Opinion
100631/05
Decided April 4, 2005.
Petitioner's application to confirm the arbitrator's award is granted. Respondents' cross-motion to vacate the arbitration award is denied.
Petitioner was a structural steel subcontractor on a project to construct a building at a local community college. Respondent issued a Labor and Material Payment Bond to the contractor of the project, guaranteeing payment for all labor and materials used in the performance of the general contract. In January 2002 the general contractor was terminated and respondent, in its capacity as surety on the performance bond was called upon to complete the project. On or about January 18, 2002, petitioner and respondent entered into a Ratification Agreement wherein petitioner agreed to complete its performance of the contract, ratifying the original subcontract between petitioner and the general contractor. A dispute arose between the petitioner and respondent over the work performed by petitioner, as a result of which respondent terminated petitioner's services and hired someone else to complete the job. Petitioner's entitlement to payments for the work performed on the project became due by June 2002.
On or about January 29, 2003, respondent served a demand for arbitration on petitioner pursuant to Article XXXII of the Subcontract Agreement seeking $500,000 representing the cost respondent claims it incurred to complete and correct petitioner's work. On or about December 31, 2003, petitioner served a counterclaim on respondent seeking to recover the amount due petitioner under the Ratification Agreement. Both parties requested interest, attorneys fees and costs of the arbitration. The Agreement by which respondent sought arbitration incorporates the Construction Industry Rules of the American Arbitration Association (AAA), which includes, inter alia, a provision which permits an arbitrator to award attorneys fees only when both parties have made such a request.
On or about December 8, 2004, the arbitrator ruled against the respondent and in favor of the petitioner, awarding petitioner $185,842.00 due under the agreement, plus interest from May 17, 2002 in the amount of $41,814.00 plus attorneys fees in the amount of $70,000.00. The arbitrator further held that respondent was required to pay the costs of arbitration as follows: (1) $11,750 in administrative fees of the American Arbitration Association, (2) $7,678.00 for compensation for the Arbitrator, and (3) $7,428.00 reimbursement to petitioner representing the amounts petitioner had advanced to the AAA. On December 10, 2004, a copy of the arbitrator's award was delivered to the parties.
On or about January 11, 2005, petitioner commenced the instant proceeding to confirm the arbitration award. Respondent cross-moves to vacate the award.
Under CPLR § 7510, a court is required to confirm an arbitration award upon application of a party within one year after its delivery to the party seeking its confirmation, unless the award is vacated or modified upon a ground specified in section 7511. CPLR § 7511(1), sets forth the grounds for the court to vacate an arbitrator's award as follows: (I) corruption, fraud or misconduct in procuring the award; or (ii) partiality of an arbitrator appointed as a neutral . . .,
(iii) an arbitrator, or agency or person making the award exceeded his power . . .; or (iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.
Under New York law, an arbitrator's award will be vacated only if it violates strong public policy, is irrational or clearly exceeds specific enumerated limitations on the arbitrator's authority. ( In the Matter of the United Federation of Teachers, 1 NY3d 72, 79; Joshua L. Bailey Co., Inc v. Modeani of New York, Inc., NYLJ December 21, 2004 at 18 col. [Sup. Ct. NY County]). A court may not vacate an arbitrator's award due to mistake of law and or fact by the arbitrator ( In the Matter of the United Federation of Teachers, supra. at 83), unless the mistake of law rendered the award totally irrational or in violation of a strong public policy ( In the Matter of the Arbitration Between the City of Buffalo and the Buffalo Police Benevolent Association, 786 NYS2d 789 [4th Dept 2004]). Such is not the case here.
Respondent moves to vacate the instant award on the basis that the arbitrator exceeded his authority by ruling on petitioner's counterclaims, which were time barred pursuant to State Finance Law § 137 (4)(b). In reality, respondent's complaint is that the arbitrator made an error on the law and facts in the case. State Finance Law § 137 (4)(b) requires that any action on a payment bond shall be commenced after the expiration of one year from the date on which final payment under the claimant's subcontract became due. The record however shows that the issue of payments due under the subcontract and the demand for arbitration on that claim arises under and was made pursuant to Article XXXII of the subcontract which was incorporated into the Ratification Agreement between the parties, not State Finance Law, and was not time barred. Only petitioner's claim for attorneys fees was made pursuant to State Finance Law. State Finance Law § 137 (4) (c) provides for an award by the court of reasonable attorneys fees when it appears that either the original claim or the defense interposed to such a claim is without substantial basis in fact or law. Pursuant to State Finance Law § 137 (b), a claim for attorneys fees must be brought along with the underlying claims, as stated above, within one year after the expiration on the date on which final payment under the claimant's subcontract became due. There is no dispute that the cross-claim for attorneys fees was interposed in excess of one year after final payment on the subcontract was due petitioner. Under these circumstances, respondent could have moved to stay the arbitration pursuant to CPLR § 7503(b) to allow the court to rule on whether the claim for attorneys fees was time barred pursuant to CPLR § 7502 (b). Instead, respondent submitted to the arbitration and raised this objection with the arbitrator who, in the exercise of his sole discretion, did not apply the limitation (CPLR § 7502 [b]). While the court is empowered to resolve the question of whether a statute of limitation bars a particular claim submitted to arbitration, such intervention by the court must be sought prior to the arbitration taking place ( County of Rockland v. Primiano Construction Co., 51 NY2d 1, 6-7; Traveler's Indemnification Co. V. Levy, 195 AD2d 35, 40 [1st Dept 1993]). By continuing with the arbitration under these circumstances, the respondent waived the right to have the court consider statute of limitations defense. As provided by CPLR § 7503 (c), unless the party served with a demand for arbitration (in this case the notice of cross-claims), applies to stay the arbitration within twenty days after service, said party shall be precluded from asserting in court the bar of a limitation of time. ( In the Matter of Arbitration between Rosalyn Silverman v. Cooper, 61 NY2d 299). Respondent did not move to stay the instant arbitration.
The case cited by the respondent in support of its application to vacate the arbitrator's award, Windsor Metal Fabrication Ltd. V. General Accident Co. of America, 94 NY2d 124, is distinguishable. Unlike in the instant case, the insurer in Windsor was not a party to the underlying arbitration, although the insurer appeared at the arbitration. The first time a claim was made against the insurer in the Windsor case was in the action brought in state court.
Having waived the objection to the statute of limitation, petitioner's claim for attorneys fees was properly before the arbitrator. As the Construction Industry Rules of the American Arbitration Association, incorporated into the parties agreement, provides for an award of attorneys fees where both parties request attorneys fees, and both parties did request an award of attorneys fees, the arbitrator did not exceed his authority in awarding petitioner attorneys fees. Respondent's application to vacate the arbitrator's award is thus denied.
Having denied respondent's application to vacate the award, and petitioner having made application to confirm the arbitrator's award within one year after the delivery of said award pursuant to CPLR § 7510, it is
ORDERED that the petition is granted and the award in favor of petitioner against respondent is confirmed; and it is further
ORDERED and ADJUDGED that petitioner Structural Steel Fabrications, Inc, having an address at 80 John Street, New York, New York, have judgment and recover against respondent Travelers Casualty Surety Company of America, having an address at 399 Thornall Street Edison, New Jersey 08837, in the amount of $305,084.00, plus interest at the statutory rate of 9% per annum from December 8, 2004, as computed by the Clerk in the amount of $______, together with costs and disbursements in the amount of $_____, and that the petitioner have execution therefor.
Petitioner's request for additional attorneys fees pursuant to State Finance Law § 137(4)(c), relating to the application and enforcement of this judgment is denied.
This constitutes the decision and order of the court.