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A COURT MUST ACCEPT AN ARBITRATOR’S INTERPRETATION OF CONFLICTING EVIDENCE; BUT THE TERMINATION OF THE TEACHER, WHO HAD AN UNBLEMISHED RECORD, FOR INAPPROPRIATELY RESTRAINING A FEMALE STUDENT, SHOCKED ONE’S SENSE OF FAIRNESS (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the arbitrator’s interpretation of conflicting evidence must be accepted, but termination of the teacher based on the evidence was not warranted. It was alleged the petitioner-teacher inappropriately restrained a female student who was trying to get past him:

“Where, as here, the obligation to arbitrate arises through a statutory mandate (see Education Law § 3020-a), the determination of the arbitrator is subject to ‘closer judicial scrutiny’ under CPLR 7511(b) than it would otherwise receive” … . “An award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious” … .

Here, there was a rational basis and evidentiary support for the finding that the petitioner committed the conduct with which he was charged by inappropriately restraining a female student who was trying to get past him. Although a video of the incident, which was admitted into evidence at the hearing, could be interpreted in more than one way, this Court must “accept the arbitrator’s credibility determinations, even where there is conflicting evidence and room for choice exists” … .

However, in light of the petitioner’s otherwise unblemished record of approximately 19 years as a teacher with the respondent, the penalty of termination of employment was so disproportionate to the offense as to be shocking to one’s sense of fairness … . Matter of O’Brien v Yonkers City Sch. Dist., 2023 NY Slip Op 03011, Second Dept 6-7-23

Practice Point: In this arbitration pursuant to the Education Law, the court was required to accept the arbitrator’s interpretation of conflicting evidence. But termination of the teacher for inappropriately restraining a female student who was trying to get past him shocked one’s sense of fairness.

 

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PLAINTIFF WAS DEEMED TO HAVE READ THE INFORMATION WHICH WAS HYPERLINKED; THEREFORE PLAINTIFF WAS DEEMED TO HAVE AGREED TO ARBITRATION (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff agreed to arbitrate based upon the hyperlinks in the document plaintiff reviewed:

Uber [defendant] sustained its burden of demonstrating that the parties had an explicit and unequivocal agreement to arbitrate. … [P]laintiff had agreed to be bound by the arbitration agreement when he affirmatively indicated and confirmed, by taking two separate actions, that he had reviewed and agreed to Uber’s updated terms of use, which were overtly hyperlinked as part of the pop-up screen and sufficient to form a binding contract … .

… [P]laintiff was on inquiry notice of the updated Terms of Use that required any disputes between the parties to be resolved by arbitration. Although a clickwrap agreement’s terms and conditions must be clear and conspicuous, they need not all be simultaneously and immediately visible; the terms may be binding and enforceable even if they are only accessible through a hyperlink … . The keys to enforceability are a reasonable indication of the existence of the additional terms and the user’s being required to manifest assent to them … . Brooks v Lang Yang, 2023 NY Slip Op 02610, First Dept 5-15-23

Practice Point: Here the plaintiff was deemed to have read information which was hyperlinked and therefore was deemed to have agreed to arbitrate.

 

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​THE ARBITRATOR’S AWARD OF EXCESSIVE ATTORNEY’S FEES WAS IRRATIONAL AND WARRANTED VACATION OF THE ENTIRE ARBITRATION AWARD (SECOND DEPT),

The Second Department, reversing Supreme Court, determined the attorney’s fee awarded by the arbitrator was excessive and warranted vacation of the entire arbitration award:

