TNS HOLDINGS, INC., &C., ET AL., RESPONDENTS, v. MKI SECURITIES CORP., ET
AL., APPELLANTS.
92 N.Y.2d 335, 703 N.E.2d 749, 680 N.Y.S.2d 891 (1998).
October 22, 1998
1 No. 131
(Case Summary by the Editorial Board)
(98 NY Int. 0123)
Decided October 22, 1998
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This opinion is uncorrected and subject to revision before publication
in the New York Reports.
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Meryl E. Wiener, for appellants.
Omar D. Lopera, for respondents.
CIPARICK, J.:
At issue on this appeal is whether a corporation that is related to,
but not itself, a party to an agreement containing an arbitration
clause can be compelled to arbitrate a dispute arising from alleged
breach of that agreement. We conclude that,absent a showing of abuse
of the corporate form, the nonsignatory corporation cannot be
compelled to arbitrate.
Plaintiffs respondents, TNS Holdings, Inc. and two of its officers and
major shareholders, Richard Zachar and George Bloukos, have brought
this action against MAI and two of its subsidiaries, MKI and
Batchnotice, claiming breach of several agreements. During 1992 and
1993, plaintiffs had been in negotiations with MKI, a company engaged
in bond trading, to sell TNS' primary asset a software system for on
line bond trading called "TradeNET." Three main written agreements
were executed: those for Hardware Purchase and Software Licensing were
between MKI and TNS and the third, a Software Purchase Agreement, was
between TNS and Batchnotice, who would take title to the software for
internal tax purposes. The third agreement contained the arbitration
clause at the center of this dispute. Although plaintiffs say they
learned that Batchnotice would be the signatory only 24 hours before
signing, they acknowledge that the main provisions of the Software
Purchase Agreement were worked out in prior meetings with MKI,
including a "sustained discussion" on whether to require arbitration
as a means of dispute resolution, which MKI and TNS eventually agreed
SNIPPETS:
At issue on this appeal is whether a corporation that is related to, but not itself, a party
We conclude that,absent a showing of abuse of the corporate form, the nonsignatory
Plaintiffs respondents, TNS Holdings, Inc. and two of its officers and major shareholders,
During 1992 and 1993, plaintiffs had been in negotiations with MKI, a company engaged in bond
Three main written agreements were executed: those for Hardware Purchase and Software
Although plaintiffs say they learned that Batchnotice would be the signatory only 24 hours
Because Batchnotice had no assets other than the software to be purchased from TNS, a letter
Plaintiffs claim that the written agreements were accompanied by an oral agreement from MKI's
Plaintiffs claimed a breach of the alleged oral employment agreement that accompanied the
Supreme Court denied the motion, stating that the court had previously "ordered arbitration
The majority determined that MKI was the "alter ego" of Batchnotice, and as such could be
The majority further held that as to MKI, there were issues in the underlying dispute
The Appellate Division granted defendants leave to appeal to this Court,
Indeed, unless theparties have subscribed to an arbitration agreement it would be "unfair to
Those seeking to pierce a corporate veil of course bear a heavy burden of showing that the
Applying the "alter ego" test here, plaintiffs have failed to show that, even if MKI
Far from seeking to avoid obligations by vesting title to the software in Batchnotice a step
Plaintiffs concede that the Software Purchase Agreement was the product of substantial
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