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Current Developments in the Commercial Divisions of the
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Posted: December 6, 2015

Arbitration Award Affirmed Because its Legal Analysis Was At Least Barely Colorable

On November 24, 2015, the First Department issued a decision in Matter of Esrey v. Ernst & Young, L.L.P., 2015 NY Slip Op. 08632, affirming an arbitration award based on its finding that the legal analysis in the arbitrators’ award was at least barely colorable, explaining:

The court properly found that the arbitration panel’s decision to enforce the provision of the letter agreement between the parties, which limited the prevailing parties’ damages to the actual damages suffered, did not evince a manifest disregard of the law, which requires a court to find both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case. Here, the panel, while correctly declining to enforce the provision of the agreement that would have limited petitioners to the fees they paid to respondent, distinguished the provision that limited the prevailing party to actual damages, on the ground that the actual damages, as measured by the reduced prejudgment interest in this case, fully compensated petitioners. The panel’s analysis distinguishing the actual-damages provision, was, at least, a barely colorable justification for the outcome reached.

(Internal quotations and citations omitted) (emphasis added).

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