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THE PETITION TO STAY ARBITRATION PENDING A FRAMED ISSUE HEARING SHOULD HAVE BEEN GRANTED IN THIS UNINSURED MOTORIST TRAFFIC ACCIDENT CASE; PROCEDURAL CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the motion for a stay of arbitration pending a framed issue hearing should have been granted in this uninsured motorist traffic accident case:

“The party seeking a stay of arbitration has the burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay” … . “Thereafter, the burden shifts to the party opposing the stay to rebut the prima facie showing” … . “Where a triable issue of fact is raised, the Supreme Court, not the arbitrator, must determine it in a framed-issue hearing, and the appropriate procedure under such circumstances is to temporarily stay arbitration pending a determination of the issue” … .

Here, the appellants concede that Infinity [petitioner insurer] satisfied its prima facie burden of showing sufficient evidentiary facts to establish a preliminary issue that would justify a stay of arbitration. In support of its petition, Infinity submitted, inter alia, an affidavit from its investigator, who stated that he found that a claim for property damage was previously made to GEICO arising out of the subject accident … . In opposition, the appellants raised issues of fact as to whether GEICO’s insured was involved in the accident … . Matter of Infinity Indem. Ins. Co. v Leo, 2023 NY Slip Op 01003, Second Dept 2-22-23

Practice Point: The procedural criteria for a determining a petition for a stay of arbitration pending a framed issue hearing in an uninsured motorist traffic accident case are explained.

 

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THE CHALLENGES TO THE PROCEDURES FOR RELIGIOUS AND MEDICAL EXEMPTIONS FROM THE COVID-19 VACCINE MANDATE FOR NYC TEACHERS, AS WELL AS “LEAVE WITHOUT PAY” FOR THOSE WHO DID NO APPLY FOR AN EXEMPTION, WERE PROPERLY REJECTED (FIRST DEPT).

The First Department, over a dissent, determined the COVID-19 vaccine mandates imposed by the arbitrator for NYC Department of Education (DOE) employees properly survived the hybrid Article 75/78 challenge. The arbitration initiated by the United Federation of Teachers (UFT) resulted in the September 10, 2021 Impact Award which established procedures for religious and medical exemptions:

The article 75 claims were properly dismissed, as petitioners lack standing to challenge the Impact Award and failed to join UFT as a necessary party. The article 75 claims also fail on the merits. As to the article 78 claims, petitioners are unable to show that DOE made an error of law or acted irrationally. * * *

Petitioners are similarly situated teachers employed by DOE. All received notification by email that they were being placed on Leave Without Pay (LWOP) status because they were not in compliance with DOE’s COVID-19 Vaccine Mandate. They were informed that they could not report to their school sites as of Monday, October 4, and that, in order to return to work, they were required to upload proof of having received the first vaccine shot and “E-sign the attestation stating that you are willing to return to your worksite within seven calendar days of submission.” The notifications also summarized the options for separation and leave extensions. Petitioners, with the exception of Loiacono, did not submit proof of vaccination or request religious or medical exemptions. * * *

When a union represents employees during arbitration, only that union — not individual employees — may seek to vacate the resulting award … .

Petitioners also failed to join UFT as a party. UFT advocated successfully for the exemptions, accommodations, and extended benefits for teachers otherwise unwilling to be vaccinated, all of which were prescribed in the Impact Award. Accordingly, UFT would be adversely impacted by a judgment favorable to petitioners and is thus a necessary party (CPLR 1001[a] …). Matter of O’Reilly v Board of Educ. of the City Sch. Dist. of the City of N.Y., 2023 NY Slip Op 00957, First Dept 2-21-23

Practice Point: The individual NYC Department of Education (DOE) employees did not have standing to challenge the results of the COVID-19 vaccine-mandate arbitration initiated by the United Federation of Teachers (UFT). The UFT was a necessary party to the challenge but was not made a party. The DOE did not act arbitrarily or capriciously. Essentially the procedures for religious and medical exemptions to the vaccine mandate were upheld. Teachers who did not apply for an exemption and were not vaccinated were deemed properly placed on leave without pay (LWOP).

