Matter of Blumenfeld Dev. Corp. v. MCK Assoc., 67 N.Y.2d 1024 (1986)
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Failure to strictly comply with the service provisions of CPLR 7503(c) in serving a demand for arbitration tolls the time limit for applying to stay arbitration, but a stay is improper where the petitioner had actual notice of the demand and an opportunity to challenge arbitrability.
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Summary
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Blumenfeld Development Corporation sought to stay arbitration demanded by MCK Associates, arguing that the demand was not properly served according to CPLR 7503(c). The Court of Appeals affirmed the lower court’s order denying the stay. The court held that while strict compliance with CPLR 7503(c) is required for proper service of a demand for arbitration, the petitioner’s actual notice of the demand and opportunity to challenge arbitrability in court rendered a stay inappropriate. The court reasoned that CPLR 7503(c) is consistent with the federal right to arbitrate. Because Blumenfeld had actual notice and an opportunity to be heard, the purpose of the service requirement was fulfilled, even if technical compliance was lacking.
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Facts
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MCK Associates served a demand for arbitration on Blumenfeld Development Corporation. Blumenfeld sought a stay of arbitration, arguing the demand was ineffectual due to improper service. The specific method of service and the exact defect are not detailed in the Court of Appeals memorandum decision, but the core issue revolves around non-compliance with CPLR 7503(c).
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Procedural History
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The lower court denied Blumenfeld’s application to stay arbitration. Blumenfeld appealed. The Court of Appeals affirmed the lower court’s decision, finding that despite any defect in service, Blumenfeld had actual notice and the opportunity to challenge the demand.
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Issue(s)
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Whether a stay of arbitration is appropriate when the demand for arbitration was not served in strict compliance with CPLR 7503(c), but the petitioner had actual notice of the demand and an opportunity to judicially review objections to arbitrability.
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Holding
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No, because the petitioner had actual notice of the demand to arbitrate and an opportunity, via the proceeding to stay arbitration, to judicially review its threshold objections to arbitrability, a stay of arbitration is improper, even if the demand’s service did not strictly comply with CPLR 7503(c).
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Court’s Reasoning
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The Court of Appeals reasoned that while strict compliance with CPLR 7503(c) is generally required, its purpose—ensuring notice and an opportunity to be heard—was satisfied in this case. The court acknowledged the rule that failure to strictly comply with CPLR 7503(c) tolls the time limit for seeking a stay of arbitration. However, it distinguished this from a situation where a stay should be granted despite actual notice and an opportunity to litigate arbitrability. The court stated that CPLR 7503(c), which governs service of a demand for arbitration, “is consistent with the Federally created right to arbitrate (US Code, tit 9) [the Federal Arbitration Act].” Thus, the court balanced the state procedural rule with the federal policy favoring arbitration. The court cited Matter of Board of Educ. v Palmyra-Macedon Faculty Assn., 78 AD2d 765, to support the principle that failure to strictly comply with CPLR 7503(c) tolls the time limit on an application to stay arbitration. The court emphasized that because the petitioner