The Attorney General may obtain victim-specific relief notwithstanding an arbitration clause in the victim's contract, rules the NY Court of Appeals relying on US Supreme Court precedent.

Attorney General Andrew Cuomo sued a viatical settlement provider in the case of Cuomo v. Coventry First LLC. Defendant Coventry claimed that:

• Cuomo was the "alter ego" of the policy holders, and
• since there was a mandatory arbitration clause in the contract between the policy holders and Coventry,
• any claims must be arbitrated.

Coventry did not dispute the right of the AG to seek injunctive relief, but disputed the right of the AG to seek victim-specific relief where a valid ADR clause existed.

New York's highest court first  reiterated the rule that one not a party to a contract is not bound by its terms (with rare exceptions such as where the non-signatory is an agent of the bound party). The Court held that:

the Attorney General should not be limited, in his duty to protect the public interest, by an arbitration agreement he did not join. Such an arrangement between private parties cannot alter the Attorney General's statutory role or the remedies that he is empowered to seek. We therefore hold that the arbitration agreement between defendants and their alleged victims does not bar the Attorney General from pursuing victim-specific judicial relief in his enforcement action.

The Court relied on a 2002 Supreme Court case, EEOC v. Waffle House and stated the 2 principles of Waffle House to be:

1. Pro-arbitration policy goals do not require a government agency to give up its statutory enforcement authority in favor of arbitration if it has not consented to do so, and
2. A government agency may seek relief specific to a victim who agreed to arbitrate claims, because, as here, that relief is best understood as part of the vindication of a public interest.

Coventry First's reliance on Waffle House suggests applicability throughout the United States, and is a reminder that a state franchise regulator has broad powers to protect individual franchisees in the course of discharging the regulator's duty to vindicate the public interest.