Matter of Velez v Financial Indus. RegulatoryAuth. Dispute Resolution, Inc.

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Matter of Velez v Financial Indus. Regulatory Auth. Dispute Resolution, Inc. 2008 NY Slip Op 32018(U) July 16, 2008 Supreme Court, New York County Docket Number: 0103697/2008 Judge: Joan A. Madden Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. . SCANNED ON 711812008 [* 1 ] I ...+ I SUPREME COURT OF I i STATE OF NEW YOIRK - NEW YORK COUNTY HE PART u INDEX NO. y-21-uq MOTION DATE MOTION SEQ. NO. n l o MOTION CAL. NO. The following papers, numbered 1 to were r$ad o n this motion tolfor PAPERS NUMBERED Notice of Motion/ Order to Show Cause - Affidavits - Exhibits Answering Affidavits Replying Affidavits ... - Exhibits - Cross-Motion: n Yes 1 No 1 '0 O L v Check one: FINAL DISPOSITION Check if appropriate: &ON-FINAL 0 DONOTPOST DIS&%ON 1 REFERENCE 7 ' [* 2 ] SUPREME COURT OF T H E STATE OF NEW YORK COUNTY OF NEW Y O R K : PART 11 OLIVER L. vEr,Ez, l'eti tioncr, For an ordcr Pursuanl to Article 75 oftlic CPLR to Pcrmanently Stay Arbitration Index No. 103697/08 -against- FINANCJAT, INDIJS'TRY REGULATORY AUTIIORITY DISPUTE RESOLUTION, INC. (FORMERLY, T H E NASD), GREG CAPRA and PRISTTNE CAPITAT, IIOLDINGS, INC'., %4 J4 Rcspondents. % , MADDEN, J: i 8 2008 N&Q%OF In this aclion, petitioiier Olivcr L. Velez (Velez) inovcs, by &&&'to s k a u s e , ? - pursuant to C'PLK 7502 ~ i 7503, to pennanently slay Arbitration No. 07-02396 before d - res poiiden t Fi nanci a1 Industry Kegul atory Au thori l y Di sputc R esol 11ti 017, I ric. (FIN RA), I rm erly, b the NASI),' and captioncd Tn the Matter of the Ar-l%trationbetween Greg Capra arid Prisfiiic Capital Holdings, Inc. v Olivcr L.Vclcz (the NASD Arbitration) on the groiirid that no valid agreement lo arbitrate exisls between petitioner arid respondents Greg Capra (Capra) and Pristine Capital Holdings, Iiic. FACTS 111 1994, I Vclcz and Capra founded Prisline Capital Mariagement, Inc. (Pristine h 2007, the regulatory arm of the NASD incrged with the New York Stock Exchange and adopted the FINRR name. For case of 1-efcrcnce,this opinioll will continiie lo use the imorc familiar NASD iiaiiic. [* 3 ] Capital) (Velez Al'f., 1 3). Vclcz and Caps each held 50% of the cquity (id.). In 2001, Velez 1 and Capra foiinded Pristine Sccuritics, Inc. d/b/a Mastcrtrader.com (MTC), a broker-dealer I-cgislered with the Scciirilies and Exchange Commission (the SEC), and a nieniber of the NASD (d., In 2001, Vclcz and Calm rounded Pristine Services, h c . (PSI) (d., ) . In 2001, 1 4). 1 15 1 Velez and Capra reorganized Pristine Capital. As rz result, Pristine Capital becamc a holding company for MTC and PSI, 111 addition, Pristine Capital was rcnanied Pristinc Capital Holdings, Inc. (I'C'H), and tlic sliarcs of PCJ1 wei-e allocaled 47% to Vclez and 47% to Capra (A.,1 6). 1 Velcz was tlic cliaiiiiian and chief excculive oftlcer o l PCH @.,1 ti), and Capra was i t s president 1 (Capra AfC, 1 22). Neither PCH nor PSI are members of [he NASD. 1 PSI provides cducational support and infomation seivices to activc seciirities Iradcrs via thc inteiiict, seminars, publications and DVDs, and is coilsidered to bc a leadcr in tho sccurities indusliy (d., 1 20). As a brokcr-dealer and because ol' its inemhership in tlic NASD, 1 MTC is subject to the fedcral securities laws, and the rulcs and regulations proiiiulgated by tlic NASD and the SEC, which Inandale arbitratioii of disputes betwccn and among tneiiiber fiiiiis, associatcd persoiis and cci-tain others arising h m the securities busiiicss 1101- (d,,I). 12 1 Neitlicr PSI M'l'C arc partics in lhe inslant aclion, or in thc related arbitration procceding. Velcz contends that his rolc in I'ST was limited to conducting scniinar-s on how lo lradc securitics (Vcloz M I , ,1 7). Velez jiirther contends tlial he had no role in tlic manageiiicnl 1 of MTC, aiid that his role was liiiiitcd solcly to that of a capital contributor or investor (d,, 1 8). 