JUNIPER WALK CONDOMINIUM v. PATRIOT MANAGEMENT CORP (2004)

Plaintiff moves for an order vacating an arbitration award and restoring the action to the arbitration calendar.   The issues presented are twofold:  (1) where, as here, a party defaults at an arbitration hearing, what constitutes “good cause” for vacatur of an award and restoration to the arbitration calendar;  and (2) upon granting such a motion, may a court impose costs beyond those made mandatory by court rule.

This contract case was commenced to recover $3,260.00.   Since the demand for relief was less than $6,000.00, the matter was referred to mandatory arbitration (Uniform Rules for Trial Courts [22 NYCRR] § 28.2[b] ).  On the scheduled arbitration date, plaintiff's lawyer appeared without a witness and/or evidence in support of the claim.   As a result, the arbitrator dismissed the case.

In support of the motion, plaintiff submits the affidavit of its managing agent, an individual with personal knowledge of the facts.   It is alleged that on the arbitration date the managing agent was unexpectedly detained at the condominium complex due to broken water pipes and resulting water damage to the property.   The affidavit further avers that defendant, the former managing agent of the condominium complex, breached its contract by over billing plaintiff for certain expenditures related to photocopying, printing and postage.

The defendant opposes the motion, claiming that the action is “bogus” and further argues that counsel for defendant devoted five hours of time to a hearing which never occurred.   Specifically, the affirmation of defense counsel states that he spent two hours in preparation for the hearing, two hours commuting and one hour waiting for plaintiff's counsel to arrive at the location designated for arbitration of the claim.

In reply, plaintiff argues that its default was necessitated by an unforeseen emergency and that defense counsel's expenditure of time is either exaggerated and/or was unnecessary.

Uniform Rules for Trial Courts (22 NYCRR) § 28.7(a) provides as follows:

“Where a party fails to appear at the hearing, the panel shall nonetheless proceed with the hearing and shall make an award and decision, as may be just and proper under the facts and circumstances of the action, which may be entered as a judgment forthwith pursuant to section 28.11(b) of this Part. The judgment, if any, the default and the award may be vacated and the action may be restored to the arbitration calendar only upon order of the court where the action was commenced or, if the action was transferred, the court to which it was transferred, upon good cause shown.   Such order of restoration shall be upon condition that the moving party pay into the court an amount equal to the total fees payable by the administrative office for the courts to the panel.”

 Notwithstanding plaintiff's uncontested allegation that its lawyer appeared on the scheduled hearing date and supplied the arbitrator with pleadings and a bill of particulars, the Court finds that the absence of an authorized representative constitutes a default under 22 NYCRR § 28.7 (see Finamore v. Huntington Cardiac Rehabilitation Association, 150 A.D.2d 426, 427, 541 N.Y.S.2d 36 [2d Dept.1989] ).   Accordingly, the Court must determine whether plaintiff has demonstrated “good cause” to vacate the award and restore the action to the arbitration calendar.   An analysis of case law shows that interpretation and application of the “good cause” standard is less than uniform.

In the First Judicial Department, the Appellate Term has consistently held that a party seeking to vacate a default under 22 NYCRR § 28.7(a) must demonstrate both an excuse for the default and a meritorious cause of action or defense (see Edelman v. Akhverdiev, 2002 WL 31520416 [App. Term 1st Dept.];  Statom v. Lumbermans Mutual Casualty Co., 106 Misc.2d 442, 431 N.Y.S.2d 875 [App. Term 1st Dept.1980];  see also Chase Manhattan Bank v. Wolfman, 104 Misc.2d 973, 429 N.Y.S.2d 836 [Civ.Ct. Bronx Co.1980] ).   The same Court has also affirmed a decision vacating a default under 22 NYCRR § 28.7(a) where it was shown that the defendant actively participated in the litigation prior to the default, filed an answer and engaged in disclosure proceedings, and at no time exhibited an intention to abandon its defense.   The opinion further noted that the defendant's default did not result in appreciable delay or demonstrable prejudice to the plaintiff (see Matzkin Co., Inc. v. Pedersen Associates, Inc., 117 Misc.2d 109, 457 N.Y.S.2d 365 [App. Term 1st Dept.1982] ).   Notwithstanding the foregoing authority, at least one lower court in the First Judicial Department has held that a party seeking to vacate a default under 22 NYCRR § 28.7(a) need not establish a meritorious cause of action or defense (see Goldstein v. Fox, 175 Misc.2d 883, 670 N.Y.S.2d 652 [Civ.Ct. N.Y. Co.1997] ).