 

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THE JUDGE CANNOT, SUA SPONTE, DIRECT ARBITRATION WITHOUT A REQUEST FROM A PARTY; NON-SIGNATORIES TO AN AGREEMENT CONTAINING A FORUM SELECTION PROVISION MAY BE BOUND BY THE PROVISION IF THEY ARE SIGNATORIES TO A RELATED AGREEMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Connolly, interpreted jurisdiction, forum selection and arbitration provisions in the subject agreements. The decision is fact-specific and cannot be fairly summarized here. The court summarized its rulings as follows:

This appeal presents novel questions related to jurisdiction, as well as arbitration and forum selection provisions in agreements. The first question is whether, upon reviewing an agreement and determining that an arbitration provision governs, a court should, sua sponte, direct the parties to arbitrate. We hold that a court should not direct parties to arbitrate absent a request from one of the parties.

The second question requires us to examine the circumstances under which non-signatories to an agreement containing a forum selection provision may be bound by that provision consistent with due process. We hold that non-signatories to an agreement may be bound by that agreement’s forum selection provision when they are signatories to a related agreement, which forms part of the same transaction, and are closely related to both the transaction and one of the signatories to the agreement containing the forum selection provision. P.S. Fin., LLC v Eureka Woodworks, Inc., 2023 NY Slip Op 00877, Second Dept 2-15-23

Practice Point: A judge should not, sua sponte, direct parties to arbitrate pursuant to an agreement absent a request from a party.

Practice Point: Non-signatories may be bound by a forum selection provision in an agreement if they are signatories to a related agreement.

 

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THE AMOUNT OF GENERAL MUNICIPAL LAW 207-A COMPENSATION TO WHICH RETIRED PERMANENTLY DISABLED YONKERS FIREFIGHTERS ARE ENTITLED UNTIL RETIREMENT AGE IS SUBJECT TO ARBITRATION UNDER THE COLLECTIVE BARGAINING AGREEMENT (CBA) (CT APP). ​

The Court of Appeals, in a full-fledged opinion by Judge Wilson, determined the amount of General Municipal Law 207-a compensation to which retired permanently disable Yonkers firefighters are entitled until reaching retirement age is subject to arbitration under the terms of the collective bargaining agreement (CBA):

If there is a “reasonable relationship between the subject matter of the dispute and the general subject matter of the CBA,” the matter is arbitrable, leaving the arbitrator to “make a more exacting interpretation of the precise scope of the substantive provisions of the CBA, and whether the subject matter of the dispute fits within them” … . Here, the Union argues that both Appendix C and Article 31 of the CBA demonstrate that the parties agreed to arbitrate the present grievance.

Appendix C, which is entitled, “General Municipal Law Section 207-a Procedure,” contains six pages of detailed terms to which Yonkers and the Union agreed, including very broad provisions granting the arbitrator “authority to decide, de novo, the claim of entitlement [and continued entitlement] to [section] 207-a benefits.” It further provides that when “the matter presents a termination of [section] 207-a benefits, the Fire Department shall have the burden of proof by a preponderance of the evidence that the member is no longer eligible for [section] 207-a benefits.” The Union’s grievance reasonably relates to these provisions because they provide for the arbitration of disputes over General Municipal Law § 207-a benefits, and the Union contends that Yonkers is attempting to terminate such benefits by withholding special pays. Matter of City of Yonkers v Yonkers Fire Fighters, Local 628, IAFF, AFL-CIO, 2022 NY Slip Op 07095, CtApp 12-15-22

Practice Point: The Court of Appeals applied black-letter law to conclude the amount of General Municipal Law 207-a compensation to which retired permanently disabled Yonkers firefighters are entitled until retirement age is subject to arbitration under the collective bargaining agreement.

