Commercial Division Reaffirms that a Party May Waive Right to Arbitration Through Conduct

Patterson Belknap Webb & Tyler LLP

Patterson Belknap Webb & Tyler LLP

How long and to what extent can a party litigate in court before claiming that the dispute needs to be arbitrated? That issue has come up with some frequency in state and federal courts throughout the country. The Commercial Division’s decision in Worbes Corp. v Sebrow[1] adds to that body of developing case law. In Worbes, Bronx County Justice Fidel E. Gomez dismissed the plaintiffs’ motion seeking to compel arbitration against the defendants, reaffirming that despite favoring arbitration (where the parties have agreed to arbitrate their claims), courts may not compel arbitration if a party has litigated a matter extensively in court.


The complaint in the matter alleged that plaintiff ZVI Sebrow (“ZS”) owned 50 percent of the stocks in Worbes Corp. (“Worbes”), a corporation, whose sole asset was real property located in the Bronx and whose exclusive business was to own, hold, and operate the property.[2] Worbes Corp. was governed by a Stockholder’s Agreement (“Agreement”), dated January 2, 1997, whereby the shares in the corporation were equally owned by Abraham Sebrow (“AS”), Joseph Sebrow (“JS”), ZS, and David Sebrow (“DS”).[3] When AS died in 2000, ZS became the owner of 50% of the shares in Worbes. Similarly, upon JS’s death, DS became the owner of 50% of the shares in the corporation.[4] The shares were once again shuffled when DS died in 2017, and his shares were reverted to Worbes.

In 2018, ZS sought to wind up Worbes’s affairs and arranged for the sale of the property. He also personally paid $437,138.78 to prevent a tax lien foreclosure.[5] However, in 2019, DS’s wife Betty Sebrow (“BS”) filed an action seeking a declaration that, upon DS’s death, she and DS’s estate became owners of 50% of the shares in Worbes.[6] She was unsuccessful, moved to reargue the court’s decision, and also filed an appeal. The motion and the appeal were pending when the instant decision in Worbes was given.

On January 5, 2022, ZS entered into a contract on behalf of Worbes to sell the property for $5,500,000, and sought a declaratory judgement from the court that BS does not own any of the shares in Worbes. ZS also argued that BS’s initiation of the prior action prevented ZS from selling the property and amounted to tortious interference with prospective business relations, abuse of process, and malicious prosecution. Additionally, ZS asserted that if it was found that BS owned any share in Worbes, “the refusal to consent to the sale of the [property] unless their demands [were] met constitute[d] a breach of duty of loyalty to Worbes.” ZS also moved for an order pursuant to CPLR §7503(a), compelling defendants to participate in arbitration, pursuant to Worbes’s Stockholders Agreement.

Factors Considered in Evaluating Whether the Right to Arbitrate Has Been Waived

Justice Gomez explained that under CPLR §7503(a), a party can seek leave to compel arbitration, and similarly, under CPLR §7503(b), an opposing party may seek an injunction to stay arbitration. He noted that the right to arbitrate was not “unfettered and irrevocable,” and a party, “by his conduct, can waive the right” even if it was granted by an agreement between the parties.[7]

Justice Gomez’s analysis considered five factors. First, the court evaluated whether the party seeking arbitration had “elected to proceed and/or resolve the otherwise arbitral dispute between the parties in a judicial arena.”[8] Justice Gomez explained that in “addressing waiver, courts usually consider the amount of litigation that has occurred, the length of time between the start of the litigation and the arbitration request, and whether prejudice has been established.”[9] The court clarified that this did not mean that mere participation in litigation or seeking any relief from a court would amount to waiver. Rather, the linchpin of the waiver inquiry is whether a party’s conduct in court was “clearly inconsistent with its later claim that the parties were obligated to settle their differences by arbitration.”[10] Justice Gomez explained that arbitration would be waived if a “defendant interposed an answer to [a] complaint, raised a substantive defense, interposed a counterclaim demanding money damages, served a notice of trial and also moved to depose a witness.”[11] By contrast, arbitration would not be waived where, “despite lengthy litigation” in court, a defendant had only defended its position and had not acted in a manner that waives the right to arbitrate.[12]

Second, the court considered whether the party seeking to compel arbitration availed itself of the remedies available in court. “[A] party who either affirmatively seeks to have a court resolve otherwise arbitral claims or who in defending a claim avails itself of the remedies available in [court] ought not be allowed to proceed to arbitration.”[13] By contrast, “a party’s participation in a judicial proceeding is mitigated if and when its use of the judicial forum is due to an ‘urgent need to preserve the status quo’” requiring some “immediate action which cannot await the appointment of arbitrators.”[14]

