BARONE v. HASKINS (2021)

MEMORANDUM AND ORDER

It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.

Memorandum: Plaintiff commenced this action alleging fraud, negligence, breach of contract, breach of fiduciary duty, and violations of the General Business Law. James D. Haskins and Commonwealth Equity Services, Inc., doing business as Commonwealth Financial Network (defendants), brought a motion seeking, inter alia, to compel arbitration pursuant to CPLR 7503 (a). On a prior appeal, we concluded that Supreme Court erred in denying the motion to compel arbitration on the ground that arbitration in this case would be financially prohibitive to plaintiff without first directing plaintiff to apply for a waiver of the arbitration fee charged by the Financial Industry Regulatory Authority (FINRA) (Barone v. Haskins, 132 A.D.3d 1422, 1423, 17 N.Y.S.3d 665 [4th Dept. 2015]). We therefore reversed the order and remitted the matter to Supreme Court for that purpose (id.). Upon remittal, plaintiff brought a motion to, inter alia, apply this Court's directive. Plaintiff argued that she had complied with this Court's decision by applying for a waiver and that, because a full waiver was not granted, the court should proceed with trial. During motion practice, however, defendants agreed to pay any and all fees assessed by FINRA. Thereafter, the court denied plaintiff's motion to, inter alia, apply this Court's directive, and determined that, in light of defendants’ agreement to pay any fees imposed on plaintiff by FINRA, it was not necessary to address whether the steps that plaintiff had already taken would satisfy this Court's directive. The court further noted that “plaintiff clearly cannot satisfy the [relevant] criteria ․ required for proceeding in Supreme Court and she must now submit her claims against ․ defendants through FINRA.” Plaintiff did not take an appeal from the ensuing order (April 2017 order), which directed that plaintiff's claims proceed through FINRA. The matter proceeded to arbitration and the arbitration panel, inter alia, denied all of plaintiff's claims and assessed all fees to defendants. Plaintiff then moved pursuant to CPLR 7511 to vacate the arbitration award, and defendants cross-moved pursuant to CPLR 7510 to confirm the arbitration award. Plaintiff now appeals from an order (October 2019 order) that denied plaintiff's motion to vacate and granted defendants’ cross motion to confirm.

We note, initially, that this appeal does not bring up for our review the April 2017 order, which effectively compelled arbitration (see generally Matter of Sanders Constr. Corp. [Becker], 292 A.D.2d 155, 155, 738 N.Y.S.2d 195 [3d Dept. 2002], lv denied 98 N.Y.2d 614, 751 N.Y.S.2d 168, 780 N.E.2d 979 [2002]; Matter of Allstate Ins. Co. [Schlueter] [appeal No. 2], 267 A.D.2d 1098, 1099, 701 N.Y.S.2d 682 [4th Dept. 1999]; Matter of Morrow [Paragon Enters.], 135 A.D.2d 931, 932, 522 N.Y.S.2d 333 [3d Dept. 1987]). Consequently, the only contentions properly before us are those relating to the October 2019 order.

Contrary to plaintiff's contention, the court properly denied her motion to vacate and properly granted defendants’ cross motion to confirm. Preliminarily, we reject plaintiff's contention that this case should be reviewed pursuant to a standard of review applicable where compulsory arbitration is provided by statute. Plaintiff was not compelled statutorily to arbitrate. Rather, she was compelled to arbitrate based on contract (see Mount St. Mary's Hosp. of Niagara Falls v. Catherwood, 26 N.Y.2d 493, 507, 311 N.Y.S.2d 863, 260 N.E.2d 508 [1970], rearg denied 27 N.Y.2d 737, 314 N.Y.S.2d 1029, 262 N.E.2d 683 [1970]; see also Matter of Fiduciary Ins. Co. v. American Bankers Ins. Co. of Florida, 132 A.D.3d 40, 45-46, 14 N.Y.S.3d 427 [2d Dept. 2015]).

“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” (Matter of New York State Correctional Officers & Police Benevolent Assn. v. State of New York, 94 N.Y.2d 321, 326, 704 N.Y.S.2d 910, 726 N.E.2d 462 [1999]; see Matter of Falzone [New York Cent. Mut. Fire Ins. Co.], 15 N.Y.3d 530, 534, 914 N.Y.S.2d 67, 939 N.E.2d 1197 [2010]; Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471, 479-480, 813 N.Y.S.2d 691, 846 N.E.2d 1201 [2006], cert dismissed 548 U.S. 940, 127 S.Ct. 34, 165 L.Ed.2d 1012 [2006]). 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” (New York State Correctional Officers & Police Benevolent Assn., 94 N.Y.2d at 326, 704 N.Y.S.2d 910, 726 N.E.2d 462; see Wien & Malkin LLP, 6 N.Y.3d at 479-480, 813 N.Y.S.2d 691, 846 N.E.2d 1201).

Although “judicial review of arbitration awards is extremely limited” (Wien & Malkin LLP, 6 N.Y.3d at 479, 813 N.Y.S.2d 691, 846 N.E.2d 1201), 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” (CPLR 7511 [b] [1] [iii]). 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 (see Falzone, 15 N.Y.3d at 534, 914 N.Y.S.2d 67, 939 N.E.2d 1197; Matter of New York City Tr. Auth. v. Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 N.Y.3d 332, 336, 812 N.Y.S.2d 413, 845 N.E.2d 1243 [2005]). An award is “irrational” where “there is no proof whatever to justify the award” (Matter of Professional, Clerical, Tech., Empls. Assn. [Board of Educ. for Buffalo City Sch. Dist.], 103 A.D.3d 1120, 1122, 959 N.Y.S.2d 310 [4th Dept. 2013], lv denied 21 N.Y.3d 863, 2013 WL 4563289 [2013] [internal quotation marks omitted]). Where, however, “an arbitrator offer[s] even a barely colorable justification for the outcome reached, the arbitration award must be upheld” (id. [internal quotation marks omitted]).

While “ ‘courts are obligated to give deference to the decision of the arbitrator ․ even if the arbitrator misapplied the substantive law’ ” (Schiferle v. Capital Fence Co., Inc., 155 A.D.3d 122, 125, 61 N.Y.S.3d 767 [4th Dept. 2017]), an arbitrator can exceed his or her power when he or she “manifestly disregard[s]” the substantive law applicable to the parties’ dispute (Wien & Malkin LLP, 6 N.Y.3d at 481, 813 N.Y.S.2d 691, 846 N.E.2d 1201). “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” (Schiferle, 155 A.D.3d at 127, 61 N.Y.S.3d 767 [internal quotation marks omitted]). 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’ ” (Whitney v. Perrotti, 164 A.D.3d 1601, 1602-1603, 85 N.Y.S.3d 289 [4th Dept. 2018]).

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 (see id. at 1602, 85 N.Y.S.3d 289). We have reviewed plaintiff's remaining contentions and conclude that none warrants modification or reversal of the order.