Summary of Opinion: Serino v. Lipper

Factual and Procedural Background

Plaintiffs Matthew Serino et al. brought a putative class action. Defendant Kenneth Lipper moved in Supreme Court, New York County, to compel arbitration of the plaintiffs' putative class action before the American Arbitration Association (AAA) pursuant to a partnership agreement containing a broad arbitration clause requiring that "all disputes and questions whatsoever" arising under the agreement be submitted to arbitration, either before the National Association of Securities Dealers (NASD) or the AAA. Supreme Court (Karla Moskowitz, J.) granted Lipper's motion to compel arbitration on May 7, 2007. The Appellate Division, First Department, unanimously affirmed the order, without costs, on October 28, 2008.

Legal Issues Presented

1. Whether the court should compel arbitration before the AAA under the parties' broad partnership arbitration clause.
2. Whether the question of NASD rules prohibiting class arbitration before the AAA is a matter for the arbitrator to decide.
3. Whether Lipper's involvement in other cases related to the factual circumstances of this case constituted a waiver of his right to seek to compel arbitration.
4. Whether plaintiffs are judicially estopped from opposing the motion to compel arbitration because they did not oppose similar motions made by other defendants.

Arguments of the Parties

Appellants' (Plaintiffs') Arguments

• Plaintiffs contended (or advanced) that Lipper's involvement in other related cases constituted a waiver of his right to compel arbitration.
• Plaintiffs' conduct in not opposing motions made by other defendants was asserted by some as potentially barring their opposition here (judicial estoppel issue).

Respondent's (Lipper's) Position

• Lipper moved to compel arbitration under the partnership agreement's broad arbitration clause requiring arbitration before the NASD or the AAA.

Table of Precedents Cited

Court's Reasoning and Analysis

The court reasoned that the partnership agreement contained a broad arbitration clause requiring that "all disputes and questions whatsoever" arising under the agreement be submitted to arbitration before either the NASD or the AAA, and therefore granting Lipper's motion to compel arbitration before the AAA was proper. The court held that whether NASD rules prohibit class arbitration even when the arbitration is before the AAA is a matter for the arbitrator to decide, citing Matter of Smith Barney Shearson v Sacharow, Green Tree Financial Corp. v Bazzle, and Vaughn v Leeds, Morelli Brown, PC. The court further concluded that plaintiffs failed to show Lipper waived his right to compel arbitration by virtue of his involvement in other related cases, applying the principle from Stark v Molod Spitz DeSantis Stark and citing Flynn v Labor Ready. Finally, the court determined that plaintiffs were not judicially estopped from opposing Lipper's motion merely because they had chosen not to oppose similar motions by other defendants whom they believed were judgment proof, citing Ford Motor Credit Co. v Colonial Funding Corp.

Holding and Implications

Affirmed — the order granting defendant Kenneth Lipper's motion to compel arbitration before the American Arbitration Association was unanimously affirmed, without costs.

Direct effect: The plaintiffs' putative class action claims against Lipper must proceed to arbitration before the AAA (with the arbitrator to determine whether NASD rules bar class arbitration in this context). The opinion does not announce a new legal precedent beyond applying existing authorities to these facts.