Arbitration Award Partially Vacated Because Decision Was Found To Be “Irrational”

• Posted on: Jul 28 2025

By: Jeffrey M. Haber

As readers know from past articles, CPLR § 7511 (b) sets forth the statutory grounds for vacating an arbitration award.[1] Under that section, a court may vacate an award if the rights of the movant were prejudiced by: (1) corruption, fraud or misconduct in procuring the award; (2) partiality of the arbitrator; (3) the arbitrator exceeding or imperfectly executing his/her power; or (4) the arbitrator failing to follow the procedure of Article 75.

With respect to whether an arbitrator exceeded or imperfectly executed his/her power, an award will not be overturned unless the award violates a strong public policy, is totally irrational, or exceeds a specifically enumerated limitation on the arbitrator’s power.[2]

In general, the grounds for vacating an arbitration award are narrowly construed.[3] It will be upheld even when the arbitrator makes errors of law and/or fact.[4] As noted by the Court of Appeals, the courts are not to assume the role of overseer of the arbitration and mold an award to its sense of justice.[5]

An arbitration award violates strong public policy “only where [the] court can conclude, without engaging in any extended fact-finding or legal analysis, that a law prohibits the particular matters to be decided by arbitration, or where the award itself violates a well-defined constitutional, statutory, or common law of this state.”[6] An award will be found to violate public policy only where such policy prohibits, in the absolute sense, particular matters being decided or certain relief being granted by the arbitrator.[7]  Vacatur on public policy grounds is exercised sparingly[8] in order to preserve the parties’ choice of a nonjudicial forum to the greatest extent possible.[9]

Additionally, “[a]n arbitration award may be vacated on the ground that the arbitrator exceeded his or her power where the ‘award … is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.’”[10] “An arbitrator’s award is irrational ‘where there is no proof whatever to justify the award.”[11]

“A party seeking to overturn an arbitration award bears a heavy burden and must establish a ground for vacatur by clear and convincing evidence.”[12]

In Matter of Centurion Cos., Inc. v. Bowne Tech Constr. Corp., 2025 N.Y. Slip Op. 04246 (2d Dept. July 23, 2025) (here), the Appellate Division, Second Department reversed, in part, a judgment entered by the Supreme Court confirming an arbitration award on the grounds that “there was no proof whatever to justify” the award.[13]

Centurion Companies involved, among other things, the renovation of real property located in West Nyack, N.Y. that was to be used as a new self-storage facility (the “project”). Petitioner, Centurion Companies, Inc. (“Centurion”), and respondent, Bowne Tech Construction Corp. (“Bowne”), entered into an agreement with regard to the project pursuant to which Bowne agreed to perform certain steel work for the project in exchange for $840,000 (the “subcontract”).

Over one year later, Bowne filed a notice of mechanic’s lien against the subject property in the sum of $261,200, the amount allegedly owed to it for its work on the project pursuant to the terms of a change order increasing the subcontract price by $150,000.

On May 25, 2022, Centurion served upon Bowne a notice of demand for arbitration in accordance with the subcontract, challenging the validity of Bowne’s $261,200 claim for unpaid construction work and seeking its own damages based on Bowne’s alleged noncompliance with the subcontract.

In an arbitration award dated March 22, 2023, the arbitrator denied Bowne’s claim and awarded Centurion damages in the principal sum of $156,790, including $91,250 in delay damages.

Subsequently, Centurion commenced a special proceeding pursuant to CPLR Article 75 to confirm the arbitration award. Bowne opposed the petition and cross-moved to vacate or modify the arbitration award. In an order dated July 17, 2023, the Supreme Court, inter alia, granted the petition, confirmed the arbitration award, denied Bowne’s cross-motion, and directed the entry of a judgment in favor of Centurion and against Bowne in the principal sum of $156,790. A judgment dated August 7, 2023, was entered upon the order in favor of Centurion and against Bowne in the principal sum of $156,790.

Bowne appealed.

The Court held that “Supreme Court erred in granting that branch of Centurion’s petition which was to confirm so much of the arbitration award as determined that Centurion [was] entitled to $91,250 for delay damages, and in denying that branch of Bowne’s cross-motion which was to vacate that portion of the arbitration award.”[14] The Court found that “[t]his portion of the arbitration award was irrational because there was no proof whatever to justify it.”[15] The Court explained that “when claims are made for damages for delay, a plaintiff must show that the defendant was responsible for the delay, that the delay caused a delay in the completion of the contract (eliminating overlapping or duplication of delays), and that the plaintiff suffered damages as a result of the delay.”[16] The record, said the Court, showed that Centurion had acknowledged that the project site was not ready for Bowne to begin work until December 2020 “due to its own delays”.[17] The Court further found that “[t]here was no evidence presented to show that Centurion suffered any damage as a result of any alleged further delay by Bowne.”[18]

The Court also held that the was no “rational basis for using a figure for damages for delay of $1,000 per day.”[19]

“Under the circumstances presented,” concluded the Court, “the arbitrator’s determination that Centurion is entitled to $91,250 for delay damages was clearly irrational and contrary to public policy.”[20]

