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Client’s Claim His Attorney Pressured Him Into Changing the Retainer Agreement, Thereby Costing the Client More, Did Not Sound In Malpractice and Was Not an Arbitrable Fee Dispute

The First Department noted that an action by a client alleging he was pressured by his attorney into changing the retainer agreement from an hourly retainer to a contingency retainer (thereby costing the client more) did not sound in malpractice and was not arbitrable under part 137 of the Rules of the Chief Administrator of the Courts:

Plaintiff does not assert that defendants’ conduct caused the result of his dispute with his disability insurer to be worse than it would have been. Rather, he argues that defendants, in bad faith and without full disclosure, pressured him into changing from an hourly retainer to a contingency retainer. The only loss he alleges is the additional fees owed to counsel as a result of changing the retainer. This is fatal to his claim for malpractice … . …

The retainer agreement provided for arbitration under part 137 of the Rules of the Chief Administrator of the Courts. However, the gravamen of the contract claim is that it is invalid because of defendants’ misconduct in inducing plaintiff to sign it, or because it created a windfall for defendants. By the express terms of the rules the parties chose to govern their arbitration, claims such as this are not arbitrable since 22 NYCRR 137.1(b)(3) provides that part 137 does not apply to “claims involving substantial legal questions, including professional malpractice or misconduct” … . Cohen v Hack, 2014 NY Slip Op 04068, 1st Dept 6-5-14

 

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Whether Color-Blind Bus Driver Should Be Given a Road Test to Determine Driving Abilities Was a Proper Subject of Arbitration Pursuant to the Collective Bargaining Agreement

The Second Department determined that whether a bus driver (Cruz), who had been found by a physician to be color-blind, should be given a road test to determine the safety of his driving was the proper subject of arbitration under the collective bargaining agreement.  The NYC Transit Authority (TA) argued that the driver should not undergo a road test and the physician should determine whether the driver met the vision requirements of Vehicle and Traffic Law 509-g (1) and related regulations.  The union filed a grievance on behalf of the driver arguing the TA’s refusal to cooperate with the administration of the road test violated the collective bargaining agreement (CBA):

In the public sector context, determining whether a grievance is arbitrable requires a court to first determine whether ” there is any statutory, constitutional or public policy prohibition against arbitration of the grievance'” … . If there is no prohibition against arbitration, then the court must determine “whether the parties in fact agreed to arbitrate the particular dispute by examining their collective bargaining agreement” … .

Contrary to the TA’s contention, no statute or public policy absolutely prohibits an arbitrator from deciding whether Cruz should undergo a road test before it is determined whether Cruz meets the vision requirements. Moreover, the parties’ agreement to arbitrate this dispute is supported by the terms of the CBA. The relevant arbitration provisions of the CBA are broad, and there is a reasonable relationship between the subject matter of the dispute and the general subject matter of the CBA … . Any alleged ambiguity in the CBA as to whether the physician could recommend that Cruz undergo a road test ” is . . . a matter of contract interpretation for the arbitrator to resolve'” … .  Matter of New York City Tr Auth v Transport Workers Union of Greater NY Local 100, 2014 NY Slip Op 03689, 2nd Dept 5-21-14

 

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Participation in Arbitration Precluded Action to Stay Arbitration

The Second Department determined plaintiffs participated in arbitration initially and therefore could not bring a proceeding to stay arbitration:

Pursuant to CPLR article 75, “a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement was not made” (CPLR 7503[b]). Consequently, “a party seeking to avoid arbitration on the ground of no agreement to arbitrate can raise such objection only when it has not participated in the arbitration” … .

Here, the record demonstrates that the plaintiffs “participated in the arbitration” (CPLR 7503[b]…). The plaintiffs could not actively engage in the arbitration proceedings and simultaneously retain their right to seek subsequent judicial intervention pursuant to CPLR 7503(b), as such “forum-hedging” is incompatible with the legislative policy underlying CPLR 7503(b) … . Stone v Noble Constr Mgt Inc, 2014 NY Slip Op 02571, 2nd Dept 4-16-14

 

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Commissioner of Education Has Primary Jurisdiction Over Dispute About the Appropriate Pay for a School Principal Whose Position Was Abolished But Who Was Subsequently Assigned an Assistant Principal Position/Petition for Stay of Arbitration Pursuant to the Collective Bargaining Agreement Should Have Been Granted/Arbitration Prohibited by Public Policy

The Fourth Department determined Supreme Court should have granted petitioner’s application for a stay of arbitration.  A former principal whose position was abolished was hired as an assistant principal.  A grievance was filed by respondent on the former principal’s behalf contending that her new position warranted the same level of pay she had received in the abolished position. After the grievance was denied by petitioner, the respondent demanded arbitration pursuant to the collective bargaining agreement.  The Fourth Department determined the demand for arbitration should have been denied because the matter must be determined by the Commission of Education in the first instance:

It is well settled that, in deciding an application to stay or compel arbitration under CPLR 7503, the court is concerned only with the threshold determination of arbitrability, and not with the merits of the underlying claim (see CPLR 7501…). In making the threshold determination of arbitrability, the court applies a two-part test. It first determines whether “there is any statutory, constitutional or public policy prohibition against arbitration of the grievance” … . “If no prohibition exists,[the court then determines] whether the parties in fact agreed to arbitrate the particular dispute by examining their collective bargaining agreement” … .

