Tuesday, June 14, 2016

Vacatur of an arbitration award pursuant to CPLR 7511.

Practice point:  In this contract action between the seller of a business and the broker, the seller moved to vacate the arbitration award and the broker cross-moved to confirm the award.  The Appellate Division determined that the seller failed to establish its entitlement to vacatur, pursuant to CPLR 7511(b)(1)(i), (ii), or (iii), on the ground of partiality, misconduct, or irrationality.

The arbitrator should have disclosed to the parties that he had been the arbitrator in a prior unrelated proceeding in which the broker was a party. Although the seller's attorney learned of the prior arbitration from the brokers' attorney a week after the hearing, the seller continued to actively participate in the arbitration process without raising any objections to the arbitrator. Under these circumstances, the seller waived any claims related to the alleged partiality of the arbitrator. In any event, the seller failed to establish that the prior arbitration had any effect upon the arbitrator's ability to be neutral in the instant matter. The seller also failed to demonstrate that the arbitrator committed misconduct, or that the arbitration award was irrational.

Student note:  CPLR 7511(b)(1)(i) and (ii) provide that an arbitration award shall be vacated upon the motion of a party if the court finds that the rights of that party were prejudiced by misconduct in procuring the award or partiality of an arbitrator appointed as a neutral.  In addition, an arbitration award may be vacated pursuant to CPLR 7511(b)(1)(iii) where an arbitrator exceeds his or her power, which includes only those narrow circumstances in which the award violates public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power. Outside of these narrowly circumscribed exceptions, courts lack authority to review arbitral decisions, even where an arbitrator has made an error of law or fact.

Case:  A & L Vil. Mkt., Inc. v. 344 Vil., Inc., NY Slip Op 04368 (2d Dep't June 8, 2016)

Here is the decision.

Tomorrow's issue:  An owner's liability for a fall in a lessee's bar.