New Brunswick Theological Seminary v. Van Dyke

• Decision Date: 03 June 2020
• Docket Number: Index No. 600869/18,2018–12323
• Citation: 184 A.D.3d 176,125 N.Y.S.3d 153
• Parties: In the Matter of NEW BRUNSWICK THEOLOGICAL SEMINARY, Respondent, v. Victoria Anne VAN DYKE, Appellant.
• Court: New York Supreme Court — Appellate Division

184 A.D.3d 176

125 N.Y.S.3d 153

In the Matter of NEW BRUNSWICK THEOLOGICAL SEMINARY, Respondent,

v.Victoria Anne VAN DYKE, Appellant.

2018–12323

Index No. 600869/18

Supreme Court, Appellate Division, Second Department, New York.

Argued - January 16, 2020

June 3, 2020

La Reddola, Lester & Associates, LLP, Garden City, N.Y. (Steven M. Lester of counsel), for appellant.

McElroy, Deutsch, Mulvaney & Carpenter, LLP, New York, N.Y. (Robert M. Van De Veire and Richard S. Mills of counsel), for respondent.

REINALDO E. RIVERA, J.P., MARK C. DILLON, ROBERT J. MILLER, BETSY BARROS, JJ.

OPINION & ORDER

MILLER, J.

The appellant in this case was a registered broker with the Financial Industry Regulatory Authority (hereinafter FINRA). She contends that her constitutional right to procedural due process was violated when she failed to receive actual notice of an arbitration that had been commenced against her by one of her former clients. In analyzing the issues implicated by the appellant's claim, the parties have revealed a deep misunderstanding of the interplay between the constitutional rights to due process and freedom of contract, and the somewhat thorny issues that may arise when the parties have agreed to arbitrate their disputes in a nonjudicial setting. Given the parties' confusion and the relatively few writings devoted to this issue, we deem it appropriate to set forth some guidance on this topic in an effort to promote certainty and predictability in this important area of the law. For the reasons that follow, we affirm the judgment appealed from.

The petitioner commenced this proceeding pursuant to CPLR article 75 to confirm an arbitration award that it obtained against the appellant, who did not appear for the arbitration.

As relevant here, the appellant cross-moved to vacate the award and to dismiss the petition on the ground that the procedure used for service of the notice of arbitration deprived her of her right to due process. In an order dated August 13, 2018, the Supreme Court granted the petition and denied the cross motion. A judgment dated September 20, 2018, was thereafter entered in favor of the petitioner and against the appellant in the principal sum of $3,229,097. The appellant appeals from the judgment. We affirm.

"[A]rbitration is a creature of contract" ( Matter of Siegel [Lewis], 40 N.Y.2d 687, 688, 389 N.Y.S.2d 800, 358 N.E.2d 484 ), and "is a favored method of dispute resolution in New York" ( Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88, 93, 571 N.Y.S.2d 686, 575 N.E.2d 104 ). Through arbitration, "[p]arties, by agreement, may substitute a different method for the adjudication of their disputes than those which would otherwise be available to them in public courts of law" ( Matter of Siegel [Lewis], 40 N.Y.2d at 688–689, 389 N.Y.S.2d 800, 358 N.E.2d 484 ; see CPLR 7501 ; see also Restatement [Second] of Judgments § 84, Comment a). "When they do so, they in effect select their own forum" ( Matter of Siegel [Lewis], 40 N.Y.2d at 689, 389 N.Y.S.2d 800, 358 N.E.2d 484 ). In New York, "[i]t has long been the policy of the law to interfere as little as possible with the freedom of consenting parties to achieve that objective" ( id. ; see Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d at 93, 571 N.Y.S.2d 686, 575 N.E.2d 104 ).

In this case, the appellant, as a former registered broker with FINRA, does not dispute that she agreed to arbitrate this matter in accordance with FINRA's rules. Instead, the appellant contends that the contractual method used to provide notice of the arbitration, as applied in this case, worked to deprive her of her constitutional right to procedural due process. In this regard, the appellant asserts that service by certified mail was not reasonably calculated to place her on notice of the arbitration because the petitioner knew that she could be contacted by email and knew or should have known that she spent long periods of time away from her New York residences.

"[S]ervice of process ... implicates [the] due process requirements of notice and opportunity to be heard" ( Keane v. Kamin, 94 N.Y.2d 263, 265, 701 N.Y.S.2d 698, 723 N.E.2d 553 ). "Notice of a proceeding is, of course, a fundamental component of a court's proper exercise of personal jurisdiction over a party" ( John Galliano, S.A. v. Stallion, Inc., 15 N.Y.3d 75, 80, 904 N.Y.S.2d 683, 930 N.E.2d 756 ). It is within this context, that it has been generally observed that "[d]ue process does not require actual receipt of notice before a person's liberty or property interests may be adjudicated; it is sufficient that the means selected for providing notice was ‘reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections’ " ( Matter of Beckman v. Greentree Sec., 87 N.Y.2d 566, 570, 640 N.Y.S.2d 845, 663 N.E.2d 886, quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 ).

