Opinion
15-0739
04-18-2016
Thomas Larison and Jodi Larison, Petitioners, For an Order and Judgment pursuant to CPLR Article 75 Confirming an Arbitration Award v. Victor Magnotti, Respondent.
Greg D. Lubow, Esq. Counsel for Petitioners, movant 6025 Main Street, P.O. Box 282 Tannersville, New York 12485 Victor Magnotti Respondent, pro se Simon & Schneider, PLLC Prior counsel for Respondent P.O. Box 908 6193 Main Street Tannersville, New York 12485
Greg D. Lubow, Esq. Counsel for Petitioners, movant 6025 Main Street, P.O. Box 282 Tannersville, New York 12485 Victor Magnotti Respondent, pro se Simon & Schneider, PLLC Prior counsel for Respondent P.O. Box 908 6193 Main Street Tannersville, New York 12485 Lisa M. Fisher, J.
Petitioners timely move to confirm the written arbitration Award dated August 7, 2015, which awarded them $74,356.09 plus interest. Petitioners attach two exhibits (the contract and the arbitration Award) and a sworn statement from Petitioner Jodi Larison. Respondent, pro se, opposes such application with an unsworn opposition. Respondent's prior counsel, Simon & Schneider, PLLC, also submit two sets of opposition to the application. Even though Respondent and his prior counsel cite to numerous exhibits and excerpts of the tape recorded hearing, neither attach any exhibits nor provide the transcript of such tape recording. During the pendency of this motion, the Court received several e-mail volleys and requests between Petitioners and Respondent during the submission of this motion, including multiple denials for permission to Sur-reply. For the reasons that follow, the arbitration award is confirmed in its entirety.
The Court cannot accept the unsworn opposition for a recitation of the facts, and ignores it for such purpose. Since the Respondent is pro se, the Court still considers the opposition for its legal arguments.
Petitioners are homeowners who contracted with Respondent, a general contractor, for the renovation of Petitioners' home. The contract was signed and executed between the parties on May 29, 2012. Paragraph 8 of the contract provided that Respondent shall complete "all work on or before October 31, 2012, time being of the essence of this contract." Paragraph 22 of the contract provided "[a]ny controversy or claim arising out of or relating to this Contract, or breach thereof, shall be settled by arbitration . . . ." Three schedules were attached to the contract noting the services to be performed and the costs.
At some point thereafter, there was a breakdown between Petitioners and Respondent. Petitioner Jodi Larison, the only individual who submitted a sworn statement with personal knowledge of the facts leading up to the arbitration, claims that Respondent "walked off the construction job claiming non-payment" on or about December 20, 2012. The Award provides that there was a disagreement between the parties over the work that was done, Petitioners' lack of timely direction, and Respondent's inadequate explanations of the work and the invoices.
On February 1, 2013, Respondent filed a demand for arbitration arguing Petitioners breached the contract. Respondent sought $51,798.77 allegedly representing the balance due on the contract. On February 27, 2013, Petitioners responded with a counterclaim arguing Respondent breached the contract by failing to adequately staff the job and progress the work, by completing the work in a defective and substandard fashion, and by failing to properly track and order appropriate quantities of materials. Petitioners argued nothing was owed to Respondent, but they were entitled to $174,886.28 for costs to complete the agreed upon work, costs to correct allegedly defective work, and additional costs for alleged waste or misrepresented amounts.
On August 7, 2015, after 14 days of hearings and two site inspections, "hundreds of pages of exhibits constituting expert reports, photographs, invoices, and extensive e-mail communications involving the parties and others involved in the project[,]" arbitrator James Hughes, Esq. awarded Petitioners $70,000.00 plus interest at 9% per annum from January 1, 2013 for their breach of contract claim, and $4,356.09 plus interest at 9% per annum from March 17, 2015 as what Respondent owes to Petitioners in reimbursement for the administrative fees, compensation, and expenses of the arbitrator. The arbitrator also required each party to bear their own legal fees.
Arbitration is governed by article 75 of the CPLR. "In determining any matter arising under this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute" (CPLR § 7501). An arbitration award must be confirmed "upon application of a party made within one year after its delivery to him, unless the award is vacated or modified upon a ground specified in section 7511" (CPLR § 7510). An arbitration award must be vacated if a party's rights were impaired by an arbitrator who "exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made" (CPLR § 7511 [b] [1] [iii]).
