After DiLorenzo defaulted in payment of her credit card, the FIA initiated arbitration before the National Arbitration Forum (“NAF”), without first checking to see whether JAMS was unable or unwilling to act. The arbitrator issued an award in favor of FIA and, after DiLorenzo refused to comply with the award, FIA petitioned to confirm it pursuant to CPLR 7510.
Initially, the court found that it had subject matter jurisdiction to hear the dispute pursuant to the Uniform District Court Act, which grants the court jurisdiction to confirm, vacate or modify an arbitration award involving claims for the recovery of money where the amount sought does not exceed $15,000. See Perpetual Securities, Inc. v. Tang, 290 F.3d 132 (2d Cir. 2002) (noting that an independent basis for subject matter jurisdiction is required for actions arising under the FAA).
The court further found that the choice of law provision in the credit card agreement was enforceable, because the FAA bore a reasonable relationship to the action and the provision did not violate the public policy of New York. Indeed, the court noted that the action would be governed by the FAA even without the choice of law provision, because it involved interstate commerce. See Allied-Bruce Terminex Cos., Inc. v. Dobson, 513 U.S. 265 (1995) (“The FAA applies expansively and applies to any transaction affecting interstate commerce”).
Applying the FAA, the court held that the arbitrator’s award should be vacated pursuant to 9 U.S.C. §10, since FIA failed to comply with the provision of the arbitration agreement requiring any dispute first be submitted to arbitration before JAMS. The court noted that FIA did not argue that JAMS was unwilling or unable to participate in the arbitration, but rather unilaterally submitted the dispute to NAF without first checking the availability of JAMS. Thus, NAF never had authority to hear the action in the first place and exceeded its power in doing so.
