IMCLONE SYSTEMS INCORPORATED v. Robert Goldhammer, et al., Nonparty Appellants.

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Supreme Court, Appellate Division, First Department, New York.

IMCLONE SYSTEMS INCORPORATED, Plaintiff, v. Samuel D. WAKSAL, Defendant-Respondent. Robert Goldhammer, et al., Nonparty Appellants.

Decided: October 20, 2005

ELLERIN, J.P., WILLIAMS, CATTERSON, MALONE, JJ. Kramer Levin Naftalis & Frankel LLP, New York (Eric A. Tirschwell of counsel), for Robert Goldhammer, appellant. Clifford Chance US LLP, New York (Anthony M. Candido of counsel), for John Landes, appellant. Simpson Thacher & Bartlett LLP, New York (Paul C. Gluckow of counsel), for Arnold Levine and John Mendelsohn, appellants. Wolf, Block, Schorr and Solis-Cohen LLP, New York (Lani A. Adler of counsel), for respondent.

Order, Supreme Court, New York County (Helen E. Freedman, J.), entered April 5, 2005, which, inter alia, denied the non-parties' motion to vacate orders, same court and Justice, entered March 4, 2005, which granted open commissions in aid of arbitration, unanimously affirmed, with costs.   Appeals from the March 4 orders unanimously dismissed, without costs, as superseded by the appeal from the April 5 order.

 We agree with the conclusion reached by the motion court, but for different reasons (see Matter of Am. Dental Coop. v. Attorney Gen. of New York, 127 A.D.2d 274, 279 n. 3, 514 N.Y.S.2d 228 [1987] ).   The generic choice of law clause in the subject agreement, which did not provide for the application of New York law to its “enforcement,” did not displace the subject provision of the Federal Arbitration Act (9 USC § 7) (see Matter of Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247, 253, 793 N.Y.S.2d 831, 826 N.E.2d 802 [2005];  Matter of Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39, 47-48, 666 N.Y.S.2d 990, 689 N.E.2d 884 [1997] ).   The parties' residence and negotiation of the agreement in New York and the lack of a substantial effect on interstate commerce do not require the conclusion that the FAA does not govern.   The parties' agreement affected interstate commerce (see Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 123 S.Ct. 2037, 156 L.Ed.2d 46 [2003];  Wien & Malkin LLP v. Helmsley-Spear, Inc., 12 A.D.3d 65, 783 N.Y.S.2d 339 [2004];  see also Morgan Stanley DW Inc. v. Afridi, 13 A.D.3d 248, 250 n. 1, 788 N.Y.S.2d 11 [2004] ).   Plaintiff is federally regulated, its products are undisputedly distributed nationally and it has investors across the nation;  moreover, the restrictive covenant contained in the subject agreement limits plaintiff's activities throughout the states (see Graphic Scanning Corp. v. Yampol, 850 F.2d 131, 133 [1988] ) and its “golden parachute” financial provisions no doubt would have some effect on interstate commerce.   While it is an open question in the Second Circuit whether pre-hearing nonparty depositions are authorized under the FAA (see Natl. Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184, 188 [1999] ), and there is substantial federal authority that they are not (see e.g. Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 410 [2004];  Matter of Integrity Ins. Co. v. Am. Centennial Ins. Co., 885 F.Supp. 69, 71-73 [1995];  Odfjell ASA v. Celanese AG, 328 F.Supp.2d 505, 506 [2004] ), in the absence of a decision of the United States Supreme Court or unanimity among the lower federal courts, we are not precluded from exercising our own judgment in this matter (see Flanagan v. Prudential-Bache Secs., Inc., 67 N.Y.2d 500, 506, 504 N.Y.S.2d 82, 495 N.E.2d 345 [1986], cert. denied 479 U.S. 931, 107 S.Ct. 402, 93 L.Ed.2d 355 [1986] ).   We subscribe to the view that depositions of nonparties may be directed in FAA arbitration where there is a showing of “special need or hardship,” such as where the information sought is otherwise unavailable (see COMSAT Corp. v. Natl. Science Found., 190 F.3d 269, 276-277 [1999];  Matter of Deiulemar Compagnia Di Navigazione S.p.A. v. M/V Allegra, 198 F.3d 473, 479-480 [1999], cert. denied 529 U.S. 1109, 120 S.Ct. 1962, 146 L.Ed.2d 794 [2000] ).   This view properly takes into consideration the realities and complexities of modern arbitration.   Here, the information sought would plainly be unavailable from other sources, since the crucial issue in plaintiff's attempt to vitiate the agreement is its claim that it was induced by fraud, and the nonparties defendant seeks to depose are the officers and directors who took part in its drafting and negotiation.   It was unnecessary for defendant to state in so many words that such information was otherwise unavailable or that exceptional circumstances, special need or hardship exist.

We have considered appellants' other contentions and find them unavailing.