In Re the Arbitration Between Capital Siding & Construction, LLC

State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: April 14, 2016 520787
________________________________

In the Matter of the
Arbitration between CAPITAL
SIDING & CONSTRUCTION, LLC,
Doing Business as ABAR
CONSTRUCTION,
Appellant, MEMORANDUM AND ORDER
and

ALLTEK ENERGY SYSTEM, INC.,
Respondent.
________________________________

Calendar Date: February 19, 2016

Before: Peters, P.J., Garry, Rose, Lynch and Clark, JJ.

__________

Fox & Kowalewski, LLP, Clifton Park (Brendan R. Wolf of
counsel), for appellant.

McNamee, Lochner, Titus & Williams, PC, Albany (Kevin
Laurilliard of counsel), for respondent.

__________

Rose, J.

Appeal from an order of the Supreme Court (Platkin, J.),
entered March 17, 2015 in Albany County, which denied
petitioner's application pursuant to CPLR 7503 to permanently
stay arbitration between the parties.

Petitioner, a contractor, entered into a construction
contract (hereinafter the subcontract) with respondent
subcontractor. When a dispute arose and petitioner withheld
certain payments from respondent, respondent sought expedited
arbitration pursuant to General Business Law article 35-E, also
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known as the Prompt Payment Act (hereinafter PPA). Petitioner
then commenced this proceeding, seeking to permanently stay the
arbitration on the ground that section 6.2 of the subcontract
expressly states that litigation, not arbitration, is the
parties' chosen method of dispute resolution. Supreme Court
denied petitioner's application, interpreting the PPA to render
the subcontract's dispute resolution provision void and
unenforceable because it denies respondent the option to
arbitrate the payment dispute. Petitioner appeals.

"The governing rule of statutory construction is that
courts are obliged to interpret a statute to effectuate the
intent of the Legislature, and when the statutory language is
clear and unambiguous, it should be construed so as to give
effect to the plain meaning of the words used" (People v Brown,
25 NY3d 247, 250 [2015] [internal quotation marks, brackets and
citations omitted]; accord Matter of Arita v Goodman, 132 AD3d
1108, 1109 [2015]). The PPA's stated purpose is "to expedite
payment of all monies owed to those who perform contracting
services pursuant to [private] construction contracts" exceeding
a certain monetary threshold (General Business Law § 756-a; see
General Business Law § 756 [1]). As relevant here, that purpose
is effectuated by General Business Law § 756-b (3) (c), which
states that, if a contractor is accused of violating any of the
PPA's provisions, an aggrieved subcontractor "may refer the
matter . . . to the American Arbitration Association for an
expedited arbitration." The PPA also states that, "[e]xcept as
otherwise provided in this article," the terms and conditions of
the parties' written agreement will supersede the PPA's
provisions (General Business Law § 756-a). However, General
Business Law § 757 (3) specifically directs that "[a] provision,
covenant, clause or understanding in, collateral to or affecting
a construction contract stating that expedited arbitration as
expressly provided for and in the manner established by [General
Business Law § 756-b] is unavailable to one or both parties" is
"void and unenforceable."

Here, petitioner contends that the PPA expressly provides
that the subcontract's dispute resolution provision supersedes
the PPA's requirement that expedited arbitration be available to
an aggrieved party, and that it is unaffected by the "[e]xcept as
 -3- 520787

otherwise provided" language of General Business Law § 756-a.
Petitioner argues that the only exception to the PPA's general
policy of giving primacy to the terms of a construction contract
is found in General Business Law § 756-b (1), which provides for
the accrual of interest on overdue payments "[n]otwithstanding
any contrary agreement." Petitioner's reading of the PPA,
however, ignores the existence of General Business Law § 757 (3),
which, as we have stated, unambiguously voids and renders
unenforceable any contractual provision that makes expedited
arbitration unavailable to one or both parties. Contrary to
petitioner's argument, the obvious function of section 6.2 of the
subcontract is to establish litigation as the sole legal option
for the resolution of disputes under the subcontract, which, in
turn, denies both parties the opportunity to arbitrate such
claims. Inasmuch as General Business Law § 757 (3) clearly
operates to void and render unenforceable the subcontract's
dispute resolution provision, we find that Supreme Court properly
denied petitioner's application to stay arbitration.

Although petitioner also argues that Supreme Court's
reading of the PPA violates its own constitutional right to a
jury trial, petitioner admittedly raised this issue for the first
time on appeal and, thus, it is unpreserved for our review (see
People v Haskell, 68 AD3d 1358, 1361 [2009]; Matter of County of
Sullivan [ABC Pac. Realty LLC], 55 AD3d 1029, 1031 [2008], lv
denied 12 NY3d 713 [2009]). Moreover, even if we were to
consider this issue (see State of New York v Butti, 304 AD2d 917,
918 [2003]; Matter of Woodin v Lane, 119 AD2d 969, 970 [1986]),
petitioner's argument – though styled as a challenge to the
application of the PPA to the facts of this case – is, in
reality, a facial challenge to the constitutionality of its
provisions requiring expedited arbitration. Accordingly,
petitioner was required to serve notice upon the Attorney
General, who must be permitted to intervene in support of the
constitutionality of the statute (see Executive Law § 71; CPLR
1012 [b]). As there is no evidence that petitioner did so at any
stage of this proceeding, we decline to pass upon the
constitutional issue at this time (see People v Parker, 290 AD2d
650, 652 [2002], lv denied 97 NY2d 759 [2002]).
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Peters, P.J., Garry, Lynch and Clark, JJ., concur.

ORDERED that the order is affirmed, with costs.

ENTER:

Robert D. Mayberger
Clerk of the Court