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Prior “Minimal” Contact Between an Arbitrator and Counsel Held Insufficient to Vacate Arbitral Award

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  • Posted on: Feb 1 2019

In New York, judicial review of arbitration awards is limited. Tullett Prebon v. BGC Fin., 111 A.D.3d 480, 482 (1st Dept. 2013). The reason for such a limited review is to promote the settlement of disputes efficiently and avoid protracted and expensive litigation. Id. Thus, the grounds upon which an arbitral award will be modified or vacated are few. 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 arbitral award under the CPLR.

In Citrin Cooperman & Co., LLP v. Skyline Risk Management, Inc., 2019 N.Y. Slip Op. 30200(U) (Sup. Ct. N.Y. County Jan. 7, 2019) (here), the Court considered whether a prior contact between the arbitrator and counsel sufficed to overturn an arbitral award. As discussed below, the Court found that the contact was “minimal” and insufficient to evidence any prejudice to the parties’ rights or the integrity of the proceeding.

Citrin involved a dispute between Citrin Cooperman & Co., LLP (“Citrin”) and Skyline Risk Management, Inc. (“Skyline”), which the parties agreed would be resolved through binding arbitration before the American Arbitration Association (“AAA”).

After a demand for arbitration was filed, a hearing was conducted on December 4, 2017, before Barbara A. Mentz (“Mentz”). By Decision and Award dated December 21, 2017, Mentz determined that Citrin was entitled to $17,500.00, plus pre-award interest of $1,717.39, from November 19, 2016, at the rate of 9%, to the date of the award, and $13,500.00, in attorneys’ fees (the “Award”). The total amount of the Award was $32,717.39.

Citrin sought to confirm the Award and to enter judgment. CPLR 7510. Skyline sought vacatur of the Award under CPLR 7511(b)(1)(ii) on the ground that Mentz had an undisclosed, prior professional relationship with Citrin’s counsel. The Court granted the petition to confirm the Award and denied the cross-petition to vacate.

Under CPLR 7511(b)(1)(ii), a court will vacate or modify an arbitral award when the arbitrator was biased or maintained an undisclosed personal relationship to one of the parties, resulting in a prejudiced decision. J.P. Stevens & Co. v. Rytex, 34 N.Y.2d 123, 129-130 (1974). Peripheral, superficial and insignificant contacts or relationships will not subject an arbitral award to vacatur or modification. In the Matter of Cross Props., Inc. v. Gimbel Bros., Inc., 15 A.D.2d 913 (1st Dept. 1962). The relationship must be material. Id. See also J.P. Stevens, 34 N.Y.2d at 129. Mere inferences of impartiality are insufficient to warrant interference with the arbitrator’s award; the evidence must be stronger; it must be clear and convincing. Matter of Provenzano, 28 A.D.2d 528 (1st Dept. 1967), aff’d, J.D.H. Rest. Inc. v. New York State Liquor Auth., 21 N.Y.2d 846 (1968).

In Citrin, the Court found that Skyline “failed to satisfy the requisite heavy burden, to warrant vacatur of the award at issue.” Slip op. at *3.

Skyline claimed that Mentz failed to disclose “a prior … contact with petitioner’s counsel (who was appearing on behalf of Citrin, approximately 5 1/2 years prior to the subject arbitration)” “until the day before the originally scheduled arbitration hearing between the … parties.” Id.  That contact, said the Court, consisted of “a single conference call of approximately 15 minutes in length, for the mere purpose of issuing a case scheduling order in another [unrelated] arbitration.…” Id. No other contact or conversations were had between counsel and Mentz on the matter since it settled, and counsel never appeared in front of Mentz since that time. Id. at **3-4. Such contact, held the Court, was “minimal” and did “not rise to the level of ‘clear and convincing evidence that any impropriety or misconduct of the arbitrator prejudiced its rights or the integrity of the arbitration process or award,’ to warrant vacatur of the … [A]ward.” Slip Op. at *3 (citing US. Electronics, Inc. v. Sirius Satellite Radio, 73 A.D.3d 497, 498 (1st Dept. 2010).

In addition, the Court found it significant that the parties were given one week to object to Mentz’s appointment as the arbitrator. Skyline availed itself of the opportunity. After reviewing the party’s positions, the AAA “confirmed Mentz as the arbitrator, determining that her previous contact would not prejudice the parties, nor the arbitration process herein.” Slip Op. at *4.

The Court concluded that “[u]nder the within circumstances, respondent failed to meet its heavy burden to support that there was an appearance of bias or partiality, to warrant vacatur of the subject award.” Slip op. at *4. Consequently, the Court granted the petition and denied the cross-petition to vacate.

Takeaway

The facts of Citrin highlight the magnitude of bias needed to overturn an arbitral award. As the Court noted, the prior contact between the arbitrator and counsel was minimal. Its insignificance was underscored by the Court’s observation that had the parties been in a court, such contact would be insufficient to secure disqualification of the judge: “The Court notes that in a judicial proceeding, such a basis, that an attorney merely previously appeared before a particular judge, would never be grounds to disqualify that judge from hearing a subsequent case with the attorney.” Moreover, the fact that Mentz assured the parties that the prior contact “would in no way affect her impartiality, or ability to be fair and unbiased and serve as an arbitrator in [the] matter” (Slip op. at *4) and the AAA’s concurrence in that assessment only reinforced the finding of no bias and the absence of any prejudice to the parties and the integrity of the proceeding.  Under such circumstances, vacatur would have been an improvident exercise of discretion.

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