Master No-Fault Arbitration Award Not Vacated

NO-FAULT – GROUNDS FOR VACATING MASTER ARBITRATION AWARD – CPLR ARTICLE 75 PROCEEDING
Matter of Travelers Indem. Co. v. United Diagnostic Imaging, P.C.
(2nd Dept., decided 2/23/2010)

New York Civil Practice Law and Rules section 7511(b) sets forth the grounds upon which a court may vacate an arbitration award:

(b) Grounds for vacating. 

1. The award shall be vacated on the application of a party who either participated in the arbitration or was served with a notice of intention to arbitrate if the court finds that the rights of that party were prejudiced by: 

(i) corruption, fraud or misconduct in procuring the award; or 

(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or 

(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; 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.

Case law makes it clear that New York courts apply these four grounds narrowly, declining more times than not to vacate arbitration awards.   This case is no different, the Second Department affirming the lower court's denial of Travelers' petition to vacate the master arbitration award, with costs.

In support of its petition to vacate, Travelers argued that the arbitration award should be vacated pursuant to CPLR 7511(b)(1)(iii) because the master arbitrator had exceeded his power in confirming the award.  Travelers also contended that both the arbitrator and master arbitrator "acted in a manner that was arbitrary, capricious, irrational, and without a plausible basis."  Both the Supreme Court and Second Department disagreed, the appellate court holding:

"Consistent with the public policy in favor of arbitration, the grounds specified in CPLR 7511 for vacating or modifying a no-fault arbitration award are few in number and narrowly applied" (Matter of Mercury Cas. Co. v Healthmakers Med. Group, P.C., 67 AD3d 1017, 1017).  * * * * *

"An arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious" (Matter of State Farm Mut. Auto. Ins. Co. v City of Yonkers, 21 AD3d 1110, 1111). "On review, an award may be found to be rational if any basis for such a conclusion is apparent to the court based upon a reading of the record" (id.; see Caso v Coffey, 41 NY2d 153, 158).

Here, the petitioner failed to demonstrate that the master arbitrator's award should have been vacated pursuant to CPLR 7511(b)(1)(iii) (see generally Matter of New York City Tr. Auth. v Transport Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336). Moreover, the determination of the master arbitrator confirming the original arbitration award had evidentiary support and a rational basis, and was not arbitrary and capricious. Accordingly, the Supreme Court properly denied the petition to vacate the award.

Remember that pursuant to New York Insurance Law § 5106(c) and 11 NYCRR § 65-4.10(h)(1)(ii), if the master arbitrator's award is $5,000 or more, exclusive of interest and attorney’s fees, either party may, in lieu of commencing a CPLR article 75 proceeding, institute a court action to adjudicate the dispute de novo.  Can't do both, however.  It's either commence a special proceeding to vacate the award pursuant to CPLR 7511(b) or commence an action to adjudicate the disputed claim de novo.  Pursuant to 11 NYCRR § 65-4.10(h)(2) and CPLR 7511(a), the deadline for commencing either a special proceeding or de novo action is 90 days after delivery of the master arbitrator's award to that party.  "Delivery" has been held to mean receipt for purposes of CPLR 7511(a)'s 90-day statute of limitations.  Matter of Lowe v. Erie Ins. Co., 56 AD3d 130 (4th Dept. 2008).