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In re the Arbitration between Jack Kent Cooke, Inc. & Saatchi & Saatchi North America
Citations: 222 A.D.2d 334; 635 N.Y.S.2d 611; 1995 N.Y. App. Div. LEXIS 13330
Court: Appellate Division of the Supreme Court of the State of New York; December 20, 1995; New York; State Appellate Court
The Supreme Court of New York County, under Justice Stanley Parness, issued an order on March 14, 1995, reversing a prior decision and granting the petition to stay arbitration, with costs awarded. The case revolves around long-term commercial leases for two midtown Manhattan office buildings, where the parties' predecessors established a rent escalation formula in 1978. According to this formula, the landlord was required to provide an annual detailed statement of operating expenses, which the tenant would pay within 90 days unless disputed. If a dispute arose, the tenant had 270 days to submit the issue to arbitration. From 1978 to 1992, the tenant had paid the escalations without contest. In 1993, the tenant engaged an audit consultant, leading to claims of fraud and breach of contract, and a demand for arbitration seeking reimbursements for overcharges since 1980. The landlord initiated proceedings asserting the tenant’s claims were time-barred. The IAS Court ruled that the claims' untimeliness could potentially be addressed through tolling of the statute of limitations for fraud and equitable estoppel, but the appellate court found no basis for these claims. It emphasized that the contract allowed parties to set conditions precedent for arbitration, including clear time limits. The court determined that compliance with these time limitations is a matter for judicial review, not arbitration. The court noted that the tenant had access to the operating expense records well before hiring the auditor and failed to demonstrate evidence of fraudulent concealment necessary to support their claims. As a result, the tenant was barred from arbitrating any operating expense statements issued before August 1993. The ruling was concurred by Justices Sullivan, Rosenberger, Wallach, Ross, and Asch.