1 PSI and MTC engage in thc cross-marketing oPthcir products aid scrvices to each other's custoiiicrs. 131, the subsidiary 011thc education side of PCH's business, develops iicw clients - investors who wish to learn how to transact profitably in the stock niarkct. Once t11c 2 [* 4 ] new customers subscribe to a PSI product or scrvice, they arc then rercrred to NASD niembcr finii MTC, for cxecutioii of their brokerage lraiisactioiis. Also, iicw brokerage clients acquired by PSI arc cncouraged to purchase PSI educational products, using a variety of proiiiotional 1 incentives (Capra Afl-., 1 23). Among ils Inany regiilatory duties, the NASD regitlatcs iiiarkcting to public custoiiicrs of mcnibei- linns like MTC. When MTCl was foiiiicd in 2000, the NASD initially reslricted it fiom marketing its products and services in connection with PSI ($., 71 24; Ex11 F). Accoi-ding to Capra, thc cross-marketing stratcgy between lhc PSI and MTC is a sigiiificant p i t of tlic PCH business model. It required NASL) approval as a coiidition of pcrrnittirig the cross-promotional strategies between the companics. Tlic regulator flirther required, as a coiiditioii of its approval of the marketing techniques, that Velcz and Capra beconic licensed, registcrcd principals of MTC to erisiirc the NASD s oversight and jurisdiction ovcr the cxecutivcs of PCH, Velez and Capra, ovcr the member finn MTC, aiid the 11oniiieiJiber firm PSI, and over the holding conipariy PCH, regarding the iiiarketing activitics o r tlic affiliated firms ( d i, 1 25). 1 Velex and Capra were the only individuals involved in obtaining the lifting of the NASD restiiction against the cross-marketing approach, and acting also as principals aiid a g e ~ ~ t s for MTC, PSI and PC H. Capra alleges that lie and Velcz discussed in depth, and fully comprcliendcd, the rcgulatoiy purposes that required their licensure and registration with the NASD (d., 1 26). 1 Tndeed, to meet the rcquirernenls imposed by the NASD in 2001, to becomc 1iceiised Registered Principals of MTC, Velez and C l a p embarked oii an intensive threemonth study regime, so that they could simullancously pass tlic Serics 7 Gcneral Sales exam 3 [* 5 ] and tlie Series 24 General Principal exam. As part of the licensing process, both Velez and Capra each executed a Foiiii U-4, a Unifor-m Application for Securities Industry Kegistration ( d 27; Vclcz Aff., 1 9). i 71 , 1 Form U-4 is a noticc filing to regulators and to the public at large that a particular person is associatcd with a broker-dealer. Once they passed tlic two exams, Vclez and Capra each bccamc an Associated Pcrson and Registered Principal of MTC (Capra AK, 7 28; Exhs G and H). The refereiiccd marketing restrictions wcrc tlieii removed @., Ex11 I). Foiiii LJ-4 contains a clause which binds a signatory to arbitrate disputcs before self regulatory organizations (SKOs), including tlie NASD: I agrcc to arbitrate aiiy disputc, claim or coiitrovcrsy that may arise between me and my firm, or a custoiiicr, or any other person, tliat is required to bc arbitrated under thc rules, constitulioiis or by-laws of the SROs indicated in [this form] as may be amcndcd from timc to time aiid h a t any arhitration award rcndcrcd against me may be entercd as a judgineiit in aiiy court of coiiipetcnt jurisdiction. 1 Form 11-4,lI 5 . 