"It is well-settled that an arbitrator exceed[s] his power' under the meaning of the statute where his award [1] violates strong public policy, [2] is irrational or [3] clearly exceeds a specifically enumerated limitation on the arbitrator's power'" (Kowaleski, 16 NY3d at 85, quoting Matter of New York City Tr. Auth. v Transport Workers' Union of Am., Local 100, AFL- CIO, 6 NY3d332, 336 [2005]). Even where an arbitrator's "interpretation of the agreement misconstrues or disregards its plain meaning or misapplies substantive rules of law," the award will not be vacated unless one of the three exceptions are met. ( Matter of Silverman [Benmor Coats], 61 NY2d 299, 308 [1984] [citations omitted].)
"Outside these narrowly circumscribed exceptions, courts lack authority to review arbitral decisions, even where an arbitrator has made an error of law or fact'" (Kowaleski, 16 NY3d at 85, quoting Matter of Falzone [New York Cent. Mut. Fire Ins. Co.], 15 NY3d 530 [2010] [applying "this State's well-established rule that an arbitrator's rulings, unlike a trial court's, are largely unreviewable."]). The well-established precedent strictly and narrowly limits a court's review, and the statute makes leaves the court powerless to determine the merits of the matter even if the arbitrator is wrong and the law and the facts. (See Rochester City School Dist. v Rochester Teachers Ass'n, 41 NY2d 578, 582 [1977] ["Those who have chosen arbitration as their forum should recognize that arbitration procedures and awards often differ from what may be expected in courts of law."]; CPLR § 7501; see also Silverman, 61 NY2d at 308.) This is because an arbitrator "may do justice as he sees it, applying his own sense of law and equity to the facts as he finds them to be and making an award reflecting the spirit rather than the letter of the agreement, even though the award exceeds the remedy requested by the parties" (Silverman, 61 NY2d at 308 [citations omitted]).
Here, it is claimed the arbitrator was biased and "pre-judged" the matter as the proceedings were ongoing. The burden to proving an arbitrator's ruling "constituted misconduct rests with [the] respondent and must be met by clear and convincing proof" (Matter of S. Wiener Furniture Co. [Kingston City Schools Consol.], 90 AD2d 875, 876 [3d Dept 1982], citing Matter of Reale [Healey NY Corp.], 54 AD2d 1039 [3d Dept 1976]).
First, the Court notes that Respondent did not move to vacate the Award which is the proper vehicle to do so for an alleged bias. (See Matter of Wagner [American Arbitration Assn.], 58 AD2d 912 [3d Dept 1977].)
Second, no evidence has been submitted to establish a bias or prejudice, hardly enough to meet the "clear and convincing" burden, even though the hearings were "tape recorded" and previously "reviewed" by two of Respondent's prior attorneys. It is also argued that the arbitrator precluded the testimony of Respondent's expert, however there is no proof from the tape recording this occurred. Nor is there proof—or even a contention—that the submitted expert's report was not considered. Notwithstanding, "[a]n arbitrator's refusal to receive evidence is not a sufficient basis to vacate an award; rather it must be shown that the excluded evidence was material and relevant to the issues present in the proceeding" (Matter of Thompson [S.L.T. Ready-Mix, Div. of Torrington Indus.], 245 AD2d 911, 913 [3d Dept 1997]).
Moreover, as a practical point, the arbitrator was alleged to have "prejudged" the matter on July 11, 2014, which was the last full day of evidentiary hearing and one of the last hearing days out of the 14 held. At this point in the process, particularly given the voluminous submissions and length of testimony, an arbitrator does begin to form an opinion as to the merits of the matter. Whether what the arbitrator said was proper, the Court will not know as a transcript has not been provided and it will not accept hearsay to overcome Respondent's clear and convincing burden of proof.
