Curtis, Mallet-Prevost, Colt & Mosle, LLP v. Garza-Morales

308 A.D.2d 261, 762 N.Y.S.2d 607, 2003 N.Y. App. Div. LEXIS 8547

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: July 31, 2003
• Status: Published

Opinions

OPINION OF THE COURT

Friedman, J.

In 1999, respondent in this CPLR article 75 proceeding, a New York attorney, entered into an agreement with his partners in petitioner, a New York-based law firm, that contained a broad provision for arbitration of disputes in New York. Two years later, when a dispute arose, respondent commenced a legal proceeding against his firm in Mexico, in which he asserted statutory claims not subject to arbitration under Mexican law. In seeking reversal of the injunctive relief the IAS court granted the firm against further prosecution of the Mexican proceeding, respondent argues that the doctrine of comity supplants the parties’ arbitration agreement simply because respondent alleges that he maintains a part-time residence, and performed a portion of his work for the firm, in Mexico. We hold that these circumstances do not warrant setting aside this State’s strong and longstanding policy favoring agreements to arbitrate, especially since the case arises from a relationship between a New York law firm and a New York attorney that, as discussed more fully below, was centered in New York. Accordingly, we affirm the injunction barring respondent from further prosecuting the Mexican proceeding.

Respondent Edgar H. Garza-Morales (Garza-Morales), a native of Mexico, has resided in New York City continuously at least since 1977, has been a member of the bar of this state since 1979, and has been a United States citizen since 1988. Garza-Morales was affiliated with the petitioner law firm, Curtis, Mallet-Prevost, Colt & Mosle, LLP (Curtis), for nearly a quarter-century, from 1977 to 2001, first as an associate, and then, from 1991 to 2001, as a nonequity partner. Although Curtis has several branches throughout the world, Garza-Morales does not dispute that, throughout his lengthy tenure with Curtis, the only one of these branches at which he was based or assigned an office was Curtis’s New York office. In 1999, Garza-Morales entered into an amended and restated partnership agreement with his partners that obligated each of them to resolve “[a]ny dispute or claim arising out of or in any way relating to this Agreement or the Partnership” through arbitration in New York City.

In 2001, Garza-Morales and his partners had a falling out, as a result of which he was voted out of the firm as of December 20 of that year. Thereupon, notwithstanding the partnership agreement’s broad arbitration clause, Garza-Morales commenced a legal proceeding against Curtis in a Mexican labor tribunal, in which he asserted Mexican statutory claims for back pay and reinstatement. Garza-Morales invoked the tribunal’s jurisdiction based on the presence in Mexico City of a Curtis branch office and of a Mexican law firm affiliated with Curtis (Curtis-Mexico). Garza-Morales also alleged in support of the tribunal’s jurisdiction (1) that Garza-Morales continued to maintain a residence in Mexico, (2) that Garza-Morales had performed a portion of his work for Curtis in Mexico, and (3) that, in spite of signing Curtis’s partnership agreement, Garza-Morales had in reality been only an employee of the firm. Notably, Garza-Morales selected as the venue of the Mexican proceeding the city of Monterrey, where he grew up and allegedly continues to maintain a part-time residence, although Curtis’s only office in Mexico, and Curtis-Mexico’s sole office, are in Mexico City, approximately 580 miles away (see 2003 Rand McNally Road Atlas Deluxe: United States, Canada and Mexico, at 128). It is also noteworthy that Garza-Morales does not dispute Curtis’s contention that he did not record a single hour of billable time in Mexico during his last two years with the firm.

In response to Garza-Morales’s commencement of the Mexican proceeding, Curtis commenced this proceeding seeking to compel Garza-Morales to arbitrate the dispute (including Curtis’s claims against him for breach of fiduciary duty and for the return of firm files) and to enjoin Garza-Morales from further prosecution of the Mexican proceeding. The IAS court ordered Garza-Morales to submit to arbitration in New York (a ruling not challenged on this appeal), and issued an injunction directing him to take no further steps to prosecute the Mexican proceeding. We now affirm the grant of injunctive relief.