1 1addition to an agrccnient to arbitratc, Forrn 1)-4 also states that: I apply for registration with the jurisdictions and SROs iiidicatcd in [this form] as inay be amended from time to time and, i n consideration of the jurisdictions and SROs receiving and considcl-ing my application, I submit to tlic authority of the -jurisdiclions aiid SROs and agrcc to comply with all provisions, coiiditioiis and coveiiaiits of the statutcs, constitutions, ccrtitkates of incorporation, by-laws and nilcs and regulations of the jiirisdictions and SROs as they are or may be adopted, or amendcd from time to time. I further a g e c to be subject lo and comply with all requiremcnts, rulings, ordcrs, directives and dccisiom of, and pciialties, prohibitions and liniitatioiis imposed by tlic jurisdictioiis and SROs, subject to right of appeal or rcview a s providcd by law. Capra alleges that both hc and Velez revicwcd the Poml U-4 prior to completing aiid signing it, 2nd discussed it in depth with cach other arid others, and tliat [wle liilly 4 [* 6 ] uiiderstood tlic import of the arbitration clause contained therein" (Capra Afl.,, 129). hideed, two years latcr, procccdiiig iii 2003, PCH, PSI, MTC, Velez and C a l m prosecuted a NASD arbitration (seeNASD Case No. 03-061 85, In the Matter of the Arbitration between Pristine Sccurities LLC d/b/a Maslertrader.com, Pristine Services, Inc., Pristine Capital Holdings, Inc., Oliver L. Vclcz and Greeory Chpra v Instinet clear in^ Services, I i ~ cTerra Nova Trading, LIK .~ and Georlie Muniz), in which they were jointly and severally awardcd iiiore than $160,000 against aiiotlicr company (d., 1 30). 1 On Novciiibcr 20, 2006, Velez was rclicvcd 01his executive duties as chairillan and CEO and removed as an orficer aiid director of PCII, as a result of the discovery of iiiorc than $250,000 of coi-porate h n d s converted to his pcrsoiial use, and other misdeeds (Capra Af-f.., 1 33; Vclcz AK., 10). Velez and Capra mutually agreed that 1ic would remain employed by PCH 1 in an undefincd capacity, pending an investigation into his alleged malfcasaiice (Capl-a Aff., 1 33). 1 I n Fchruary 012007, both Velez and Calm resigned as licensed principals of MTC (Velez Aff., 1 10; Capr-a Afl-., 7 32). In order to cffcctuatc the resignations, PSI filed a 1 Formi IJ-5 (Uiii foiiii Teiininalion Notice for Sccur-itics Industry Registration) on bclialf o f C a p 1 and Vclcz with the NASD on February 13, 2007 (Velez Aff., 1 1 1). Shortly alter leaving M'IC, Vclcz fouiidcd Vclez Capital Management LLC. Capra allcgcs that Vclcz lbnlled this coiiipany to compete directly against PCIJ, by copying its marketing techniques, and using thc veiy strategies regulated by the NASD iii tlic PCH husiiicss 1 7 36). model (C'apra Ail-.,1 35). Velez was temiinatcd by PCH on Febniary 21, 2007 (d., Rccause Velez was a licensed principal of MTC, a NASD inember liiiii, the nature of his 5 [* 7 ] teniiinatioii in February 2007 and related subsequent events also triggered a iiiandatory, internal regulatory review and rclatcd filiiigs with the NASD (d., 1 39). 1 I n August 2007, Capra and PCH coiiimcnccd the NASD Arbitration against Velcz, alleging copyright and trademark infringement, unlair competition, breach o r contract and covcriaiit not to compete, breach of duty of loyalty, tortious interference, conversion and faithless scwant, Although Velez refused to participate in the NASD Arbitration, on September 2 I , 2007, FTNRA Dispute Resolution infornied Vclcz that lie was rcquired to arbitrate the dispute (Capra Aff., 1 5 ; Exh A [9/21/07 1,etter rroni FINRA Dispute Resolution to Velez [Exh A] ( your 1 submission to this arbitration is mandatory and not voluiitary ... [arid] [t]hcrcforc you arc rcquircd by the Rules of FJNRA Dispute Resolution to arbitratc this niattcr )]). On Scptcmhcr 21, 2007, Velez liled a petition lo stay arbitratiori i n this court before the Honorable Jane Solomon, which was removed to federal court, aiid cvcntual ly reiminded back to state coLirt. A panel of arbitrators was appointed in Janiiary of 2008, the Initial Prehearing Confereiicc in tlic NASD Arbitration