As New York arbitration law is in accord with the policies of the Federal Arbitration Act, New York law governs federal court review of New York award

As New York arbitration law is in accord with the policies of the Federal Arbitration Act, New York law governs federal court review of New York award
County of Nassau v Chase, United States Court of Appeals, Second Circuit, No. 09-3643-cv, Summary Order

Chase and other parties appealed a federal district court's granting Nassau County’s motion to confirm an arbitration award.

As the contract between the parties provided that “any appeal from an arbitration award is to be governed exclusively by New York state law,” the Circuit Court said that this provision “must be honored by the courts unless the state law conflicts with federal law.”

As, said the court, “New York law accords with the policies of the [Federal Arbitration Act] (in favor of binding arbitration), federal law does not preempt New York state law here. New York state law therefore governs our review of this arbitration award.*

The Circuit Court then set out the following basics with respect to New York State Law concerning arbitration:

1. The appropriate standard is whether the arbitration award "violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator's power," citing N.Y.C. Transit Auth. v. Transp. Workers' Union of Am., Local 100, AFL-CIO, 6 N.Y.3d 332. [Zorc and Chase, said the court, fail to satisfy this standard.]

2. “Arbitrators are not bound by principles of substantive law or legal procedure: An arbitrator "may do justice as he sees it, applying his own sense of law and equity to the facts as he finds them to be and making an award reflecting the spirit rather than the letter of the agreement," citing Silverman v. Benmor Coats, Inc., 61 N.Y.2d 299

3. Misapplication of law and errors of fact are insufficient to overturn an award. Motor Vehicle Accident Indemnification Corp. v. Aetna Cas. & Surety Co., 89 N.Y.2d 214.
In this instance the Circuit Court said that the arbitration award did not violate any "strong public policy" of New York or federal law nor did the arbitration clause in question did not set out any limitations on the arbitrators' power, and Zorc and Chase never argue to the contrary.

Absent any limitations set out in the arbitration clause, the Circuit Court concluded that the arbitrators cannot have "clearly exceed[ed] a specifically enumerated limitation" on their power.”

Finally, the Circuit Court said that under New York state law, a sufficient showing of partiality can justify overturning an arbitration award, citing CPLR §7511(b) (ii). However, the decision notes that although Zorc and Chase make this assertion, they did not provide any evidence of any actual partiality by any arbitrator. Rather Zorc and Chase claim that because the arbitrators made factual findings adverse to them, the arbitrators must have been harboring secret bias against them. This assertion begs the question of partiality.

The Circuit Court confirmed the district court's grant of Nassau's motion to confirm the arbitration award and denied Zorc and Chase petition to vacate the award.

* The Circuit Court, agreeing with the District Court that the arbitral award must be confirmed, did so “pursuant [the CPLR] §7510, and not the Federal Arbitration Act, 9 U.S.C. § 9, as the District Court did.”

The decision is posted on the Internet at:
http://www.ca2.uscourts.gov/decisions/isysquery/ab1178bc-bd21-46c7-8188-adf226ceac52/8/doc/09-3643_so.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/ab1178bc-bd21-46c7-8188-adf226ceac52/8/hilite/
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