KWMC Secures Major Arbitration Victory

KWMC Partners, Gary Smith and Patrick Shelley, with the assistance of associate Morgan Williams, were successful on a dispositive motion in an AAA arbitration, reducing the claimant’s seven-figure damages claims to nuisance. The Claimant, a well-known fine art gallery with exhibition spaces in New York City and Easthampton, NY, rented a storage unit from our client in Arizona. Upon doing so, it entered into the client’s standard rental agreement which contained an arbitration clause and $5,000 damages limit. Despite the rental agreement stating that the Claimant was not to store more than $5,000 in its unit, Claimant asserted that it stored unique and valuable art in the unit, and that the art was subsequently damaged. The gallery sued in New York County Supreme Court for breach of contract, negligence, recklessness, gross negligence, “willful breach,” and tortious breach of the implied covenant of good faith and fair dealing. First, we compelled the Court to stay the matter and force arbitration based on the agreement. Once in arbitration, we successfully argued—under controlling Arizona law—that the rental agreement governs, the contract was valid and enforceable, and the Claimant’s actions in storing the art in the unit despite the clear terms of the contract should not result in a different outcome than the parties bargained for in the agreement.