was had 011 March 1 I , 2008, and a hearing scliedule was adopted that set heaiiiig dates for the arbitration in September of 2008 (Capra Aff., 7 7). To date, Velcz refuses to cooperate with MTC in respoiidiiig to and mccting NASD regulatory rcquircniciits rclatcd to 11;s tetiiiinatioii aiid to which he voluntarily submitted when he executed the Foi-ni U-4. Also, he rcfuscs to pxticipatc iii tlic NASD Arbitration. D1 SCUSSI ON The partics here do not coiitcst thc validity of thc arbitratioii clause itself. Instead, they dispute the idcritity ol the partics who arc bound by tlic agrcciiiciit in tlic Form LJ-4 executed by Velez and Capra. In support of his motion to permanently stay the NASD Arbitration, Velez [* 8 ] inakcs two main arguments. First, Vclez argues that there is no valid ageeiiicnt to arbitrate betwccri the parties because he is not a signatory to any arbitration agreement with respoiidents. Second, Velez argues that this inattcr is not arbitrablc bccause NASD iiieiiibcr firm MTC is not a party to the arbitration, and tlic claims asscrted by respondcnts in the NASL) Arbitralioii arise only in corincction with tlic business of PCH, which is not a NASD member firm. Coiivcrsely, respondcnts argue that Vclcz is bound to arbilratc this dispute by reason of his execution or the Fonii LJ-4, and as ai1 Associated Pcrson ofMTC pursuant to thc rules of the NASD. Nolisignatory PC H is also bound, respondelits coiitcnd, as an intciided third-parly beiictTciary of the execiited by its controlling principals and direct arbitration ageemcnt sel forth in the Forms U-4 c 0-0w i i crs . It is well-eslablislied that parties to a coiiiniercial transaction will not be held to liavc chosen arbitration as tlic foriiiii for the resolution of their disputes in the abscnce ofaii express, Lincquivocal agreement to that effect (Matter of Actin< Supt. of Schools of Livcrpool Cent. School Dist [United Livcipool Faculty hssii,l, 42 NY2d 509, 512 [l977]; accord God s Battalioii of Prayer Pentecostal ( hurch, Tiic. v Mielc Assocs., T,LP, 6 NY3d 371 [2006]; Matler oIPriiiiex liitl, Coi-p. v Wal-Mart Storcs, Inc., 89 NY2d 594 11 9971). Thus, a party will not be compelled lo arbitrate abscnt evidcnce which affirmatively establislics that tlic parties cxpressly agrecd to arbitrate their disputcs (Matter of Waldron [Goddess], 6 I NY2d 181 , 183 [ I%4] [citation oiiiilted]; Matler o r Phannacia 6r LJpiohii C o. [Elan Phamiaccuticals, Iiic.1, 10 AD3d 331, 333 [ l Depl 20041 [ a coiiit will not order a party lo submit to arbitration absent evidence of that party s LmcqLiivocal intent to arbitrate the rclevant dispule ], quoling Primavcra Labs., Inc. v Avo11Prods., Inc., 297 AD2d 505, 505 [lst Dept 20021). 7 [* 9 ] hi detennining whcthcr parties have entered into a valid arbitration agreement, courts sliould apply ordinary statc-law principles that govern tlic formation of coiitracl (First Options of Chicaeo, Iiic. v Kaplan, 5 14 IJS 938, 944 [IC)%]). Under New York law, it is for tlic court, not thc arbitrator, to dccide whcthcr both parties have made a valid agrccnicnt to arbitrate (Matter oPPrii-riex Itill. ( om. v Wal-Mart Stores. Inc., 89 NY2d 594, supra; accord Eisciiiari Lcviiie Lehrliauet & Kakoyiarinis, P.C. v Toriiio .lewelers, Ltd., 44 AD3d 581, 583 1 Dept 20071 [ The law is scttlcd that whether a controversy is properly subjcct to arbitration is initially m e for the courts to deteniiine ]; Primavera Labs., Inc. v Avon Prods., Iiic., 297 AD2d at 505 [ Tlic tlircshold detemiination of whctlicr thcrc is a clear, unequivocal and extant agreement to arbitrate the disputed claims is to bc inadc by the court and not lhe arbitrator (citation oniittcd) l). Despite this ovenvhelniing prcccdciit i n favor of court deteiiniiiation as to whctlier an agreement to arbitrate exists, rcspondciits nevertheless assert that the deteimination of the parties subject lo thc arbitration agrccnicnt is a iiconditionprecedent to the ai-bitrability of thc dispute, aiid is thus an issue of procedural arbitrability Ibr the arbitrators, not the court, to dccide (Opp Mern., at IO). 