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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 26, 2021

Award Vacated Because it was Issued After the Deadline Set by the Parties

On June 11, 2021, Justice Platkin of the Albany County Commercial Division issued a decision in Matter of Papakonstadinou v. Sparakis, 2021 NY Slip Op. 50543(U), vacating an arbitral award because is was issued after the deadline set by the parties, explaining:

CPLR 7507 requires the arbitrator’s award to be issued within the time fixed by the agreement, or, if the time is not fixed, within such time as the court orders. The parties may in writing extend the time either before or after its expiration. A party waives the objection that an award was not made within the time required unless he or she notifies the arbitrator in writing of his or her objection prior to the delivery of the award to him or her.

Inasmuch as arbitration is a matter of contract, grounded in agreement of the parties, it always is open to the parties in any instrument to provide explicitly for modification or termination of their agreement to arbitrate.

Here, the Arbitration Stipulation did not fix any time for issuance of the award. But the Joint Letter, signed by each side’s attorney and appearing on their letterheads, constituted a conditional modification of the parties’ agreement to select Judge Conrad to arbitrate their dispute based on his delay in issuing an award.

Thus, the Joint Letter provided that if an award was not rendered by the November 15, 2020 deadline, the matter would be withdrawn from the Arbitrator’s consideration and the parties would proceed to re-arbitrate the case before a new arbitrator. Thus, the Joint Letter conditionally withdrew the matter from the Arbitrator, and after the November 15, 2020 deadline passed without issuance of an award, the withdrawal of jurisdiction from the Arbitrator became fully effective.

Because the Joint Letter constituted a mutual modification of the parties’ agreement to arbitrate before Judge Conrad, the Court rejects petitioners’ reliance on the unilateral letter of their counsel, dated November 6, 2020, wherein counsel expressed to the Arbitrator his clients’ willingness to extend the November 15, 2020 deadline to December 6, 2020 if the Arbitrator felt that still more time was needed to prepare a reasoned decision.

Nor is there merit to petitioners’ contention that respondents waived the November 15, 2020 deadline by failing to respond to their November 6, 2020 letter. The unilateral letter of petitioners’ counsel expressed petitioners’ willingness to agree to an extension if the Arbitrator felt he needed more time, but the Arbitrator did not respond to the letter or ask for more time. And once the parties’ jointly established deadline of November 15, 2020 passed without issuance of the award and the parties’ conditional agreement to divest the Arbitrator of jurisdiction became fully operative, respondents’ counsel immediately advised the Arbitrator that his clients considered the arbitration to have been terminated via the Joint Letter and requested the Arbitrator to stop working on the decision. Respondents restated this position again on November 17, 2020. There was no waiver.

The Court also rejects petitioners’ argument that the effect of the Joint Letter (and subsequent communications with the Arbitrator) is a matter for the Arbitrator, not the court. The cases relied upon by petitioners involve the arbitrability of questions with respect to the validity and effect of subsequent documents purported to work a modification or termination of the substantive provisions of the parties’ original agreements where the parties had assented to broad arbitration clauses.

In contrast, the parties’ subsequent agreement here, the Joint Letter, pertained only to arbitration, and it did not touch or implicate any of the substantive provisions of any alleged contract between the parties. As the subsequent agreement pertained solely to arbitration, determination of the legal effect of that agreement is for the court to determine.

Finally, petitioners argue that respondents have identified no prejudice from the 17-day delay between the November 15, 2020 date for the decision and its issuance on December 2, 2020.

The issue, however, is not the Arbitrator’s mere lateness in rendering an award. Rather, based on the Arbitrator’s persistent and unexplained delays in rendering an award, the parties lost confidence in whether the Arbitrator could provide them a full opinion explaining the reasoning for any award within an acceptable timeframe. For that reason, the parties jointly agreed to divest the Arbitrator of the power to decide their dispute unless he issued the award by November 15, 2020. After that deadline came and went without issuance of an award and respondents notified the Arbitrator and petitioners that they considered the arbitration to have been terminated in accordance with the Joint Letter, the Arbitrator exceeded his power by purporting to render a decision.

The Court therefore concludes that the Arbitrator’s decision must be vacated, and the matter must be remanded for hearing before another arbitrator.

(Internal quotations and citations omitted).

Commercial litigation involves more than courts. Disputes often are–by agreement–decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.

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