Appearances on Return Date: None The following numbered papers were read on this motion: NYSCEF Document No. 1: Petition NYSCEF Document No. 2: Order to Show Cause (Proposed) NYSCEF Document No. 3: Emergency Affirmation of Dominick Dale NYSCEF Document No. 4: Exhibit A — Agreement NYSCEF Document No. 5: Exhibit B — Arbitration Demand NYSCEF Document No. 6: Exhibit C — Affidavit of Robert Kleiber NYSCEF Document No. 7: Discovery Requests NYSCEF Document No. 8: Request for Judicial Intervention NYSCEF Document No. 9: Order to Show Caused — Signed NYSCEF Document No. 10: Notice of Filing of Notice of Removal NYSCEF Document No. 11: Notice of Removal DECISION AND ORDER For an Order Pursuant to Article 75 of the CPLR, Permanently staying arbitration demanded by Background This matter came before the Court based on a merchant cash advance contract in which Petitioner C.W. Home Solutions, LLC sold $89,700.00 in future receivables to Respondent LCF Group, Inc. for $65,000.00. Claiming that Petitioner breached the contract by frustrating Respondent’s access to draw receivables from Petitioner’s designated bank account on or about May 26, 2023, Respondent filed for arbitration around June 1, 2023, seeking $79,239.93 in damages from Petitioner. This amount was the sum of $55,528.80 owed in receivables together with default fees of $5,000.00 and counsel fees of 33 percent of the original balance in the amount of $18,711.13. The arbitration was to take place before RapidRuling, as per the contract. (See NYSCEF Doc Nos. 1, 3-6.) Petitioner responded by commencing this special proceeding pursuant to Article 75, seeking a stay of the arbitration and court direction of discovery in aid of the arbitration in accordance with CPLR 3102 (c).1 The portion of the proposed order to show cause bringing on the petition for determination included a stay of the arbitration but it was crossed out by the Justice who signed it. That left the issue of pre-arbitration discovery. (See NYSCEF Doc Nos. 1, 9.) Determination On June 23, 2023, Respondent removed this special proceeding to federal court in the Eastern District of New York pursuant to 28 U.S.C §§1441 and 14462, asserting that the within action involves a dispute under the Federal Arbitration Act (see NYSCEF Doc Nos. 10-11). The matter was assigned Docket No.23-cv-04702 by the clerk of said court. Because removal was effected, this court no longer has the jurisdiction necessary to hear this case. Case law has held this to be so in the context of motions made within actions (e.g., Financial Freedom Acquisition, LLC v. Braunsberg, 201 AD3d 788 [2d Dept 2022]; Lipin v. Danske Bank, 130 AD3d 470 [1st Dept 2015]); see also Fire Ass’n of Phila. v. General Handkerchief Corp., 304 NY 382 [1952] (holding that where a party’s action was properly removed to federal court said party may not plead his cause of action as a counterclaim in an action subsequently brought against him in a state court). In the aforecited cases of Financial Freedom Acquisition, LLC v. Braunsberg and Lipin v. Danske Bank, the respective Appellate Divisions affirmed the denials of motions in actions which had been removed to federal court. “The Supreme Court also properly denied, as academic, the defendants’ motion pursuant to CPLR 6513 to dismiss the complaint insofar as asserted against them, and their separate motion to cancel the notice of pendency, because at that time, the action had been removed to federal court, leaving the court without jurisdiction to entertain those motions [citation omitted]” (Financial Freedom Acquisition, LLC, 201 AD3d at 792 [emphasis added]). “In these two related actions, the motion court properly denied plaintiff’s motions for default judgments on the basis of lack of jurisdiction. Once the underlying actions were removed to the United States District Court for the Southern District of New York by the filing of the notice of removal with the state court, the state court no longer had jurisdiction to rule on plaintiff’s motions (see 28 USC §1446; Clayton v. American Fedn. of Musicians, 243 AD2d 347 [1st Dept 1997])” (Lipin, 130 AD3d at 471 [emphasis added]). A special proceeding, such as one commenced pursuant to Article 75 with respect to an arbitration, “is a civil judicial proceeding in which a right can be established or an obligation enforced in summary fashion. Like an action, it ends in a judgment (CPLR 411), but the procedure is similar to that on a motion (CPLR 403, 409). Speed, economy and efficiency are the hallmarks of this procedure.” (Vincent C. Alexander, Prac Commentaries, McKinney’s Cons Laws of NY, CPLR C401:01.) Nonetheless, this Court finds that the within petition commencing the special proceeding cannot be denied due to lack of jurisdiction as would a motion in an action under these circumstances. To deny the petition would effectuate a resolution of the underlying dispute — whether there should be pre-arbitration discovery. Now that the special proceeding was removed to the federal court, it is the latter who must make such determination. This special proceeding must be treated as an action would under the circumstances (see Byrne v. Lathrop, Shea & Henwood, 60 Misc 350 [Sup Ct, Albany County 1908]), and no determination of the petition can be made other than to direct the Clerk of this Court to mark this matter as “Removed to United States District Court for the Eastern District of New York, Docket No. 23-cv-04702.” Dated: July 14, 2023
