Great Deference Afforded Arbitral Awards Leads Court to Refuse to Vacate Award

On April 30, 2021, the Fourth Department issued a decision in Barone v. Haskins, 2021 NY Slip Op. 02686, holding that the great deference afforded arbitral awards mandated the refusal to vacate an award, explaining:

Courts are bound by an arbitrator's factual findings, and a court may not examine the merits of an arbitration award and substitute its judgment for that of the arbitrator simply because it believes that its interpretation would be the better one. Indeed, even where an arbitrator makes errors of law or fact, courts will not assume the role of overseers to conform the award to their sense of justice.

Although judicial review of arbitration awards is extremely limited, a court may vacate an arbitrator's award where it finds that the rights of a party were prejudiced when an arbitrator exceeded his or her power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made. An arbitrator exceeds his or her power only where his or her award violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power. An award is irrational where there is no proof whatever to justify the award. Where, however, an arbitrator offers even a barely colorable justification for the outcome reached, the arbitration award must be upheld.

While courts are obligated to give deference to the decision of the arbitrator even if the arbitrator misapplied the substantive law, an arbitrator can exceed his or her power when he or she manifestly disregards the substantive law applicable to the parties' dispute. To modify or vacate an award on the ground of manifest disregard of the law, a court must find both that (1) the arbitrator knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrator was well defined, explicit, and clearly applicable to the case. Finally, it is well established that an arbitrator's failure to set forth his or her findings or reasoning does not constitute a basis to vacate an award.

Here, upon our application of the above-referenced legal principles, we conclude that there is a colorable justification for the award rendered by the arbitration panel, and thus the award cannot be said to be irrational. We have reviewed plaintiff's remaining contentions and conclude that none warrants modification or reversal of the order.

(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.