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FILED: SUFFOLK COUNTY CLERK 03/02/2018 03:27 PM INDEX NO. 619609/2017
NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 03/02/2018
E-F'LE
SHORT FORM ORDER INDEX NO. 619609/2017
SUPREME COURT - STATE OF NEW YORK
COMMERCIAL DIVISION lAS PART 48 - SUFFOLK COUNTY
PRESENT:
HON. JERRY GARGUILO
SUPREME COURT JUSTICE
ORIG. RETURN DATE: 1/5/18
FINAL SUBMITTED DATE: 2128/18
ESTATE OF JAY A. FREED, DECEASED BY MOTION SEQ#OOI
MOTION: MG STAY
BARBARA KEMNITZER, AS EXECUTRIX,
Plaintiffs, PLAINTIFF'S ATTORNEY:
RAY, MITEV & ASSOCIATES
122 N COUNTRY RD PO BOX 5440
-against-
MILLER PLACE, NY 11764
631-473-1000
PROHEALTH CARE ASSOCIATES, LLP FIKJA
PEDIATRIC & ADOLESCENT MEDICINE, DEFENDANTS' ATTORNEY:
MITCHELL KLEINBERG MD, MICHAEL Attorneys for Mitchell Kleinberg MD
NUSSBAUM MD, ROBERT FESTA MD, JASON Michael Nussbaum MD, Robert Festa MD,
Jason Kronberg D. 0. , individually, -
KRONBERG D.O. , INDIVIDUALLY., FREED, Freed, Kleinberg, Nussbaum, Festa &
KLEINBERG, NUSSBAUM, FESTA & Kronberg, MD. .'
KRONBERG, M.D., ALLSTATE LIFE MCLAUGHLIN & STERN, LLP
INSURANCE COMPANY OF NEW YORK D/B/A 260 MADISON AVENUE
ALLSTATE, THE ALLSTAtE CORPORATION, NEW YORK, NY 10016
212-448-6250
Defendants. DEFENDANTS' ATTORNEY:
Attorneys for AllState Life Insurance
DEFENDANT PRO SE: Company of New York d/b/a AllState
PROHEALTH CARE ASSOCIATES, LLP FIKJA and The AllState Corporation
PEDIA TRIC & ADOLESCENT MEDICINE DRINKER BIDDLE & REATH LLP
1 DAKOTA DRIVE 1 LOGAN SQ., STE. 2000
LAKE SUCCESS, NY 11042 PHILADELPHIA, PA 19103
215-988-2876
The Court has considered the following in connection with its determination:
1. Defendants' (as designated herein) Notice of Motion To Stay Action And
Compel Arbitration, with Affirmation In Support of Alan E. Sash, ,Esq. and
Exhibits A through J;
2. Affirmation In Opposition ofVesselin Mitev, Esq. with Exhibits 1 and 2; and
3. ..Reply Affirmation of Alan E. Sash, Esq. and Exhibits 1- and 2.
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FILED: SUFFOLK COUNTY CLERK 03/02/2018 03:27 PM INDEX NO. 619609/2017
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Defendants, Mitchell Kleinberg,MD, Michael Nussbaum, MD, Robert Festa, MD,
Jason Kronberg, D.O., individually and Freed, Kleinberg, Nussbaum Festa & Kronberg,
M.D. (collectively, the "Kleinberg Defendants") seek an order pursuant to CPLR ~~ 7503(a)
and 321 1(a)(4) staying the action and compelling arbitration.
Plaintiff opposes the application in its entirety.
Plaintiff alleges various causes of action, including, breach .of contract, conversion,
breach offiduciary duties ofloyalty, good faith and fair dealing, fraud, unjust enrichment and
interest in real estate holdings. Other causes of actions are alleged against Defendant, Allstate
Life Insurance Company ofNe~ York.
In. support of their application, the Kleinberg Defendants rely on two written
agreements namely a medical partnership agreement and a realty partnership agreement, of
which both contain arbitration clauses. Defendants also claim that a related pending AAA
arbitration p~oceeding has commenced on May 22, 2017 wherein Plaintiff seeks the same
relief sought herein. On June 2, 2017 an answer was filed with the AAA, however, prior to
the submission of a scheduling order Plaintiffs counsel filed this application.
