State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: March 19, 2015 519354
________________________________
In the Matter of the Arbitration
between DELANEY GROUP, INC.,
Respondent-
Appellant,
and
MEMORANDUM AND ORDER
HOLMGREN ENTERPRISES, INC.,
Doing Business as VIKING
LAND CLEARING,
Appellant-
Respondent.
________________________________
Calendar Date: January 5, 2015
Before: McCarthy, J.P., Egan Jr., Lynch and Clark, JJ.
__________
Fox & Kowalewski, LLP, Clifton Park (Laurence I. Fox of
counsel), for respondent-appellant.
Jacobowitz & Gubits, LLP, Walden (Kara J. Cavallo of
counsel), for appellant-respondent.
__________
Egan Jr., J.
Cross appeals from an order of the Supreme Court (Aulisi,
J.), entered March 6, 2014 in Fulton County, which, among other
things, denied respondent's cross application pursuant to CPLR
7511 to confirm a modified arbitration award.
At all times relevant, petitioner was the prime contractor
on a public work project awarded by the Department of
Transportation for construction work on a portion of State Route
17 in Sullivan County. In conjunction therewith, petitioner
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entered into a subcontract with respondent to clear and grub
approximately 75 acres of land in exchange for $406,250. The
parties' subcontract provided that "[a]ny controversy of [sic]
claim" arising out of or related to the subcontract would be
settled by arbitration.
In October 2010, respondent filed a demand for arbitration
contending, among other things, that it was entitled to extra
payment for clearing and grubbing additional acreage over and
above that required by the underlying subcontract, in response to
which petitioner apparently interposed a counterclaim. At the
conclusion of the hearing that followed, the arbitrator found
that respondent was entitled to $150,250 for the additional trees
removed and the additional acreage cleared and grubbed. The
arbitrator also concluded, however, that petitioner was entitled
to what amounted to a credit totaling $96,318.35 – representing
$13,806 in "stipulated backcharges" and $82,512.35 that
petitioner, pursuant to a stipulation of the parties, was
permitted to withhold pending resolution of certain issues that
were not part of the arbitration proceeding. Accordingly,
petitioner was directed to pay respondent $53,931.65 "at [that]
time."1
Following receipt of the arbitrator's original award,
respondent sought "clarification" thereof – contending that the
arbitrator "misunderstood the parties['] stipulation."
Specifically, respondent asserted that petitioner had withheld
the $82,512.35 referenced in the award prior to the actual
arbitration and, further, that the parties had stipulated that
such sum "could continue to be withheld pending the passage of
time or other resolution between the parties." According to
respondent, the $82,512.35 at issue was not intended to be
applied against any award made in its favor and, therefore, the
arbitrator should not have deducted that amount from the total
1
The parties' stipulation was not reduced to writing, the
hearing minutes were not transcribed and the parties' post-
hearing submissions do not appear in the record.
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sum due and payable to respondent.2 Petitioner opposed the
relief sought, arguing that the requested clarification would
amount to a redetermination of the merits and, further, that the
adjustment sought by respondent did not qualify as the
"correction of a clerical, typographical, technical or
computational error" in the original award within the meaning of
CPLR 7509 and 7511 (c) (1). In so doing, petitioner did not
address the substance of respondent's claim – namely, that
petitioner was, in effect, receiving a double credit as to (at
least) the $82,512.35 at issue.
The arbitrator thereafter issued a modified award, which
granted the full $150,250 to respondent and deleted any reference
to the previous "credits," thereby making no award of damages
with respect to petitioner's counterclaim. As to the basis for
such modification, the arbitrator noted, "It now appears that the
amounts in question were withheld from [respondent's] final
payment, and therefore should not, of course, have been withheld
again in the [original arbitration] [a]ward." Petitioner then
commenced the instant proceeding seeking to vacate both the
original and the modified award contending, among other things,
that respondent's request for modification was untimely, that the
arbitrator exceeded her authority with respect to the modified
award as such modification did not fall within any of the grounds
set forth in CPLR 7511 (c) and that the original award should be
vacated in its entirety due to respondent's failure to comply
with what petitioner deemed to be a condition precedent to
arbitration. Respondent answered and requested that Supreme
Court dismiss the petition in its entirety and confirm the
modified arbitration award.
Supreme Court declined to vacate the original award based
upon respondent's failure to comply with the notice of claims
provision set forth in the parties' arbitration agreement,
finding that the arbitrator's decision not to enforce this clause
was both rational and based upon consideration of the underlying
equities. Similarly, Supreme Court denied petitioner's request
2
The request for clarification made no mention of the
$13,806 in "stipulated backcharges."