Reported decisions in the Second Judicial Department have given considerable attention to the “good cause” standard.   In Finamore v. Huntington Cardiac Rehabilitation Association, 150 A.D.2d 426, 427, 541 N.Y.S.2d 36 (2d Dept.1989) the plaintiff was not entitled to vacatur and restoration of an action to the arbitration calendar where the record was devoid of a “valid reason” for his failure to proceed.   See also Bitzko v. Gamache, 168 A.D.2d 888, 564 N.Y.S.2d 808 (3d Dept.1990)(“good cause” not shown where record fails to indicate a “valid reason” for defendant's failure to proceed with arbitration);  Martbeat Medical Supply, Inc. v. Geico Insurance Company, N.Y.L.J., January 17, 2003, at 23, col. 2 (Dist. Ct. Nassau Co.)(in order to establish “good cause,” a party must show a “valid reason” for the failure to proceed with arbitration).

Similarly, without expressly commenting upon the requirement of a showing of a meritorious cause of action or defense, the Appellate Division, Second Department has held that in order for a moving party to establish “good cause,” the proof must show that the default was excusable (Sassower v. Higbee, 96 A.D.2d 588, 465 N.Y.S.2d 280 [2d Dept.1983];  see also Schurmann v. Sayres, 2002 WL 1837898 [App. Term 9th & 10th Jud. Dists.][conclusory assertion that defendant's “responsibilities as such prevented [him] from appearing ․” insufficient to establish “good cause”] ).

However, in reversing an order which granted defendant's motion to vacate an arbitration award and restore the action to the arbitration calendar, the Second Department noted that the defendant, who was in default on the arbitration, failed to show a meritorious defense to the claim.   Citing CPLR 5015(a), the Court reaffirmed that proof of a meritorious cause of action or defense is “a requirement on any application to vacate a determination made upon a default.”  (Landa, Picard & Weinstein v. Ruesch, 102 A.D.2d 813, 476 N.Y.S.2d 383 [2d Dept.1984] ).

In contrast to Landa, Picard & Weinstein, one lower court in the Second Judicial Department has distinguished the requirements for vacatur of a default pursuant to CPLR 5015 and has held that a motion under 22 NYCRR § 28.7(a) need not demonstrate the existence of a meritorious cause of action or defense (see Polygon Co. Division of Plas-Steel Products v. Kotten Machine Company of Brooklyn, Inc., 106 Misc.2d 903, 433 N.Y.S.2d 400 [Dist. Ct. Suffolk Co.1980] ).

 Under the doctrine of stare decisis, a lower court must follow a decision of an Appellate Term to which an appeal from the former lies.  28 N.Y. Jur.2d Courts and Judges § 220.   Applying the foregoing principle of law, this Court is not bound to follow the decisions of the Appellate Term, First Department (see e.g.  People v. Furst, 1 Misc.3d 654, 765 N.Y.S.2d 753 [City Court of White Plains 2003];  People v. Pestana, 195 Misc.2d 833, 762 N.Y.S.2d 786 [Crim. Ct. N.Y. Co.2003];  Yellow Book of N.Y., L.P. v. Dimilia, 188 Misc.2d 489, 729 N.Y.S.2d 286 [Dist. Ct. Nassau Co.2001];  81 Franklin Co. v. Ginaccini, 149 Misc.2d 124, 563 N.Y.S.2d 977 [Civ.Ct. N.Y. Co.1990];  but compare Dolan v. Linnen, 195 Misc.2d 298, 753 N.Y.S.2d 682 [Civ.Ct. Richmond Co.2003][decision of the appellate term outside the lower court's judicial department is binding] ).   Nonetheless, the Court finds the Edelman and Statom decisions highly persuasive and adopts the “good cause” standard espoused therein.