In the pending arbitration, Barbara Kemnitzer, as Executrix of the Estate of Jay A.
Freed is the Claimant participating on the arbitration, seeks the turnover of insurance
proceeds on the life of Freed in the amount of$500,996.58. The named Respondent is FLSK
Realty, LLC, a real estate corporation. Kemnitzer also seeks access to the LLC's real estate
holdings for purposes of valuation and payment of the difference between the insurance
proceeds received and the appraised value of Freed's interest. The Demand For Arbitration
synopsizes the description of the dispute and also states as follows:
The executrix is. entitled thereto under the provisions of the
LLC's operating agreement dated December 23, 1997 (copy
attached), Article XXII(E), p.30, of which requires arbitration
of said issues.
The medical partnership agreement is between Plaintiff and the Kleinberg Defendants.
As concerns this agreement, Plaintiff alleges that the Kleinberg Defendants failed to pay
Plaintiff (as Executrix of the Estate of Jay A. Freed) life insurance proceeds or the buyout
interest in the medical partnership. Plaintiff also asserts that the Defendants converted the
life insurance proceeds in breach of the medical partnership agreement. Defendants claim
that these claims are duplicative of those in the pending AAA arbitration. Additionally,
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FILED: SUFFOLK COUNTY CLERK 03/02/2018 03:27 PM INDEX NO. 619609/2017
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Pla~nt~ffclaims that ~efendants breached the realty partnership agreement by failing to pay
Plamtlff the buyout mterest in the real property. Defendants state that this claim is also
duplicative of the pending AAA arbitration.
At Article 26(E) of the medical partnership agreement (Exhibit "A" to the Notice of
Motion), the following arbitration clause states:
E. The parties agree to do their best to work out ways and means
in all good faith to settle amicably, by frank and fair discussion
between them, any disagreements, claims, questions or
controversies which may arise out of this Agreement or out of
the interpretation hereof or any alleged breach hereof, but in
case of failure to reach accord by any such .direct ways and
means, disputes shall be settled by arbitration in accordance with
the Rules of the American Arbitration Association. The parties
agree to abide by the decisions of the arbitrator and such
decision may forthwith be converted, if necessary, into ajudiCial
decree or order by any court of competent jurisdiction. The
costs of arbitration shall be borne in accordance with the
determination of the arbitrators.
The realty partnership agreement concerns the parties' investment and ownership of
real property, inclusive ofman~gement, buyouts, life insurance proceeds, accounting, death
and so on. This agreement al~o contains an arbitration clause which is identical to the clause
in the medical partnership agreement. See Exhibit "B"to Notice of Motion at Article XI(E).
Plaintiff opposes Defendants' application arguing that the pending arbitration is
between Plaintiff and an entity which is not a named Defendant herein ("FLSK, LLC).
Plaintiff claims that besides pro forma procedural matters, the arbitration has not commenced
and has been adjourned indefinitely. Plaintiffs assertions are without merit and not accepted
by the Court. Exhibit "2" to Defendants' Reply is a copy of email exchanges between
arbitrator Peter L. Altieri and counsel for the parties herein, dated November 1, 2017,
requestin'g that counsel prepare and submit a case management plan. The Court accepts
Defendants' position that the arbitral forum is prepared to proceed on the matter clearly
related to the action before this Court.
Plaintiff also contends that where a complaint pleads fraud (5th Cause of Action in
the Complaint) arbitration is disallowed. Plaintiff alleges "...that as part ofa grand scheme
to defraud and otherwise avoid paying out decedent, upon his retirement from the medical
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partnership, Defendants, 'acted in concert' with each other to avoid paying out retired
de~edent, and to induce and/or otherwise accomplish a pay-out of his life insurance policy,
paId out to a non-existent entity (as to which no arbitration agreement exists)." 1
, As Defendants have so well articulated, "[A]n arbitration clause is generally separable
from substantive provisions of a contract, so that an agreement to arbitrate is valid even if
the substantive provisions of a contract are induced by fraud. Thus, as a general rule, the
issue of fraud in the inducement should be determined by the arbitrator." Anderson Street
Realty Corp. v. New Rochelle Revitalizatio.n, LLC, 78 AD3d 972, 974 (2d Dept. 2010).
