State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: January 22, 2015 518879
________________________________
DAVID STAVISKI, Doing Business
as CHEMUNG VALLEY
ACOUSTICAL AND PARTITION,
Respondent,
v MEMORANDUM AND ORDER
CHRISTA CONSTRUCTION, INC.,
Appellant,
et al.,
Defendants.
________________________________
Calendar Date: November 17, 2014
Before: Peters, P.J., Rose, Egan Jr. and Lynch, JJ.
__________
Ernstrom & Dreste, LLP, Rochester (Thomas K. O'Gara of
counsel), for appellant.
Schlather Stumbar Parks & Salk, LLP, Ithaca (Jeffrey D.
Walker of counsel), for respondent.
__________
Lynch, J.
Appeal from an order of the Supreme Court (O'Shea, J.),
entered June 25, 2013 in Chemung County, which, among other
things, denied a cross motion by defendant Christa Construction,
Inc. for summary judgment on its counterclaim.
As set forth in our prior decision (83 AD3d 1235 [2011]),
plaintiff commenced this action to recover damages for breach of
two separate contracts with defendant Christa Construction, Inc.
(hereinafter defendant), the general contractor on a project to
construct an assisted living facility. Plaintiff and defendant
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executed a subcontract wherein plaintiff agreed to install
drywall. During construction, mold was discovered at the
facility and plaintiff and defendant executed a second contract
wherein plaintiff agreed to perform certain remediation work. We
affirmed Supreme Court's order finding that plaintiff was
entitled to partial summary judgment in its favor on the
remediation contract and that questions of fact precluded an
award of summary judgment in defendant's favor on the subcontract
(83 AD3d at 1238-1239). Thereafter, plaintiff moved and
defendant cross-moved for summary judgment on the subcontract.
Supreme Court denied the motions, finding that there were
questions of fact precluding summary judgment in favor of either
party. Defendant appeals and we affirm.
The subcontract includes an alternative dispute resolution
(hereinafter ADR) provision wherein the parties agreed that the
"[c]ontractor's [r]epresentative, acting personally, [could]
decide all questions of any nature whatsoever arising out of,
under, or in connection with, or in any way related to or on
account of, [the subcontract] and his decision shall be
conclusive final and binding on the parties." Pursuant to the
ADR procedure, the subcontractor who disagreed with the
representative's "final and binding" decision could "commence a
lawsuit in a [c]ourt of competent jurisdiction of the State of
New York . . . under the procedures and laws applicable in that
court, it being understood the review of the [c]ourt shall be
limited to the question of whether or not the [c]ontractor's
[r]epresentative's determination is arbitrary, capricious or
grossly erroneous to evidence bad faith." Pursuant to the
express terms of the subcontract, the contractor's representative
was Brian Grinter, the project manager. Here, after plaintiff
claimed that it was due certain payments on the subcontract,
Grinter issued a determination in February 2002 rejecting
plaintiff's claim. More specifically, Grinter determined that
plaintiff "repeatedly failed to protect [its] materials from the
elements, allowed drywall and other materials to become saturated
with water and contributed to the growth of mold throughout the
. . . project," and that plaintiff was "30% responsible for the
outbreak of mold." As a result, Grinter offset the unpaid
balance due plaintiff under the subcontract by 30% of the total
damages that defendant incurred to remediate the mold, and
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assessed damages against plaintiff in the amount of $226,083.
Defendant has no quarrel with Supreme Court's finding that
plaintiff's submissions sufficiently established a question of
fact as to whether Grinter's determination was arbitrary and
capricious. Rather, defendant claims that the ADR provision
allows only limited review, such that by identifying questions of
fact the court was required to find that the determination had a
factual basis and was therefore not arbitrary and capricious as a
matter of law. We do not agree. We have already determined that
this action constitutes an appeal of Grinter's determination
under the ADR provisions of the original subcontract, and that
questions of fact have been raised as to whether Grinter's
determination was arbitrary, capricious or grossly erroneous.
Each side has since moved for summary judgment supporting their
respective positions through affidavits of the participants,
including Grinter. These affidavits do nothing more than sustain
our prior determination that questions of fact exist as to the
basis of the ADR determination. It does not follow, as defendant
maintains, that by finding questions of fact, Supreme Court was
required, as a matter of law, to conclude that the ADR
determination was not arbitrary, capricious or grossly erroneous.
The ADR provision here mirrors that found in Westinghouse
Elec. Corp. v New York City Tr. Auth. (82 NY2d 47 [1993]) calling
for broader judicial review similar to that under CPLR article
78, and not the stricter standards of arbitration review under
CPLR article 75 (id. at 54-55; compare Maross Constr. v Central
N.Y. Regional Transp. Auth., 66 NY2d 341, 344 [1985]). The
Westinghouse provision differs from the one at issue in this
case, however. Each contract utilizes the identical standard of
"arbitrary, capricious or grossly erroneous to evidence bad
faith" (emphasis added), but only the Westinghouse contract
expressly authorizes a challenge under the procedures set forth
in CPLR article 78 (Westinghouse Elec. Corp. v New York City Tr.
Auth., 82 NY2d at 51). Notably, the underscored phrase is not
included in CPLR 7803 (3), which authorizes a proceeding to
challenge a determination as "arbitrary and capricious or an
abuse of discretion." At the very least, the "grossly erroneous
to evidence bad faith" standard is applicable to plaintiff's
contention that defendant unduly interfered in Grinter's
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determination that plaintiff was 30% at fault for the mold
damage. Since the contract embraces a claim of bad faith, it
would be incongruous to conclude that Grinter's determination on
this issue is entitled to the deference generally accorded to a
discretionary determination made by an administrative agency. In
our view, Supreme Court did not err when it determined that there
were questions of fact with regard to Grinter's determination.
Peters, P.J., Rose and Egan Jr., JJ., concur.
ORDERED that the order is affirmed, with costs.
ENTER:
Robert D. Mayberger
Clerk of the Court