Here, we agree with petitioner that the Commissioner of Education has primary jurisdiction over the parties’ dispute, and that arbitration is therefore prohibited by public policy. As we have previously noted, “ ‘the Commissioner of Education has the specialized knowledge and expertise to resolve the factual issue of whether the . . . former position and the new position are similar within the meaning of Education Law § [2510 (3) (a)]’ ” … . Based on his or her specialized knowledge and expertise, the Commissioner of Education should “resolve, in the first instance,” the issue of fact whether two positions are sufficiently similar under Education Law § 2510 … . Matter of Arbitration …, 285, 4th Dept 3-28-14

 

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Teacher’s Termination for a One-Time Mistake “Shocks One’s Sense of Fairness”

The First Department determined the termination of a teacher’s employment was a punishment which “shocked one’s sense of fairness.”  The teacher, who was well-respected and had an unblemished record, was found to have engaged in sexual conduct with an adult colleague in the school building after hours. The incident was highly publicized.  In finding the punishment too severe, the court wrote:

“[A] result is shocking to one’s sense of fairness if the sanction imposed is so grave in its impact on the individual subjected to it that it is disproportionate to the misconduct, incompetence, failure or turpitude of the individual, or to the harm or risk of harm to the agency or institution, or to the public generally visited or threatened by the derelictions of the individuals. Additional factors would be the prospect of deterrence of the individual or of others in like situations, and therefore a reasonable prospect of recurrence of derelictions by the individual or persons similarly employed. There is also the element that the sanctions reflect the standards of society to be applied to the offense involved” … . * * *

While petitioner’s behavior demonstrated a lapse in judgment, there is no evidence that this incident, was anything but a one-time mistake … . Of critical significance is that, unlike matters involving some form of romantic involvement or other inappropriate conduct with a student, petitioner’s engaging in what appeared to be consensual sexual conduct with an adult colleague is not in and of itself either criminal or otherwise improper.  * * *

Nor is there is any indication in the record that petitioner’s conduct will affect her ability to teach or that she intended to inflict any damage on any student. While it is unfortunate that the incident garnered so much attention and was exploited in the media, that in and of itself does not warrant the penalty of termination … . Matter of Brito v Walcott, 2014 NY Slip Op 01813, 1st Dept 3-20-14

 

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Language in the Arbitration Agreement Supported the Applicability of the New York Law Reserving the Determination of a Statute of Limitations Defense to the Court, Even Though the Controlling Federal Arbitration Act Presumptively Reserves the Determination of a Statute of Limitations Defense to the Arbitrator

The First Department determined that an arbitration agreement which specifically incorporates “the arbitration laws of New York State” incorporates the New York rule that the resolution of a statute of limitations defense is for the court, not the arbitrator, even where the matter is controlled by the Federal Arbitration Act [FAA] (which presumptively reserves resolution of a statute of limitations defense to the arbitrator):

Under the FAA, the “resolution of a statute of limitations defense is presumptively reserved to the arbitrator, not a court” … . “[A]n exception to this rule exists where parties explicitly agree to leave timeliness issues to the court” (Matter of Diamond Waterproofing Sys., Inc. v 55 Liberty Owners Corp., 4 NY3d 247, 253 [2005]). This is in keeping with the FAA policy by which private arbitration agreements are to be enforced according to their terms (id. at 252). Unlike the FAA, New York law “allows a threshold issue of timeliness to be asserted in court” even absent an agreement to do so (…CPLR 7502 [b]; 7503 [a]).

The arbitration clause of the agreement before us provides that “the arbitration laws of New York State” shall govern the parties’ arbitration. In Matter of Smith Barney, Harris Upham & Co. v Luckie (85 NY2d 193 [1995]…), the Court held that a choice of law provision which states that New York law shall govern both “the agreement and its enforcement” incorporated New York’s rule that threshold statute of limitations questions are for the courts (id. at 202). In Diamond Waterproofing, the Court held that an agreement that merely provided that it “shall be governed by the law of [New York]” did not express an intent to have New York law govern enforcement (4 NY3d at 253). The Court reasoned that “[i]n the absence of more critical Language concerning enforcement . . . all controversies, including issues of timeliness, are subjects for arbitration” (id.).

