Criteria for Provisional Remedies in Aid of Arbitration

, New York Law Journal


George Bundy Smith and Thomas J. Hall
George Bundy Smith and Thomas J. Hall

In New York, parties to an arbitration may petition the state court for the provisional remedies of orders of attachment and preliminary injunctions in aid of arbitration. Such remedies provide valuable tools for parties seeking to preserve during the arbitration process the ability to enforce an arbitral award once obtained. Section 7502(c) of the New York Civil Practice Law and Rules (CPLR) provides that, to obtain such relief, a petitioner must demonstrate that "the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief." Although Section 7502(c) provides that the CPLR provisions applicable to orders of attachment (Article 62) and preliminary injunctions (Article 63) outside the arbitration context apply to the procedural aspects of an application for such provisional remedy in aid of arbitration, including "those relating to undertakings and to the time for commencement of an action,"1 Section 7502(c) provides that a showing of an ineffectual award is the "sole ground for the granting of the remedy."2

With no precedent from the New York Court of Appeals, the Appellate Division and trial courts have applied, over time, evolving standards to determine whether such provisional remedies in aid of arbitration are authorized. Earlier courts focused on whether the ultimate arbitration award may be ineffective if the remedy is not granted,3 whereas more recent courts have fashioned a stricter test, incorporating an "equitable criteria" analysis for preliminary injunction motions—specifically likelihood of success on the merits, irreparable harm and the balance of equities in movant's favor—into the standard for establishing provisional relief under Section 7502(c).

Recent trial court cases, including one in the Commercial Division, likewise have applied the equitable requirements to petitions for orders of attachment. As discussed below, the application of these criteria to petitions for orders of attachment in aid of arbitration raises the issue of whether a showing of irreparable harm is inconsistent with the dictates of Section 7502(c) that the "rendered ineffectual" test is the sole substantive ground for such relief.

Preliminary Injunction

For a preliminary injunctions in aid of arbitration, the First and Second Departments have recently made clear that petitioners must show "customary equitable criteria," including "a likelihood of success on the merits, irreparable harm and a balance of equities in their favor," in addition to the Section 7502(c) "rendered ineffectual" test.4 The Third and Fourth Departments do not appear to have expressly weighed in on this issue of whether this three-prong test for injunctive relief needs to be met.5

Recent Commercial Division decisions have followed this trend in the First and Second Departments. Justice Eileen Bransten of the New York County Commercial Division recently stated in JetBlue Airways v. Stephenson that "Article 63 criteria [including the equitable criteria traditionally required for the granting of preliminary relief] must be applied to a motion under Section 7502(c)."6 In another Commercial Division decision, Matter of Richard Manno & Co. v. Manno, Justice Thomas Whelan of the Suffolk County Commercial Division found that the petitioner for preliminary injunction under Section 7502(c) failed to show that an award in its favor would be rendered ineffectual because the petitioner failed to satisfy the three-prong test for injunctive relief.7

Litigants seeking a preliminary injunction in aid of arbitration thus now appear to face a clear standard—they must demonstrate that they have satisfied the three-prong test for preliminary injunction relief, and that the award to which they would be entitled would be rendered ineffectual in the absence of the preliminary injunction as required by Section 7502(c).

Orders of Attachment

With respect to the standard for an order of attachment in aid of arbitration, however, New York decisions are somewhat less clear. Early First Department cases held that because the "sole ground" for the granting of provisional relief in aid of arbitration is a showing that, in the absence of such relief, the award would be rendered ineffectual, the substantive requirements of Sections 6201(3) for order of attachments and 6301 for preliminary injunction generally are "irrelevant."8 In that 1988 decision, Drexel Burnham Lambert v. Ruebsamen, the First Department reversed the Supreme Court's denial of attachment in aid of arbitration, finding that "the language of [Section 7502(c)] neither limits an order of attachment in aid of arbitration to the narrow circumstances set forth in CPLR 6201(c) nor requires that the petitioner demonstrate any affirmative conduct on the part of the respondent(s)."

More recently, the Appellate Division expressly integrated the requirements of Section 6212(a)—including that a movant for an order of attachment demonstrate a probability of success on the merits—into the standard for obtaining an order of attachment in aid of arbitration.9 In Thornton v. Naumes v. Athari Law Office, the Third Department cited the criteria set forth in Section 6212(a) for orders of attachment as applicable to petitions in aid of arbitration under Section 7502(c):

In granting an order of attachment in aid of arbitration, petitioners were required to show that there is a viable cause of action, a probability of success on the merits, that the award may be rendered ineffectual without the relief sought and that the amount demanded exceeds all counterclaims known to petitioners.

While the probability of success element of Section 6212(a) overlaps with the three-prong test for a preliminary injunction, the court did not apply that three-prong test.

Other courts have required petitioners for orders of attachment in aid of arbitration to demonstrate that the respondent was hiding or dissipating assets.10 For example, in Spiegel v. D.H. Blair & Co., the First Department held that the trial court did not abuse its discretion in denying a petition for an order of attachment pursuant to Section 7502(c) where there was no evidence that respondents were hiding or dissipating assets.11 While these cases might be read as applying the Section 6201(3) ground for orders of attachment, which other courts have rejected, they can be easily characterized as instead applying the requirement of Section 7502(c) that the petitioner demonstrate the award may be rendered ineffective without provisional relief.

In explaining the incorporation of Section 6212(a) requirements into the Section 7502(c) standard for attachment, the Supreme Court in Erickson v. Kidder Peabody & Co. stated that since "CPLR 7502(c) replaces only the 'grounds' which must be established for a grant of attachment or injunctive relief, which are set forth in sections 6201 and 6301," the "remainder of these articles still apply."12 According to this court, this means that a party seeking an order of attachment under Section 7502(c) still needs to establish a valid cause of action and grounds for relief as required by Rule 6212(a), even if it does not need to meet the substantive grounds for an order of attachment provided in Section 6201.

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