## Facts

- Bidermann Industries Licensing, Inc. (BILI) entered into a license agreement with Avmar N.V., Leit Motif, Inc., and Karl Lagerfeld.
- The agreement contained a broad arbitration clause requiring arbitration in New York City under American Arbitration Association rules for disputes arising from the agreement.
- A dispute arose under the license agreement, and arbitration was initiated.
- During the arbitration, respondents sought to disqualify BILI’s counsel (Coudert Brothers), asserting (i) counsel’s involvement in underlying events made counsel potential witnesses and (ii) counsel had obtained confidential information from Lagerfeld in a related prior transaction.
- BILI petitioned in New York Supreme Court under CPLR 7503 to stay arbitration of the disqualification application, arguing disqualification is nonarbitrable because it implicates attorney ethics and public policy reserved to courts.
- The Supreme Court stayed arbitration of the disqualification issue and also stayed arbitration as to Bidermann Industries U.S.A., Inc., a related entity that had not agreed to arbitrate.
- Respondents appealed to the Appellate Division, First Department.

## Issues

1. Whether a tribunal may decide a motion to disqualify counsel in a pending arbitration under a broad “arising from” arbitration clause, or whether the issue is nonarbitrable because it is intertwined with overriding public policy concerns governing attorney ethics.
2. Whether a related corporate entity that did not sign the arbitration agreement may be compelled to arbitrate the dispute.

## Decision

- The Appellate Division unanimously affirmed the order and judgment.
- The court held the counsel-disqualification dispute was intertwined with overriding public policy considerations and therefore was for judicial determination, not arbitrators.
- The court upheld the stay of arbitration as to Bidermann Industries U.S.A., Inc. because it had not agreed to arbitrate disputes concerning the relevant contracts.

## Legal Principles

- Even a broadly worded arbitration clause does not require arbitration of a dispute when the subject is intertwined with overriding public policy concerns.
- Courts retain supervisory authority over attorney ethics, including conflicts of interest and protection of client confidences; such matters may be reserved to judicial resolution notwithstanding an arbitration agreement.
- Arbitration is a matter of consent; absent an agreement to arbitrate, a non-signatory generally cannot be compelled to arbitrate.

## Conclusion

The court affirmed a limited stay of arbitration to reserve attorney-disqualification questions for judicial determination on public policy grounds, and it also confirmed that a non-signatory affiliate could not be forced into arbitration without an agreement to arbitrate.


Bidermann Indus. Licensing, Inc. v. Avmar N.V., 173 A.D.2d 401, 570 N.Y.S.2d 33 (1st Dep’t 1991)