The starting point of our analysis is the long-settled principle that a party seeking to enforce a valid agreement to arbitrate in New York under CPLR 7503 (a) is entitled, as a matter of course, to injunctive relief against further prosecution of proceedings in tribunals of other jurisdictions concerning matters within the scope of the arbitration agreement (see H. M. Hamilton & Co. v American Home Assur. Co., 15 NY2d 595 [1964], affg 21 AD2d 500, 502 [1964]; Matter of Wolff Co. [Tulkoff], 9 NY2d 356, 361-362 [1961]; Matter of PricewaterhouseCoopers L.L.P. v Rutlen, 284 AD2d 200 [2001]; see also Nico Constr. Co., Inc. v Installux Co., 1989 WL 146779, *1, 1989 US Dist LEXIS 14247, *2-3 [SD NY, Nov. 30, 1989, 89 Civ 7521] [court, applying New York law, enjoined prosecution of French proceedings]; Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C7503:l [1], at 454 [1998]; Siegel, NY Prac § 592, at 1000 [3d ed]; 13 Weinstein-Korn-Miller, NY Civ Prac ]f 7503.22). Similar relief is available under the Federal Arbitration Act (9 USC § 1 et seq.; see New-bridge Acquisition I, L.L.C. v Grupo Corvi, S.A. de D.V., 2003 WL 42007, *3, 2003 US Dist LEXIS 55, *7-8 [SD NY, Jan. 6, 2003, 02 Civ 9839] [enjoining prosecution of Mexican proceedings]; Smoothline Ltd. v North Am. Foreign Trading Corp., 2002 WL 273301, *6, 2002 US Dist LEXIS 3123, *19-20 [SD NY, Feb. 27, 2002, 00 Civ 2798] [enjoining prosecution of proceedings in Liechtenstein]).

If an injunction against the prosecution of a foreign proceeding commenced in violation of a valid arbitration agreement were, as the dissent asserts, “extraordinary relief’ not readily granted, an arbitration agreement would be easily defeated, and compliance therewith would be rendered essentially voluntary, in any case having even a minimal connection to a foreign jurisdiction. As the Court of Appeals has explained:

“The purpose of a stay is to enforce a contractual obligation to arbitrate by preventing other actions or proceedings inconsistent with that obligation. If our courts may only prevent inconsistent actions or proceedings in the courts or administrative agencies of this State, they will only be providing partial enforcement of the promise to arbitrate; if the court’s power to stay were thus limited, the obligation of the contract could easily be frustrated by the prosecution of actions or proceedings in another jurisdiction.

“* * * To deny to our courts the power to grant specific performance of an arbitration clause by enjoining the prosecution of foreign proceedings would be a step backward. It would partially reestablish the long-abandoned doctrine that an agreement to arbitrate is revocable. We may not and should not take such a step unless expressly directed to do so by the Legislature.” (Matter of Wolff Co. [Tulkoff], supra at 361-362.)

Our dissenting colleague, essentially adopting Garza-Morales’s position, would have us depart from the foregoing principles by holding that, notwithstanding any otherwise applicable agreement to arbitrate in New York, comity mandates the denial of injunctive relief against proceedings in a foreign country where requiring the party who commenced those proceedings to arbitrate the foreign claims would violate the “public policy” of the foreign forum. Essentially, the dissent and Garza-Morales contend, so long as there is sufficient connection between a foreign country and a dispute otherwise arbitrable in New York to provide a pretext for suing abroad, the proponent of arbitration will be forced to litigate in the foreign country if that country would not enforce the arbitration agreement under its own laws. We reject the view that any such evisceration of New York’s “long and strong public policy favoring arbitration” (Matter of Smith Barney Shearson v Sacharow, 91 NY2d 39, 49 [1997]) is required by the doctrine of comity.

In arguing that our policy favoring arbitration is overridden in this case by the countervailing doctrine of comity, the dissent and Garza-Morales rely primarily on a 1960 Court of Appeals decision, Arpels v Arpels (8 NY2d 339 [1960]), and a 1985 decision of this Court, Faberge Intl. v Di Pino (109 AD2d 235 [1985]). Arpéis provides no support for Garza-Morales’s position, and Faberge, assuming that it should be followed, is readily distinguishable.

Turning first to Arpéis, that decision’s statement that resort to litigation in a foreign court generally should not be enjoined unless “there is danger of fraud or gross wrong being perpetrated on the foreign court” (8 NY2d at 341) was made in the context of litigation in which neither party invoked any arbitration agreement. Because Arpéis did not involve any attempt to enforce an arbitration agreement, New York’s policy favoring arbitration simply was not implicated in that case. Nothing in Arpéis speaks to the issue presented by this appeal, which is whether a foreign country’s hostility to arbitration of certain claims warrants the denial of full enforcement of an otherwise applicable agreement to arbitrate in New York.

Our dissenting colleague would graft the Arpéis standard for enjoining foreign proceedings, articulated in a case in which no arbitration agreement was invoked, onto cases where such an injunction is sought to enforce an applicable arbitration agreement. We decline to take this step, as to do so would abruptly curtail the enforceability of an agreement to arbitrate in New York. Moreover, in arguing that Arpéis cannot be distinguished from this case on the ground that there was no arbitration issue in Arpéis, the dissent implicitly takes the position that, for purposes of considering an application to enjoin foreign proceedings, there is no material distinction between a case involving an arbitration agreement, on the one hand, and, on the other hand, a case involving no such agreement. Given the high priority this State has long given to its policy favoring arbitration, we cannot agree with this view.

