Key Points

  • The Appellate Division, Second Department, affirmed a Queens County order denying Merlex Auto Group's CPLR 7503(a) motion to compel arbitration and stay a personal-injury suit over a vehicle fire.
  • The court held that Merlex waived its contractual right to arbitrate through litigation conduct inconsistent with an intent to arbitrate.
  • The conduct cited included omitting arbitration from its answer, attending preliminary and compliance conferences, declining ADR referral in discovery stipulations, taking written and expert inspection discovery, and waiting about 18 months after answering to seek arbitration.
  • Relying on the Court of Appeals' decision in DeSapio v. Kohlmeyer, the panel said the courtroom may not be used as a 'convenient vestibule to the arbitration hall.'
  • The panel did not separately analyze prejudice and declined to reach the parties' remaining contentions.

A New York appeals court ruled Wednesday that a car dealer sued over a vehicle that caught fire cannot move the case into arbitration, holding that the dealer gave up that contractual right by litigating the suit in state court for about a year and a half before asking to arbitrate.

A four-justice panel of the Appellate Division, Second Department, affirmed a Queens County trial judge's refusal to compel arbitration in a personal-injury suit brought by Shameek E. Champion against Merlex Auto Group, the dealer that sold him the vehicle. The unsigned decision and order, joined by Justices Valerie Brathwaite Nelson, Paul Wooten, Janice A. Taylor and Elena Goldberg Velazquez, keeps the case in court rather than before an arbitrator.

The ruling applies the New York rule that a party can waive an arbitration clause through its own conduct in litigation. The panel found that Merlex's steps in the lawsuit, which included leaving arbitration out of its answer, taking part in court conferences, turning down referral to alternative dispute resolution and conducting expert discovery, were "inconsistent with an intent to arbitrate."

According to the decision, Champion bought the vehicle from Merlex under a sale contract in April 2020. In September 2020, the vehicle caught fire, and Champion allegedly was injured. He sued Merlex and other defendants in March 2022 in Supreme Court, Queens County.

Merlex answered in July 2022 and asserted cross-claims. The parties then engaged in discovery for about 18 months. In January 2024, Merlex moved under CPLR 7503(a) to compel arbitration and stay the action pending arbitration.

Justice Phillip Hom denied the motion in an order entered Sept. 27, 2024, and Merlex appealed. The other defendants, including TT of Freeport Inc., appeared on the appeal as respondents and filed a brief separate from Champion's.

The panel began with the principle that "The right to arbitrate, like any other contractual right, may be modified, waived, or abandoned," citing the New York Court of Appeals' decision in Sherrill v. Grayco Builders. Quoting an earlier Appellate Division decision, Willer v. Kleinman, the court wrote that "there is no inflexible or mechanical rule as to what constitutes a waiver of the right to arbitrate" and that the question depends on the facts and circumstances of each case.

The court listed the factors that guide that analysis: "the extent of the party's participation in litigation and conduct inconsistent with the assertion of a right to arbitrate, the delay in seeking arbitration, and whether the other party has been prejudiced."

Applying those factors, the panel catalogued a series of steps that it said were not contested. "Here, it is undisputed that Merlex failed to raise its purported right to arbitration as a defense in its answer," the court wrote. The dealer also participated in preliminary and compliance conferences.

The panel further found that Merlex "affirmatively declined referral to alternative dispute resolution in discovery stipulations." The dealer also engaged in discovery that included written disclosures and an expert inspection of the vehicle.

Merlex then waited about 18 months after filing its answer to request arbitration, the court said. "Under these circumstances, Merlex's conduct was inconsistent with an intent to arbitrate and, therefore, the Supreme Court properly determined that Merlex waived its right to arbitration," the panel held.

The decision did not separately analyze whether Champion had been prejudiced by the delay, the third factor on the court's list. The panel instead rested its conclusion on Merlex's participation in the case and the time that passed before the dealer sought arbitration.

To support the result, the panel turned to DeSapio v. Kohlmeyer, a decision of the Court of Appeals. "The courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a party to create [a] unique structure combining litigation and arbitration," the court wrote, quoting that decision. It also cited the Court of Appeals' ruling in Roggio v. Nationwide Mutual Insurance Co.

The panel additionally relied on Friedman v. CYL Cemetery Inc., and it cited Byrnes v. Castaldi with a "cf." signal. Both are Appellate Division decisions.

The court declined to reach the parties' other arguments. It said the parties' remaining contentions "either are improperly raised for the first time on appeal or need not be considered in light of our determination." The decision does not describe those arguments.

The panel affirmed the order insofar as Merlex appealed from it and awarded one bill of costs payable to the respondents appearing separately and filing separate briefs, a group that included both Champion and Merlex's co-defendants.

Lawyers for Merlex included Emily C. Walpole of Wade Clark Mulcahy LLP. Champion was represented by Matthew Gaier of Kramer, Dillof, Livingston & Moore. The other defendants were represented by Lewis Johs Avallone Aviles LLP.

With the denial of the motion to compel arbitration and stay the action affirmed, the personal-injury suit proceeds in Supreme Court, Queens County, under Index No. 706185/22. The decision, reported as 2026 NY Slip Op 05763, is marked uncorrected and subject to revision before publication in the Official Reports.