1414 Holdings, LLC v BMS-PSO, LLC

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1414 Holdings, LLC v BMS-PSO, LLC 2017 NY Slip Op 32551(U) December 1, 2017 Supreme Court, New York County Docket Number: 654931/2016 Judge: Eileen Bransten Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 1] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NE\V YORK: IAS PART THREE ---------------------------------------------------------------------]{ 1414 HOLDINGS, LLC Plaintiff, Index No, 654931/2016 Mot Seq, 001 -againstBMS-PSO, LLC DECISION A.1~D ORDER Defendants< ---------------------------------------------------------------------_)( BON. EILEEN BRANSTEN: Petitioner, 1414 Holdings, LLC, makes this motion to vacate an arbitration award (mot seq. 001). A, General Background Petitioner, 1414 Holdings LLC, is the landlord of premises located at 1414 Avenue ofthe Americas in Ne-..v York (hereinafkr "Premises''). Respondent is the tenant of 1414 Avenue of the Americas, Floor 19. In 1996, the parties entered into a leasing agreement for the 19th floor for a Tenn of fifteen (15) years and six (6) days. Pet. irs-9. Pursuant to the terms of the lease agreement, the Tenant had the option to extend the lease for two additional five (5) year periods, Id at ~10. The Tenant exercised the first option to extend in 2010 and the second option to extend in 2015. Id at~, l 1, 15. 2 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 2] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v, BrvIS-PSO~ LLC (65493112016) Page 2 of9 Also pursuant to the tenns of the lease agreement, when the Tenant exercises the option to extend the lease, the Landlord shall have twenty (20) days to give a notice of the determination as to the fair market value of the rental for the premises. See id at if 16. Upon receipt of the Landlord's notice the Tenant then has nventy (20) Days to give its determination as to the fair market value of the rental for the prernises. ld. \Vhere the parties are unable to agree on the fair rental value of the premises, the lease provides the parties wm arbitrate the dispute. id. Each party may select an arbitrator and then jointly select a third) neutral, arbitrator to decide which fair maTket proposal to utilize. Id at 4Iii 16-17 The instant dispute arose when the Tenant elected to extend the lease for a second time, triggering the twenty-day notice requirement. The parties provided each other with notices as to the fair market value, IcL Unable to agree on the fair market value each party selected an arbitrator then jointly selected a third, neutral, arbitrator. See id at il1f 19-22; see also Claman Affirm. Ex 5. B. The Arbitration Clause o,fthe Lease Agreement Section 75 of the Lease Agreement provides the terms under which the tenant may exercise the option to extend the lease for a period of five years. See Pet. Ex. 1 §75. Part B of section 75 includes an agreement to arbitrate disputes in the valuation of the 3 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 3] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v. BMS-PSO, LLC (654931/2016) Page 3 of9 Property when exercising the option to extend the lease. See id at §75.B. It states; in relevant part Within twenty (20) days after the Landlord's receipt of Tenant's notice exercising said option, L~mdlord sha11 give Tenant notice ('"Landlord's Notice") of Landlord's determination of fair market value of fixed annual rent and escalation package (coUectively "Landlord's Fair l\tfarket Terms'') for the rental of the Demised Premises to Temmt for the Option Period in question. Landlord's Notice shall also contain specification of an individual with not less than 10 years; experience in leasing commercial office space in Nevv York City ("Landlord's Arbitrator"), Tenant Shall give notice ("Tenant's Notice") to Landlord \Vithin t\venty (20) days of the giving of Landlord's Notice ofterms ('Tenant's Fair l\tfarket Terms") which tenant believes are such fair maxket value. If Tenant gives Tenanfs Notice, it must contain specification of an individual with such leasing experience as an arbitrator. Otherndse Tenant's Notice shall be void, If tenant does not give Tenant's Notice within such twenty (20) day period, Landlord's Fair ~1arket Tenns shall be deemed to be "Tme Fair l'vfarket". , , If Tenant gives Tenanfs Notice, then the two individuals so selected shall[,] within three (3) days after the giving of Tenant's Notice[,] select[,] in writing[,] a third individual (the "Arbitrator") with the sars:1e level of qualifications. If the Arbitrator 1s not selected within said three (3) days, then the third arbitrator having such qualifications shall be appointed by the American Arbitration Association f "AAA"). \Vithin ten ( l 0) days of fue appointment the Arbitrator shall select either Landlord's Fair Market Terms or Tenant's Fair l\ifarket tenns. Such selection shall he deemed to [he] '"True Fair I'vfarket". Id. Pursuant to the terms of this agreement~ the Landlord selected Brian S. \Yater.man as its Arbitrator, who valued the Property at $111. 