… [T]he arbitrator’s excessive award of attorneys’ fees in the sum of $11,307 was irrational because it was not supported by any proof. The arbitrator issued an award in the petitioner’s favor upon a finding that Surgery Center defaulted in answering the demand for arbitration. After awarding the petitioner damages in the principal sum of $22,614.89, plus interest, the arbitrator proceeded to award attorneys’ fees in the sum of $11,307, which is equal to 50% of the damages award. On the issue of attorneys’ fees, the petitioner submitted only the service agreements, which contained identical provisions stating that “[i]f [the petitioner] prevails in any litigation or arbitration between the parties, [Surgery Center] shall pay [the petitioner’s] legal fees,” and a letter of engagement between the petitioner and its counsel, which stated that the petitioner’s “collection matters will be handled on a contingency basis of one third of all amounts recovered or whatever legal fees are awarded, whichever is greater.” The petitioner’s counsel did not submit, and the arbitrator did not consider, any evidence as to the hours of legal work by the petitioner’s counsel or the hourly rate. Although the arbitrator stated that he was awarding the sum of $11,307 in attorneys’ fees “as provided for in the agreement between the parties,” there was no proof that Surgery Center agreed to unlimited or unreasonable fees, and no proof that Surgery Center agreed to the fee arrangement that the petitioner made with its counsel. Moreover, the award of attorneys’ fees was contrary to the petitioner’s agreement with its counsel. As such, the arbitrator’s award of attorneys’ fees was irrational … .

Further, the arbitrator’s award of attorneys’ fees violates the strong public policy against excessive fees, e.g., fee arrangements “where the amount becomes large enough to be out of all proportion to the value of the professional services rendered” … .

Under the circumstances present here, where the award of attorneys’ fees was clearly irrational and contrary to public policy, vacatur of the entire arbitration award is warranted … . Matter of Briscoe Protective, LLC v North Fork Surgery Ctr., LLC, 2023 NY Slip Op 02120, Second Dept 4-26-23

Practice Point: Here there was no support in the record for the attorney’s fee award, which was deemed excessive. Therefore the attorney’s fee award was irrational and warranted vacation of the entire arbitration award.

 

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​ IN A DISPUTE INVOLVING THE TELECAST RIGHTS FOR TWO MAJOR LEAGUE BASEBALL TEAMS, THE ARBITRATOR EXCEEDED ITS POWERS, WHICH WERE SPELLED OUT IN THE SETTLEMENT AGREEMENT, BY IMPOSING A MONEY JUDGMENT; THE ARBITRATOR’S RULING WAS AFFIRMED BUT THE MONEY JUDGMENT WAS VACATED (CT APP).

The Court of Appeals, in a full-fledged opinion by Justice Singas, determined that the settlement agreement controlled the limits of the arbitrator’s powers in this dispute between two major league baseball team and their co-owned sports network about the value of telecast rights. Pursuant to the settlement agreement the arbitrator had the power to decide the fees associated with the telecast rights, but did not have the power to impose a money judgment:

New York’s well-established rules of contract law, which apply to arbitration agreements, provide that courts will enforce a commercial contract between sophisticated and counseled parties according to the contract’s terms. In this case, two Major League Baseball (MLB) teams and their co-owned regional sports network are in a dispute regarding the fair market value of certain telecast rights. By affirming the confirmation of the second arbitration award and directing that the money judgment be vacated, we hold the highly sophisticated parties to the terms of their agreement. * * *

Although the courts below correctly confirmed the second arbitration award, the order appealed from must be modified because Supreme Court erred by awarding the Nationals prejudgment interest and rendering a money judgment in the Nationals’ favor. The settlement agreement grants the RSDC [the arbitrator] the power only to determine “the fair market value” of the telecast rights fees. The parties did not agree that the RSDC could resolve disputes over nonpayment of such fees. Instead, remedies for … nonpayment of those fees are governed by a different provision of the settlement agreement, which sets forth certain requirements, including a cure period. Only after that cure period expires do the Nationals “have a right to seek money damages.” Further, disputes over nonpayment of the fees appear to be governed by the settlement agreement’s more general dispute resolution provisions. Matter of TCR Sports Broadcasting Holding, LLP v WN Partner, LLC, 2023 NY Slip Op 02090, CtApp 4-25-23

Practice Point: Sophisticated parties (here major league baseball teams and a regional sports network) must be held to the terms of the underlying commercial contract. The arbitrator exceeded its powers by imposing a money judgment after deciding the fee dispute. The settlement agreement did not empower the arbitrator to impose the money judgment.