Third, even assuming that there was a bias—which there was not—Respondent nor his prior attorneys, which fully represented him at the hearings, acted on the alleged bias and are found to have waived such claim. (See Matter of Canajoharie Central School Dist. [Canajoharie United School Empls. ], 108 AD2d 1087, [3d Dept 1985], quoting Matter of J. P. Stevens & Co. [Rytex Corp. ], 34 NY2d 123, 125 [1974] ["This does not mean that a party to an arbitration may sit idly back and rely exclusively upon the arbitrator's disclosure. If a party goes forward with arbitration, having actual knowledge of the arbitrator's bias, or of facts that reasonably should have prompted further, limited inquiry, it may not later claim bias based upon the failure to disclose such facts."].) This applies not only prior to the arbitration beginning, but also if an alleged bias arises during the arbitration. ( See Matter of Namdar [Mirzoeff], 161 AD2d 348 [1st Dept 1990] ["A party who proceeds with an arbitration with actual knowledge of bias on the part of an arbitrator of facts that should have prompted further inquiry, waived his objection to the arbitration . . . . the alleged prejudice of the arbitrators was known to [the respondent] before completion of the arbitration proceeding. [The respondent], however, did not raise the alleged bias until well after the arbitration award was rendered."], citing Matter of J. P. Stevens & Co., 34 NY2d at 125.)
It has not been explicitly argued that the Award was irrational, but the Court considers this implicit argument and, upon the Court's examination, the arbitrator's Award cannot be said to be irrational. "To vacate an award on the basis of irrationality, a party must show that there was no proof whatever to justify the award'" (Matter of Eastman Assoc., Inc. [Juan Ortoo Holdings, Ltd.], 90 AD3d 1283, 1285 [3d Dept 2011] quoting Matter of Local 342 v Town of Huntington, 52 AD3d 720, 721 [2d Dept 2008]) or that the award "gave a completely irrational construction to the provisions in dispute and, in effect, made a new contract for the parties" (National Cash Register Co. v Wilson, 8 NY2d 377, 382 [1960]). "Irrational" is defined as "[n]ot guided by reason or by a fair consideration of the facts" (Black's Law Dictionary 10th ed. 2014). Only if an arbitrator's award is completely irrational, "it may be said that he exceeded his power." (Rochester City School Dist., 41 NY2d at 582). Here, given the herculean effort by the arbitrator to hold 14 days of hearings, two site visits, and the voluminous exhibits/submissions, and particularly given the undisputed fact that the work was not complete on the "time of the essence" deadline of October 31, 2012, the Court cannot say that the arbitrator's award was irrational.
It has not been argued that the Award is violative of a strong public policy or that the arbitrator has clearly exceeded a specifically enumerated limitation on his power, nor does the Court's review reveal either is applicable.
To the extent not specifically addressed above, the parties' remaining contentions have been examined and found to be lacking in merit or rendered academic.
Thereby, it is hereby
ORDERED that Petitioners' motion is confirm the arbitration award is GRANTED, in its entirety, with costs and disbursements of $625.00, and it is further ORDERED that Petitioners shall submit to chambers within 30 days of the signing of this Decision and Order a proposed Order Confirming Arbitration Award and Judgment with a filed copy of this Decision and Order as an exhibit, for the Court's review and signature.
This constitutes the Decision and Order of the Court. Please note that a copy of this Decision and Order along with the original motion papers are being filed by Chambers with the County Clerk. The original Decision and Order is being returned to the prevailing party, to comply with CPLR R. 2220. Counsel is not relieved from the applicable provisions of this Rule with regard to filing, entry and Notice of Entry.
IT IS SO ORDERED. DATED: April 18, 2016 Catskill, New York E N T E R : _______________________________ HON. LISA M. FISHER SUPREME COURT JUSTICE Papers Considered: Notice of petition to confirm and for judgment, of Greg D. Lubow, Esq., dated August 14, 2015; petition to confirm arbitration award and issue judgment, of Greg D. Lubow, Esq., with annexed exhibits, dated August 12, 2015; affidavit to confirm arbitration award, of Jodi Larison, dated August 12, 2015; costs and disbursements; Unsworn correspondence from Victor Magnotti, with annexed exhibit, dated December 21, 2015 (*considered only for legal arguments, not for factual evidence as it is unsworn); Affidavit of Sarah M. Schneider, Esq., dated September 30, 2015; affidavit of William M. Simon, Esq., dated September 30, 2015; and Reply to Magnotti's objection, of Greg D. Lubow, Esq., dated February 5, 2016.