On May 26, 2015, a New York appellate court sided with Wear First Sportswear, Inc. in a dispute with a third-party factoring agent that claimed Wear First owed one of its clients money under a factoring agreement.
Wear First sought dismissal of the case, brought by Plaintiff DS-Concept Trade Invest LLC, on the basis that all of the agreements on which DS-Concept was relying contained broad arbitration clauses requiring the matter to be arbitrated in China.
In response, DS-Concept contended that a 1984 decision of the New York appellate court created a special rule that factoring agents do not have to comply with arbitration clauses contained in contracts that have been assigned to the factoring agent.
The New York Supreme Court, First Department Appellate Division, confirmed the long-standing rule in New York that when a party is assigned a contract, the assignee merely steps into the shoes of the assignor (and gains no greater or different rights). In the case of DS-Concept v. Wear First, the appellate court reversed the lower court, holding that an assignee (DS-Concept) must abide by an arbitration agreement contained in a contract that was allegedly assigned. In so holding, the appellate court rejected its decision from three decades earlier, Rosenthal v. Kunstadt, 106 A.D.2d 277 (1st Dep't 1984)) which previously had been construed as creating a different rule for factoring agents.