"Ordinarily a court can acquire jurisdiction of the person of a defendant only by service of process within the jurisdiction of the court; but that rule does not apply where the defendant ‘has agreed in advance to accept, or does in fact accept, some other form of service as sufficient’ " ( Pohlers v. Exeter Mfg. Co., 293 N.Y. 274, 279, 56 N.E.2d 582, quoting Wilson v. Seligman, 144 U.S. 41, 44, 12 S.Ct. 541, 36 L.Ed. 338 ). "This consent may be given either before or after [an] action has been brought" ( Gilbert v. Burnstine, 255 N.Y. 348, 355, 174 N.E. 706 [internal quotation marks omitted] ). "To be effective, the consent must be given by a person who is under no legal incapacity, and jurisdiction must be exercised in strict conformity with the terms of the consent" ( Restatement [Second] of Conflict of Laws § 32 ). Under those circumstances, it is a defendant's consent, as opposed to a defendant's relationship with the territorial jurisdiction, "which imparts power" ( Gilbert v. Burnstine, 255 N.Y. at 355, 174 N.E. 706 ; see Matter of Bauer [Motor Veh. Acc. Indem. Corp.], 31 A.D.2d 239, 241, 296 N.Y.S.2d 675 ; National Equip. Rental v. Dec–Wood Corp., 51 Misc.2d 999, 1000, 274 N.Y.S.2d 280 [App. Term, 2d Dept.] ; see also Restatement [Second] of Conflict of Laws § 27 [1][e]; Restatement [Second] of Judgments § 5 ).

Similarly, in the context of binding arbitration, it is the parties' consent which vests the authority in the arbitrator to decide a particular dispute. Accordingly, although the CPLR provides that a demand for arbitration, or a notice of intention to arbitrate, must be served "in the same manner as a summons or by registered or certified mail, return receipt requested" ( CPLR 7503[c] ), New York courts have long recognized that "parties to an arbitration agreement may prescribe a method of service different from that set forth in the CPLR" ( Matter of New York Merchant's Protective Co. v. Mima's Kitchen, Inc., 114 A.D.3d 796, 797, 979 N.Y.S.2d 847 ; see Matter of Andy Floors, Inc. [Tyler Constr. Corp.], 202 A.D.2d 938, 939, 609 N.Y.S.2d 692 ). Indeed, "the parties may agree to other methods for service, either by stipulating the manner in the arbitration clause or, more generally, by adopting the arbitration rules of an arbitration agency" (1 Domke on Commercial Arbitration § 18:9 [2020] ). "Where ... parties agree to the manner in which a demand for arbitration can be served, they do not have to comply with the service requirements established by CPLR 7503(c)" ( Astoria Equities 2000 LLC v. Halletts A Dev. Co., LLC, 47 Misc.3d 171, 177, 996 N.Y.S.2d 516 [Sup. Ct., Queens County] ; see Matter of Severin [County of Broome], 89 A.D.2d 689, 453 N.Y.S.2d 794 ; Matter of Wappingers Cent. School Dist. v. Wappingers Congress of Teachers, 51 A.D.2d 766, 767, 380 N.Y.S.2d 54 ; see generally 1 Domke on Commercial Arbitration § 18:9 [2020] ).

Applying these principles, the Court of Appeals has enforced an arbitration agreement pursuant to which the parties consented to a particular notice procedure as set forth in an English statute (see Gilbert v. Burnstine, 255 N.Y. at 355, 174 N.E. 706 ). In that case, the Court of Appeals determined that "[the] [d]efendants' agreement without reservation to arbitrate in London according to the English statute necessarily implied a submission to the procedure whereby that law is there enforced" ( id. at 354, 174 N.E. 706 ). "Otherwise the inference must be drawn that they never intended to abide by their pledge" ( id. ). The Court of Appeals stated that "[c]ontracts made by mature [individuals] who are not wards of the court should, in the absence of potent objection, be enforced" ( id. ). The Court of Appeals held that "under [New York] arbitration law" the agreement to arbitrate in accordance with the procedure set forth in the English statute "ha[d] become irrevocable in the sense that one of the parties without the consent of the other [could not] deprive it of its enforcibility" ( id. ).

Where parties to an arbitration agreement have consented to an alternative method of service, "[t]he method of service by which parties have agreed to be bound must be complied with according to the exact terms thereof in order that the requirements of due process be satisfied" ( Matter of Republique Francaise [Cellosilk Mfg. Co.], 309 N.Y. 269, 279, 128 N.E.2d 750 ; cf. Restatement [Second] of Conflict of Laws § 32 ). Unless otherwise provided for in the agreement to arbitrate, where the parties to an arbitration agreement consent to a particular arbitration procedure, "[t]he resolution of procedural questions, including whether the invocation of arbitration was proper or timely, commonly referred to as procedural arbitrability, is generally left to the arbitrator" ( 21 Richard A. Lord, Williston on Contracts § 57:25 [4th ed 2019] ; see New York Merchants Protective Co., Inc. v. Backyard Party Tent Rental, Inc., ...