Revis v. Schwartz
| Decision Date | 30 December 2020 |
| Docket Number | 2017–07940,Index No. 67097/16 |
| Citation | 192 A.D.3d 127,140 N.Y.S.3d 68 |
| Parties | Darrelle REVIS, et al., appellants, v. Neil SCHWARTZ, et al., respondents. |
| Court | New York Supreme Court — Appellate Division |
When the parties' contract delegates the arbitrability question to an arbitrator, a court may not override the contract. Under such circumstances and without more, a court possesses no authority to decide the arbitrability issue.
In this case, the defendants established, as a matter of law, that the plaintiff Darrelle Revis entered into an agreement with the defendant Neil Schwartz pursuant to which they agreed to arbitrate "gateway" questions of arbitrability. The defendants further established that, given the allegations in the complaint, the remaining parties to this lawsuit are bound by the same broad arbitration clause. Under these circumstances, the Supreme Court properly granted the defendants' motion to compel arbitration and to stay the action pending completion of the arbitration.
Revis and his corporate entity Shavae, LLC (hereinafter Shavae), commenced this action to recover damages for, among other things, breach of fiduciary duty, breach of contract, and fraud. The complaint alleged that Revis is a professional football player and that Shavae is a limited liability company that is wholly-owned by Revis. The complaint alleged that the defendant Schwartz & Feinsod, LLC (hereinafter S & F), is a business that provides legal services to professional football players. The complaint alleged that Schwartz is an attorney admitted to practice in the State of New York, and that he and the defendant Jonathan Feinsod are partners and co-owners of S & F.
The complaint alleged that in January 2007, Revis and Schwartz entered into a Standard Representation Agreement (hereinafter the SRA) in accordance with the National Football League Players Association Regulations Governing Contract Advisors (hereinafter the NFLPA Regulations). The complaint alleged that the SRA "provid[ed] that ... Schwartz would represent ... Revis as his attorney and contract advisor." Pursuant to the terms of the SRA, Revis agreed that Schwartz "would be his exclusive representative with respect to negotiating player contracts with NFL clubs." The SRA provided that Revis would pay Schwartz a certain percentage of the compensation that Revis earned under any NFL player contracts that were negotiated by Schwartz.
The complaint further alleged that on some unspecified date, Revis and Schwartz also entered into a separate oral agreement. The complaint alleged that "[t]he oral agreement provided that ... Schwartz would provide a range of legal services to ... Revis in return for a 10% contingent fee from amounts received by ... Revis for marketing and endorsement agreements handled by ... Schwartz on ... Revis's [sic] behalf." The complaint alleged that the SRA was the only written agreement between Revis and Schwartz, and that the SRA contained the only memorialization of the terms of the alleged oral agreement. In this regard, the SRA indicated that Revis and Schwartz had entered into "separate agreements" and included, inter alia, the following description of the services covered by them: "Marketing & Endorsements—Ten (10%) Percent—Cash Only." The complaint alleged that "[w]hen Shavae was formed ... Schwartz provided legal services to Shavae under the terms of his oral legal engagement agreement with ... Revis."
The complaint asserted eight causes of action. Each of the causes of action was asserted by both Revis and Shavae, and the complaint alleged that both plaintiffs were entitled to the remedies requested for each cause of action. The first cause of action sought certain injunctive relief on behalf of both plaintiffs on the ground that Schwartz breached his fiduciary duty to them. The second cause of action sought money damages on behalf of both plaintiffs against all of the defendants for breach of fiduciary duty owed to the plaintiffs. The third cause of action sought, among other things, money damages against the defendants for fraud.
In the fourth cause of action the plaintiffs sought to recover, among other things, money damages against Schwartz for breach of contract. The fourth cause of action alleged that "[t]he agreement between ... Schwartz and ... Revis and Shavae concerning the provision of legal services in return for a 10% contingent fee on marketing and endorsement deals handled by ... Schwartz and a 2% contingent legal fee on compensation from employment by National Football League teams was an enforceable contract." The plaintiffs alleged that "Schwartz committed a number of material breaches of the contract" and sought to recover, inter alia, "compensatory damages" for those breaches.
