Deephaven Distressed Opportunities Tradings, Ltd. v 3V Capital Master Fund Ltd.

Deephaven Distressed Opportunities Tradings, Ltd. v 3V Capital Master Fund Ltd. 2011 NY Slip Op 08993 Decided on December 13, 2011 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on December 13, 2011
Mazzarelli, J.P., Andrias, Renwick, Freedman, Manzanet-Daniels, JJ. 6328-
600610/08 6329N 590803/08

[*1]Deephaven Distressed Opportunities Tradings, Ltd., et al., Plaintiffs-Respondents,

v

3V Capital Master Fund Ltd., et al., Defendants-Appellants. 3V Capital Master Fund Ltd., Third-Party Plaintiff-Appellant, Imperial Capital, LLC, et al., Third-Party Defendants-Appellants.




O'Melveny & Myers LLP, New York (Tancred V. Schiavoni of
counsel), for Post Distressed Master Fund, LP, Post Aggressive
Credit Master Fund, LP and Post Total Return Master Fund, LP,
appellants.
Stagg, Terenzi, Confusione & Wabnik, LLP, Garden City
(Andrew Kazin of counsel), for 3V Capital Master Fund, Ltd.,
Scott Stagg, SV Special Situations Master Fund Ltd., SV
Special Situations Fund LP, SV Special Situations Master Fund, Inc.,
Stagg Capital Group LLC, Stagg Capital LLC, and Stagg
Capital Partners LLC, appellants.
Friedman Kaplan Seiler & Adelman LLP, New York (Andrew
W. Goldwater of counsel), for Imperial Capital, LLC, appellant.
Gibbons P.C., New York (Jeffrey A. Mitchell of counsel), for
respondents.

Orders, Supreme Court, New York County (Melvin L. Schweitzer, J.), entered July 1, 2011, which, insofar as appealed from, denied defendants' motion to vacate the note of issue, and denied third-party defendant Imperial Capital's motion to stay arbitration, unanimously modified, on the facts, to grant defendants' motion, and otherwise affirmed, without costs.

Since the certificate of readiness incorrectly stated that discovery proceedings had been completed, the note of issue should have been vacated (see 22 NYCRR 202.21[e]; Nielsen v New York State Dormitory Auth., 84 AD3d 519 [2011]). Although plaintiffs later exchanged a copy of the outstanding statement of claim filed in the arbitration proceeding against third-party defendant Imperial Capital, that did not cure the defect in the note of issue since it was to be [*2]expected that the exchange would generate additional discovery requests.

Imperial argues that plaintiffs should be deemed to have waived their right to arbitrate by delaying their request for arbitration for more than three years after the commencement of this action, engaging in substantial litigation in this action, and causing prejudice to Imperial by engaging in discovery without allowing Imperial the same opportunity (see S & R Co. of Kingston v Latona Trucking, Inc., 159 F3d 80, 83 [2d Cir 1998], cert dismissed 528 US 1058 [1999]). However, plaintiffs never asserted any claims against Imperial in this action (see Matter of Advest, Inc. v Wachtel, 253 AD2d 659, 660 [1998] ["a party
waives the right to arbitrate when it engages in protracted litigation that results in prejudice to the opposing party"] [internal quotation marks and citation omitted]).

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: DECEMBER 13, 2011

CLERK