COURT REFUSES TO COMPEL ARBITRATION OVER “COLLATERAL” MATTERS IN THE INTERESTS OF JUSTICE AND JUDICIAL ECONOMY

In a shareholder dispute over the alleged improper termination of a company president, a court recently compelled arbitration of issues central to the case, but retained jurisdiction over a collateral issue related to ownership of corporate shares. The underlying shareholder agreement provided that all parties agreed to arbitrate “any controversy relating to [the] Agreement.” The court held that “all issues and claims raised in the plaintiffs’ complaint, relating to defendant’s performance of his duties as president and his alleged breaches of duty to plaintiffs” related to the shareholder agreement and therefore should be referred to arbitration. With respect to an ancillary dispute as to the status of the company shares of a former shareholder who left the United States, the court decided to retain jurisdiction in “the interests of justice and judicial economy.” The court explained that matters relating to the ownership dispute were collateral to the termination dispute, and that at least one pending issue would continue to involve the court “even were the question of share ownership referred to arbitration.” Boz Export & Import, Inc. v. Karakus, Case No. 8738/11 (N.Y. Sup. Ct. Sept. 15, 2011).

This post written by Michael Wolgin.

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