In Protostorm, Inc. v Foley & Lardner LLP, 193 AD3d 486 [1st Dept 2021], the court stayed the client’s action for legal malpractice pending arbitration between the client and attorney:
“Where there is no substantial question whether a valid agreement [to arbitrate] was made or complied with, … the court shall direct the parties to arbitrate” and its order “shall operate to stay a pending … action” (CPLR 7503[a] [emphasis added]). Once a valid arbitration agreement is identified, an arbitration should only be stayed “when the sole matter sought to be submitted to arbitration is clearly beyond the arbitrator’s power” (Silverman v. Benmor Coats, Inc., 61 N.Y.2d 299, 309, 473 N.Y.S.2d 774, 461 N.E.2d 1261 [1984] [emphasis added]). Further, where “arbitrable and nonarbitrable claims are inextricably interwoven, the proper course is to stay judicial proceedings pending completion of the arbitration, particularly where … the determination of issues in arbitration may well dispose of nonarbitrable matters” (Cohen v. Ark Asset Holdings, Inc., 268 A.D.2d 285, 286, 701 N.Y.S.2d 385 [1st Dept. 2000]; see also Lake Harbor Advisors, LLC v. Settlement Servs. Arbitration and Mediation, Inc., 175 A.D.3d 479, 105 N.Y.S.3d 520 [2d Dept. 2019]; Monotube Pile Corp. v. Pile Foundation Constr. Corp., 269 A.D.2d 531, 703 N.Y.S.2d 234 [2d Dept. 2000]).
There is no dispute that there is a valid agreement between the parties to arbitrate any dispute regarding unpaid fees. Thus, the court must compel arbitration of defendants’ claim for unpaid fees and stay this action pending completion of the arbitration (CPLR 7503[a]). Moreover, because plaintiff’s nonarbitrable malpractice claim is inextricably intertwined with the arbitrable claim for unpaid fees, the proper course is to stay the action pending completion of the arbitration (see Cohen, 268 A.D.2d at 286, 701 N.Y.S.2d 385; Lake Harbor Advisors, LLC, 175 A.D.3d at 479, 105 N.Y.S.3d 520; Monotube Pile Corp., 269 A.D.2d at 531, 703 N.Y.S.2d 234).
To the extent plaintiff argues that it cannot be forced to arbitrate its malpractice claim because it did not explicitly agree to do so, both the First and Second Departments have clearly found that a nonarbitrable issue can be decided in an arbitration when it is inextricably intertwined with an arbitrable issue, particularly where, as here, the determination of the arbitrable unpaid fees claim may dispose of the nonarbitrable malpractice claim (see Cohen, 268 A.D.2d at 286, 701 N.Y.S.2d 385; Lake Harbor Advisors, LLC, 175 A.D.3d at 480, 105 N.Y.S.3d 520; Monotube Pile Corp., 269 A.D.2d at 531–532, 703 N.Y.S.2d 234).
Richard A. Klass, Esq.
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Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached at (718) COURT●ST or RichKlass@courtstreetlaw.com with any questions.
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