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to vacate the modified award based upon respondent's untimely
modification request, finding – in essence – that the arbitrator
acted within her authority in entertaining a request that, due to
law office failure, was filed one day beyond the 20-day period
set forth in CPLR 7509. As to the merits, Supreme Court agreed
that the arbitrator exceeded her authority in issuing the
modified award, as such modification went beyond the mere
correction of a computational error within the meaning of CPLR
7511 (c) (1), and granted petitioner's request to vacate this
award. As to the original award, Supreme Court found that the
arbitrator – by neglecting to delineate and address the effect of
the parties' purported stipulation – failed to make "a final and
definite award [upon] the subject matter submitted" (CPLR 7511
[b] [1] [iii]). Accordingly, Supreme Court vacated the original
award as well and remanded the matter to the arbitrator for a
rehearing and redetermination of the issues – including the
existence and/or content of the parties' alleged stipulation and
the corresponding effect, if any, upon petitioner's counterclaim.
Respondent now appeals, seeking reinstatement of the modified
award, and petitioner cross appeals, contending that there is no
basis upon which to remand this matter to the arbitrator for
further proceedings.
We affirm. Initially, we reject petitioner's assertion
that respondent failed to comply with what it characterizes as a
condition precedent to arbitration. The parties' dispute in this
regard centers around a notice of claim clause contained within
the arbitration agreement, which required that any claim for an
adjustment in the subcontract price be made within 15 days of the
occurrence giving rise to the claim. Although the arbitrator
recognized that respondent failed to comply with this provision,
she determined that such noncompliance was not a bar to
arbitration given, among other things, that the parties
anticipated that respondent might be called upon to perform
additional work – as evidenced by the fact that petitioner's
contract with the Department of Transportation assigned a value
to respondent's work that far exceeded the amount of respondent's
subcontract – as well as uncontroverted testimony that the exact
acreage to be cleared and grubbed could not be ascertained until
the work was completed. "An arbitrator is charged with the
interpretation and application of the [parties'] agreement . . .
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[and] courts are obligated to give deference to the decision of
the arbitrator" (Matter of New York City Tr. Auth. v Transport
Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336 [2005]
[citations omitted]). Inasmuch as the arbitrator's decision in
this regard was rational and, further, was based upon a
consideration of the underlying equities, Supreme Court properly
declined to vacate the original award upon this ground. We reach
a similar decision with respect to Supreme Court's finding that
the arbitrator did not exceed her authority in excusing
respondent's one-day delay in submitting its modification request
(cf. Spector v Torenburg, 852 F Supp 201, 207-208 [1994]; but see
Matter of Bianchi [Katz], 111 AD3d 1012, 1013 [2013]).
Accordingly, neither the original award nor the modified award is
subject to vacatur based upon these procedural grounds.
As to the merits, we agree with petitioner that the
arbitrator's modification of the original award exceeded the
narrow grounds set forth in CPLR 7511 (c). A review of the
modified award reveals that the arbitrator did not simply correct
a "miscalculation of figures . . . in the [original] award" (CPLR
7511 [c] [1]) but, rather, made new factual findings as to the
applicability of the parties' apparent stipulation relative to
petitioner's counterclaim and its corresponding impact upon the
moneys awarded, i.e., the arbitrator impermissibly revisited the
merits of the parties' dispute. Under these circumstances, the
modified award was properly vacated (see CPLR 7509, 7511 [c];
Avamer Assoc., L.P. v 57 St. Assoc., L.P., 67 AD3d 483, 484
[2009]; cf. Matter of Outback Steakhouse, Inc. v Contracting
Mgt., Inc., 58 AD3d 855, 855 [2009]).
We also are persuaded that Supreme Court properly vacated
the original arbitration award and remanded the matter to the
arbitrator for a rehearing (see CPLR 7511 [d]). CPLR 7511 (b)
(1) (iii) permits a court to vacate an arbitration award if the
court finds that a party's rights were prejudiced because the
arbitrator, in making such an award, either "exceeded his [or
her] power or so imperfectly executed it that a final and
definite award upon the subject matter submitted was not made."
Although we find no basis upon which to conclude that the
arbitrator exceeded her authority in rendering the initial award,
we agree with Supreme Court that, by failing to address the
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existence and/or content of the parties' purported stipulation,
ascertain whether the contested funds were in fact withheld by
petitioner prior to the start of the arbitration and assess the
corresponding impact, if any, upon petitioner's counterclaim, the
arbitrator "so imperfectly executed" her powers that "a final and
definite award" was not in fact made (CPLR 7511 [b] [1] [iii]).
In reaching this result, we are not suggesting that the
arbitrator made a factual or legal error as to the import and/or
effect of the parties' apparent stipulation, as we acknowledge
that such matters are largely beyond our review (see Matter of
Falzone [New York Cent. Mut. Fire Ins. Co.], 15 NY3d 530, 534
[2010]; Matter of Aftor v Geico Ins. Co., 110 AD3d 1062, 1064
[2013]). Rather, it is the arbitrator's failure to ascertain the
existence of the stipulation, articulate its parameters and
assess its impact upon both respondent's claim for additional
compensation and petitioner's corresponding counterclaim that
warrants vacatur of the original award. The parties' remaining
contentions, to the extent not specifically addressed, have been
examined and found to be lacking in merit.
McCarthy, J.P., Lynch and Clark, JJ., concur.
ORDERED that the order is affirmed, without costs.
ENTER:
Robert D. Mayberger
Clerk of the Court