Challenging Construction Arbitration Awards in New York

Arbitration is an established alternative to court litigation in construction disputes. Challenging an unfavorable construction arbitration award is so difficult that homeowners may wish to give serious thought before submitting their disputes with contractors to arbitration. Courts give great deference to the decisions of arbitrators, refusing to review arbitration awards even for errors of law or fact.[1] There are few exceptions to this rule, and courts only invoke them in rare circumstances.

Under New York law, a construction arbitration award can be vacated for (1) corruption, fraud or misconduct in procuring the award, (2) partiality of the arbitrator, (3) the arbitrator exceeding his power, or (4) failure to follow the procedures of CPLR Article 75.[2] New York courts have also found that an arbitration award should be vacated if “it violates public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.”[3] To emphasize how rarely the courts vacate an arbitration award, only one case I reviewed in preparation for this article overturned the challenged arbitration award.

Construction Arbitration Case Study

In the Matter of Omega Contracting, Inc. v. Maropakis Contracting, Inc., the court found that an arbitrator had abused his discretion when he refused an adjournment, and one of the parties was consequently prevented from presenting crucial evidence.[4] In every other instance, the court refused to vacate the award regardless of its underlying merits.

A prime example of the injustice that may be worked by this standard is the all-too-common situation when a contractor employed by a homeowner turns out to be unlicensed. While strong public policy precludes an unlicensed home improvement contractor from collecting from homeowners, the deferential standard of judicial review of arbitration awards allows for judgments that arguably violate that public policy.

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One case on point is the Matter of Hirsch Construction Corp. v. Anderson, in which a homeowner sought to vacate an arbitration award in favor of a contractor whose license had temporarily lapsed during construction.[5] The homeowner argued that the amount awarded by the arbitrator included payment for work performed when the contractor was unlicensed, but the court refused to delve into the facts of the case and confirmed the construction arbitration award.[6] Since the arbitration award did not say in so many words that the award included monies sought for the time during which the contractor was unlicensed, the court could not inquire further, regardless of any evidence that the homeowner might have presented to the court.

Cases such as Hirsch caution that, for all its benefits, arbitration may not suit homeowners in all situations. Keeping in mind the difficulty of vacating an unfavorable award, special care and consultation with experienced construction law counsel are necessary before homeowners agree to arbitration and in selecting an arbitrator and bringing a case through arbitration.

John Caravella, Esq

John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608-1346.

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[1] Matter of Matra Building Corp. v. Kucker, 2 A.D.2d 732, 734 (2d Dep’t 2003).
[2] CPLR § 7511(b).
[3] Matter of Sheriff Officers Assn., Inc. v. Nassau County, 113 A.D.3d 620, 621 (2d Dep’t 2014) (quoting Matter of Shenendehowa Cent. Sch. Dist. Bd. of Educ. [Civil Servs. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO, Local 864] 20 N.Y.3d 1026, 1027 [2013]).
[4] 160 A.D.2d 942, 943 (2d Dep’t 1990).
[5] 180 A.D.2d 604, 604 (1st Dep’t 1992).
[6] Id. at 604-05.

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