“What next?” is a question commonly asked by recipients of an arbitration award. Those who believe that the award is fundamentally wrong or unfair may pose the same question. This article provides an overview of post-arbitration procedures under New York Civil Practice Law and Rules Article 75.
I. Confirming Arbitration Awards
CPLR 7510 states that, “The Court shall confirm an award 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 CPLR 7511. Of course, it would be preferable for arbitration awards to be honored voluntarily by all parties, but this is not always the case. CPLR 7510 allows an arbitration award to be converted into a judgment, affording the prevailing party the judgment enforcement mechanisms outlined in CPLR Article 52. This includes the ability to freeze a judgment debtor’s assets, garnish wages, foreclose against real estate, and seize personal property. A successful petition under CPLR 7510 does not guarantee payment to the prevailing party. As is the case with all judgments, the judgment debtor may have no assets to collect against after the exemptions set forth in CPLR 5205.
One seeking to confirm an arbitration award must be cognizant of the applicable procedural requirements. The most important is the one-year enforcement period triggered after the “delivery” of the award. Delivery simply refers to the practice of arbitrators penning a written decision and mailing it, by registered or certified mail, to each of the parties. See CPLR 7507. To commence a special proceeding to confirm such award, the petitioner must submit the written agreement to arbitrate alongside the petition, as the written agreement is what confers jurisdiction upon the court to utilize the confirmation procedure. See MBNA America Bank v. Straub, 815 N.Y.S.2d 450 (N.Y. Civ. Ct. 2006). An affidavit of service demonstrating that the demand has been served upon the Respondent must also be annexed. See CPLR 308. Finally, a judgment confirming an arbitration award must be entered by the court before enforcement efforts can commence.
II. Vacating Arbitration Awards
"Judicial review of an arbitration proceeding is extremely limited." Frankel v. Sardis, 76 A.D.3d 136, 139 (1st Dept 2010). This brief statement from the 1st Department is illustrative of the “hands off” approach New York courts take when it comes to vacating an arbitration award. indeed, "[e]ven in circumstances where an arbitrator makes errors of law or fact, courts will not assume the role of overseers to conform the award to their sense of justice." Matter of New York State Correctional Officers & Police Benevolent Assn. v. State of New York, 94 N.Y.2d 321, 326 (N.Y. 1999). It is crucial for parties to understand this before entering into a contract that mandates arbitration.
CPLR 7511 enumerates the situations where the court has authority to vacate an arbitration award. Where a party seeking vacatur participated in the arbitration or was served with a notice of intention to arbitrate, a court may vacate the award based on: (1) corruption, fraud or misconduct in procuring the award; (2) partiality of an arbitrator; (3) an excess of power on the part of the arbitrator; or (4) a failure to follow the procedures set forth in CPLR 75. Where a party seeking vacatur neither participated in the arbitration nor was served with a notice of intention to arbitrate, the court may vacate the award where: (1) the rights of that party were prejudiced by one of the aforementioned grounds; (2) a valid agreement to arbitrate was not made; (3) the agreement to arbitrate had not been complied with; or (4) the arbitrated claim was untimely under CPLR 7502(b).
In each case, the party seeking to vacate an arbitration award bears a heavy burden. Courts apply a “clear and convincing evidence” standard to allegations of misconduct or bias on the part of an arbitrator. See e.g. Blumenkopf v. Proskauer Rose LLP, 95 AD3d 647 (1st Dept. 2012). Where a party claims that an arbitrator exceeded their authority, it must be shown that the resulting award is “completely irrational.” Rochester City Sch. Dist. V. Rochester Teachers Ass’n, 41 N.Y.2d 578, 583 (1977). It is significantly more difficult to vacate an arbitration award than to reverse a trial court decision. A poorly reasoned arbitration award, unless resulting from prejudice or corruption, will generally not be second guessed by the courts pursuant to CPLR 7511.
III. Modifying the Award
CPLR 7509 allows an arbitrator, upon receipt of a written application within twenty days after delivery of an arbitration award, to modify such award for the reasons set forth in CPLR 7511(c). Enumerated grounds for modification are: (1) miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award; (2) the arbitrators have awarded upon a matter not submitted to them; or (3) the award is imperfect as a matter of form. If the arbitrator refuses to modify the award, modification may be sought from the court pursuant to CPLR 7511(c).
A key distinction between modification and vacatur is that, in modification, only certain aspects of the arbitration award are altered. It is therefore an easier remedy to obtain so long as an application is made promptly. See CPLR 7509. Nevertheless, one should be aware of the narrow interpretation of CPLR 7511(c)(2) with respect to what matters are deemed to have been considered by an arbitrator. For example, CPLR 7511(c)(2) was found to not preclude an award of damages to individual petitioners even though the statement of claim asserted only derivative claims on behalf of petitioners’ corporation. See Roffler v. Spear, Leeds & Kellogg, 13 A.D.3d 308 (1st Dept. 2004). This is because the language of arbitration demands is subject to a more liberal interpretation than formal court pleadings, which themselves are subject to liberal notice pleading standards. In light of the difficulty of establishing that a given claim was not submitted to arbitration, modification may not be easy to obtain.
IV. Conclusion
Arbitration can be beneficial for disputes requiring specialized expertise to adjudicate. However, in many cases, arbitration proves more expensive than litigation due to the need to pay the arbitrator and difficulty of resolving claims through pre-trial motions. Courts retain a role in enforcing arbitration awards and identifying defects. Parties must understand post-arbitration procedure and be wary of common pitfalls in order to obtain the best results from the process. Above all, it should be understood that the arbitration award will rarely be set aside by the court once it is granted.
About Author
Garrett Cusack graduated from the University of Maryland School of Law in 2019, where he served as an Editor of the Journal of Business & Technology Law. Read more.
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