Fourth Department Vacates Portion of Arbitral Award Because Arbitrator Exceeded His Authority

• Posted on: Feb 5 2020

In New York, arbitration, like other alternative dispute resolution mechanisms, is valid and enforceable. Westinghouse v. New York City Tr. Auth., 82 N.Y.2d 47, 54 (1993) (“Considerable authority thus supports the validity and enforceability of alternative dispute resolution mechanisms.”). 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.” Id.

Because of the strong public policy favoring arbitration, courts give considerable deference to arbitrators and their awards. Tullett Prebon v. BGC Fin., 111 A.D.3d 480, 482 (1st Dept. 2013) (“awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation”). In fact, judicial review of arbitration awards is severely limited in New York. Id.  As this Blog previously noted (here), setting aside arbitral awards are difficult.

Grounds for The Review of Arbitral Awards

Upon receiving a motion to confirm an arbitration award, New York courts must confirm the award unless the movant satisfies one of the statutory reasons for modification or vacatur provided by New York Civil Practice Law and Rules Section 7511. See CPLR § 7510; see also Bernstein Family Ltd. P’ship v. Sovereign Partners, 66 A.D.3d 1, 7-8 (1st Dept. 2009) (confirmation is mandatory in the absence of grounds for vacatur). The grounds for modification or vacatur under CPLR § 7511 are limited.  These include: (1) “corruption, fraud, or misconduct in procuring the award”; (2) partiality of the arbitrator; (3) the arbitrator exceeded his power or imperfectly executed it; (4) failure to follow the procedures of Article 75 of the CPLR. CPLR § 7511(b)(1)(i)-(iv).  Only when the record demonstrates one of the foregoing will a New York court vacate or modify an award under the CPLR. (This Blog previously wrote about the importance of a record in the context of vacating an award, here and here.)

In today’s post, this Blog examines Matter of Arbitration Between Buffalo Teachers Fedn., Inc. (Board of Educ. of the Buffalo Pub. Schs.), 2020 N.Y. Slip Op. 00794 (4th Dept. Jan. 31, 2020) (here), a case involving vacatur because the arbitrator exceeded his/her authority.

Under CPLR § 7511(b)(1)(iii), a movant can vacate or modify an arbitral award when the arbitrator exceeded his or her authority under the arbitration agreement. To succeed under CPLR 7511(b)(1)(iii), the movant must demonstrate that the arbitration agreement limited the arbitrator’s authority to act, and the arbitrator subsequently violated that limitation. New York City Tr. Auth. v. Transport Workers’ Union of Am. Local 100, AFL-CIO, 6 N.Y.3d 332 (2005). The same is true with regard to arbitration mandated by statute.  Vacatur will be warranted where the arbitrator fails to follow the standards and requirements of the subject statute. Forest River, Inc. v. Stewart, 34 A.D.3d 474, 474 (2d Dept. 2006). Absent an agreement or statute, however, as long as an arbitrator addresses the issue(s) submitted for resolution, vacatur will not be granted, unless the award is completely irrational – that is, the resulting award goes beyond the issues before the arbitrator. Rochester City Sch. Dist. v. Rochester Teachers Ass’n, 41 N.Y.2d 578, 583 (1977).

Matter of Arbitration Between Buffalo Teachers Fedn., Inc. (Board of Educ. of the Buffalo Pub. Schs.)

After hiring 16 teachers’ aides in compliance with a prior arbitration award, the Board of Education announced its intention to eliminate 5½ teaching positions for the 2017-2018 school year in order to offset the cost of hiring the teachers’ aides. The Buffalo Teachers Federation filed a grievance seeking, inter alia, to prevent the elimination of the teaching positions on the ground that the Board’s intended conduct was retaliatory.

A temporary restraining order was issued preventing the elimination of the positions while the dispute was pending. After the 2017-2018 school year ended, an arbitrator issued an opinion and award that set forth the arbitration award in the last five paragraphs thereof, only two of which were at issue on the appeal.

The Teachers Federation moved to confirm the award, and the Board filed a cross-motion to vacate the award. The motion court granted the petition to confirm, denied the cross-petition to vacate, and confirmed the award. The appeal ensued.

The Board maintained that the arbitrator exceeded his authority under the governing collective bargaining agreement (“CBA”) by requiring it to make the elimination of teaching positions in accordance with the “School Based Development Guide” (“Guide”) rather than the CBA. The Fourth Department agreed, holding that “‘in effect, [the arbitrator] made a new contract for the parties in contravention of [an] explicit provision of [the] arbitration agreement which denied [the] arbitrator power to alter, add to or detract from’ the collective bargaining agreement.” Slip Op at *2 (quoting Schiferle v. Capital Fence Co., Inc., 155 A.D.3d 122, 126 (4th Dept. 2017) (internal quotation marks omitted). The Court concluded, therefore, “[b]ecause the CBA does not require respondent to make its staffing or budgetary decisions in accordance with the Guide, the arbitrator contravened an express provision in the CBA that denied him the ‘authority to modify or amend it.’” Id.

Takeaway

Under CPLR § 7511(b)(1)(iii), the party seeking vacatur of arbitral award must demonstrate that the agreement to arbitrate limited the arbitrator’s authority to act and the arbitrator subsequently violated that limitation. In Matter of Buffalo Teachers Federation, the Board was able to meet this standard.