A. Worms, New York, NY, for appellants.
Muchin Rosenman LLP, New York, NY (Jason C. Vigna, Matthew D.
Parrott, and Margaret J. McQuade of counsel), for
REINALDO E. RIVERA, J.P., COLLEEN D. DUFFY, BETSY BARROS,
ANGELA G. IANNACCI, JJ.
DECISION & ORDER
action, inter alia, to recover damages for fraud, the
plaintiffs appeal from an order of the Supreme Court, Queens
County (Timothy J. Dufficy, J.), entered November 17, 2016.
The order granted the defendants' motion pursuant to the
Federal Arbitration Act (9 USC § 1 et seq.) and
CPLR 7503 to compel arbitration and to stay all proceedings
in the action pending arbitration.
that the order is affirmed, with costs.
action arises out of a dispute involving a service agreement
(hereinafter the 2014 agreement) between CityStar, LLC
(hereinafter CityStar), a company formed by the plaintiffs,
Kamal Zafar, Jamal Zafar, and Armughan Asar, and the
defendant Fast Track Leasing, LLC (hereinafter Fast Track), a
company that provides turnkey automobile leasing services to
for-hire vehicle drivers. The defendants Eric Rothman and
Seth P. Markowitz were principals of Fast Track. Markowitz
executed the 2014 agreement on behalf of Fast Track, while
Jamal Zafar and Kamal Zafar executed the agreement on behalf
of CityStar. The plaintiffs alleged that they formed CityStar
to enable them to enter into the 2014 agreement, which
governed the commission and equity compensation that CityStar
would receive from Fast Track for services provided to Fast
Track by the plaintiffs through CityStar. According to the
2014 agreement, the services CityStar agreed to provide
included having the plaintiffs promote and market Fast
Track's services to for-hire vehicle drivers.
2014 agreement contained a broad arbitration provision which,
in relevant part, mandated that "any dispute,
controversy or claim arising out of or relating to [the 2014
agreement] shall be settled promptly by arbitration."
The 2014 agreement also included a provision whereby CityStar
acknowledged that the agreement was executed
"voluntarily and without any duress or undue
influence," and that CityStar understood the terms,
consequences, and binding effect of the 2014 agreement. In
addition, at the behest of Fast Track, the 2014 agreement
contained a moral turpitude clause which provided that Fast
Track could immediately terminate the 2014 agreement via
certain notice provisions, without a right to cure by
CityStar, at any time following the time that it became aware
that CityStar or any CityStar representative had committed
any act or become involved in any situation or occurrence
which brought Fast Track or CityStar "into public
disrepute, scandal or ridicule," shocked or offended the
community, or "derogate[d] from the public image."
relevant to this appeal, Fast Track terminated the 2014
agreement pursuant to the moral turpitude clause after it
learned that Jamal Zafar had been sentenced to a prison term
upon his conviction of the crime of scheme to defraud in the
first degree. The plaintiffs thereafter commenced this action
against the defendants, alleging fraud, unjust enrichment,
and breach of fiduciary duty and seeking the imposition of a
constructive trust in connection with the 2014 agreement. The
defendants then moved pursuant to the Federal Arbitration Act
(9 USC § 1 et seq.) and CPLR 7503(a) to compel
the plaintiffs to arbitrate the dispute pursuant to the
arbitration provision of the 2014 agreement and to stay the
court proceedings pending arbitration. The Supreme Court
granted the defendants' motion in an order entered
November 17, 2016, and the plaintiffs appeal.
may not be compelled to arbitrate a dispute unless there is
evidence which affirmatively establishes that the parties
clearly, explicitly, and unequivocally agreed to arbitrate
the dispute (see God's Battalion of Prayer
Pentecostal Church, Inc. v Miele Assoc., LLP, 10 A.D.3d
671, 672, affd 6 N.Y.3d 371). Under both federal and
New York law, unless it can be established that there was a
grand scheme to defraud which permeated the entire agreement,
including the arbitration provision, a broadly worded
arbitration provision will be deemed separate from the
substantive contractual provisions, and the agreement to
arbitrate may be valid despite the underlying allegation of
fraud (see Riverside Capital Advisors, Inc. v Winchester
Global Trust Co. Ltd., 21 A.D.3d 887, 889; Stellmack
A.C. & Refrig. Corp. v Contractors Mgt. Sys. of NH,
293 A.D.2d 956, 957; see also Cologne Reins. Co. of Am. v
Southern Underwriters, 218 A.D.2d 680).
broad arbitration clause in the 2014 agreement, together with
the other provisions of the 2014 agreement, demonstrate that
the plaintiffs explicitly and unequivocally agreed to
arbitrate the matters that are the subject of this action. In
addition, the plaintiffs' bare conclusory assertions of
fraud failed to establish that any alleged fraud was part of
a grand scheme that permeated the entire agreement, including
the arbitration clause (see Matter of Weinrott
[Carp], 32 N.Y.2d 190, 197; Cologne Reins. Corp. of
Am. v Southern Underwriters, 218 A.D.2d at 681).
plaintiffs' remaining contentions are without merit.
we agree with the Supreme Court's determination to grant
the defendants' motion to compel arbitration and to stay
all proceedings in the action pending ...