August 17, 2006

Allstate Ins. Co. v Merrick (2006 NY Slip Op 51815(U))


The main issue in this case was whether Allstate Insurance Company could obtain a judicial stay on an arbitration commenced by Sallie Merrick on the grounds that the claim was barred by the statute of limitations. Allstate argued that it was still free to seek a stay despite its participation in the arbitration because Merrick did not comply with the provisions of CPLR 7503(c). However, the court held that because Allstate participated in the arbitration proceedings by making an opening statement, cross-examining Merrick, and submitting evidence, it waived its rights to seek a judicial stay. The court also ruled that Allstate's argument, that there were statute of limitations issues, was unavailing as Allstate was required to commence a special proceeding before participating in the arbitration. Therefore, the court denied Allstate's petition and dismissed the proceeding.

Reported in New York Official Reports at Allstate Ins. Co. v Merrick (2006 NY Slip Op 51815(U))

Allstate Ins. Co. v Merrick (2006 NY Slip Op 51815(U)) [*1]
Allstate Ins. Co. v Merrick
2006 NY Slip Op 51815(U) [13 Misc 3d 1213(A)]
Decided on August 17, 2006
Supreme Court, New York County
Bransten, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on August 17, 2006

Supreme Court, New York County

Allstate Insurance Company, Petitioner,


Sallie Merrick, Respondent.


Eileen Bransten, J.

Pursuant to CPLR 7502 and 7503, Allstate Insurance Company (“Allstate”) petitions for a Judgment, among other things, staying an arbitration commenced by respondent Sallie Merrick (“Ms. Merrick”).


By Denial of Claim form dated September 27, 1996, Allstate informed Ms. Merrick that “all no-fault claims benefits will be denied effective 10/04/96.” Affirmation in Support (“Supp.”), Ex. B.

Ms. Merrick contends that in April 2002, “within the six-year period of the statute of limitations,” she “properly commenced” an arbitration before the American Arbitration Association (“AAA”), contesting Allstate’s denial of no-fault benefits. Affirmation in Opposition (“Opp.”), at ¶ 3. In May 2002, Ms. Merrick provided additional information responsive to an inquiry from AAA.

On January 9, 2003, after receiving no further communications, a paralegal for Ms. Merrick’s counsel contacted AAA to ascertain a date for arbitration proceedings. The paralegal swears that AAA advised her that “they were unable to locate the file” and that an Arbitration Request Form and check for $40 should be resubmitted. Opp., Ex. C, at ¶ 7. That very day, the paralegal resubmitted the materials. Id.

Again, the paralegal contacted AAA inquiring about the status of Ms. Merrick’s arbitration. She “continued to call every six months and received the same response that [Ms. Merrick] would be hearing by way of a letter indicating the name of the Arbitrator and the date of the arbitration.” Opp., Ex. C, at ¶ 8. After “many calls,” the paralegal was advised to resubmit yet another set of papers. Id., at ¶ 9. On February 17, 2005, Ms. [*2]Merrick’s attorney forwarded the papers to AAA, along with a new check and a letter indicating that “the enclosed request was previously submitted.” Opp., Ex. E. AAA returned the arbitration request because it was incomplete. Opp., Ex. F.

AAA received additional papers on June 8, 2005. Supplemental Affirmation from Allstate (“Allstate Aff.”), Ex. A. On June 15, 2005, AAA confirmed “acceptance of an arbitration request.” Id.

On September 19, 2005, in response to an email from the AAA no-fault conciliator assigned to the matter informing Allstate that there was “no record of receiving a submission from Allstate to date,” a Staff Claim Adjuster explained that the company had “no notice of this arbitration * * * This case has never been assigned we never [received AAA] notice.” Allstate Aff., Ex. A. That very day, the conciliator offered to forward Allstate a copy of the filings and notices. Id.

Subsequently, in a September-26-2005 email to the AAA no-fault conciliator, an Allstate Senior Staff Claim Service Representative noted that the file on the claim was old and stated: “I would suspect that there are some statute of limitations applicable here.” Allstate Aff., Ex. C. (There is no indication that Ms. Merrick’s attorney received a copy of the email.)

On October 19, 2005, counsel for Ms. Merrick and Allstate were informed that an arbitrator had been appointed and that a hearing was scheduled for November 22, 2005. Supplementary Affirmation in Opposition (“Supp. Opp.”), Ex. A. Counsel were advised to “attend promptly with * * * witnesses and be prepared to present * * * proofs.” Id. A few days before the hearing, on November 17, 2005, attorney Peter C. Merani wrote the AAA case manager assigned to Ms. Merrick’s claim, advising that “the above captioned matter has been assigned to our office to appear as counsel to the insurer in the pending No-Fault arbitration. Please note your files accordingly, advise us of all scheduled hearing dates, adjourned dates, direct all correspondences and awards to our offices.” Supp. Opp., Ex. B.