The question arises as to whether the specific incorporation of “the arbitration laws of New York State” in the instant arbitration clause itself constitutes the needed “more critical language concerning enforcement” within the contemplation of Diamond Waterproofing. We hold that it does and, under the agreement, the arbitration laws of New York State include article 75 of the CPLR.  Matter of ROM Reins Mgt Co Inc v Continental Ins Co Inc, 2014 NY Slip Op 01546, 1st Dept 3-11-14

 

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Limited Role of Courts in Determining Applications to Stay Arbitration (Re: a Collective Bargaining Agreement [CBA]) Explained

The Third Department determined the petition to stay arbitration in a teacher-tenure matter should have been denied. In so finding, the Third Department explained the limited role of the courts in determining applications to stay arbitration:

The court’s role in determining applications to stay arbitration is limited and, as relevant here, requires a determination of whether the parties have agreed to arbitrate the dispute at issue … .Inasmuch as respondent has asserted a violation of the evaluation procedures agreed to by the parties as part of the CBA, there is a rational relationship between the subject of the grievance and the CBA … . The question of whether petitioner violated these procedures “goes to the merits of the grievance, not to its arbitrability” … . “[T]he fact that the substantive clauses of the contract might not support the grievances . . . is irrelevant on the threshold question of arbitrability. It is for the arbitrator, and not the courts, to resolve any uncertainty concerning the substantive rights and obligations of the[] parties'” … . Matter of Brunswick Central School District …, 517060, 3rd Dept 2-20-14

 

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“Common Law Arbitration” Explained/”Common Law Arbitration” Waived by Seeking Relief in a Counterclaim

The Second Department explained “common law arbitration,” i.e., an oral agreement to arbitrate, and determined defendant had waived the agreement to arbitrate by raising a counterclaim which related to the subject of the agreement to arbitrate:

Although there was no written agreement to arbitrate in this case, where one party demands arbitration, and the other party accepts the demand, an oral agreement to arbitrate may be formed … . Oral agreements to arbitrate are not covered by CPLR article 75, and are referred to as “common-law arbitration” agreements… . * * *However, the defendants, by their conduct in this lawsuit, waived arbitration. As this Court explained in Reynolds & Reynolds Co., Automotive Sys. Div. v Goldsmith Motor Corp. (251 AD2d 312, 313),”[t]here is no inflexible or mechanical rule as to what constitutes a waiver of the right to arbitrate. Rather, determination of the issue depends on the facts and circumstances of each particular case . . . Among the factors to be considered are the extent of the party’s participation in litigation and conduct inconsistent with the assertion of a right to arbitrate, the delay in seeking arbitration, and whether the other party has been prejudiced”… . Willer v Kleinman, 2014 NY Slip Op 01164, 2nd Dept 2-19-14

 

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Court Does Not Have the Power to Determine Whether Arbitrator Misinterpreted Collective Bargaining Agreement/Court Can Not Review Merits of Arbitrator’s Determination

The Second Department determined Supreme Court should not have vacated the arbitrator’s award because the award was not “irrational:”

“[J]udicial review of arbitration awards is extremely limited” … . In determining any matter arising under CPLR article 75, “the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute” (CPLR 7501). Accordingly, it is ” not for the courts to interpret the substantive conditions of [a] contract or to [otherwise] determine the merits'” … . “An arbitration award must be upheld when the arbitrator offer[s] even a barely colorable justification for the outcome reached'” … .

The Court of Appeals has recognized “three narrow grounds that may form the basis for vacating an arbitrator’s award—that it violates public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power”… . As relevant here, an arbitrator exceeds his or her power if the award “g[ives] a completely irrational construction to the provisions in dispute and, in effect, ma[kes] a new contract for the parties” …

The petitioner’s contention that the arbitrator misinterpreted the terms of the collective bargaining agreement constitutes a challenge to the merits of the arbitrator’s determination … . Since the arbitrator’s determination was not “completely irrational” … , the petitioner’s challenge to the merits of the arbitrator’s determination does not provide a ground for vacating that determination… . Matter of Sheriff Officers Assn Inc v Nassau County, 2014 NY Slip Op 00108, 2nd Dept 1-8-14

 

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Federal Arbitration Act Applies When Interstate Commerce Involved

The Second Department determined the parties had entered an agreement to arbitrate and, because interstate commerce was involved, federal arbitration law applied.  A New York architectural firm was hired re: the renovation and construction of buildings in Connecticut:

As a threshold matter, the defendants are correct in asserting that this action is governed by the Federal Arbitration Act (hereinafter the FAA) (9 USC § 1 et seq.), which applies to any arbitration agreement evidencing a transaction involving interstate commerce (see 9 USC § 2). * * *

Through the FAA, Congress has declared “a strong federal policy favoring arbitration as an alternative means of dispute resolution” … . In accordance with this policy, doubts as to the arbitrability of a claim are to be resolved in favor of arbitrability … .

On the other hand, arbitration is “a matter of consent, not coercion” … and “a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit” … . Under the FAA, the determination as to whether the parties have entered into an agreement to arbitrate is made by applying ordinary state law principles governing the formation of contracts… . Highland HC, LLC v Scott, 2014 NY Slip Op 00089, 2nd Dept 1-8-14

 

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