Dimson v. Elghanayan, 19 N.Y.2d 316 (1967)

When parties include both an appraisal clause and an arbitration clause in an agreement, the appraisal clause can limit the scope of the arbitration clause, especially when the appraisal is intended to resolve a specific valuation issue.

Summary

Dimson v. Elghanayan concerns a dispute between two groups of real estate investors (BDF and E) who sought to divide their shared interests in several properties. To ensure fairness, they agreed to an independent appraisal process for two key properties. When a dispute arose over the valuation, the E group sought arbitration, but the BDF group argued that the appraisal clause limited the scope of arbitrable issues. The New York Court of Appeals held that the appraisal clause, designed to protect against inequities due to one group’s swing interest, limited the scope of the arbitration clause. The court reasoned that the appraisal served the function of an arbitrator’s award on valuation, and therefore the appraisal values were not subject to further arbitration regarding a specific portion of the deal.

Facts

Two groups, BDF and E, jointly owned interests in eight real estate enterprises. They decided to divide their interests by