period has elapsed.   Rather, it grants discretion to extend the time limit without any reference as to when such discretion must be exercised.   Such language can hardly be characterized as prescribing extension after expiration.

The second is that a statute of limitations may not be extended, since CPLR § 201 provides “No court shall extend the time limited by law for the commencement of an action.”   See, e.g., Dorst v. Eggers Partnership, et al., 265 A.D.2d 294, 696 N.Y.S.2d 478 (2nd Dept.1999).   Since § 7502(c) is not a statute of limitations, there is no limitation.   If the 30 day limit expires under § 7502(c), and is not extended, the applicant merely loses her right to provisional relief.   Nothing in § 7502(c) prohibits an applicant from commencing arbitration or any action for that matter, once the time limit has expired.

Finally, there is no discretion, even under § 2004, to extend the time in which to file an appeal, since CPLR § 5514(c) expressly provides that “[n]o extension of time shall be granted for taking an appeal or for moving for permission to appeal except as provided in this section, section 1022, or section 5520.”

Thus it seems conclusive that the exceptions are inapplicable and that there is discretion to extend the 30 day time limit under § 7502(c), upon a showing of good cause, allowing Sierra to commence arbitration while the TRO remains in effect.   However, IT & S advances three arguments against such discretion.

IT & S first argues that § 2004 does not apply to provisional remedies, because provisional remedies are drastic in that they operate to limit or restrict a party's property rights until a final adjudication of the merits, and as such, must be strictly construed.   See, e.g., Northern Blvd. & 80th St. Corp. v. Siegel, 16 A.D.2d 523, 523-524, 229 N.Y.S.2d 827 (1st Dept.1962).   However, this general observation does not preclude application of § 2004 to provisional remedies.   Indeed, the First Department recognized that there is discretion to extend the time limit on a provisional remedy under § 2004:

The Legislature clearly intended that attachment should be expeditiously pursued and, when it provided that a levy shall become void after 90 days upon failure to proceed (CPLR 6214(e)), it can hardly be said to have contemplated proceedings extending over a period of years, notwithstanding statutory acknowledgement of the courts' discretion to enlarge the time limit (ibid.;  CPLR 2004).

Posadas De Puerto Rico, Inc. v. Gruberman, 226 A.D.2d 249, 253, 641 N.Y.S.2d 615 (1st Dept.1996) (Emphasis added).

Also worthy of note is the absence of any authority holding that § 2004 is not applicable to provisional remedies.

IT & S next argues that prior to the 2005 amendment of § 7502(c), there was no discretion to extend the time period to commence arbitration once it had expired.   Since, the legislative intent behind the 2005 amendment cannot be interpreted to grant such discretion, IT & S claims that I am powerless to extend the 30 day time limit under the amended § 7502(c), once it has lapsed.   As mentioned, before the amendment, an attachment granted under § 7502(c) prior to the commencement of arbitration, incorporated the 60 day deadline to commence under § 6213.   And a court may not extend such 60 day deadline once it has lapsed.

It is clear from the legislative history, that the 2005 amendment was focused mainly on broadening the statute to include arbitration proceedings held outside of New York State, and did not address the discretion issue.   The legislative history of mentions the addition of the 30 day deadline in the amendment, without commenting on whether the court can exercise discretion to expand it once it has expired.   See Pt.'s Brief, Ex. B (including:  Amend. of New York CPLR Sec. 7502(c) to Permit Attachment and Prelim. Inj. in Support of Intl. Arb. Proc. In New York and Elsewhere, Jt. Rpt. of the Intl. Commercial Disputes Comm. and Comm. on Arb. of the Association of the Bar of the City of New York, Feb. 11, 2005;  CPLR Memorandum # 4, New York State Bar Association, Sept. 26, 2005;  N.Y. Sen., Bill No. S.4837 (2005);  N.Y. Assem., Bill No. A.8296 (2005);  N.Y. Comm. CPLR Rpt. No. S.4837).   However, the text of amended § 7502(c) make is plain that discretion, regarding extension, was indeed affected by the 2005 amendment.

