Brooks v. BDO Seidman, LLP

25 Misc. 3d 445
CourtNew York Supreme Court
DecidedJuly 13, 2009
StatusPublished
Cited by1 cases

This text of 25 Misc. 3d 445 (Brooks v. BDO Seidman, LLP) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brooks v. BDO Seidman, LLP, 25 Misc. 3d 445 (N.Y. Super. Ct. 2009).

Opinion

OPINION OF THE COURT

Nicholas Figueroa, J.

In this contested CPLR article 75 proceeding, petitioner seeks to stay an arbitration under section 7503 (b) of the CPLR. As his ground for such relief, petitioner claims that he never agreed to arbitrate. Such a ground is, of course, the type of threshold issue that is for the court to resolve, rather than the arbitrator (Cooper v Bruckner, 21 AD3d 758, 759 [2005]). The underlying facts are not disputed. In early 2007, petitioner retained two law firms to defend him in lawsuits brought in the wake of probes by the Securities and Exchange Commission and U.S. Attorney’s Office into the finances and operations of a company that he had run. The written agreement with one of the law firms, McDermott Will & Emery (MWE), expressly contemplated that the firm might hire “outside providers of services (such as . . . outside consultants)” for purposes of his defense.

On March 26, 2007, the two law firms and respondent signed a letter of engagement (the engagement letter) under which the law firms, “on behalf of our client, David H. Brooks,” retained respondent to perform various consulting services for petitioner’s defense. The engagement letter contained, among other things, a broad arbitration provision.

By the spring of 2009, respondent had been paid some $265,000 for its participation in petitioner’s defense, but claimed that it was due an additional $225,000. Petitioner clearly disagreed, as witness a notice to arbitrate that respondent eventually served upon him.

[447]*447Petitioner’s challenge to the proposed arbitration rests on the axiom that, as a general rule, no one may be made to arbitrate a private dispute unless he or she has expressly agreed to do so (Matter of Marlene Indus. Corp. [Carnac Textiles], 45 NY2d 327, 333 [1978]). As the party seeking arbitration, respondent has the burden of establishing that there was such an agreement on petitioner’s part (Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. v Torino Jewelers, Ltd., 44 AD3d 581, 583 [2007]).

Ordinarily, respondent’s burden in such respect would appear to be more than satisfied by the documents before the court, i.e., the agreement authorizing petitioner’s lawyers to retain consultants and the engagement letter by which the lawyers did that very thing “on [petitioner’s] behalf.” Petitioner maintains, however, that the record actually establishes the converse.

Petitioner first argues that he was not a party to the arbitration clause contained in the engagement letter because he was not a signatory to the letter itself. In this connection it is noted that petitioner never signed the engagement letter, although the instrument included at its end a line and space for his signature.

It is fundamental, of course, that one who has not personally signed a contract will nonetheless be bound by it if he or she has signed it through an authorized agent. The omission of petitioner’s personal signature is material, therefore, only if that signature was intended as the sine qua non of his being bound. It is noted that the body of the engagement letter does not reflect any such intent. Nor do the terms of petitioner’s delegation to MWE suggest that the latter was not free to enter into a consulting agreement without prior vetting by petitioner.

There is, moreover, positive evidence that the line for petitioner’s signature on the engagement letter was mere surplusage, rather than a precondition to petitioner’s obligations thereunder. Simply put, the evidence is supplied by the parties’ conduct in furtherance of the terms of the letter — including not only respondent’s rendering of services, but also, among other things, petitioner’s funding of respondent’s retainer and his acceptance of the contract’s benefits. Such actions clearly bespeak the parties’ understanding that petitioner (through his agents) had entered into an effective contract with respondent.

Petitioner would argue secondly, however, that, even if the law firms were authorized to bind him to a consulting agreement, and did so, they were nevertheless not authorized to bind him to any arbitration clause. In this connection, petitioner [448]*448cites several cases purportedly to the effect that an agent cannot make his principal subject to arbitration unless the principal has specifically authorized the agent to agree to an arbitration clause.

The precedents cited by petitioner, however, are inapposite or otherwise unavailing. Thus, for example, in In re Continental Airlines, Inc. (484 F3d 173 [2007]), where a petitioner sought to force respondents to arbitrate under a collective bargaining agreement, neither respondents nor any of their agents had been signatory to such agreement. As another example, Mionis v Bank Julius Baer & Co. (301 AD2d 104 [2002]) only further illustrates that persons who are indisputably strangers to a contract cannot be bound by it (and that no one can be personally bound to perform on a contract that he or she has signed only as an agent).

To be sure, one of the cases cited by petitioner (Matter of J. K. Knitting Mills, Inc. [Dorgin], 273 App Div 591, 595 [1948]) adverts to the proposition that a principal cannot be compelled to arbitrate unless he has “explicitly” authorized his agent to bind him to do so. But the reference appeared in the dissent, was unsupported by citation, and was only dictum at best. Moreover, there are reasons to question the applicability of so blanket a rule in cases such as this.

Indeed, there is at least one precedent, Matter of Wachusett Spinning Mills (Blue Bird Silk Mfg. Co.) (12 Misc 2d 822 [1958], mod on other grounds 7 AD2d 382 [1959]), not cited by either party, that cuts against petitioner’s position that the agent’s authority must be conferred “explicitly.” Simply put, the Wachusett decision supports the view that, in an appropriate context, an agent may bind his principal to an arbitration agreement under an authority that is at least apparent and therefore a basis for an estoppel against the principal.

In Wachusett, the operators of yarn spinning mills sought to stay an arbitration commenced by a textile manufacturer under several alleged contracts. Among other grounds for the stay, petitioners argued that the arbitration contracts had been signed ostensibly on their behalf by a sales agent and factor and that such an agent did not have the authority to bind them to an arbitration agreement. The Wachusett court disagreed, noting that

“[a]s sales agent for Wachusett, Fitchburg Sales, regardless of its actual authority, possessed apparent . . . authority sufficient to bind Wachusett.... [449]*449The fact that the accepted orders contained an arbitration clause does not alter this conclusion, for, as the Court of Appeals observed in Matter of Helen Whiting, Inc. . . . (307 N. Y. 360) at page 367: ‘From our own experience, we can almost take judicial notice that arbitration clauses are commonly used in the textile industry’. A customer dealing with a general sales agent has the right to assume that the latter has authority to enter into a contract, on behalf of its principal, containing an arbitration clause, particularly a textile contract which commonly contains such a provision.” {Id. at 829.)

The instant proceeding involves not a textile industry transaction, but a consulting contract.

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Bluebook (online)
25 Misc. 3d 445, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brooks-v-bdo-seidman-llp-nysupct-2009.