IN RE: KENT WATERFRONT ASSOCIATES (2019)

DECISION & ORDER

ORDERED that on the Court's own motion, the notice of appeal is deemed to be an application for leave to appeal, and leave to appeal is granted; and it is further,

ORDERED that the order is reversed, on the law, with costs, and the matter is remitted to the Supreme Court, Kings County, for a determination on the issue of whether the dispute is arbitrable insofar as it involves the petitioners Kent Waterfront Associates, LLC, BFC Partners, L.P., and L & M Development Partners, Inc.

There is no dispute that a payment agreement existed between the respondent, National Union Fire Insurance Company of Pittsburgh (hereinafter National Union), and the petitioner Kent Waterfront Builders, LLC (hereinafter Kent Builders), and that the payment agreement contained an arbitration clause whereby “[a]ny other unresolved dispute arising out of this Agreement must be submitted to arbitration.”  When a dispute over payment arose, National Union served a demand for arbitration on Kent Builders, as well as on the petitioners Kent Waterfront Associates, LLC, BFC Partners, L.P., and L & M Development Partners, Inc. (hereinafter collectively the appellants), among others.  The petitioners commenced this proceeding pursuant to CPLR article 75 to permanently stay the arbitration insofar as it involves the appellants on the basis that the appellants were not parties to or bound by the payment agreement.  In the order appealed from, the Supreme Court referred the petition to the arbitration panel for determination as to whether the appellants were bound by the agreement to arbitrate.

It is a “well-settled proposition that the question of arbitrability is an issue generally for judicial determination in the first instance” (Matter of Smith Barney Shearson v. Sacharow, 91 N.Y.2d 39, 45, 666 N.Y.S.2d 990, 689 N.E.2d 884).  “If the court determines that the parties had not made an agreement to arbitrate, that concludes the matter and a stay of arbitration will be granted or the application to compel arbitration will be denied” (Matter of County of Rockland [Primiano Constr. Co.], 51 N.Y.2d 1, 7, 431 N.Y.S.2d 478, 409 N.E.2d 951).  This threshold determination must be made by the court unless the parties have “evinced a clear and unmistakable agreement to arbitrate arbitrability” (Matter of Smith Barney Shearson v. Sacharow, 91 N.Y.2d at 45–46, 666 N.Y.S.2d 990, 689 N.E.2d 884 [internal quotation marks omitted]; see Matter of Sherwood [Kirkpatrick], 108 A.D.3d 979, 980, 970 N.Y.S.2d 124).  Since the determination of whether the appellants were bound by the arbitration provision in the payment agreement was a threshold question for the courts, and not the arbitrator, to decide, we disagree with the Supreme Court's determination to refer that issue to an arbitration panel (see Matter of Giamo [Visscher], 94 A.D.3d 1395, 1396, 942 N.Y.S.2d 705; Matter of Perciballi Assoc., LP v. Corporate Natl. Realty, LLC, 74 A.D.3d 976, 977, 906 N.Y.S.2d 48).

Accordingly, we reverse the order and remit the matter to the Supreme Court for a determination on the issue of whether the dispute is arbitrable insofar as it involves the appellants.

MASTRO, J.P., BALKIN, DUFFY and CONNOLLY, JJ., concur.