Court of Appeals Sends Kazahk Billionaire’s Suit Over Bad Financial Advice to Arbitration in London

In Garthon Business Inc. v Stein (No. 99), which I previewed here, the Court of Appeals was asked whether Kazakh billionaire Patokh Chodiev’s suit alleging breach of contract, fraud, and negligence for bad financial advice could be litigated in New York, or had to proceed to arbitration in London.  The dispute involved multiple different investment advisement agreements with conflicting provisions over whether US law applied or whether any dispute needed to be brought to arbitration in London.

The Appellate Division, First Department had held, on a three-two vote, that the claims must be litigated in court.  The First Department reasoned that the 2009 arbitration clauses were not a clear manifestation of intent to abandon the 2000 forum selection clause in the Quennington agreement, because at best they showed only the intention to arbitrate disputes that arose after July 1, 2009.  And Garthon’s claims involved allegations from the Spring of 2009 before the 2009 agreements went into effect.  The dissenters countered that the 2009 arbitration clauses reserved to the arbitrators’ the right to determine whether the disputes were arbitrable, and so they believed that arbitration was properly compelled.

The Court of Appeals, in a short memorandum with very little analysis, agreed with the Appellate Division dissent, and granted the motions to compel arbitration in London.  The Court held that under the parties’ agreements, which incorporated the rules of the London Court of International Arbitration, the dispute had to be sent to arbitration in London because the parties had agreed to allow the arbitrator to decide whether the dispute was arbitrable.

The Court of Appeals’ opinion can be found here.

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