Sunterra Corporation, et al v. Ernst & Young, LLP, Case No.: 24-C-02-002963, 2003 MDBT 1 (Circuit Court for Baltimore City)(January 30, 2003)(per Albert J. Matricciani, Jr.)

Plaintiff Sunterra Corporation (ASunterra@) sued Defendant Ernst & Young (AErnst & Young@) for fraud, fraudulent concealment, negligent misrepresentation, and negligence/professional malpractice. Sunterra filed an amended complaint alleging that an arbitration agreement was induced by fraud. Ernst & Young moved to dismiss or for a stay pending arbitration, demanding that the mediation/arbitration provisions deprived the Court of jurisdiction to determine the arbitrability of Sunterra=s claims. Sunterra filed a motion for a stay of arbitration, contending that the mediation/arbitration agreements were invalid and that the Court, and not the arbitrators, should determine whether there are claims subject to arbitration.

Held: The Court would hold a hearing to decide whether the agreement to arbitrate was procured by fraud.

Synposis: Arbitration agreements are severable from the other terms of a contract. A court has jurisdiction to determine whether a valid and enforceable agreement to arbitrate exists. Claims of fraud in the inducement must go directly to the arbitration provisions themselves and not merely to the underlying contract. Sunterra=s allegation raised a substantial and bona fide dispute as to the existence of an agreement to arbitrate: the allegations asserted a substantial relationship between the alleged fraud and the agreement to arbitrate.

Counsel:	Arnold M. Weiner, Esq.

Paul F. Strain, Esq.

Irwin B. Nathan, Esq.

Related case: 2003 MDBT 2.