73isq, ft. See Pet. E«. 3. The Tenant selected Joseph J, Messina as its Arbitrator, who valued the Property at $76.40isq, 11 See Pet. Ex. 4. Together, the two arbitrators recommended Theresa Nygard, a profossional real estate appraiser; serve as the neutral, arbitrator in thls action. Arbitrator Nygard was retained by the parties and, pursuant to the lease tenns, selected the Ten ant's Fair iV1arket Terms . .._\'ee Claman Affinn. Ex. 12, 4 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 4] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v, Bl\.1S-PSO, LLC (654931/2016) Page 4 of9 C The Arbitration Retainer 1 Prior to commencing work as the third arbitrator, Arbitrator Nygard provided the parties with a Retainer Agreement Clarnan Affirm Ex. 5. The parties agreed to waive the requirement that the third arbitrator have "not less than 10 years' experience in leasing commercial office space in New York City" given Arbitrator Nygard's professional experience as a real estate appraiser. See id Arbitrator Nygard agreed not to render an appraisal but to arbitrate this dispute by selecting one of the nvo proposed valuations pursuant to the lease terms. S'ee id. The terms of the Retainer agreement further provide that "the scope of the assignment will include meeting with [the parties'] arbitrators, reviewing all submitted documents and evidence, inspecting tbe subject premises, confirming the appropriateness of the data assumption and analyses presented by the arbitrators, and reaching a decision as to the value of the 191h Floor space." See id. 1 The copy of the Arbitration Retainer provided to the court only contains the signature of counsel fix the Landlord Petitioner and not the Tenant Respondent. Subsequent correspondence between the Petitioner and the Respondent, however, along with Respondent's agreement to proceed with the arbitration without objection, and indeed the Respondent's desire to dismiss the Petition, indicate the Respondent's desire to be bound by the terms ofthe Retainer, See Kmmlchuk v. Stroup. 61 A.D.3d 118, 125 (1st Dep't 2009) (noting that even when.~ the ab'Teement lacked the signature of one party, the subsequent course of performance established a viable contract). 5 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 5] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v. B1-1S-PSO, LLC (654931/2016) Page 5 of9 Arbitrator Nygard specifically addressed the issue as to whether a formal hearing should be conducted on this matter stating, "H is my understanding that there is disagreement over whether the arbitrators should conduct formal hearings on this matter. Upon being formally retained as the third arbitrator, I will review the documents already subrilltted to me and meet with the party-appointed arbitrators to resolve this issue preparatory to addressing the rent valuation." Id. D. The Dispute over a Forrnal Hearing As indicated by Arbitrator Nygard, the parties disagreed over the need for a formal hearing in this dispute. See Claman .Affinn Ex. 6 - 9. Specifically, the Landlord desired a formal bearing whereby it could exercise its claimed "due process" right to present evidence and cross examine witnesses. Pet. ~iI27-30, 41. The Tenant was satisfied resting upon the papers and relying upon the decision of the arbitrator. See Claman Affirm. Ex. 9. On .March 23, 2016i the Petitioner filed an Order to Show Cause seeking to compel Respondent to .participate in an arbitration hearing. Id at 1f4135-36. At that hearing, this court expressly stated that the arbitrator is the person to determine whether a CPLR §7 506 hearing is necessaxy, See Claman .~/firm. Ex, 9 (Tr, 9: 3-13). 6 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 6] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v. Bl\1S-PSO, LLC (654931/2016) Page 6 of9 Upon entering into the Retainer Agreement with Arbitrator Nygard, the parties agreed that the need for a formal hearing was to be addressed by the arbitrator. C'!aman Affirm. Ex. 5. Ultimately, the arbitrator detennined that there was no need for a fonna1 hearing in this dispute. See C:/aman Affirm. EXo 10. Specifically, upon review, the arbitrator determined that the Lease did not call for a formal CPLR 7506 hearing and that a determination could be made pending an inspection of the premises and upon a submitted rebuttal of the broker reports. Jd, It is this court's understanding that no further objection was made subsequent to the arbitrator's decision not to conduct a fomml