 

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PLAINTIFF, DECEDENT’S SON, SIGNED THE NURSING HOME ADMISSION AGREEMENT WHEN HIS FATHER, WHO HAD DEMENTIA, WAS ADMITTED; THE NURSING HOME DID NOT DEMONSTRATE PLAINTIFF, BY SIGNING THE ADMISSION AGREEMENT, HAD THE AUTHORITY TO BIND DECEDENT TO ARBITRATION OF DECEDENT’S NEGLIGENCE/PERSONAL INJURY ACTION AGAINST THE NURSING HOME (SECOND DEPT). ​

he Second Department, reversing Supreme Court, determined defendant nursing home did not demonstrate plaintiff had the authority to bind the decedent to arbitration concerning the decedent’s negligence/personal injury action against the nursing home. Plaintiff is the decedent’s son who signed the admission agreement when his father, who suffered from dementia, was admitted. The nursing home did not present sufficient proof of plaintiff’s authority to sign the admission agreement on decedent’s behalf:

A party seeking to compel arbitration must establish “the existence of a valid agreement to arbitrate” … . Here, the defendants failed to meet that burden because they did not submit sufficient evidence of the plaintiff’s authority to bind the decedent to arbitration at the time he signed the admission agreement on the decedent’s behalf. Most significantly, the defendants failed to submit the instrument through which the plaintiff allegedly derived his authority to bind the decedent to arbitration … . Evidence showing that the plaintiff represented to the defendants that he held a power of attorney when signing the admission agreement was insufficient to establish that he, in fact, held such authority as a matter of law … . Contrary to the defendants’ further contention, neither the plaintiff’s status as the decedent’s son … , nor his apparent willingness to be the decedent’s “responsible party” under the terms of the admission agreement … , have any bearing on his authority to bind the decedent to arbitration…. . Wolf v Hollis Operating Co., LLC, 2022 NY Slip Op 06954, Second Dept 12-7-22

Practice Point: Plaintiff, decedent’s son, signed the nursing-home admission agreement when decedent, who had dementia, was admitted. The nursing home did not demonstrate plaintiff, by signing the agreement, had the authority to bind decedent to arbitration of decedent’s negligence/personal injury action against the nursing home. The fact that plaintiff represented that he had power of attorney for decedent was not enough.

 

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THE ARBITRATOR’S RULING IN THIS STATUTORY, COMPULSORY ARBITRATION WAS ARBITRARY AND CAPRICIOUS, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the arbitrator’s ruling in this no=fault insurance case was arbitrary and capricious, noting that judicial review of statutory, compulsory arbitration is more stringent than review of a voluntary agreement to arbitrate. Plaintiff GEICO paid the injured driver’s no-fault benefits and sought reimbursement from the insurer of the loaner car involved in the accident. The arbitrator denied reimbursement and the Second Department reversed:

Where, as here, the obligation to arbitrate arises through a statutory mandate, the arbitrator’s determination is subject to “closer judicial scrutiny” under CPLR 7511(b) than it would receive had the arbitration been conducted pursuant to a voluntary agreement between the parties … . To be upheld, an award in a compulsory arbitration proceeding “must have evidentiary support and cannot be arbitrary and capricious” … . “Moreover, with respect to determinations of law, the applicable standard in mandatory no-fault arbitrations is whether ‘any reasonable hypothesis can be found to support the questioned interpretation'” … . …

The arbitrator’s interpretation of the rental agreement … as relieving [defendant insurance company] of its obligation to provide mandatory personal injury protection (hereinafter PIP) coverage was contrary to 11 NYCRR part 65, which provides … that all motor vehicle insurance policies must contain a mandatory PIP endorsement; expressly sets forth the language of the PIP endorsement; permits deviations from the prescribed language only upon prior approval; and prohibits any release, express or implied, from mandatory or optional PIP benefits … . Matter of GEICO Gen. Ins. Co. v Wesco Ins. Co., 2022 NY Slip Op 06926, Second Dept 12-7-22

Similar issues and result in Matter of Wesco Ins. Co. v GEICO Indem. Co., 2022 NY Slip Op 06933, Second Dept 12-7-22

​Practice Point: The Second Department explained that the criteria for judicial review of statutory, compulsory arbitration is more stringent than for judicial review of arbitration by voluntary agreement.

