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arbitration agreementAgreements to arbitrate are supposed to reduce the amount of litigation in the world. By that standard, the agreement to arbitrate between Bergassi Group LLC (Bergassi) and Allied World Insurance Company (Allied World) has been an utter failure. After Allied World served Bergassi with a demand for arbitration in September 2019, Bergassi launched a proceeding under CPLR Art. 75 to stay the arbitration. In January 2020, Supreme Court, New York County (Tanya Kennedy, J.) granted a permanent stay of arbitration. Pending appellate review of that decision, Bergassi sued Allied World and its attorneys in Westchester County, alleging that Allied World’s demand to arbitrate constituted malicious prosecution and abuse of process (Index No. 53708/2020). On April 13, 2021, the Appellate Division, First Department, reversed the permanent stay of arbitration in the New York County matter. Only time will tell if the arbitration clause that started all of this will spawn additional litigation. In any case, the Appellate Division’s decision offers some straightforward, but valuable, guidance about the interplay between the Federal Arbitration Act (FAA) and CPLR Art. 75, and raises some interesting questions for further review.

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