Third, a court considered “whether the claims before the court are the same as those sought to be arbitrated.”[15] In other words, did the litigation between the parties involve claims that were only arbitrable under the agreement? Justice Gomez explained that “when the claims sought to be arbitrated have been asserted, affirmatively or defensively in a plenary action, arbitration proceedings will be stayed. Where, however, the claims asserted in court are distinct from those sought to be arbitrated, arbitration should be allowed to proceed.”[16]

Fourth, the court considered whether the party seeking to compel arbitration delayed seeking arbitration of its claims. Justice Gomez noted that “[g]enerally, the longer the delay, the more it militates towards a finding of waiver. However, the length of time between the start of the litigation and the time arbitration is sought, by itself, is generally insufficient to constitute a waiver.”[17]

The last factor that the court considered was whether arbitration would result in prejudice to the party opposing arbitration.[18] If so, the arbitration should be stayed. Justice Gomez explained that with “respect to waiver there [are] two types of prejudice – substantive prejudice and procedural prejudice – the former is the loss of some substantive advantage accorded by the judicial forum if arbitration is allowed to proceed” and the “latter, is where the opponent of arbitration, has by litigation in the judicial forum, incurred unnecessary delay or expense” and would be further prejudiced if arbitration is ordered.[19]

The Court’s Holding

Applying the first and second factor to the matter before it, the court held that the plaintiffs, ZS and Worbes, had “so significantly availed themselves of the litigation process in th[e] action, so as to constitute waiver of the right to arbitration.”[20] The court explained that the plaintiffs initiated the action by filing a complaint containing causes of actions sounding in declaratory judgement, tortious interference with prospective business relations, abuse of process, malicious prosecution, and breach of fiduciary duty.[21] Moreover, the plaintiffs had filed five motions seeking various reliefs and remedies before they filed the instant motion seeking an order compelling arbitration.[22] The court noted that it agreed with the plaintiff that “under the circumstances then existing – the existence of a tax lien … – judicial intervention authorizing the sale of the [property] was necessary.”[23] Thus, the court’s decision was “not premised on the plaintiffs’ initiation of the instant action; “[h]ad the plaintiffs sought arbitration at that point, it is likely that the instant motion would have been granted.”[24] However, the plaintiffs “decided to avail themselves of this court’s ability to decide this action on papers and made a motion, their third, seeking summary judgement.”[25] The court held that this was clearly inconsistent with the plaintiffs’ claim that the parties were obligated to settle their differences by arbitration.[26]

Moving to the third factor, the court noted that although the plaintiffs’ pleadings were “bereft of any indication of what issues” they seek to arbitrate, the court “will assume that they are the very issues asserted in the complaint.”[27] The court denied the motion to compel arbitration because the claims that the plaintiffs seek to arbitrate had already been asserted before the court.

Addressing the fourth and fifth factors, the court held that the plaintiffs had “for months charted a course of litigation,” causing a significant delay in the resolution of the claim.[28] The “plaintiffs waited almost a year from the time they were granted the exigent relief that they could not get via arbitration to seek arbitration.”[29] The court opined that this delay “when viewed against the procedural history is egregious and militates in favor of the conclusion urged by defendants, namely that when it became apparent that the litigation in this action would be protracted, plaintiffs’ moved to abandon it and avail themselves of arbitration.”[30] The court found this unacceptable as it would enable the plaintiffs to create their own unique structure combining litigation and arbitration. Lastly, the court noted that the defendant had incurred unnecessary delay and expense; hence, it would be prejudiced if compelled to arbitrate.


Worbes is instructive on courts’ balancing of the public policy favoring arbitration (where there is an arbitration agreement) with ensuring that a party does not take advantage of arbitration agreements where it is has already leveraged the benefits of litigating a claim in court.

[1] Worbes Corp. v Sebrow, 78 Misc 3d 1212(A) (Sup. Ct. Bronx Cnty. March 17, 2023)

[2] Id. at *1

[3] Id.

[4] Id.

[5] Id. at *1-2

[6] Id. at *2.

[7] Id. at *3 (collecting cases to show that right to arbitrate can be waived).

[8] Id. (referencing Spirs Trading Co., Ltd. v Occidental Yarns, Inc., 73 AD2d 542, 543 (1st Dept 1979)

[9] Id. (quoting Cusimano v Schnurr, 26 N.Y. 3d 391, 400 (2015)).

[10] Id. at *4

[11] Id. at *4

[12] Id.

[13] Id. at *4-5

[14] Id. at*5 (quoting Sherrill v Grayco Builders, Inc., 64 N.Y. 2d 261, 273 (1985))

[15] Id.

[16] Id.

[17] Id. at *6 (referencing NBC Universal Media, LLC v Stauser, 190 A.D. 3d 461, 461 (1st Dept 2021))

[18] Id.

[19] Id. (internal citations omitted)

[20] Id.

[21] Id.

[22] Id. at *7

[23] Id.

[24] Id. at *7-8

[25] Id. at *8

[26] Id.

[27] Id. at *9

[28] Id. at *9

[29] Id.

[30] Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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