Affirming a trial court's denial of a motion to stay arbitration proceedings, a New York appellate court held that CLPR 7503(c) precludes a party from challenging an arbitration agreement's scope if it does not do so within the twenty day required period.

In In re Colonial Co-op. Ins. Co (Muehlbauer)., --- N.Y.S.2d ---, 2007 WL 4259970 (N.Y. App. Div. Dec. 06, 2007), York Claim Service began providing claim adjusting services for Colonial Co-op. Ins. Co (CCIC). In 2004, the parties memorialized their arrangement by entering into a written contract containing an arbitration clause. In 2006, CCIC attempted to terminate its relationship with York.

York sued CCIC in New Jersey for breach of contract and tortious interference with contract. CCIC moved to compel arbitration pursuant to the parties' agreement. However, York did not seek to stay the arbitration within the required twenty-day period.

CCIC also commenced proceedings in New York seeking to enjoin York from continuing or initiating any litigation against it. The New York trial court stayed all but one of the outstanding New Jersey claims and ordered the parties to arbitrate. York appealed.

Affirming the trial court, the Court held that York's appeal seeking to stay arbitration was time barred. CLPR 7503(c) provides that a party must apply to stay arbitration within twenty days after service of a demand to arbitrate. The statute precludes a party from challenging an arbitration provision's scope if the challenge is untimely. Here, York challenged the arbitration provision's scope by contending the arbitration agreement only applied to contract rather than tort claims. Consequently, the Court denied York's appeal.