The fifth cause of action was asserted by the plaintiffs against all of the defendants. It alleged that, pursuant to the implied duty of good faith and fair dealing implied in every contract, "[the] Defendants were required to deal honestly with ... Revis and Shavae." The complaint alleged that the defendants "violated the implied covenants of good faith and fair dealing" and, as a result, the plaintiffs were entitled to, among other relief, compensatory damages.
The sixth cause of action alleged unjust enrichment and was asserted by the plaintiffs against all of the defendants. This cause of action alleged that the defendants had been unjustly enriched by commissions which were paid "on various contracts wholly negotiated and signed after ... Schwartz took fraudulent actions." In this regard, the complaint specifically cited to, among other contracts, Revis' "March 2015 contract with the New York Jets football club." The complaint alleged that the defendants were "all unjustly enriched" when they received commissions on these contracts as "Revis's [sic] and Shavae's funds would have otherwise gone to ... Revis and Shavae."
The seventh cause of action was asserted by the plaintiffs against Schwartz. It alleged that Schwartz engaged in conversion and civil theft, and sought compensatory and punitive damages on behalf of the plaintiffs.
The eighth cause of action, sounding in fraudulent inducement, was also asserted by the plaintiffs against Schwartz. This cause of action alleged that Schwartz "represented to ... Revis that he ... would represent ... Revis as his attorney, in order to convince ... Revis to contract with [him] for his ... services, and then ... Schwartz represented that he would serve as counsel for Shavae, to represent Shavae as its attorney." The complaint alleged that Revis relied upon these representations, but that Schwartz never had any intention of serving as an attorney for either of the plaintiffs. As a result, the plaintiffs sought, among other relief, "a declaration that no further amounts are due to any of the Defendants from any of the Plaintiffs ... and all other appropriate equitable relief, including rescissory damages, restitution, and rescission of all contracts or agreements between Plaintiffs and ... Schwartz."
The defendants subsequently moved pursuant to CPLR 7503 to compel arbitration of this matter and to stay all proceedings in the action pending arbitration. In support of their motion, the defendants submitted, inter alia, a copy of the complaint, a copy of the SRA entered into between Revis and Schwartz, a copy of the NFLPA Regulations, and a copy of the Labor Arbitration Rules of the American Arbitration Association (hereinafter the AAA Rules). In a memorandum of law submitted in connection with the motion, the defendants cited to separate arbitration provisions in the SRA and in the NFLPA Regulations, and argued, among other things, that "[t]he broad language of the binding arbitration provisions in the SRA and Regulations plainly cover [the plaintiffs'] claims here."1 The defendants further argued that, by incorporating the AAA Rules into the NFLPA Regulations, the parties had agreed to delegate any threshold arbitrability questions to the arbitrator.
The plaintiffs opposed the defendants' motion. In a memorandum of law, the plaintiffs argued that the defendants' motion should be denied because they "failed to present sufficient evidence of a clear and unequivocal intent to arbitrate the claims at issue." The plaintiffs contended that their "legal claims ... are wholly separate from the rights and duties created under the SRA." The plaintiffs asserted that their "claims arise from ... Schwartz's separate agreement to provide other legal services to ... Revis and his company, Shavae."
In the order appealed from, the Supreme Court granted the defendants' motion to compel arbitration and to stay the action pending completion of the arbitration. The court stated that "[i]t is clear ... that the parties entered into a valid arbitration agreement and that the issues stated in the Summons and Complaint are encompassed within the SRA's broad arbitration clause." The court rejected the plaintiffs' contention "that the claims in this action are wholly separate from the rights and duties created under the SRA." The plaintiffs appeal.
The Federal Arbitration Act () was enacted by Congress "in response to widespread judicial hostility to arbitration" ( American Express Co. v. Italian Colors Restaurant, 570 U.S. 228, 232, 133 S.Ct. 2304, 186 L.Ed.2d 417 ; see Matter of Monarch Consulting, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 26 N.Y.3d 659, 665, 27 N.Y.S.3d 97, 47 N.E.3d 463 ). The purpose of the FAA is to "ensure judicial enforcement of privately made agreements to arbitrate" ( Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 ; see Matter of Monarch Consulting, Inc. v. National Union Fire Ins. Co. of Pittsburgh,...
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