 Moreover, in Landa, Picard & Weinstein the Appellate Division, Second Department has made clear that a showing of a meritorious cause of action or defense is a requirement on any application to vacate a determination made upon a default, including the dismissal of an action based upon a party's default at a compulsory arbitration hearing.   This case represents binding authority upon the Court (see Mountain View Coach Lines v. Storms, 102 A.D.2d 663, 476 N.Y.S.2d 918 [2d Dept.1984] ).

In view of the foregoing, the Court holds that the “good cause” standard set forth in 22 NYCRR § 28.7(a) requires that a moving party establish a reasonable excuse for the default and the existence of a meritorious cause of action or defense.   Upon the papers submitted, plaintiff has satisfied this burden.

Uniform Rules for Trial Courts § 28.7(a) requires that an order of restoration be conditioned upon the payment of an amount equal to the total fees paid by the administrative office for the courts to the arbitration panel.   Although cast in mandatory rather than discretionary terms, the Appellate Term, First Department has stated that the “court necessarily retains discretion, albeit a limited one, to waive the fee requirement where the court concludes that the default arose from circumstances beyond the defaulting party's control and to that extent was not a true default.”   (Brookman & Brookman, P.C. v. Shaheed, 136 Misc.2d 927, 929, 520 N.Y.S.2d 902 [App. Term 1st Dept.1987] ).

 While plaintiff's default appears to be unintentional and caused by a sudden event, the Court will abide by the plain meaning of 22 NYCRR § 28.7(a) and will direct plaintiff to pay the required fee.   Next, the Court must determine whether it has authority to impose additional costs and, if so, what amount is reasonable under the circumstances.

In Matzkin Co., Inc. defendant's motion pursuant to 22 NYCRR § 28.7(a) was granted upon the condition that defendant's attorney pay $450.00 in costs to the plaintiff.   This amount was upheld on appeal notwithstanding defendant's default being characterized as a “one-time transgression.”  Id. at 111, 457 N.Y.S.2d 365.   Similarly, the decision in Chase Manhattan Bank granted plaintiff's motion subject to the payment of $150.00 and the required fees to the administrative offices of the court.  Id. at 977, 429 N.Y.S.2d 836.   Likewise, in Lewis v. Miller, 111 Misc.2d 700, 705, 444 N.Y.S.2d 849 (City Court of Rochester 1981) a motion to vacate and restore an action to the arbitration calendar was granted on the condition that defendant post security in an amount equal to the extra expenses incurred by plaintiff for his expert witness' fees.

 The Court concludes that the mandatory fee requirement under 22 NYCRR § 28.7(a) does not bar or otherwise impact upon its authority to impose costs as compensation for expenses incurred by a non-defaulting party.

 There is no evidence to suggest that plaintiff's failure to appear was willful.   However, it still remains that plaintiff was in the best position to avoid its default and/or make alternate arrangements for its appearance at the arbitration hearing.   As such, reasonable costs in favor of the defendant are appropriate under the circumstances.   Indeed, any other result would cause the defendant to shoulder expenses incurred by no fault of its own.

Motion granted upon the condition that plaintiff pay defendant costs in the sum of $200.00.   Plaintiff shall also pay into court the fee paid by the administrative office for the courts to the arbitrator (22 NYCRR § 28.7 [a] ).

THIS DECISION CONSTITUTES THE ORDER OF THE COURT.

BRIAN HANSBURY, J.