Further, the Court of Appeals held that "[a]s a general rule, ...under a broad arbitration
provision the claim of fraud in the inducement should be determined by arbitrators" Matter
ofWeinrott, 32 N.Y.2d 190, 199 (1973). When the language of the arbitration clause is
broad enough to encompass the claims of fraudulent inducement, the Second Department
held that a motion to compel arbitration should be granted. Cologne Reinsurance Co. Of Am.
V S. Underwriters, Inc., 218 AD2d 680, 681 (2d Dept. 1995).
In this action, Plaintiff does not allege that the arbitration clause was induced by fraud.
ePLR 7503 (a) provides, in part, that a party aggrieved by the failure of another to arbitrate
may apply for an order compelling arbitration. The 'question of arbitrability, in the first instance must
be determined by the court (Smith Barney Shearson Inc. v Sacharow, 91 NY2d 39, 666 NYS2d 990
[1997]). On motions to stay or to compel arbitration there are three threshold questions to be
resolved by the courts: whether the parties made a valid agreement to arbitrate, whether if such an
agreement was made it has been complied with, and whether the claim sought to be arbitrated would
be barred by limitation of time had it been asserted in a court of the State (see, ePLR 7503 [a];
CPLR 7502 [b]; County of Rockland v Primiano Constr. Co., 51 NY2d 1,6-7,431 NYS2d 478
[1980]).
In order for the court to compel arbitration, the agreement to arbitrate between the parties
must be clear, explicit and unequivocal (Marek v Alexander Laufer & Son, Inc., 257 AD2d 363, 683
NYS2d 50 [1st Dept 1999]). "Generally, a broad arbitration clause in an agreement survives and
remains enforceable for the resolution of disputes arising out of that agreement subsequent to the
termination thereof and the discharge of obligations thereunder, irrespective of whether the
termination and discharge resulted from the natural expiration of the term of the agreement (Nolde
Bros. v Bakery Confectionery Workers Union, 430 US 243, 251-253, 97 Set 1067 [1977]), a
I. The name FLSK (Freed, Lieber, Sherz & Kleinberg, LLP) was the prior name used by Defendant
medical practice, as oppos~d to the current name of Freed, Kleinberg, Nussbaum, Festa & Kronberg
M.D.,LLP.
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unilateral termination under a notice of cancellation provision (HM Hamilton & Co. v American
Home Assur. Co., 21 AD2d 500,503, affd 15 NY2d 595 [1st Dept 1964]), or the breach of the
agreement by one of the parties (Matter of Terminal Auxiliar Maritima [Winkler Credit Corp.], 6
NY2d 294,298, 189 NYS2d 655 [1959]); Pri'}1ex International Corp. v Wal-Mart Stores, 89 NY2d
594, 599, 657 NYS2d385 [1997]). Parties to an arbitration agreement may waive their rights
thereunder (Zimmerman v Cohen, 236 NY 15, 1923 NY LEXIS 848 [1923]); Nagy v Arcas Brass
& Iron Co., 242 NY 97, 1926 NY LEXIS 963 [1926]) and may come to the courts of the State ifthey
mutually choose to do so.
Applying these principles, upon a plain reading of the agreements at issue, the court finds that
the parties made a clear, explicit, and broad agreement to arbitrate in 1997 and 2010. In addition,
Plaintiff has not complied with the agreement to arbitrate. Moreover, the claim is not barred by the
statute oflimitations. Inasmuch as parties did not mutually agree to waive the arbitration climse and
there is no express intent to abandon arbitration, the parties are directed to arbitrate the matter (Lake
Beechwood Country Club, Inc. v Peekskill Manor, Inc., 2 A D 2d 865, 156 NYS2d 176 [2d Dept
1956]; Flash v Goldman, 278 AD 829, 104 NYS2d 297 [2d Dept 1951]).
Accordingly, Defendants' motion to compel arbitration and to stay this action is GRANTED,
and the parties are directed to proceed to arbitration as provided for in the parties' agreements. Any
matter not herein addressed is deemed DENIED.
The foregoing constitutes the decision and ORDER of this Court.
Dated: March 2, 2018
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