However, held the Court, “Supreme Court properly denied that branch of Bowne’s cross-motion which was to modify the arbitration award.”[21] Bowne contended that the arbitrator should have offset the damages awarded to Centurion by $84,000. That challenge, noted the Court, was “a challenge to the arbitrator’s legal and factual conclusions rather than to the arbitrator’s arithmetic.”[22] “As such,” concluded the Court, “it is not a proper ground for modification.”[23]

Finally, the Court rejected Bowne’s contention that the award should be vacated because the arbitrator improperly applied the law (i.e., manifestly disregarded the law)[24] “relevant to the subcontract’s no-oral-modification clause.”[25] The Court explained that “the subcontract expressly provided that change orders must be signed by both parties, as well as the owner of the property, in order to be enforceable, and the evidence demonstrated that only Bowne signed the subject change order.”[26] “Under such circumstances,” concluded the Court, “the arbitrator’s determination that the change order was unenforceable was not irrational.”[27]

Takeaway

In New York, arbitration, like other alternative dispute resolution mechanisms, is valid and enforceable. Like many jurisdictions, New York has a strong public policy that favors arbitration. In fact, arbitration is not only favored but encouraged as an effective and expeditious means of resolving disputes between willing parties desirous of avoiding the expense and delay frequently attendant to the judicial process.

Because of the strong public policy favoring arbitration, courts give considerable deference to arbitrators and their awards. In fact, judicial review of arbitration awards is severely limited in New York.  As this Blog previously noted, setting aside an arbitral award is difficult.

Although courts typically defer to arbitrators’ decisions, even when there are factual or legal errors, Centurian reaffirms that such deference has limits—specifically when an award is irrational (i.e., the award is unsupported by any evidence). Centurian also illustrates that an award violating public policy—such as awarding damages without proof—can be vacated. However, as the legal discussion above makes clear, this ground for vacatur is applied sparingly to preserve the integrity of arbitration as an alternative dispute resolution mechanism.

Centurian further highlights the boundaries of CPLR 7511(c)(1)—the provision that permits modification of an arbitral award. As discussed, the Court rejected Bowne’s attempt to modify the award because Bowne’s request went beyond a mathematical error. The Court made clear that legal or factual disagreements with the arbitrator’s conclusions are not valid grounds for modification under CPLR 7511(c).

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] This Blog has written dozens of articles addressing numerous aspects of arbitration and arbitration awards. To find such articles, please visit the Blog tile on our website and search for any arbitration issue that may be of interest to you.

[2] Matter of Silverman (Benmor Coats), 61 N.Y.2d 299 (1984); Matter of Kowaleski (New York State Dept. of Correctional Servs.), 16 N.Y.3d 85, 90 (2010); Frankel v. Sardis, 76 A.D.3d 136, 139 (1st Dept. 2010).

[3] Frankel, 76 A.D.3d at 139-140.

[4] Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471, 479-480 (2006) (citing, Matter of Sprinzen (Nomberg), 46 N.Y.2d 623, 629 (1979)).

[5] Wein & Malkin, 6 N.Y.3d at 480.

[6] Matter of Reddy v. Schaffer, 123 A.D.3d 935, 937 (2d Dept. 2014).

[7] Sprinzen, 46 N.Y.2d at 631.

[8] Matter of Neirs-Folkes, Inc. (Drake Ins. Co. of N.Y.), 75 A.D.2d 787 (1st Dept. 1980).

[9] Sprinzen, 46 N.Y.2d at 630.

[10] Matter of CEO Bus. Brokers, Inc. v. 1431 Utica Ave. Corp., 187 A.D.3d 1185, 1186 (2d Dept. 2020) (internal quotation marks omitted) (quoting Matter of Quality Bldg. Constr., LLC v. Jagiello Constr. Corp., 125 A.D.3d 973, 973 (2d Dept. 2015)); see also Matter of Douglas Elliman of LI, LLC v. O’Callaghan, 220 A.D.3d 945, 946 (2d Dept. 2023).

[11] Matter of Briscoe Protective, LLC v. North Fork Surgery Ctr., LLC, 215 A.D.3d 956, 957 (2d Dept. 2023) (internal quotation marks omitted) (quoting Matter of J-K Apparel Sales Co., Inc. v. Esposito, 189 A.D.3d 1045, 1046 (2d Dept. 2020)); see also Matter of CEO Bus. Brokers, 187 A.D.3d at 1186.

[12] Kotlyar v. Khlebopros, 176 A.D.3d 793, 795 (2d Dept. 2019).

[13] Slip Op. at *3.

[14] Id.

[15] Id. (citations omitted).

[16] Id. (citations omitted).

[17] Id. According to the Court, “[t]he project was substantially completed seven months later in July 2021”. Id.

[18] Id.

[19] Id.

[20] Id. (citations omitted).

[21] Id.

[22] Id. Bowne was moving under CPLR 7511(c). Under that rule, the court must modify an arbitration award if “there was a miscalculation of figures.” CPLR 7511(c)(1).

[23] Id. (citations omitted).

[24] On July 23, 2025, this Blog examined the manifest disregard of the law doctrine (here).

[25] Id. Bowne contended that Supreme Court erred in denying that branch of its cross-motion which was to vacate so much of the arbitration award as denied its claim for $261,200 in unpaid construction work. Id.

[26] Id.

[27] Id.

Tagged with: Arbitration, Arbitration Award, Arbitrator Exceed Authority, Confirm Arbitral Award, Irrational Award, Vacate Arbitral Award