This motion, by the defendants, for an order dismissing the Complaint of plaintiff Farooq Chaudhry pursuant to CPLR §§3211(a)(1), (a)(2), (a)(5) and (a)(7) based on documentary evidence, because the Court lacks subject matter jurisdiction over this action, because Chaudhry was obligated to raise the dispute regarding his security violation by arbitration and for failure to state a claim for which relief may be granted; or for a stay of this action pursuant to CPLR §7503 pending the decision of any arbitration concerning Chaudhry's security violation, is determined as hereinafter set forth.

During April and June of 2006, several incidents involving the plaintiff occurred. These [*2]incidents lead to the issuance, by Vital Holding's board, of a security slip and a $6,000 fine against the plaintiff for violating Vital Security Rule #

3 (Inappropriate Conduct). Due to a by-law provision, the security violation led to the alleged constructive resignation by the plaintiff from the board of Vital Holding. This action was brought to recover damages from the defendant for the improper removal of the plaintiff from the board of directors of Vital Holding. The plaintiff further seeks reinstatement to the board of directors and annulment of a board-imposed security violation.

The defendants argue that there is a signed writing that binds Chaudhry to the arbitration provision in the current Proprietary License. The defendants submit that when Chaudhry purchased shares of VTI in October 1990, he signed a Proprietary License which bound him to future changes to the form of that license. Furthermore, the defendants assert that Chaudhry was also bound by the terms of the Stock Certificate. The defendants also re-emphasizes that the arbitration provision is applicable to Chaundhry's dispute because the $6,000 security violation is a "monetary fine" under to the Proprietary License.

[*3]DECISION

A motion pursuant to CPLR 3211(a)(1) to dismiss the complaint on the ground that the action is barred by documentary evidence may be granted only where the documentary evidence utterly refutes the plaintiff's factual allegations, thereby conclusively establishing a defense as a matter of law. (Fast Track Funding Corp. v. Perrone, 19 AD3d 362, 796 NYS2d 164, 2nd Dept., 2005).Although VTI's current Proprietary License was not executed by either party, the Court finds that the Proprietary License which Chaudhry signed in 1990 binds him to the provisions of the current License. The current Proprietary License states that the "sole and exclusive" method for resolving claims or controversies arising out of or related to voucher payments and monetary fines is by first appealing the claim within in sixty days, and if the aggrieved Licensee is not satisfied by the decision of the committee, by submitting the same to binding arbitration. The security violation is governed by the arbitration provision because the violation' s $6000 fine is within the meaning of "monetary fines" in the Proprietary License. Therefore, pursuant to the License, because Chaudhry did not make a timely appeal regarding the Security Committee's determination, he is barred from arbitration. Additionally, because the License states that an appeal and arbitration are the sole and exclusive methods of resolving Chaudhry's claim, Chaudhry is also barred from seeking judicial relief regarding his 2006 security violation.

The defendants argue that pursuant to Vital Holding's by-laws, Chaudhry automatically resigned as a member of the board of directors when he was sanctioned by the Security Committee. Conversely, the plaintiff argues that Article III, Section 5 of Vital Holding's by-laws states that the proper method for removing a member of the board of directors is to hold an affirmative vote of the holders of a majority of all the shares of stock outstanding during a special meeting. Given the defendants' heavy reliance on Vital Holding's by-laws, it cannot be overlooked that Chaudhry was not removed from the board of directors pursuant to Article III, Section 5. Therefore, although Chaudhry has waived his right to seek arbitration or judicial relief regarding his security violation, the documentary evidence does not conclusively refute the allegation that he was improperly removed from the board of directors. Furthermore, the binding arbitration provision does not establish that this cause of action may not be maintained, as the provision only relates to Chaudhry's security violation and not his removal from the board of directors. (See, CPLR § 3211 [a][5]). Similarly, the arbitration provision does establish that this Court does not have subject matter jurisdiction over this claim. (See, CPLR § 3211 [a][2]).

In reviewing a motion pursuant to CPLR § 3211(a)(7) to dismiss the complaint for failure to state a cause of action, the facts as alleged in the complaint must be accepted as true, the plaintiff is accorded the benefit of every possible favorable inference, and the court's function is to determine only whether the facts as alleged fit within an cognizable legal theory. (Sokoloff [*4]v. Harriman Estates Dev. Corp., 96 N .Y.2d 409)."[T]he criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one. (Guggenheimer v. Ginzburg, 43 NY2d 268, 401 NYS2d 182).Here, given the plaintiff's allegation that he was improperly removed from Vital Holding' board of directors, he has indeed stated a cause of action for which relief may be granted.

The defendants' participation in this action, to this point, has not resulted in the waiver of arbitration or the ability to seek a stay of this action pursuant to CPLR § 7503(a). Here, the defendants' actions are consistent with an assertion to the right to arbitrate. Moreover, the defendants ' have not engaged in any conduct which has been deemed by this Court to establish a waiver of arbitration. (Nachman v. Jenelo Corp., 25 AD3d 593, 807 NYS2d 408, 2nd Dept., 2006; Bucci v. McDermott, 156 AD2d 328, 548 NYS2d 277, 2nd Dept., 1989). Nonetheless, because the Court finds that Chaudhry did not comply with the arbitration agreement in the Proprietary License, he is barred from pursuing such relief regarding his 2006 security violation (See CPLR 7503[a]).

Therefore, for the foregoing reasons, the defendants' motions for dismissal of the complaint and in the alterative, stay of this action, is denied.

A Preliminary Conference has been scheduled for September 24, 2007 at 9:30 a.m. in Chambers of the undersigned. Please be advised that counsel appearing for the Preliminary Conference shall be fully versed in the factual background and their client's schedule for the purpose of setting firm deposition dates.

DatedJ.S.C.