14ius, respondents argue, thc NASD nrl3itratot-s, rathcr than this court, should detcmiinc whctlicr the parties iiitciided respondent PCH to be bound by the arbitratioii agrccment set forth in the Poniis U-4 signed by both Velez and Capra. Respondents contenlion, liowcvcr, lacks merit. In Howsain v Dcaii Wittcr Rcyiiolds, Tiic. ( 5 3 7 US 79 [ZOOZ]), the LJriitcd States Suprcnic Court held that the application of a NASD rule iiiiposiiig a tiiiie limit on subinissioii o l disputes for arbitration was a matter presumptively for the arbitrator, rather than the court, lo 8 [* 10 ] decide. In reaching this deterrnination, thc Court distinguished between threshold issues or substantive arbitrability [which] are for a court to decide, and thosc of issucs of procedural arbitrability, such as time limits, notice, lachcs, cstoppcl, and other conditions prcccdcnt [which] arc I or the arbilrators to decide (id.at 85). The category o l substantive arbitrability at iiicludes disputes about whcther tlic partics are bouiid by a given arbitration clause (d. 84; accord Mulvaney Mech.. Tnc. v Sheet Metal Workers Intl. Assn., Local 38, 351 F3d 43 [2d Cir 20031). Thus, it is clear that thc issues of whethcr Vclcz is bouiid by tlic arbitration agreement set ibitli i n the Foiiiis U-4, arid whether the parlies intended respondent PC H to be bouiid by such arbitration a@-eement,arc for the court to dccidc. In support of his motion to stay arbitration, Vclcz iirst argues that he cannot be compelled to arbitratc bccausc, as a result o f his rcsigiiation from MTC, hc is not a party to any AIT., 7 28), and lic agi-eenieiit with Iiespondeiits lo arbitrate any matter before the NASD ( V e l e ~ is not an officer, director, or principal of any NASD member firm or any self regulatory organization and [does] not currently maintain any registration or securities licenses which would require that [he] submit to arbitration (d,, 1 29). 1 The coiirt rejects this arguriicnt. By virtue of thcir ownership iritercsts in PCH aiid their prior liccnscd principal status with M TC, V e l e ~ and C a l m arc kiiowii by thc temi pcrsoii associated with a Mcmbcr or Associated Person, defined as follows: (1) A natural person rcgistcrcd under tlic R L I ~ C S the NASD; or of (2) A sole proprietor, pai-tncr, officcr, director, or braiicli iiiaiiager of a niember, or a natural person occupying a similar status or perfolming similar hnctioiis, or a natural pcrson engaged in the investnient banking or securities business who is dircctly or indirectly controlling or controlled by a member, whether or riot [* 11 ] any such person is rcgistcred or exempt from registration with NASD uiider the By-Laws or lhc Rules of NASD. Forpiqmscs o f thc Code, II pcrsoii foriiicrly associated with ii niutiiher i a pci~sson s ussuciatril with u menihcr. NASD Code of Arbitration Procedure, 8 13 100 (rj (emphasis added). Thus, although Velcz and Capra resigncd as rcsistered priricipals of MTC, due to their owiiership inlercst, and as pcrsons ibrnicrly associated with a mcrnbcr, tlicy conlinue to be Associated Pcrsoiis of MTC, lor arbitration puq~oses.l ursuaiitto thc NASD rule, Associated Persons, likc liccnscd individuals, are required to arbitratc all controversies between or among nicnibcrs, such as M CC, or lhcmselves as associated persons, that arosc from their cmployncnt rclationship and securities industry relatcd busiiicss activities: Required hrbi tratioii (a) Geiicrally Exccpt as othcrwise provided in thc Code, a dispulc must bc arbitrated