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Ssm Realty Group, LLC v. 20 Sherman Associates

New York Supreme and/or Appellate Courts Appellate Division, First Department


December 6, 2012

SSM REALTY GROUP, LLC,
PLAINTIFF-APPELLANT,
v.
20 SHERMAN ASSOCIATES, LLC, ET AL.,
DEFENDANTS-RESPONDENTS.

SSM Realty Group, LLC v 20 Sherman Assoc., LLC

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on December 6, 2012

Gonzalez, P.J., Sweeny, Richter, Roman, Clark, JJ.

Order, Supreme Court, New York County (Carol R. Edmead, J.), entered March 5, 2012, which, to the extent appealed from, denied plaintiff's motion for summary judgment striking defendants' eighth, ninth and tenth affirmative defenses and declaring that Article 9.5 of defendant 20 Sherman Associates, LLC's Operating Agreement is null and void and that plaintiff is the manager of the LLC, unanimously affirmed, with costs.

The Operating Agreement states, "Any controversy or claim arising out of or relating to this Agreement shall be finally resolved by arbitration." Contrary to plaintiff's claim, defendants did not waive the right to arbitrate by merely serving an answer and opposing plaintiff's motion (see e.g. Stark v Molod Spitz DeSantis & Stark, P.C., 9 NY3d 59, 67 [2007]; Braun Equip. Co. v Borelli Assoc., 220 AD2d 311 [1st Dept 1995]; Two Cent. Tower Food v Pelligrino, 212 AD2d 441, 442 [1st Dept 1995]).

Plaintiff does not contend that public policy precludes arbitration of whether it is the manager of the LLC; hence, at a minimum, the second cause of action should be arbitrated. The first cause of action (seeking a declaration that Article 9.5 of the Operating Agreement is null and void) must be arbitrated because it "go[es] to the validity of the substantive provisions of [the] contract" (see Two Cent. Tower, 212 AD2d at 442). The issue whether an anti-dissolution provision in an LLC's operating agreement violates public policy does not fall into the categories of matters that cannot be arbitrated (see generally Maross Constr. v Central N.Y. Regional Transp. Auth., 66 NY2d 341, 345-346 [1985]; Matter of Sprinzen [Nomberg], 46 NY2d 623, 630-631 [1979]; Merrill Lynch, Pierce, Fenner & Smith v Benjamin, 1 AD3d 39, 44 [1st Dept 2003]).

Having correctly declined to strike defendants' arbitration-related affirmative defenses and having found that the arbitration clause in the Operating Agreement applies to the instant dispute, the motion court should not have discussed the merits of the dispute after declining to make the declarations sought by plaintiff (see Sprinzen, 46 NY2d at 632; Merrill Lynch, 1 AD3d at 43; CPLR 7501).

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: DECEMBER 6, 2012

CLERK

20121206

© 1992-2012 VersusLaw Inc.



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