 

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WHETHER THE VILLAGE POLICE WERE ENTITLED TO ADDITIONAL COMPENSATION FOR WORK DURING THE EARLY DAYS OF THE COVID-19 PANDEMIC IS ARBITRABLE (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the issue whether the village police were entitled to additional compensation for work during the early days of the COVID-19 pandemic is arbitrable:

Where the relevant arbitration provision is broad, a court “should merely determine whether there is a reasonable relationship between the subject matter of the dispute and the general subject matter of the CBA [collective bargaining agreement]” … . If such a relationship exists, “the court should rule the matter arbitrable, and the arbitrator will then make a more exacting interpretation of the precise scope of the substantive provisions of the CBA, and whether the subject matter of the dispute fits within them” … .

… [T]he Village’s petition was grounded on its contention that the dispute in this case is not arbitrable because article V, § 4 of the CBA provides for additional compensation when the mayor of the Village declares “a holiday for Village employees due to an emergency,” and no such declaration was made by the mayor here. The petition further asserted that arbitration would be against public policy because the “members of the PBA are seeking to extract a benefit to which they clearly are not entitled and which is not contained in their contract.” These contentions are without merit, since the applicability of article V, § 4 of the CBA does not affect the arbitrability of the dispute, but only the merits of the dispute, and the merits are to be determined by the arbitrator and not by the courts … . Matter of Incorporated Vil. of Floral Park v Floral Park Police Benevolent Assn., 2022 NY Slip Op 06481, Second Dept 11-16-22

Practice Point: Whether a matter is arbitrable is separate and distinct from whether the dispute has merit, which is determined by the arbitrator.

 

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A QUESTION OF FACT WHETHER THE PARTIES AGREED TO ARBITRATE THE DISPUTE REQUIRES A FRAMED-ISSUE HEARING; THE PROPER PROCEDURE IF ARBITRATION IS REQUIRED IS TO STAY THE UNDERLYING SUIT, NOT DISMISS IT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined: (1)  there was a question of fact whether the parties agreed to arbitrate the dispute, requiring a framed-issue hearing; and (2) arbitration is not a defense to an action; so where arbitration is required the underlying action is stayed, not dismissed:

… [Q]uestions of fact exist as to whether the parties agreed to arbitrate the instant dispute, which questions require a hearing (see CPLR 7503[a] …). We therefore remit the matter … for a framed-issue hearing, and thereafter, a new determination of that branch of [the] motion which was pursuant to CPLR 7503 to compel arbitration.

… Supreme Court should have denied [the] motion which was pursuant to CPLR 3211(a)(1) to dismiss the … complaint based upon the arbitration agreement. “An agreement to arbitrate is not a defense to an action,” and “[t]hus, it may not be the basis for a motion to dismiss” … . The proper remedy, should a valid agreement to arbitrate exist, is an order compelling arbitration, which operates to stay the action (see CPLR 7503[a] …). Ferarro v East Coast Dormer, Inc., 2022 NY Slip Op 05679, Second Dept 10-12-22

Practice Point: If there is a question of fact whether the parties agreed to arbitrate a dispute, a framed-issue hearing is required. If there is a valid agreement to arbitrate, the underlying action should be stayed pending the arbitration, not dismissed.

