Party That Agreed That Arbitrator Did Not Have to Hold Hearing Cannot Vacate Award For Failure to Hold Hearing

On December 1, 2017, Justice Bransten of the New York County Commercial Division issued a decision in 1414 Holdings, LLC v. BMS-PSO, LLC, 2017 NY Slip Op. 32551(U), holding that a party that agreed that an arbitrator did not have to hold a hearing cannot get that arbitrator's award vacated for failure to hold a hearing, explaining:

CPLR § 7506(b) provides that an arbitrator designates a time and place for a hearing and notify the parties in writing personally or by certified mail not less than eight days before the hearing. At such a hearing, the parties are entitled to be heard, present evidence, and cross-examine witnesses. See CPLR § 7506(c). These requirements may be waived by the parties' written consent, or by continuing with the arbitration process without objection. See CPLR § 7506(f).

Here, the Landlord signed a Retainer Agreement with Arbitrator Nygard which left the issue of a formal hearing to the arbitrator's discretion. Arbitrator Nygard then determined that a formal hearing would not be necessary under the terms of the lease agreement. In doing so, the parties waived their right to be heard in a formal proceeding in the event the arbitrator determined a formal hearing was not necessary. Petitioner has failed to provide any evidence of objection to the arbitrator's decision not to hold a formal hearing pending Arbitrator Nygard's May 13, 2016 email. Thus, if the Petitioner did not agree to leave the issue of a hearing to the arbitrator's discretion, the Petitioner should not have agreed, vis-à-vis counsel's signature, to the conditions contained in Arbitrator Nygard's Retainer Agreement. The Petitioner should have, instead, looked for an alternative Arbitrator within the time provided by the Lease, or, sought to utilize the contingency provided in the Lease Agreement, an Arbitrator from the American Arbitration Association.

(Internal quotations and citations omitted).

Commercial litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.