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A state court in New York held that the arbitrator should decide whether the statute of limitations had run on a party's claim because the parties' agreement stated that the arbitration should proceed under the Federal Arbitration Act (FAA).
In Joseph Gunnar & Co., LLC v. Bridgeman, No. 015603/2006, 2007 WL 684963 (N.Y. Sup. Ct. Mar. 7, 2007), Bridgeman brought an action alleging breach of fiduciary duty, negligence, and other counts arising out of Gunnar's handling of Bridgeman's brokerage accounts.
Gunnar claimed that the statute of limitations on Bridgeman's claims had run and argued that, under New York law, the court should decide this issue. The parties' agreement contained an arbitration clause which stated that New York law would apply and that the arbitration should proceed under the FAA.
Although the Court agreed that New York law does require that courts, not arbitrators, decide threshold statute of limitations questions, it also noted that "[w]here the FAA [applies] there is a presumption 'that the arbitrator should decide allegations[s] of waiver, delay or a like defense to arbitrability.'" Diamond Waterproofing Systems v. 55 Liberty Owners Corp., 4 N.Y.3d 247, 252 (N.Y. Sup. 2005).
Since the parties' agreement stated that the arbitration should proceed under the FAA, and because by virtue of Gunnar's membership in the National Association of Securities Dealers (NASD) Gunnar agreed to the application of the FAA, the Court ordered the parties to arbitration to decide the statute of limitations issue.
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