Court Rejects Attempt to Modify and Vacate Arbitration Award

• Posted on: Mar 13 2024

By: Jeffrey M. Haber

In New York, Article 75 of the Civil Practice Law and Rules (“CPLR”) governs the confirmation, vacatur, modification, and enforcement of arbitration awards. Under CPLR 7511(b)(1)(iii), a court may vacate an arbitration award if “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.” In addition, a court may vacate an award when it is irrational, violates public policy, and/or fails to resolve all the issues submitted to the arbitrator.¹ 

Irrationality includes, among other things, an interpretation of the parties’ agreement that “is unsupported by the plain language of th[e] agreement,”² or an award that is “inherently inconsistent.”³ 

To vacate an arbitration award, the party seeking to vacate the award “bears a heavy burden and must establish a ground for vacatur by clear and convincing evidence.”⁴ 

Alternatively, a court may modify an arbitral award if, among other things, “there was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award.”⁵ 

In today’s article, this Blog examines Gowanus Park LLC v. KSK Construction Group LLC, 2024 N.Y. Slip Op. 30726(U) (Sup. Ct., Kings County Mar. 6, 2024) (here), a case addressing the foregoing principles.

Gowanus Park involved a contract for the construction of a four-story residential building located in Brooklyn, New York. Plaintiff alleged that defendant KSK Construction Group LLC was not equipped to manage and complete the construction project. Plaintiff maintained that the work defendant performed was defective and had to be redone at significant cost to plaintiff.

Litigation ensued and the parties eventually engaged in a multi-day arbitration proceeding that resulted in an award that required plaintiff to pay defendant $589,913.36, plus administrative fees. 

Defendant moved to confirm the award. Plaintiff opposed and cross-moved to modify or vacate the award, arguing that the arbitrator failed to properly calculate the amount plaintiff had paid various subcontractors and that such mistake amounted to windfall of almost $300,000 in defendant’s favor. Plaintiff further argued that the arbitrator failed to consider the damages it suffered as a result of defendant’s defective work.

The court rejected plaintiff’s windfall argument. The court found that the argument was based upon the testimony of defendant’s principal, who testified at the arbitration that plaintiff had paid subcontractors $1,140, 219.19, without any supporting documentation or evidence. As such, the court found that “the arbitrator was free to ignore such isolated testimony without any supporting documentation.”⁶ The court explained that although plaintiff produced checks totaling $1,055,077.06 that it paid to subcontractors, it did not produce any invoices (other than two) substantiating “that those checks concerned work under” defendant’s direction.⁷ “Indeed,” said the court, defendant “introduced competent evidence in the form of a detailed spreadsheet that the amount paid by [plaintiff] to subcontractors amounted to no more than $846,203.58,” which the court concluded, “the arbitrator appropriately credited.”⁸ Thus, concluded the court, “[t]here can be no improper conclusion reached by the arbitrator for failing to credit unsubstantiated payments urged by [plaintiff].”⁹

Turning to the arbitrator’s claimed failure to consider the damages that plaintiff allegedly suffered by reason of defendant’s defective workmanship and delay, the court denied plaintiff’s motion to vacate, holding that it was tantamount to a disagreement with the decision of the arbitrator.¹⁰ “[M]erely disagreeing with the arbitrators conclusions is not a basis upon which to vacate any arbitration award,” explained the Court.¹¹ Indeed, said the Court, “it is well settled that even where an arbitrator’s award ‘contains errors of law and fact committed by the arbitrator’ the decision will not be vacated.…’”¹² 

Accordingly, the court denied the motion to vacate and granted the motion to confirm the arbitration award.

[Eds. Note: this Blog examined some of the bases for vacatur claimed by plaintiff in Gowanus Park here, here, and here.] 

Footnotes

1. See, e.g., Denson v. Donald J. Trump For President, Inc., 180 AD3d 446, 450 [1st Dept 2020]; Rosenberg v. Schwartz, 176 A.D.3d 1069, 1071 (2d Dept. 2019).
2. Cnty. of Westchester v. Civ. Serv. Emps. Ass’n, Inc., Loc. 860, Westchester Cnty. Unit, 270 A.D.2d 348, 348 (2d Dept. 2000).
3. Spear, Leads & Kellogg v. Bulseye Sec., Inc., 291 A.D.2d 255, 256 (1st Dept. 2002); City Sch. Dist. of City of New York v. Hershkowitz, 801 NYS2d 231 (Sup. Ct., N.Y. County 2005).
4. Jurcec v. Moloney, 164 A.D. 3d 1431, 1432, 84 NYS3d 433, 434 (2d Dept. 2018).
5. CPLR 7511(c).
6. Slip Op. at *3.
7. Id.
8. Slip Op. at *3-*4.
9. Id. at *4.
10. Id.
11. Id.
12. Id. (quoting Wien & Malkin LLP v. Helrilsley-Spear, Inc., 6 N.Y.3d 471 (2006) (citation omitted)).

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.