 

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IN THIS VEHICLE ACCIDENT CASE, PLAINTIFF ENTERED AN ARBITRATION AGREEMENT WHICH INDICATED THE AWARD WOULD BE BETWEEN $0 AND $50,000, BUT THE POLICY LIMITS WERE $100,000/300,000; THE UNILATERAL MISTAKE BY PLAINTIFF’S ATTORNEY RE: THE POLICY LIMITS WAS NOT INDUCED BY DEFENDANT OR DEFENDANT’S CARRIER, THEREFORE RESCISSION OF THE AGREEMENT WAS NOT AN AVAILABLE REMEDY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s motion to compel arbitration in this vehicle-accident case should have been granted. Plaintiff wanted the agreement to arbitrate rescinded because it did not reflect the actual policy limits. But the unilateral mistake by plaintiff’s attorney was not induced by the defendant because defendant’s insurance carrier had twice notified plaintiff’s attorney of the policy limits. The agreement to arbitrate set the award at between $0 and $50,000, but the policy limits were $100,000/300,000:

“Generally, a party’s unilateral mistake is a ground for rescission of a contract only where it was induced by fraud or other wrongful conduct by the other party” … . Moreover, “the equitable remedy of rescission is not available to relieve an allegedly mistaken party of the consequences of their failure to exercise ordinary care” … .

Contrary to the plaintiff’s contention, he failed to establish that the arbitration agreement was subject to the equitable remedy of rescission on the ground of unilateral mistake by his attorney regarding the policy limits … . The purported mistake in the high-low agreement at issue arose not from any fraudulent inducement by the defendant, but from the failure of the plaintiff’s attorney to exercise ordinary care under the circumstances … . Maynard v Smith, 2022 NY Slip Op 04017, Second Dept 6-22-22

Practice Point: A unilateral mistake by one party which was not induced by the other party is not a ground for rescission of a contract.

 

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THE HIGH SCHOOL PRINCIPAL WAS CHARGED WITH GIVING STUDENTS UNAUTHORIZED CREDITS TO INCREASE GRADUATION RATES; THE CHARGES REQUIRED INTENTIONAL CONDUCT; THE HEARING OFFICER DETERMINED THE PRINCIPAL DID NOT ACT INTENTIONALLY BUT WAS GUILTY OF THE CHARGES; THE INCONSISTENCY RENDERED THE RULING ARBITRARY AND CAPRICIOUS (SECOND DEPT). ​

The Second Department, reversing the hearing officer’s ruling terminating petitioner’s employment as a high school principal, determined the hearing officer’s finding that petitioner did not act intentionally was inconsistent with finding petitioner guilty of any of the charges. Petitioner allegedly gave unauthorized credits to students in an effort to increase graduation rates:

… [T]he hearing officer’s finding that there was insufficient evidence to support a finding that the petitioner acted intentionally is inconsistent with a finding that the petitioner was guilty of any of the charges. Each of the 41 charges against the petitioner alleged that she knowingly and willfully approved the conferral of credits with full knowledge that such credit was unlawful, as part of an intentional scheme to accelerate credit acquisition in order to artificially inflate graduation rates. Because there was no allegation that the petitioner’s conduct was anything other than knowing and intentional, and because the hearing officer found that there was insufficient evidence that the petitioner acted intentionally, the hearing officer’s determination that the petitioner was guilty of all charges was arbitrary and capricious and without evidentiary support. At the hearing, the petitioner admitted to conduct that was, at most, negligent. There was no evidence to contradict the petitioner’s testimony that she did not act intentionally. Matter of Simpson v Poughkeepsie City Sch. Dist., 2022 NY Slip Op 03730, Second Dept 6-8-22

Practice Point: The high school principal was charged with giving students unauthorized credits to increase graduation rates. All the charges alleged intentional conduct. The hearing officer (correctly) found the principal did not act intentionally, but sustained the charges and terminated her employment. The inconsistency rendered the hearing officer’s ruling in the arbitration arbitrary and capricious.

 

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