Defendant New York Merchants Protective Co. Inc. (“NYMP”) is engaged in the business of installing and/or maintaining alarm systems.  See Custom Metal Inc. v. New York Merchants Protective Co. Inc., 21343/08 (Nassau County, Sup. Ct., Apr. 6, 2009).  Plaintiff Custom Metal Inc. (“Custom Metal”) was a customer of NYMP and entered into a contract in 2003 by which NYMP was responsible for installing and maintaining a security system at Custom Metal’s principal place of business.  That contract was later amended by a subsequent contract entered into by the parties in 2008.  Both contracts contained identical arbitration clauses, which provided, as follows:

Any action or dispute between the parties, including issues of arbitrability, shall, at the option of either party, be determined by arbitration administered by the National Arbitration Association under its Commercial Arbitration Rules….

Thereafter, a dispute arose between the parties under the 2008 contract, in which Custom Metal claimed that there were numerous and recurring problems with the security system installed by NYMP.  Custom Metal filed an action in state court, and NYMP moved to compel arbitration pursuant to CPLR §7503(a).

Custom Metal did not dispute that the allegations in the complaint fell within the scope of the arbitration clause in the 2008 contract.  Rather, it argued that the contract was induced through fraud and misrepresentation, rendering the arbitration clause unenforceable.  In rejecting this argument, the court relied upon the Court of Appeals decision in Weinrott v. Carp, 32 N.Y.2d 190 (1973), which held that an agreement to arbitrate is valid and enforceable even if other portions of a contract were induced by fraud, so long as the fraud did not permeate the entire contract.  Because the court found that the alleged fraud did not permeate the entire 2008 contract, the arbitration clause was enforceable and the court granted NYMP’s motion to compel.  The court further noted that the contract contained a severability clause, which it found to be supportive of well-settled New York law that an arbitration provision of a contract can be deemed separable from other portions of a contract that may have been fraudulently induced.