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National Network of Accountants Investment Advisors, Inc. v. Gray

January 28, 2010


The opinion of the court was delivered by: Spatt, District Judge.


Plaintiffs National Network of Accountants Investment Advisors, Inc. ("NNAIA") and Walter Primoff brought this action to compel the defendant, James R. Gray, as personal representative for the Estate of Hazel E. Gray, to arbitrate in New York State. For the reasons set forth below, the Court denies the plaintiff's motion.


Hazel E. Gray, now deceased, was a Wyoming resident who inherited approximately five million dollars in 2007. On January 27, 2007, Ms. Gray contracted with the plaintiff NNAIA, through its representative, plaintiff Walter Primoff, to have NNAIA provide her with financial planning services in connection with her investment of these funds. NNAIA and Primoff are based in New York, and the contract between Ms. Gray and NNAIA was executed in Wyoming. The contract Ms. Gray signed with NNAIA is a form contract prepared by NNAIA, and provides in pertinent part:

It is agreed that any controversy between NNAIA and [Ms. Gray] arising out of NNAIA business or this Agreement shall be submitted to arbitration conducted pursuant to the code of arbitration procedure of a recognized alternative dispute resolution organization selected by [Ms. Gray]. (Aff. of Walter Primoff, Ex. A, ¶ 14.)

Ms. Gray died in 2009 from natural causes. On November 9, 2009, James Gray, as representative of Ms. Gray's estate, filed an arbitration claim against NNAIA and Primoff, alleging that NNAIA and Primoff mismanaged Ms. Gray's investment account and caused her to lose approximately one and a half million dollars. Pursuant to the terms of the contract between Ms. Gray and NNAIA, Mr. Gray named ADR Services, Inc. ("ADR"), an arbitration service based in California, to arbitrate the dispute. ADR's offices are exclusively in California and Nevada, though it claims to provide alternative dispute resolution "throughout the country." (Decl. of Marc Haber, Ex. G.)

At the same time that he filed his arbitration claim on November 9, 2009, Mr. Gray requested that the arbitration be held in San Francisco, California, pursuant to ADR's arbitration rules. These rules provide in pertinent part:

9. Fixing of Locale

The parties should mutually agree on the locale where the arbitration is to be held. If any party requests that the hearing be held in a specific locale and the other party files no objection thereto within 15 days after notice of the request has been sent to it by ADR Services, the locale shall be the one requested. If a party promptly objects to the locale requested by the other party, ADR Services shall have the power to determine the locale, and its decision shall be final and binding. (Decl. of Marc Haber, Ex.F.)

The plaintiffs object to the arbitration being held in California, but they did not file an objection to this effect with ADR. Rather, they filed the present suit on November 30, 2009, more than fifteen days after Mr. Gray requested San Francisco as the arbitration venue. The plaintiffs argue that California is an inappropriate venue for arbitration because it has no connection with the facts of the case, and several important witnesses are located in New York. The plaintiffs urge that, notwithstanding the agreement between Gray and NNAIA, the proper venue for arbitration is New York State. The defendant opposes the plaintiffs' motion, and asserts that the venue for the arbitration should properly be decided by ADR. The defendant further maintains that ADR has not yet set a location for the hearing, even in light of the fact that the plaintiffs did not object to San Francisco as the venue within the fifteen day objection period.


The plaintiffs move to compel arbitration pursuant to 9 U.S.C. § 4, which provides in pertinent part:

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.

The plaintiffs maintain that the defendant should be compelled to arbitrate in the forum with the strongest connection to the operative facts of the case and where the "key witnesses" are. According to the plaintiffs, that forum is New York. The defendant does not address whether New York is the appropriate venue for arbitration, but rather ...

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