Defendants Tasawar Hussain ("Hussain") and Bandhan Catering Hall, Inc. ("Bandhan") move by Order to Show Cause for an order enjoining plaintiffs from communicating with or annoying or threatening defendant or his family, to stay the proceedings and compel arbitration pursuant to CPLR 7503[a]; and to file and serve an amended answer adding a counterclaim for breach of contract against the plaintiffs, Nusrat Shabbir ("Shabbir") and Talat Rauf ("Rauf") pursuant to CPLR 3025 [b]. For the reasons set forth below defendants' motion to compel arbitration is denied and defendants' motion to amend the Verified Answer is granted.

Prior to December 21, 2004, Hussain was the sole shareholder, officer and director of Bandhan, a catering hall located in Brooklyn. On December 21, 2004 Shabbir entered into a shareholder agreement with Hussain in which Shabbir agreed to purchase twenty percent of all outstanding shares of Bandhan for $150,000. On April 21, 2005 Rauf entered into a shareholder agreement with Hussain in which Rauf agreed to purchase half of Bandhan's remaining shares (40% of all outstanding shares) for $160,000. Each shareholder agreement contained the following arbitration clause: "Any dispute between the parties under the Agreement will be settled by voluntary mediation. If mediation fails to resolve such dispute, the parties shall settle the dispute by binding arbitration using an arbitrator of the American Arbitration Association."

At the time the shareholder agreements were signed Bandhan owed money to its landlord. Hussain paid various sums to the landlord using the plaintiffs' investment funds. However, Hussain and Bandhan were evicted and Bandhan ceased all operations. Despite the fact that the shareholder agreements included a provision that all disputes were to be handled by mediation or arbitration, on February 8, 2006 plaintiffs commenced this action against Tasawar Hussain and Bandhan Catering Hall, Inc., for breach of contract, fraud and unjust enrichment arising out of the shareholder agreement. Defendants, without referring to the arbitration clause, or moving to compel arbitration, filed an answer on October 3, 2006 containing twelve general denials and five affirmative defenses. On July 12, 2006 plaintiffs moved by Order to Show to Cause to restrain and enjoin defendant Hussain's alienation of his residence. Defendant Hussain opposed the motion and the motion was denied. Between February and July 2007 the parties met for two preliminary conferences and agreed on dates for service of demands for a bill of particulars, document production, interrogatories, and dates for depositions as set forth in the preliminary conference order. The discovery deadlines were not met by either party. Subsequently, in July of 2007 Hussain obtained new counsel. On January 22, 2008, approximately twenty-two months after plaintiffs commenced this action, defendant moved to compel arbitration, and in the alternative, to amend his answer to add a counterclaim for breach of contract.DISCUSSION

It is well settled that arbitration has emerged as a preferred method for settlement of many controversies. New York codified its strong public policy favoring arbitration with the enactment of CPLR 7501^[FN1] (CPLR 7501, 13-75 New York Civil Practice: CPLR P 7501.00). Arbitration clauses are valid and enforceable on such grounds that exist at law or in equity for any contract. To this end, arbitration agreements, like contract rights, [*3]can be modified, waived or abandoned. (See Sherril v Grayco Builders, Inc., 64 NY2d 261, 272 [1985].) It is generally assumed that the party who commences the action has waived its right to arbitrate. The same assumption does not apply to the defendant (De Sapio v Kohlmeyer, 35 NY2d 402,405 [1974]). However, the right of the defendant to compel arbitration is not absolute and can be forfeited prior to trial (Matter of Zimmerman, 236 NY 15 [1923]). "[W]here the defendant's participation in the lawsuit manifests an affirmative acceptance of the judicial forum, with whatever advantages it may offer in the particular case, his actions are then inconsistent with a later claim that only the arbitral forum is satisfactory" (De Sapio at 405).

Moreover, the purpose of arbitration is to expedite and facilitate the settlement of disputes and overcome the delay of litigation; "[i]t was not intended that such law be used as a means of furthering and extending that delay" (Matter of Zimmerman at 21). This Court finds the defendants have actively participated in the litigation. Thus, defendants' unreasonable delay in serving a proper demand to compel arbitration, coupled with the defendants' manifestation of acceptance of a judicial forum, constitutes a waiver of the right to now seek arbitration (Sherrill v Gray Co. Builders, Inc., 64 NY2d at 72-74; Gabor v Spicyn, 99 AD2d 1000 [1st Dept 1984]; De Sapio at 405; Matter of Zimmerman at 19). Defendants' neglect to serve a proper demand until approximately twenty-two months after plaintiffs commenced this action constitutes an "unreasonable delay" (Gabor at 1001, noting that defendants' service of a demand for arbitration eight months after the action commenced was an "unreasonable delay" and constituted a waiver of defendant's right to arbitrate). Plaintiffs have spent time and resources actively pursuing this claim in the judicial forum and should not be prejudiced by defendants' failure to compel arbitration in a timely manner. Defendants have actively participated in this litigation by submitting an answer containing five affirmative defenses, procuring an order for discovery, and participating in two pretrial conferences (see De Sapio v Kohlmeyer , 35 NY2d 402 [1974], noting that procuring an order for the taking of a deposition is a factor in a defendant's waiver of arbitration; St. Paul Travelers Companies, Inc. v Shore Drugs, Inc., 36 AD3d 891, 892 [2d Dept 2007], noting that a preliminary conference is inconsistent with defendant's later contention of right to arbitration; Two Central Tower Food, Inc. v Pelligrino, 212 AD2d 441, 442 [1st Dept 1995], finding that the assertion of affirmative defenses may be perceived as an active participation and acceptance of litigation). Defendants' actions reflect a sufficiently affirmative use of the judicial forum to constitute a waiver of the contractual arbitration provision. Accordingly, defendants' motion to compel arbitration is denied.

Alternatively, defendants request leave to amend their answer and add a counterclaim for breach for contract against the plaintiffs. CPLR 3025 [b] provides:

A party may amend his pleading, or supplement it by setting forth additional or subsequent transactions or occurrences, at any time by leave of court or by stipulation of all parties. Leave shall be freely given upon such terms as may be just including the granting of costs and continuances. [*4]

Absent prejudice or surprise, leave to serve amended pleadings should be freely granted where such amendments are not totally devoid of merit (Krupp v Aetna Life & Casualty Co., 104 AD2d 857 [2d Dept 1984]). Hussain asserts that monies to be paid by plaintiffs as investment in Bandhan pursuant to the shareholder agreements were not paid in full and therefore plaintiffs are in breach of contract. Defendants' counterclaim arises out of the shareholder agreements at issue in the litigation and, as such, is not devoid of merit. Defendants' motion to amend the Verified Answer and add a counterclaim for breach of contract against plaintiffs is granted.

Defendants' motion to stay the proceedings and compel arbitration pursuant to CPLR 7503 [a] is denied. Defendants' motion to serve an amended answer adding a counterclaim for breach of contract against the plaintiffs is granted pursuant to CPLR 3025 [b] and the Answer is deemed served. Plaintiffs shall reply to the counterclaim within 30 days of this Order. Defendant's request to enjoin plaintiff's from annoying, communicating or threatening him is denied. The allegedly threatening behavior occurred in the summer and early fall of 2007, and is speculative in nature. Police assistance remains available to defendant should such intervention become necessary.The case will be calendared for conference on July 2, 2008.

This constitutes the decision, order, and judgment of the court.

E N T E R,

J. S. C.