Prior to the amendment, § 7502(c) was silent as to discretion to extend the time limit.   All that was mentioned regarding time for commencement was that “the provisions of articles 62 and 63 of this chapter shall apply to the application [for provisional remedy], including those relating to ․ the time for commencement of an [arbitration] if the application is made before commencement ․” In turn, § 6213, which governed time to commence,⁷ expressly provides that the court may only extend the 60 day deadline “provided that the application for extension is made before the expiration of the time fixed.” (emphasis added).

The 2005 amendment to § 7502(c) shortened the time to commence arbitration from 60 days under § 6213, to 30 days, and the Legislature added language expressly stating that there is discretion to extend the new 30 day deadline:  “If an arbitration is not commenced within 30 days of the granting of the provisional relief, the order granting such relief shall expire and be null and void ․ The Court may reduce or expand this period of time for good cause shown.”   Since prior to the 2005 amendment § 7502(c) was silent as to discretion to extend, inclusion of this last clause warrants the conclusion that the limiting language in § 6213, which prevents extension of the deadline after expiration, is no longer applicable to § 7502(c).

Finally, IT & S makes various claims that the strength of the language used in § 7502(c) regarding failure to commence arbitration within 30 days and suggests that the legislature did not intend to grant discretion to extend after expiration.   According to § 7502(c), if arbitration is not commenced within 30 days, the provisional relief granted shall be rendered both “null” and “void”, and shall “expire”.   Though inclusion of these three terms together is unusual, there are numerous cases where courts have found discretion to extend after expiration despite limiting terms used with respect to deadlines.   See, e.g., Kalman v. Neuman, 102 Misc.2d 662, 665, 424 N.Y.S.2d 649 (Sup.Ct. Queens County 1980) (court extended expired levy after 90 day time limit had expired, notwithstanding that CPLR § 6214(e) provides that a levy “shall be void” after 90 days).   Indeed, where the Legislature prohibits the exercise of discretion to extend a deadline after it has run, the text is clear.   See, e.g., CPLR § 6213 (“provided that the application for extension is made before the expiration of the time fixed.”);  CPLR § 6513 (“Before expiration of a period or extended period, the court ․ for good cause shown, may grant an extension for a like additional period.”).

The fact that § 7502(c) also grants attorneys' fees to the prejudiced party where arbitration is not commenced within 30 days is also not dispositive.   Because attachments and injunctions, both available under § 7502(c), involve a severe restriction of the respondent's property rights until adjudication of the merits, attorney's fees are generally made available to the respondent in the event it is decided that the petitioner was never entitled to such provisional relief.   See David D. Siegel, New York Practice, § 306 (4th ed. West 2005).   That § 7502(c) makes attorneys' fees available is entirely consistent with this principle, and is unrelated to whether there is discretion to extend the 30 day limit.

I conclude that § 2004 does apply to § 7502(c).  When read together, the two statutory provisions grant discretion to extend the 30 day time limit to commence arbitration under § 7502(c), even after it has expired.   Thus, upon a showing of good cause for delay, the deadline will be extended, and Sierra will be entitled to commence arbitration while the TRO remains in effect.

Shortly after I granted the July 21st TRO, 2006, the parties began settlement negotiations.   Negotiations continued until at least August 11, 2006, 21 days after I granted the TRO. See Pet.'s Br. (Sept. 12, 2006), at Ex. C.  In light of the possibility of settlement, Sierra, not unreasonably refrained from commencing arbitration in order to avoid the required $2,500 filing fee.   The delay was merely four days beyond the 30 day deadline imposed by § 7502(c).  In light of such a short delay, invalidating the TRO and risking an ineffectual arbitration award would be more prejudicial to Sierra, than allowing the TRO to remain in place until a hearing on the attachment would be to IT & S. This is particularly true in light of the fact that the parties have mutually agreed to a modification of the TRO, allowing IT & S to make payments in the ordinary course of business.   See Ltr. from Jeffrey A. Jannuzzo, Esq. (Sept. 22, 2006).   Finally, the delay is alleged to be the result of law office error, in that counsel for Sierra consulted an edition of McKinney's CPLR that purported to be current through October 10, 2006, but in fact did not contain the amendment to § 7502(c), effective October 4, 2006, which shortened the deadline to commence arbitration from 60 days to 30 days.   Thus, I find good cause to extend the 30 day deadline to August, 24, 2006, the date on which arbitration was commenced.   The TRO will remain in effect until a hearing on the merits of the requested attachment is concluded.