under lhc Code i l t h e dispute arises out of the busincss activities o r a mcmbcr or at1 associated person and is bctwecn or all1ong: Mcmbcrs; Members and Associated Persons; or Associated Persons. NASD Code o r Arbitration Proccdurc, $ 13200. Thus, this section clearly supports thc NASD s position, as stated in their co~respondcnce him, that they havc ji~risdictio~i Velez in this to over ahitration matter (E Capra Aff., Ex11 A). Velcz also argucs that although lie was originally a Registered Principal with MTC, he was basically an investor who had nothing to do with the niaii,zgement o l MTC , and thus, he cariiiol bc compelled to arbitrate (Velcz Aff., 1 30). This argunlent lacks merit, as 10 [* 12 ] respondelits present evidence that Velez was morc tlian a sileiil investor in MTC. Capra alleges, and Velez admits (seeVelez Aff., 7 7), that Velez coiiductcd PSI S seminars, and, as a result of the cross-niarketing strategy hetween PSI and MTC, was thc largest source ol.ncw brokerage accounts for MTC (E Chpra Aff., 1 23 [ Indisputably, tlie most significant dcvcloper of new 1 customers was Plainliff Velez through his seminar presenlalions ]). Indecd, these crossniarkcting practiccs - the soliciting olprospectivc brokerage clients for MTC by Velez through PSI - wcrc specifically rcgulated by the NASD. Vclcz iiirtlicr argues that NASD nicnihcr MTC is no1 a party to thc NASD Arbitration, and that all of tlie claims in thc arbitration arise solely in coniicctiori with tlie business of PCH, a non-NASDiiicmbcr, and a non-signatory to tlic arbitration agreenicnt contained in the Forms U-4 cxcculed by Velez and Capra. As such, Velez argucs, these clainis are ineligible for arbitralion. Convcrscly, respondents contend that, iii reviewing thc tcxt of the F o m U-4 arbitration agrccmcnt, h e circuiiistanccs surrounding ils execution and its prior invocation by Vclcz, Capra, PCH, PSI and MTC in another arbitration procceding, it is clcar that I h e r e was an express and uiicquivocal inlent that Vclcz, Capra and their threc companies would arbitrate any claiiiis involving any and/or all of then?, arising from tlicir businesses. Wliilc CPLR 7501 requircs that an agreement to arbitrate be in writing, this Court 113s rccognized in certain liniitcd circumstances the iiccd to impute the intcnt to arbitlate to a nonsignatory (TNS TToldinEs, Inc. v MKI Sccs. Corn., 92 NY2d 335, 339 [199&]). [A] non- sigiatory party may be bound to an arbitration agreement if so dictated by the ordinary principles o f a contract and ageiicy (T1ionison-CSF, S.A. v Aiiierican Arbitration Assn., 64 F3d 773, 770 [2d Cir 10951) 11 [* 13 ] Here, 1-espondents have raised an issuc of fact as to wlicthcr a valid agreement to arbitrate was riiadc bctweeii the parties by submitting evidence with respect to Velez and Capra s intent that nonsignatory PCH, their holdiiig company, be bound by the arbitration agreement containcd in Ihe Fonns 11-4. Tli~is, Capra allcgcs that Vclcz and Capr-a wcre tlic oiily individuals involved in thc NASD s oversight of the cross-marketing strategies between PSI and MTC, aiicl actcd as tlic principals and agents of PCH, MTC and PSI with respect to the regulatory proccss (Capra hff., 26). Clapra fiii-thcr allcgcs that hc and Vclcz discusscd in depth, and fully comprehended, 1 1 7 29). the regiilatory purposes that required heir licensure and registralion with h e NASD ( ~ , , Specifically, Capra allcgcs that [h]aviiig successfully taken advantage of the agreement to arbilrate securilies industry dispules, obviously we both clearly iindei-stood and WCPC kccnly aware that the U-4 contained an arbitration agreeineiit that required all of our companies, arid both O T us as individuals, to arbitrate controvcrsics arising from our business, and belweeii and among oursclvcs and otlicrs