First published: Apr 2023
Arbitration Rather Than Litigation
This case can revolutionize condo litigation. The arbitration clause in this case has appeared on commonly copied forms of bylaws for the past 40 years and has not generally been interpreted as it has in this case. Until now, practitioners have been satisfied that if the provisions in traditional condominium documents specifically direct that disputes on the respective provisions be arbitrated, the general arbitration clause had no effect. This is no longer a safe practice. Arbitration may become the new norm. This case has not yet been cited in any reported decision. Nor has a timely notice of appeal been filed within 30 days from the date of entry of the decision.
300 W. 110TH 19B LLC V ARGO REAL ESTATE, BOARD OF MANAGERS OF TOWERS ON THE PARK, AND JOHN DOES 1-10
WHAT HAPPENED The issue centers around the 100 parking spaces in the two-tower, 600-unit, Towers on the Park condominium. The condo’s bylaws say that owners can apply to lease a parking space at market rates for a period of up to two years. The rates for the condo spaces range from $177.20 to $238.31, depending on location, and the unit owners allege that these rates are far below “market” rates. In 2019 and 2020 parking fees brought in an average of $315,000, and the unit owners contend that if market rates had been charged, the condo would have earned additional income of $642,000 in 2020. The unit owners claim that the current rental rates mean that the 500 Tower households without parking spots are subsidizing the 100 with them, and that this is a breach of the board’s fiduciary duty. So a unit owner, on behalf of all the unit owners, is suing the Board of Managers of Towers on the Park Condominium and the condo’s management company for breach of contract and breach of fiduciary duty.
IN COURT The condo bylaws contain a general arbitration provision that provides that any matter required or permitted to be determined by arbitration shall be submitted to arbitration. However, specific provisions in the condo’s bylaws do not mention arbitration. Here, the court found that because of the general arbitration provision, this dispute shall be settled via arbitration. The American Arbitration Association (AAA) was designated as the arbitration forum, and the parties could mutually agree to select an alternative forum other than the AAA to resolve the dispute. The unit owners wanted the court to decide the matter, but the board and its management company argued that the arbitration provision applied here, and the court should dismiss the unit owner’s action based on the condo’s bylaws.
Although arbitrability is typically a question for the court, the bylaws arbitration provision shows a “clear and unmistakable” intent that an arbitrator is to determine the arbitrability of this action. Under the AAA rules, that could even include ruling on the rights of the class of unit owners. The court granted the motion to compel arbitration of the plaintiff’s claims and dismissed the plaintiff’s complaint without prejudice.
COUNSEL: For the board, the individual board members and management company: Ian Brandt, Steven Appelbaum, DAVIDOFF HUTCHER & CITRON; For the plaintiffs 300 W 110th 19th LLC: Rony Guldmann, LEE LITIGATION GROUP: JUDGE: Lucy Billings