Proceedings were conducted on November 22, 2005. “Briefs were submitted and testimony was taken on that day.” Opp., at ¶ 10. Attorney Sammy Lesman, an associate in the office of Peter C. Merani, Esq., delivered an opening statement and cross-examined Ms. Merrick. Supp. Opp., at ¶ 6. After “oral testimony was declared closed” by the arbitrator, Mr. Lesman requested to respond by producing Allstate’s No-Fault records regarding Ms. Merrick’s claim. Id., at ¶ 7. On November 25, 2005, Mr. Lesman sent “a copy of [Allstate’s] submissions for the No-Fault Matter” to the AAA, requesting that the materials be forwarded to the assigned arbitrator. Allstate’s counsel made no mention of any statute of limitations defense at the hearing or in its post-hearing submissions. Opp., at ¶ 10; Supp. Opp., at ¶ 9.In late February, the Arbitrator requested production of Ms. Merrick’s 1996-1997 tax returns and proof that she did not work following the accident. [*3]Opp., at ¶ 11; Supp. Opp., at ¶ 11. Ms. Merrick’s attorney submitted the materials to AAA and Allstate’s counsel on March 3, 2006. Opp., at ¶’11. On March 10, 2006, Ms. Merrick’s attorney was notified that a further hearing was scheduled for April 18, 2006. Id. He was subsequently advised, however, that the April 18, 2006 hearing was cancelled and “that there would be a decision fairly soon.” Opp., at ¶ 11.

On April 17, 2006, Allstate commenced this proceeding, seeking a Judgment staying Ms. Merrick’s arbitration on the ground that more than six years passed since denial of no-fault benefits. Supp., at ¶ 6. Allstate contends that a “review of the Arbitration Request[] Forms of Sallie Merrick stamped by [AAA] as found on their website, and in her submission shows that the earliest possible receipt date of her application is February 22, 2005,” which is beyond the statute of limitations. Supp., at ¶ 5. Allstate also requests an Order “staying the enforcement of any judgment” entered in accordance with the arbitration. Order to Show Cause, at 2; Supp., at ¶ 7.

The following day, “an attorney from the Law Offices of Peter C. Merani appeared on behalf of [Allstate] for the hearing on April 18, 2006.” Reply, at ¶ 9. Ms. Merrick’s counsel, believing that the session had been canceled, did not appear. Supp. Opp., at ¶ 12.

On April 19, 2006, Ms. Merrick’s attorney received Allstate’s Verified Petition. Supp. Opp., at ¶ 13. Ms. Merrick strongly opposes Allstate’s application. She urges that she should not be prejudiced simply because her submissions were misfiled once in 2002, and again in 2003. Opp., at ¶ 14. Ms. Merrick points out that the initial April 2002 arbitration request was sent to Allstate’s counsel; thus, Allstate had notice of the dispute and the AAA filing within the statute of limitations.


Because Allstate participated in the arbitration proceeding—Allstate’s counsel made an opening statement, cross-examined Ms. Merrick and submitted evidence—it waived its rights to seek a judicial stay. CPLR 7503(b) provides that “a party who has not participated in the arbitration * * * may apply to stay arbitration on the ground that * * * the claim sought to be arbitrated is barred” by the statute of limitations applicable to the same causes of action under New York law. See also, Matter of Civil Service Employees Assn. [County of Erie], 303 AD2d 1050, 1051 (4th Dept. 2003) (“participation in the arbitration constituted a waiver of any right * * * to raise a statute of limitations defense in court or obtain a stay of arbitration on statute of limitations grounds”); Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C7503:2 (“participation in the arbitration will constitute a waiver of the right to seek a judicial stay and thus foreclose raising, in court, threshold defenses relating to arbitrability and the statute of limitations. The opponent’s participation in arbitration is deemed inconsistent with his position that the dispute is nonarbitrable”); Siegel, NY Prac. § 592, [*4]at 1043 (4th ed.).

Allstate argues that because Ms. Merrick did not comply with the provisions of CPLR 7503(c), which provides that a “party may serve upon another party a demand for arbitration or notice of intention to arbitrate” that must be served in a particular manner and must set forth specified information, it is still free to seek a stay notwithstanding its participation. Allstate is wrong.

CPLR 7503(c) affords a party desirous of arbitrating a claim with a mechanism to impose a very short and strict 20-day deadline for challenging arbitrability, including raising the argument that arbitration is time barred. Within 20 days of proper service of a valid CPLR 7503(c) notice or demand, a party seeking to avoid arbitration on statute-of-limitations grounds must apply to stay arbitration or suffer the consequences of being precluded from raising the argument in court at any time—before or after the arbitration—regardless of whether the party actually participates in the proceedings. See, CPLR 7503(c); CPLR 7511(b)(2)(iv).

In contrast, when, as here, there has been no CPLR 7503(c) notice or demand to arbitrate, there is no strict 20-day limit for applying to stay arbitration and a party that did not participate in the proceedings retains the right to challenge the award because the arbitrated claim was time barred. CPLR 7503(c), however, does not in any way nullify the rule that a participant in the arbitration cannot subsequently seek a judicial stay based on passage of the statute of limitations.

That Allstate informed the AAA in an informal email that it suspected “there are some statute of limitations” issues, is equally unavailing. To obtain a judicial stay on statute-of-limitations grounds, Allstate was required to commence a special proceeding before participating in the arbitration. It cannot make arguments before the arbitrator, conduct cross-examination and submit evidence—costing all of the parties time and money—and then, for the first time, argue to the Court that the matter should never have gone to arbitration in the first place because the claim is time barred.

Accordingly, it is

ORDERED and ADJUDGED that the petition is denied and the proceeding is dismissed.

This constitutes the Decision, Order and Judgment of the Court.

Dated: New York, New York

August 17, 2006



Hon. Eileen Bransten