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February 18, 2020

Arbitration award challenged on the grounds the arbitrator exceed his authority and it violated strong public policy


Plaintiff in this CPLR Article 75 appealed of a Supreme Court's denial of her petition to vacate an arbitration award, contending [1] the award violates strong public policy and [2] the arbitrator exceeded his authority as limited by the Demand to Arbitrate.

The Appellate Division, pointing out that CPLR §7511(b) sets forth the statutory grounds for vacating an arbitration award, noted that such statutory grounds an arbitrator exceeded or imperfectly executed his power. However, opined the court, “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” and that the grounds for vacating an arbitration award are narrowly construed.

With respect to vacating an arbitration award on the grounds that it violates strong public policy, the Appellate Division, citing Matter of Reddy v Schaffer, 123 AD3d 935, said that a court will do so "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."

Further, the Appellate Division explained that exceeding expressly enumerated limits on an arbitrator's authority “is a separate basis to invalidate an award as an excess of authority” and which authority is typically set out in the arbitration clause of an agreement, in a statute, or in a notice or demand for arbitration. Significantly, the court noted that “[e]ven where a claim is otherwise arbitrable, the scope of the arbitration is still limited to the specific issues presented and may not extend to those that are materially different or legally distinct.

In addition, the decision cited Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Bd. of Educ. of City School Dist. of City of N.Y., 1 NY3d 72, in which the Court of Appeals held that “[a] public policy argument may be raised for the first time on a motion to vacate, and should be considered by the court.”

The decision is posted on the Internet at:
http://www.nycourts.gov/reporter/3dseries/2020/2020_00923.htm

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