associated with tlic sccuritics industry (d., 1). Respondents also 13 1 present evidence that both Capra and Velez previously iiivoked the arbitration agreer-nent in the Foi-ms U-4 in another controversy in 2003 that iiicluded all thrcc of tlicir companies as well as tl1eniselves &( i 71 30). I n addition, iindcr estoppel principles, a signatory of an arbitration agrccriicnt, like Velez, may be bound lo ar-bitralion with a lion-signatory such as PCH, when the issues the 11011- signatory is sccking to rcsolve in arbitratioii are intertwined with thc agrccnient thal the estoppcd pafly has signed ( lhomson-CSF, S.A. v Anicrican Arbitratioii Assn., 64 F3d at 779). I iii-siiaiit to CPLR 7503 (a), wlicrc is a question raised as to whether a valid agreement [to arbitratc] was niadc it shall be tried forlhwitli in said court (CPLR 7503 [a]; see Mattcr of 12 [* 14 ] Pliarniacia & Upjohn Co. [Elan Pharniaccuticals, Tiic 1, 10 AD3d 33 1, supra [the existence of a valid agrcernent to arbitrate is a question of fact to be resolved by the courts]; see also Matter of Atlstatc Ins. Co. v Feldman, 65 AD2d 571 [2d Dept 19781, appeal denied 47 NY2d 705 [ 19791). Accordingly, because respondents have raiscd an issue of [act as to whether a vahd agreenieiit to arhitratc was made, this issue will be referred to a Spccial Rci crcc to hear and rcpor-t (scc c.,q. Matter of Bergassi v American Sur. Agaicy, Inc., 278 AD2d 413 [2d Dept 20001 [affirniing order of Suprcmc Court directing hearing to detemiiiie whelher valid agrccmcnt to arbitrate was ~nadc]; Wciss v Kozupsky, 237 AD2d 514 [2d Dept 19971 [given controversy as to whether there was an cii [ or-ccableagreement to arbitrate, coiirl slioiild have directed a hearing as to wliellier or not there was ai enforceable arbitralioii agreement]; Burbank Broadcastii1.q Co. v Rosl in Radio Sales, Inc., 99 AD2d 976 [ 1 Dept 19841 [disputed issucs o l h c t as to whether coiiipaiiy had agreed to arbitrate, which required an evidentiary hearing in procccding by company to peniianently stay arbitration]; Matter of Trincali ~ F O Con~Sports/, 91 AD2d 887, 887 [ l Dcpt L S 19831 [niatlcr remanded to Suprcnie Court for a licaring to dctcminc whctlicr a valid agrccmcnt for arbitration of tlic dispute was iiiadc ]). Accordingly, it is hereby ORDERED that tlic issue of whether a valid agrccmcnt to arbitrate was made between petitioner Oliver L. Vclez aiid respondent Pristine Capital Holdings, lnc., or whether should be estopped from avoiding arbilratioii with I CH, is r e h - e d to a Spccial Oliver L. V e l e ~ Referee lo hear and report with recornnieridations, except that, in the event of and Lipon the filing of a stipulation of the parties, as peniiittecl by CYLR 43 17, the Special Rercrce, or anotlicr pcrsoii designated by the parties to serve as referee, shall deteiiiiine the aforesaid issucs; and i t is fiirtlier 13 [* 15 ] OKDERED that thc pctitioner s motion to stay arbitration is held in abeyance pending rcccipt of the reporl and reconiiiieiidatioiis o r the Special Referee and a motion pursuant to CPLR 4403 or rcccipt ofthe determination of tlic Spccial Relerce or the designated releree; and it is hrther ORDERED that coiiiisel for the party sccking the rercrence or, absent such party, counsel for thc plaiiitiIlshall, within 30 days from the date olthis order, serve a copy of this order with noticc of cntry, together with a completed Information Slicct upon tlic Spccial Refcrcc Clcrk in the Motion Support Ofiicc in Rui. 119 a1 GO Centre Street, who is directed lo placc this iiiatter on the calcndar of tlic Spccial Referee s Par1 (part 50R) for the earlicst c o tiveiii en1 d at e. Dated: Jiily &2008 ENTER: 6:SG Cnpics arc available in Rm, 119 at 60 Centre Street, and 011 the Court 14

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