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By Louis M. Solomon
Nat'l Bank (SNB) v. Penfold Investment Trading, Ltd., 10 Civ. 8255
(S.D.N.Y. Apr. 2011), the plaintiff sought an injunction to enjoin a AAA
arbitration and sever Penfold's separate claims into separate arbitration
proceedings. Each defendant was allegedly induced to purchase an
investment security by the SNB broker. The arbitration agreement
apparently did not provide whether the court or arbitrator would decide the
propriety of joinder and/or consolidation.
The District Court granted summary
judgment to establish the following ruling of interest to international
practice: The Court phrased the principal issue as whether the decision
to consolidate or join arbitrations was up to the Court or the AAA.
Held: although the threshold question of whether a given dispute is
arbitrable is for the Court to decide, "all other disputes concerning the
application of the arbitration agreement are referred to the arbitrators".
This included the question of joinder/consolidation.
The District Court followed what is
now fairly settled law that the "question of arbitrability" (that is, the issue
for the Court to decide) is given a very limited scope and that other
"gateway questions" are for the arbitrator to decide. These issues
include "procedural questions which grow out of the dispute and bear on its
final disposition"; these are presumptively for the arbitrator, said the Court,
quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), which
in turn quoted John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543
The District Court also followed the
decision by Judge Marrero in Anwar v. Fairfield Greenwich Ltd., 728 F.
Supp. 2d 462 (S.D.N.Y. 2010), which held that the Supreme Court's post-Howsam
decision in Stolt-Nielsen, S.A. v. Animalfeeds Int'l Corp., 130 S.Ct.
1758 (2010) (discussed here) did not dictate a different result. Stolt-Nielsenheld
that silent arbitration agreements could not be construed to require class
arbitration. Both Anwar and now Safra hold that the
joinder/consolidation issue remains an issue for the arbitrator.
International Practice Law Blog for more analysis of international
and foreign law issues.
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