The question in this case is whether a court may decide whether the parties agreed to submit a dispute to arbitration when the parties agreed that an arbitrator should decide gateway issues of arbitrability.
In 2007, Darrelle Revis, then a professional football player, hired Neil Schwartz, a partner at Schwartz & Feinsod, as his attorney and contract advisor. To formalize that representation, Revis and Schwartz entered into two agreements.
First, Revis and Schwartz signed a Standard Representation Agreement. Under that agreement, all disputes between the contracting must be resolved “exclusively through the arbitration procedures set forth in Section 5 of the [National Football League Players Association] Regulation Governing Contract Advisors.” Section 5, in turn, requires arbitration of all disputes concerning “[a]ny . . . activities of a Contract Advisor within the scope of these [NFLPA] Regulations].” Section 5 also requires that any such arbitration be governed by the American Arbitration Association’s Voluntary Labor Arbitration Rules. Those Rules grant the arbitrator “the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.”
Second, Revis and Schwartz orally agreed that Schwartz would provide legal services to Revis in exchange for 10% of the money Revis made on marketing and endorsement agreements that Schwartz handled. Schwartz also provided legal services to Shavae under the terms of this oral agreement.
Revis and Shavae sued Schwartz, Feinsod, and their firm, alleging that Schwartz breached the oral agreement and that the defendants committed various other wrongs, including breach of fiduciary duty. The defendants moved to compel arbitration, invoking the arbitration provision that the Standard Representation Agreement incorporates by reference. Supreme Court granted that motion and stayed the action pending arbitration.
The Second Department affirmed. In the court’s view, the Standard Representation Agreement, by incorporating the NFLPA’s arbitration procedures, required that the arbitrator resolve threshold issues of arbitrability. The arbitrator, rather than the court, must therefore resolve plaintiffs’ argument that their claims weren’t arbitrable—in part because they arose under the oral agreement rather than the Standard Representation Agreement. The court also held that nonsignatory defendants—Feinsod and Schwartz & Feinsod—could invoke the arbitration clause, given that they were Schwartz’s agents, acting on his behalf, and so were entitled under basic agency-law principles to enforce the arbitration provision. Finally, the court held that the arbitration provision could be enforced against Shavae, even though it did not sign the Standard Representation Agreement. Under the “direct benefits theory of estoppel,” the court explained, Shavae was bound by the arbitration provision because it “knowingly exploited” the benefits of that agreement and received benefits under it.
Justice Dillon, joined by Justice Cohen, dissented. In the dissent’s view, the Standard Representation Agreement’s arbitration clause did not apply at all, because the dispute arose under the parties’ separate oral agreement. And the oral agreement contains no arbitration clause. The dissent acknowledged an alternative argument for arbitrability: that the oral agreement “is independently subject to the broad language of the NFLPA” regulations requiring arbitration. But it refused to consider that argument, which was not raised below.
Revis and Shavae appealed to the Court of Appeals as of right.