SILVERSTEIN PROPERTIES v. PAINE, WEBBER, JACKSON, N.Y., Judgment, Law, casemine.com

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Attorney(S)

Erskine D. Henderson, Allen G. Reiter and Henry P. Wasserstein for appellant. Stephen J. Fallis and Mary Jo Reich for respondents.

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Smart Summary

Factual and Procedural Background

The parties entered into a lease agreement under which the tenant was required to pay a fixed rent plus an additional amount based on a percentage increase in operating expenses. The lease obligated the landlord to provide the tenant with statements regarding this additional rent. The lease further stipulated that these statements would constitute a final determination of real estate taxes and expenses unless the tenant disputed their accuracy or appropriateness in writing within thirty days of receipt. Any such dispute was to be resolved by arbitration.

In this case, the landlord furnished the required statements, but the tenant failed to provide written notice of dispute within the thirty-day period. Despite this, the tenant later demanded arbitration. The landlord moved to stay arbitration on the grounds that the tenant did not comply with the contractual time limitation for disputing the statements. The trial court denied the motion to stay arbitration, but the Appellate Division reversed that decision. The present appeal is from that reversal.

Legal Issues Presented

Whether the arbitration clause in the lease is broad or narrow in scope, specifically regarding the arbitrator's authority to decide questions of compliance with contractual time restrictions for demanding arbitration.
Whether the tenant's failure to provide timely written notice disputing the landlord's statements precludes arbitration and warrants a stay of arbitration proceedings.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Matter of United Nations Dev. Corp. v Norkin Plumbing Co., 45 N.Y.2d 358, 363-364	Distinguishing between broad and narrow arbitration clauses and their effect on arbitrator authority over procedural compliance issues.	Used to determine that the arbitration clause in this lease was narrow, limiting arbitrator authority to substantive disputes and reserving procedural compliance questions, such as timeliness, for the courts.

Court's Reasoning and Analysis

The court emphasized that the critical inquiry is whether the arbitration clause is broad or narrow. A broad clause generally allows the arbitrator to decide all questions, including procedural ones such as compliance with time limits for arbitration demands. However, a narrow clause restricts the arbitrator's authority to substantive disputes expressly commenced within the contractual time frame.

Here, the lease contained a narrow arbitration clause, limiting the arbitrator to deciding substantive disputes that were timely initiated. Because the tenant failed to give written notice disputing the landlord's statements within the prescribed thirty days, the tenant's demand for arbitration was untimely. Accordingly, the court held that questions regarding compliance with the time restriction fall within the court's jurisdiction, not the arbitrator's.

On the merits, the court agreed with the Appellate Division's determination that the tenant's demand for arbitration was untimely and that arbitration should be stayed.

Holding and Implications

The order of the Appellate Division affirming the stay of arbitration was affirmed, with costs.

The direct effect of this decision is that the tenant's arbitration demand was properly stayed due to its untimeliness under the lease terms. The court clarified that when an arbitration clause is narrow, courts retain authority to decide procedural compliance issues such as timely notice. No new precedent was established beyond applying existing principles to the facts of this lease dispute.

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SILVERSTEIN PROPERTIES, INC., et al., Respondents, v. PAINE, WEBBER, JACKSON CURTIS, INC., Appellant.

MEMORANDUM.

The order of the Appellate Division should be affirmed, with costs.

The parties entered into a lease which requires the tenant to pay a fixed rent and an additional amount representing a percentage of the increase in operating expenses. The lease provides that the landlord is obligated to furnish the tenant with statements relating to this additional rent and further provides as follows:

"The statements thus furnished to Tenant shall constitute a final determination as between Landlord and Tenant of real estate taxes and Expenses for the periods represented thereby, unless Tenant within thirty (30) days after they are furnished shall give a written notice to Landlord that it disputes their accuracy or their appropriateness, which notice shall specify the particular respects in which the statement is inaccurate or inappropriate.

* * *

"Any such dispute shall be resolved by arbitration".

It is conceded that the landlord furnished the statements as required by the contract, but that the tenant did not give the landlord written notice of dispute within 30 days after the landlord furnished the statements. Nevertheless, the tenant subsequently demanded arbitration and when the landlord moved to stay arbitration for failure to give the notice within the time prescribed, the tenant raised a number of issues regarding the motion and further claimed that these issues were for the arbitrator.

The trial court denied the motion to stay but the Appellate Division reversed.

We have previously noted that the critical question in such cases is whether the arbitration clause is broad or narrow ( Matter of United Nations Dev. Corp. v Norkin Plumbing Co., 45 N.Y.2d 358, 363-364). Although a broad arbitration clause will generally be deemed to reserve for the arbitrator all questions regarding compliance with time restrictions for demanding arbitration, that is not true where parties have chosen a narrow clause limiting the arbitrator's powers to a particular dispute. Here it is clear that the parties have employed a narrow clause limiting the arbitrator to deciding substantive disputes commenced within the time fixed by the contract. Thus the Appellate Division correctly held that any dispute concerning the tenant's compliance with that time restriction should be decided by the courts.

On the merits we agree with the Appellate Division, for the reasons stated in its memorandum, that the tenant's demand was untimely and that arbitration should be stayed.

Chief Judge WACHTLER and Judges JASEN, MEYER, SIMONS, KAYE, ALEXANDER and TITONE concur.

Order affirmed, with costs, in a memorandum.

SILVERSTEIN PROPERTIES v. PAINE, WEBBER, JACKSON