Many contracting parties, when drafting their contracts, give
some consideration to whether their disputes should be resolved by
litigation or arbitration. If they opt for arbitration, many
grapple with which entity should administer the process (e.g., AAA
or JAMS). But few parties give any thought to whether federal law
should govern (Federal Arbitration Act, 9 USC §1) or whether
state law should apply (Article 75 of the NY Civil Practice Law and
Rules). A recent case illustrates why it matters.
Plaintiff Vitiello ("Vitiello") entered into a
contract for the construction and sale of a new home in Saratoga
Springs, New York. The defendant builder, LNAA Construction, LLC
("LNAA"), incorporated a limited warranty into the
contract of sale. The warranty was to be provided by Home Buyers
Warranty Corporation ("HBWC"). The warranty contained a
clause stating that "any and all claims, disputes and
controversies" would be settled by "binding
arbitration." It went on to say
