Mark Ross & Co., Inc. v XE Capital Mgt., LLC

Mark Ross & Co., Inc. v XE Capital Mgt., LLC 2007 NY Slip Op 09687 [46 AD3d 296] December 6, 2007 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected through Wednesday, February 13, 2008

Mark Ross & Co., Inc., et al., Appellants,
v
XE Capital Management, LLC, Respondent.

—[*1] Herrick, Feinstein LLP, New York City (David L. Fox of counsel), for appellants.

Quinn Emanuel Urquhart Oliver & Hedges, LLP, New York City (Peter E. Calamari of counsel), for respondent.

Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered May 2, 2007, which denied petitioners' motion for a preliminary injunction staying the underlying arbitration and dismissed the petition, unanimously affirmed, with costs.

The court properly rejected petitioners' attempts to stay the underlying arbitration on the basis that they were nonsignatories to the subject agreement that contained an arbitration clause (Agreement). The Agreement was executed by respondent XE Capital Management, LLC (XE), and R 2004, LLC (R 2004), a company formed by petitioner Mark Ross & Co, Inc. (MRC), and its principals, including the individual petitioner, to enter into a joint venture with XE. Although nonsignatories to the subject Agreement, petitioners participated in the preliminary stages of the arbitration for approximately seven months without objection, and during this time, and in response to another lawsuit brought by XE and its affiliate, petitioners sought to compel XE and the affiliate, a nonparty to the Agreement, to arbitrate related claims. MRC is also estopped from seeking a stay of arbitration because it derived direct benefits from the Agreement, via a Services Agreement, that provided that MRC was to receive a monthly service fee (see HRH Constr. LLC v Metropolitan Transp. Auth., 33 AD3d 568, 569 [2006]). Because petitioners have failed to establish the likelihood of success on the merits, the denial of the preliminary injunction was proper, and the court's dismissal of the petition seeking, inter alia, to permanently enjoin XE from proceeding with the underlying arbitration was appropriate inasmuch as a motion seeking preliminary injunctive relief "opens the record and gives the court authority to pass upon the sufficiency of the underlying pleading" (Guggenheimer v Ginzburg, 43 NY2d 268, 272 [1977]). [*2]

We have considered petitioners' remaining contentions and find them unavailing. Concur—Tom, J.P., Saxe, Friedman, Gonzalez and Catterson, JJ.