Accordingly, it is hereby

ORDERED that IT & S's motion to vacate the TRO is denied ⁸ (Sequence # 002);  and it is further

ORDERED that Sierra's application to extend the 30 day time limit to commence arbitration, pursuant to CPLR § 7502(c), from August 20, 2006 to August 24, 2006, the date on which Sierra commenced arbitration, is granted;  and it is further

ORDERED that a conference will be held on the petition(Sequence # 001) on December 18, 2006 at 3:00 PM in Part 60.

FOOTNOTES

1.   CPLR § 7502(c) governs provisional remedies in aid of arbitration.   It states, in relevant part:  “The Supreme Court ․ may entertain an application for an order of attachment or for a preliminary injunction in connection with an arbitration that is pending or that is to be commenced inside or outside this state ․ but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief.   The provisions of articles 62 and 63 of this chapter shall apply to the application, including those relating to ․ the time for commencement of an [arbitration] ․ If an arbitration is not commenced within thirty days of the granting of the provisional relief, the order granting such relief shall expire and be null and void and costs, including reasonable attorney's fees, awarded to the respondent.   The court may reduce or expand this period of time for good cause shown.”  (L. 2005, ch. 703, eff. Oct. 4, 2005)

2.   CPLR § 2004 deals with the courts' discretion to extend time limits generally:  “Except where otherwise expressly prescribed by law, the court may extend the time fixed by any statute, rule or order for doing any act, upon such terms as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed.”

3.   In 2005, Sierra and IT & S entered into a purchase agreement (“Agreement”) whereby Sierra agreed to provide, and IT & S agreed to purchase, telecommunications services between the U.S. and Mexico. See Aff. Efrain Ruvalcaba ¶ 4 (July 17, 2006).   Sierra asserts that it provided those services it agreed to, but that IT & S breached the contract in failing to pay $877,121 owed under the Agreement.   See id. at ¶¶ 5-6.   Pursuant to the Agreement, Sierra prepared to commence arbitration against IT & S under the Rules of Arbitration of the International Chamber of Commerce.   See Purchase Agreement, Ex. A to Aff. Efrain Ruvalcaba, at Section III(N)(1) (July 17, 2006).   However, Sierra first petitioned for provisional remedies, including the TRO, to ensure that such arbitration would not be rendered ineffectual.

4.   In seeking either an attachment, see CPLR § 6210, or a preliminary injunction, see CPLR § 6313, a petitioner may obtain a TRO, to remain in effect until the motion for the underlying provisional relief is granted or denied.   Of course TROs are available pursuant to § 7502(c).  See, e.g., CanWest Global Communications Corp. v. Mirkaei Tikshoret Ltd., 9 Misc.3d 845, 868, 804 N.Y.S.2d 549 (Sup.Ct. New York County 2005).   Thus, for purposes of § 7502(c), the TRO that I granted on July 21, 2006, starts the clock on the 30 day time limit for arbitration to commence.

5.   When § 7502(c) was originally enacted in 1985, § 6213 governed the time to commence an action when attachment was already granted, since at that time, service of process commenced an action.   With the advent of commencement-by-filing in 1992, § 6213 was amended to govern “service of summons” rather than commencement of an action.   See 1 Weinstein, Korn & Miller, N.Y. Civ. Prac., ¶ 6213.01.   No conforming change was ever made to § 7502(c).  Still, courts continued to refer to § 6213 regarding time to commence an arbitration under § 7502(c).  See, e.g., Mulder v. A.S. Goldman & Co., 183 Misc.2d 505, 510-511, 703 N.Y.S.2d 678 (Sup.Ct. New York County 1999).

6.   CPLR 6513 states in relevant part “A notice of pendency shall be effective for a period of three years from the date of filing.   Before expiration of a period or extended period, the court ․ for good cause shown, may grant an extension for a like additional period.” (emphasis added).

7.   See note 5, supra.

8.   The additional relief sought by IT & S, which included dismissal of the petition, damages, costs, attorney fees, and sanctions, is denied.

BERNARD J. FRIED, J.