Opinion
SCK 8129/2007.
Decided July 15, 2008.
Lopez Romero Montelione, P.C., Richard J. Montelione, Esq., Attorneys for Claimant, New York, NY.
Novitt, Sahr Snow, LLP, Jeffrey A. Payne, Esq., Attorneys for Defendant, Kew Gardens, NY.
In this small claims action, claimant Clement McCalman ("claimant") moves to vacate the judgment of the arbitrator which dismissed his breach of contract claim against defendant 745 Owners Corp. ("defendant"). Claimant contends that the arbitration award must be vacated because (1) the parties failed to give their written consent to have the arbitrator adjudicate the matter, as required by 22 NYCRR 208.41 [n] [2]; (2) the claimant was denied due process of law because the arbitrator had previously been removed from a fiduciary appointment as a guardian ad litem and because the arbitrator was not familiar with what claimant describes as "rudimentary concepts of law"; and (3) public policy requires that cooperative corporations like the defendant not be permitted to unilaterally change sublease agreements. Defendant opposes the motion in all respects.
22 NYCRR 208.41 [n] [2] provides that where a small claims controversy is submitted to arbitration "the parties shall sign a consent which shall contain the name of the arbitrator, a brief recital of the nature of the controversy to be determined, a statement that they will abide by these rules, and an affirmation that the decision of the arbitrator is final and that no appeal shall lie from the award. The consent must be filed with the clerk of the small claims part." The consent to arbitration is found on the back of the court's case record card which contains spaces for the signatures of the parties and their attorneys, if the parties are so represented. The case record card for the instant action does not contain the signatures of either the parties or their attorneys. The case record card was signed by the arbitrator.
According to the Appellate Term, First Department, the purpose of the court rule requiring parties to consent to arbitration in writing "is to ensure that lay persons understand that they are waiving" their right to have a record made and to take an appeal of the arbitrator's decision and to formally memorialize that waiver ( DeLeon v Katz, 124 Misc 2d 1064, 479 NYS2d 935 [App Term, 1st Jud Dist 1984]). The court went on to state that "in the situation where the consent card is not signed, and there are conflicting accounts as to whether appropriate notice of the arbitration rules was given, the requirement of the court rule should be respected and any doubt resolved in the favor of the party whose consent was not obtained" ( Id.).
The rationale for the court rule described by the Appellate Term in DeLeon v Katz does not apply to the facts of this case. Unlike the claimant in DeLeon, who appeared pro se, and the defendant, who appeared by a nonattorney representative, both parties to the instant small claims arbitration were represented by counsel. Moreover, the nonattorney representative who appeared on defendant's behalf in DeLeon stated in an affidavit that he was not told that by appearing before an arbitrator he was waiving the defendant's right to a trial by the court. Here, claimant's attorney concedes in his affirmation that both he and his client were orally informed at the beginning of the arbitration hearing that the arbitrator's determination could not be appealed. Therefore, because there are no conflicting accounts as to whether proper notice of the arbitration rules was given to the parties prior to the commencement of the arbitration hearing, and because the parties were represented by counsel and therefore did not appear as lay persons, the fact that 22 NYCRR 208.41 [n] [2] was not complied with is not a sufficient basis to vacate the arbitrator's award.
With respect to claimant's contention that his due process rights were violated because the arbitrator was previously removed as a guardian ad litem in an unrelated Housing Court matter for what the Housing Court characterized as a "shocking and unconscionable" failure to protect his ward ( New York City Housing Authority v Maldonado, NYLJ, Apr. 13, 2005, at 9, col 3 [New York City Civil Court, Bronx County, Madhaven, J.]), CPLR § 7511 [b] [1] [i] and [ii] provides that an arbitration award may be vacated upon a showing that the award was procured through "corruption, fraud or misconduct" or upon a showing of partiality of the arbitrator. Claimant's attorney has made no allegation that the arbitration award was procured by corruption or fraud on the part of the arbitrator nor has any showing be made that the arbitrator acted partially in dismissing claimant's claim. Instead, claimant's attorney seems to imply that because the arbitrator was previously removed as a guardian ad litem, the arbitrator's hands are forever unclean and any matter in which the arbitrator becomes involved is necessarily tainted. Such an implication is of course nonsense and will not be countenanced by this court. Claimant's conclusory contentions that the arbitrator was incapable of grasping common concepts of contract law and lacked the basic skills of an attorney are also unpersuasive. The members of the New York State Bar who volunteer to assist the Civil Court by hearing and disposing of many of the cases on the Small Claims calendar provide an invaluable service to both the court and the public and do not deserve to have their character or their professional abilities called into question.
In support of his contention that the arbitration award should be set aside on public policy grounds, claimant relies on Board of Directors of Woodmont Homeowners Assn. v Gallego, 2006 NY Slip OP 51121[U] [Civil Court, Richmond County] for the proposition that an arbitration award may be set aside where public policy would be adversely impacted if the award were allowed to stand. In Board of Directors of Woodmont Homeowners Assn. v Gallego the claimant homeowners association commenced suit against the defendant alleging that defendant owed common area charges and dues. The parties elected to submit their controversy to arbitration. After a hearing on the merits the arbitrator rendered a decision in favor of the defendant dismissing the case. In vacating that determination, the Civil Court held that because the arbitrator's decision allowed the defendant to escape liability for common charges it had an adverse impact on individuals who were not parties to the action, i.e., other unit owners, since the arbitration award constituted a re-writing of the offering plan, declaration and by-laws and altered the rights of the other unit owners without giving them notice or having them participate in the litigation. Claimant contends that if the instant arbitration award is carried to its logical extreme, it could only lead to the cooperative corporation unilaterally changing its contracts to the detriment of its shareholders and that public policy therefore requires that it be vacated. However, unlike the tangible affects the arbitration award in Board of Directors of Woodmont Homeowners Assn. v Gallego had on a tangible class of individuals, the instant arbitration award affects only the rights of the claimant. It does not alter in any way the legal relationship between the nonparty shareholders and defendant cooperative corporation and would not have res judicata effect on any lawsuit brought by another shareholder against the cooperative for breach of a sublease agreement. The public policy to be given priority here is New York's long and strong public policy favoring arbitration ( Smith Barney Shearson, Inc. v Sacharow, 91 NY2d 39, 49, 689 NE2d 884, 666 NYS2d 990). This "prudent and progressive" ( id.) policy is the reason "courts interfere as little as possible with the freedom of consenting parties' to submit their disputes to arbitration" ( id. quoting Matter of 166 Mamaroneck Ave. Corp. v 151 E. Post Rd. Corp., 78 NY2d 88, 93, 575 NE2d 104, 571 NYS2d 686). The parties to the instant arbitration, both of whom were represented by counsel, were informed orally at the outset of the proceeding of the rules regarding the arbitration of small claims cases. The parties and their attorneys consented to those rules and knowingly relinquished their rights to a trial by the court and to an appeal by going forward with the arbitration hearing. Under the circumstances specific to this case, claimant will not be heard to say that his rights were prejudiced by the fact that the case record card was not signed by the parties or their attorneys.
Accordingly, claimant's motion to vacate the arbitration award dismissing his claim is denied.
This constitutes the decision and order of the Court.