Court Won’t Enforce Trust Provision Calling for Appointment of Three Orthodox Jews to Arbitrate a Dispute

From In the Matter of Ismailoff, 2007 WL 7670254 (N.Y. Sur. Ct. Feb. 1) (payment required for access), which was just posted on Westlaw in the last day or two:

This is a proceeding commenced by the grantor of an inter vivos trust for a determination that the trust is the product of undue influence.

Esther Ismailoff (grantor) executed an agreement with her four children (trustees) creating an irrevocable inter vivos trust….

Article XXIV of the agreement provides:

In the event that any dispute or question arises with respect to this Declaration of Trust, such dispute or question shall be submitted to arbitration before a panel consisting of three persons of the Orthodox Jewish faith, which will enforce the provisions of this Declaration of Trust and give any party the rights he is entitled to under New York law. This Declaration of Trust shall be construed in order to effectuate the intent of the parties and the parties admit that they have performed all the necessary requirements for this Declaration to be valid under Jewish law. The panel will have the authority to file their decision with the Court under the New York Arbitration Law. The parties have made a Kinyan Siddur with a garment that may be used for that purpose in order to effectuate this Declaration of Trust.

… The grantor argues that the parties intended to empanel a “Beth Din” (rabbinical court). However, the agreement specifically provides for enforcement of the rights of the parties under New York law. In addition, in the absence of any reference in the agreement to a “Beth Din,” the First Amendment to the United States Constitution prohibits the appointment of a religious tribunal ( Sieger v Sieger, 297 AD2d 33 [2d Dept 2002]).

The agreement provides for the selection of “three persons of the Orthodox Jewish faith.” The most common method of selecting a tripartite panel is for each contending party to select one arbitrator and for the two arbitrators to select a third. Written submissions of the parties suggest that the criteria applied to determine whether a proposed arbitrator is “orthodox” would be in dispute. That issue could never be resolved by the court.

The Establishment Clause of the First Amendment prohibits a civil court from resolving issues concerning religious doctrine and practice (Presbyterian Church v Hull Church, 393 U.S. 440 [1969]; Kelly v Garuda, _____ AD3d _____ [2d Dept 2007]; 2007 WL [60334]; Sieger v Sieger, 297 AD2d 33 [2d Dept 2002])…. Although the provision requiring orthodox arbitrators is unenforceable, the parties are free to select arbitrators, who in their own judgment, meet the religious requirement.

The court then provided for appointment of arbitrators in the normal way that arbitrators are appointed (each side selects one arbitrator and the two arbitrators select a third). This strikes me as quite right, because secular courts are not allowed to examine would-be arbitrators’ supposed religious bona fides, and decide who really is Orthodox enough. On the other hand, if the trust had called for the appointment of arbitrators by some named organization, such as the Beth Din of America, the court likely would have enforced that provision, even if the organization only appointed orthodox Jews — the court then wouldn’t have had to decide who’s Orthodox enough, but could have enforced the terms of the trust without any religious decisions on the court’s own part.

For an earlier case in which a similar issue might have arisen, but didn’t have to be decided, see In re Aramco Servs., where the contract provided that it was to be interpreted under Saudi law, and arbitrated under Saudi arbitration rules and regulations that apparently call for the arbitrators to be Muslims or Saudi citizens.