hearing. See generally, Claman Ajfir~1: see also Claman .Affirm Ex. l O; Claman Affirm. Ex. 12. It is well settled 1m..v that a participant in an arbitration proceeding who subseLluentlv seeks to vacate an arbitration award mav do so "onlv on the grounds that 1 J ~ ~ <....: the rights of that party were prf'._judiced by corruption, fraud or rnisconduct in procuring the mvard, that the arbitrator lacked impartiality, that the arbitrator exceeded his pm.ver or failed to make a final or definite award, or that there was a procedural failure that was not waived.,, See Fishman v. Roxanne Aigmt., 24 A.D.3d 365, 366 (2005). Here, the Landlord claims that its right to due process was violated by Arbitrator Nygard's refusal to subject the parties to a formal CPLR § 7506 hearing. See Pet. 7 of 10 ~5. [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 7] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v. Biv1S-PSO, LLC (654931/2016) Paae 7 of9 b CPLR § 7506(b) provides that an arbitrator designates a time and place for a hearing and notify the parties in writing personally or by certified mail not less than eight days before the hearing. At such a heaiing, the parties are entitled to be heard, present evidence, and cross-examine witnesses. See CPLR §7506(c). These requirements may be waived by the parties' vvritten consent) or by continuing with the arbitration process without objection. See CPLR § 7506(f). Here~ the Landlord signed a Retainer Agreement with Arbitrator Nygard which left the issue of a fom1al bea1ing to the arbitrator's discretion, See Claman ~1/linn. Ex. 5, Arbitrator Nygard then deten11ined that a formal hearing would not be necessary under the tem1s of the lease agreement. See Claman ,-cUJlrm. Ex. 10. In so doing~ the parties waived their right to be heard in a fonnal proceeding in the event the arbitrator detem1ined a formal hearing was not necessary, See Simson v. Cushman & Wakej?eld, Inc., 128 A.D.3d 549, 549 (Pt Dep't 2015) (holding that the Plaintiff surrendered any right to call or cross-examine witnesses in the arbitration by ente1ing into an arbitration agreement waiving such rights, and further, by participating in the arbitration proceeding without objection). Petitioner has failed to provide any evidence of objection to the arbitrator's decision not to hold a formal heaiing pending Arbitrator Nygard's Jvfay 13~ 2016 ernai1. See Claman Affirm. Ex. 10. Thus, if the Petitioner did not agree to leave the issue of a hearing to the arbitrator's discretion, the Petitioner should not have agreed, visa-vis counsel's signature, to the conditions contained in Arbitrator Nygard's Retainer 8 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 8] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v, BJ\1S-PSO, LLC (654931/2016) Page 8 of9 Agreement. The Petitioner should have, instead, looked for an alternative Arbitrator within the time provided hy the Lease, or, sought to utmze the contingency provided in the Lease Agreement, an Arbitrator from the American Arbitration Association. See Pet. E.X, ..4. \'7~B Si~· . It is well settled "when parties set down their agreement in a clear, complete document, their writing should , , . be enforced according to its terms." rrermont Teddy Bear Co. v. 538 Jvfadison Realty Co., l N.Y.3d 470, 475 (2004). In reviewing the lease tenns, the Arbitrators determined that there was no express requirement for a forrnal hearing stated in the lease. See Claman Affirm Ex, 10; see also Pet. Ex. 1 §75H The possibility that the arbitrator could have made a different conclusion fails to indicate that Arbitrator Nygard '"so misread the lease provisions as to empm.ver a court to set aside the award." See Eighty Eight Bleecker Co., LLC v. 88 Bleecker St. Owners, Inc., 51 A.D3d 507, 508 (1st Dep't 2008) citing Nat'l Cash Register Co. v. rVi!son, 8 N.Y2d 377, 383 (1960). Absent an indication that the Petitioner's rights were "'prejudiced by corruption, fraud or misconduct in procuring the award, that the arbitrator lacked impartiality, that the arbitrator exceeded his power or failed to make a final or definite asvard, or that there \Vas a procedural failure that was not i.-vaived" this court sees no reason why it should vacate the av,1ard. See Fishman v. Roxanne A1gmt., 24 A.D3d 365, 366 (2005) (emphasis added), 9 of 10 [*FILED: NEW YORK COUNTY CLERK 12/05/2017 02:41 PM 9] NYSCEF DOC. NO. 31 INDEX NO. 654931/2016 RECEIVED NYSCEF: 12/05/2017 1414 Holdings LLC v. Bl\r1S-PSO, LLC (654931/2016) Page 9 of9 DECISION AND ORDER: Upon the foregoing Decision~ it is hereby ORDERED the petition to vacate the arbitration award is hereby dismissed; and it is further ORDERED the arbitration award is hereby surnmarily confinned, 10 of 10

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