 

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THE INSURER DID NOT EXPLAIN ITS FAILURE TO TIMELY REQUEST THAT THE INSURED UNDERGO A PHYSICAL EXAM AND AN EXAMINATION UNDER OATH; THE STAY OF ARBITRATION IN THIS UNINSURED MOTORIST BENEFITS DISPUTE SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the insurer, GEICO, should not have been granted a stay of arbitration in this uninsured-motorist-benefits dispute with its insured, Eser. GEICO did not explain its failure to timely request a physical exam and an examination under oath (EUO):

GEICO had ample time after being notified of Eser’s claim to seek a medical examination and an examination under oath, but failed to do so. Moreover, it denied the claim, apparently concluding that the medical records were sufficient to determine that Eser did not sustain a serious injury. GEICO offered no excuse for its failure to request a physical examination and an examination under oath. Instead, GEICO represented to the Supreme Court that it had requested the examinations, pointing to [three letters]. Contrary to GEICO’s assertion, however, it did not request examinations in those letters, but, rather, merely advised Eser that if it ultimately determined that the other vehicle was uninsured, it “may require [her] to submit to physical examinations and/or Examination(s) Under Oath” … . Since GEICO had ample time to seek this discovery of Eser, but unjustifiably failed to do so, it was not entitled to a stay of arbitration in order to conduct the examinations … . Matter of Government Empls. Ins. Co. v Eser, 2023 NY Slip Op 01999, Second Dept 4-19-23

Practice Point: Here the insurer in this uninsured-motorist-benefits dispute had ample time to request that the insured undergo a physical exam and an examination under oath and did not explain its failure to do so. The stay of arbitration should not have been granted.

 

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COURTS HAVE ONLY A LIMITED POWER TO REVIEW AN ARBITRATOR’S RULING; HERE SUPREME COURT SHOULD NOT HAVE FOUND THE ARBITRATOR EXCEEDED HER AUTHORITY BY ORDERING BACK PAY FOR A REINSTATED COUNTY EMPLOYEE (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the arbitrator in this employment dispute did not exceed her authority when she ordered that the employee be reinstated with back pay. The employee had been absent from work and the employer (the county) the absence a voluntary resignation. Supreme Court had affirmed the employee’s reinstatement but found the arbitrator had exceeded her authority by ordering the back pay:

… “[J]udicial review of arbitral awards is extremely limited. Pursuant to CPLR 7511 (b) (1), a court may vacate an award when it violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on an arbitrator’s power” … . “Outside of these narrowly circumscribed exceptions, courts lack authority to review arbitral decisions, even where an arbitrator has made an error of law or fact” … . “[I]t is well settled that an arbitrator has broad discretion to determine a dispute and fix a remedy, and that any contractual limitation on that discretion must be contained, either explicitly or incorporated by reference, in the arbitration clause itself” … .

We discern no basis to vacate the arbitrator’s award as to back pay and benefits. Notably, the CBA [collective bargaining agreement] does not contain “a specifically enumerated limitation on the arbitrator’s power” … . In fact, it does not explicitly limit the arbitrator’s authority in any way other than stating that the arbitrator does not have the power to “amend, modify or delete any provision of the CBA,” which does not set any limitations on the arbitrator’s power to order the remedy that he or she sees fit … . Matter of County of Albany (Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO, Albany County Local 801), 2023 NY Slip Op 01828, Third Dept 4-6-23

Practice Point: Here the arbitrator ordered a county employee reinstated with back pay. Supreme Court held the arbitrator exceeded her powers by ordering back pay. The Third Department noted the courts’ limited review powers re: arbitration rulings and found no basis for concluding the arbitrator had exceeded her powers.

 

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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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