The opinion of the court was delivered by: Graffeo, J.:
This opinion is uncorrected and subject to revision before publication in the New York Reports.
We are asked in this case to determine what is the appropriate forum to resolve a statute of limitations challenge to counterclaims interposed in an arbitration proceeding -- the arbitrator or a court. Based on the particular facts presented, we hold that the timeliness question is to be decided by the arbitrator.
Ronald Tausend and his two children, Nicole and Jeffrey Tausend, were the beneficiaries of a trust that was established by Ronald's mother. Ronald was entitled to most of the trust's income during his lifetime, with the balance of income reserved for his children. Nicole and Jeffrey were to begin receiving principal at the age of 25 and, upon their father's death, the remaining principal would be distributed to them.
The trust owned two New York City buildings referred to as the "East End properties." In 1985, when Nicole was 19 years old, her father formed the N.J.R. Associates partnership (NJR) for the purpose of acquiring the East End properties. Ronald held a 60% stake in the partnership; Nicole and Jeffrey each received a 20% share. The partnership agreement included an arbitration clause as well as a New York choice of law provision.
The bank that served as trustee obtained an appraisal valuing the two
properties at $1.8 million. However, that figure did not include the
value of air rights because the appraiser believed that they had no
intrinsic worth.*fn1 NJR subsequently purchased the
properties from the trust for $1.9 million. Later that day, NJR sold
the air rights for one of the buildings for
$1.75 million. Approximately two decades later, NJR sold
its remaining interest in that property for $10.25 million. The
partnership also converted the other building into a condominium and
sold a number of units.
During this time period, Nicole received monetary distributions from both the trust and NJR. NJR also provided her with the use of an apartment in one of the East End buildings. In 2005, Ronald surrendered his interest in the trust and the remaining principal was distributed to Nicole and Jeffrey.
Three years later, Nicole's financial advisor asked NJR for information pertaining to the sale of the East End property but Ronald allegedly spurned that request. Nicole hired a law firm to represent her interests and its overtures were similarly rejected.
Nicole then commenced a CPLR article 78 proceeding against NJR and her father in order to obtain access to partnership documents and an accounting of its finances. In response, NJR issued a demand for arbitration, causing Nicole to file a petition to stay arbitration. Supreme Court denied the stay and ordered the parties to arbitration, and the Appellate Division affirmed (67 AD3d 441 [1st Dept 2009]).
Nicole appeared in the arbitration and asserted several counterclaims, which lead to NJR's commencement of this court proceeding seeking to stay arbitration of the counterclaims on the basis of the expiration of the statute of limitations.
Nicole moved to dismiss the proceeding, asserting that the timeliness challenge should be raised before the arbitrator. Supreme Court granted the petition and stayed arbitration of the counterclaims. The Appellate Division modified by dismissing NJR's petition to stay arbitration of the counterclaims, reasoning that CPLR 7503 (2) precluded the partnership from obtaining a stay because it had initiated and participated in the arbitration (83 AD3d 596 [1st Dept 2011]).
We granted leave to appeal (17 NY3d 848 ) and now affirm.
NJR maintains that it is not prohibited from requesting that arbitration of the counterclaims be stayed under CPLR 7503 because its decision to arbitrate did not waive its right to challenge the timeliness of the counterclaims in court. Nicole contends that the initiator of arbitration is statutorily barred from requesting judicial review of a counterclaim and must instead submit all matters to the arbitrator. Nicole alternatively argues that the language of the choice of law clause in the partnership agreement was insufficient to invoke the New York ...