As for Faberge — the only precedent brought to our attention in which injunctive relief against prosecution of foreign litigation was denied notwithstanding the existence of an arbitration agreement — the holding of that case should, in view of the strong public policy favoring arbitration, be limited to its particular facts. The parties to Faberge were a corporation (Faberge) and one of its executives (Di Pino). Although Di Pino’s employment agreement provided for arbitration in New York, it appears to have been undisputed that Di Pino, whom Faberge first employed as an international sales executive and subsequently as general manager of its Italian branch, had been based in Italy for the entirety of his 13-year tenure with the company. The opinion states that, upon being hired by Faberge, Di Pino, an Italian-born American citizen, “returned to Italy to work for [the company]” (109 AD2d at 236). Under these circumstances, we vacated the injunction Faberge had been granted against Di Pino’s commencement of proceedings in Italy to obtain Italian statutory severance benefits, finding that Faberge had not established that a waiver of such statutory rights would be enforceable in Italy (id. at 240-241).

The result in Faberge is best explained by the fact that there was no dispute that the relationship between Faberge and Di Pino was centered in Italy. This key fact renders Faberge inapposite to the case before us, in which the relationship between Curtis and Garza-Morales was plainly centered in New York. To reiterate, it is undisputed that Garza-Morales, a member of the New York bar since 1979, was based at Curtis’s New York office, and only at the New York office, through the entirety of his 24 years with the firm. It is also undisputed that Garza-Morales resided in New York City through all of those 24 years. True, Garza-Morales traveled to Mexico on business for Curtis from time to time, and, in his capacity as a member of the Mexican bar, served as a “founding partner” of Curtis-Mexico. Nonetheless, whatever the precise proportion of his work that he performed in Mexico, and whether or not he actually resides at his purported Mexican address, the undisputed and dispositive fact remains that Garza-Morales was, from the beginning to the end, a New York-based employee or partner of Curtis.

Garza-Morales’s failure to dispute that he was always based in New York, and nowhere else, is readily understood when the location of his only alleged residence in Mexico is borne in mind. Again, Garza-Morales’s alleged Mexican residence is in Monterrey, which is nearly 580 miles from Mexico City, the location of Curtis’s only Mexican office and of Curtis-Mexico’s sole office. If further confirmation that the parties’ relationship was centered in New York were required, it would be sufficient to recall that Garza-Morales billed no time at all from Mexico during his last two years with the firm.

Neither is it plausible for the dissent and Garza-Morales to take the position that the Mexican statutory claims are not within the scope of the parties’ arbitration agreement. The Court of Appeals has stated the applicable rule as follows:

“[W]hile a specifically enumerated restriction upon arbitral authority will be upheld by the courts, no such limitation upon either factual or legal dispute resolution will be inferred from a broadly worded contractual provision expressly calling for the arbitration of all disputes arising out of the parties’ contract.” (Maross Constr. v Central N.Y. Regional Transp. Auth., 66 NY2d 341, 346 [1985] [citations omitted].)

Bearing in mind this teaching, the arbitration clause of the Curtis partnership agreement — which covers “[a]ny dispute or claim arising out of or in any way relating to this Agreement or the Partnership” (emphasis added) — plainly incorporates any dispute or claim arising from the professional relationship between Curtis and Garza-Morales. It makes no difference whether the parties’ relationship is characterized as one of partnership or employment, which jurisdiction’s law is alleged to give rise to the asserted claim, or whether the Mexican statutory claims have any merit. Nothing in the partnership agreement gives the slightest hint of an intent to exclude foreign statutory claims for back pay and reinstatement from the scope of arbitration. Indeed, it is difficult to conceive of more inclusive language the parties could have used to express their agreement to arbitrate.

*

The fundamental flaw of the approach of the dissent and Garza-Morales is to treat the doctrine of comity as a rigid rule that overrides the deeply rooted public policy of this State to enforce freely made arbitration agreements. This completely misconceives the nature of comity. As the Court of Appeals has explained:

“The doctrine of comity ‘is not a rule of law, but one of practice, convenience and expediency' (Mast, Foos & Co. v Stover Mfg. Co., 177 US 485, 488). It does not of its own force compel a particular course of action. Rather, it is an expression of one State’s entirely voluntary decision to defer to the policy of another (Zeevi & Sons v Grindlays Bank [Uganda], 37 NY2d 220, cert den 423 US 866). * * *

“Today in New York the determination of whether effect is to be given foreign legislation is made by comparing it to our own public policy; and our policy prevails in case of conflict (Zeevi, supra at p 227).” (Ehrlich-Bober & Co. v University of Houston, 49 NY2d 574, 580 [1980] [emphasis added].)

In Ehrlich-Bober, the Court of Appeals permitted an action against a Texas state university to go forward in New York, notwithstanding that a Texas statute limited the venue of suits against the university to two specified Texas counties. The Court of Appeals concluded that comity did not require giving the Texas statute precedence over New York’s compelling interest in providing a forum for redress of an injury that arose from a commercial transaction centered in New York {id. at 581-582). Similarly, in this case, which also involves a contractual relationship centered in New York, this State’s strong public policy to honor arbitration agreements should prevail over the Mexican policy against arbitration of Garza-Morales’s alleged statutory claims. To the extent the competing policies of New York and Mexico should be “weighed” against each other as part of the comity analysis (see Faberge, 109 AD2d at 240), New York’s policy favoring arbitration should always be given primacy over a foreign country’s policy disfavoring arbitration where, as here, the parties’ relationship was centered in New York, the parties have expressly agreed to arbitrate all disputes in New York, and the dispute involves only private parties.

In arguing that a court facing a case like this should somehow “weigh” New York’s policy favoring arbitration against a foreign country’s conflicting policy, Garza-Morales raises more questions than he answers. To begin, Garza-Morales does not explain how one determines which jurisdiction’s policy “outweighs” that of the other. Nor does Garza-Morales offer reasons for placing the burden of proof for these purposes on the proponent of this State’s own public policy, rather than on the party seeking to displace that policy with the conflicting policy of a foreign jurisdiction. Finally, and most importantly, Garza-Morales fails to explain the basis for his assertion that, in the present case, Mexico’s policy precluding full enforcement of the parties’ arbitration agreement outweighs New York’s policy favoring full enforcement of that agreement. This crucial question also goes unanswered by the dissent. The dissent’s observation that courts use flexible balancing tests from time to time does not provide any substantive justification for the displacement of New York public policy the dissent would have us effect.

We further note that the position of the dissent and Garza-Morales, if adopted as the law of this State, would give rise to a legal anomaly. The Court of Appeals has recently held New York’s policy in favor of arbitration to be so strong that it overrides all but a very few other public policies of the State itself (see Matter of New York City Tr. Auth. v Transport Workers Union of Am., 99 NY2d 1 [2002]). According to the dissent and Garza-Morales, this urgent policy of our own State should be readily displaced by a foreign country’s conflicting policy whenever a party sues in that country on a claim not subject to arbitration there, so long as the foreign country has some connection to the parties’ contractual relationship. We see no reason to reach such a curious result.

In closing, we observe that the Court of Appeals urged us in Ehrlich-Bober to safeguard New York’s “recognized interest in maintaining and fostering its undisputed status as the preeminent commercial and financial nerve center of the Nation and the world” (49 NY2d at 581 [citations omitted]). This compelling interest is served by the policy favoring arbitration. Particularly in contracts between individuals or firms of different nationalities, parties stipulate to arbitration in New York largely for the purpose of controlling the risks of doing business by defining, in advance and by voluntary agreement, the forum and method of dispute resolution. Through decades of consistent enforcement of such arbitration agreements, the courts of this State have helped to foster New York’s position as the international capital of business and finance. If we were to accede to Garza-Morales’s request that we make full enforcement of an agreement to arbitrate in New York dependent on the attitude toward arbitration of a foreign country in which the parties agreed not to litigate, we would throw into doubt the extent to which an arbitration agreement will be enforced whenever the transaction or the parties have some connection to a foreign country. In declining to take such a step, we reaffirm New York’s long-settled law and policy favoring arbitration, thereby helping to maintain New York’s central role in the economy of the nation and the world.

Accordingly, the order of the Supreme Court, New York County (Emily Goodman, J.), entered May 7, 2002, which, insofar as appealed from as limited by the briefs, granted Curtis’s CPLR article 75 petition to the extent it seeks to enjoin Garza-Morales from further prosecution of a proceeding against Curtis in a Mexican labor tribunal in Monterrey, Nuevo León, Mexico, and order, same court and Justice, entered June 25, 2002, which directed Garza-Morales, inter alia, to take all steps necessary to comply with the order entered May 7, 2002, and to refrain from taking further affirmative steps of any kind in connection with the aforesaid Mexican proceeding, should be affirmed, without costs.

Since Garza-Morales’s Mexican statutory claims fall within the scope of the parties’ arbitration agreement, their merits should be left for the arbitrators to determine. Thus, the dissent, in stating that “Curtis has failed to establish that Garza-Morales’s claims under Mexican law are not viable,” addresses a question that is not properly before us. To the extent the dissent relies on the discussion in Faberge of the scope of the arbitration clause in that case, that discussion constitutes mere dicta and appears to be inconsistent with the subsequent Maross decision.