From Casetext: Smarter Legal Research

Phoenix Mar. Co., Inc. v. New York City Tr. Auth.

Supreme Court of the State of New York, New York County
Jun 16, 2004
2004 N.Y. Slip Op. 50881 (N.Y. Sup. Ct. 2004)

Opinion

102708/04.

Decided June 16, 2004.


Petitioner, Phoenix Marine Co, Inc., d/b/a Phoenix Marine, entered into a construction contract with respondent, New York City Transit Authority (NYCTA) in November 1999. The contract in question involves work on the Rockaway Viaduct. Due to unanticipated conditions, modifications were necessary. Both parties agreed that petitioner would make the modifications for the sum of $2,400,000, but thereafter, respondent deducted $1,939,000 from that amount as an offset for other work under the contract which it had cancelled. Petitioner alleges that this offset left it uncompensated, in the amount of $508,705, for overhead costs that were incorporated into the price of the cancelled work and were, therefore, still due to petitioner. For this reason, petitioner objected to this deduction and, when the parties' attempt to negotiate failed, the parties submitted to arbitration pursuant to the contract between them.

Following a hearing, in a decision dated June 23, 2003, the arbitrator awarded petitioner $508,705 in overhead costs. On August 15, 2003, respondent requested the opportunity to reargue before the arbitrator. Respondent asserted that the arbitrator's award of overhead costs to petitioner was improper because it was unsupported by sufficient documentation of those costs. Respondent also asserted that, once the arbitrator found respondent liable to petitioner, the issue of damages should have been submitted to the project's engineer pursuant to the parties' contract.

The arbitrator requested that the petitioner submit a response regarding respondent's request for reargument and the petitioner, in a letter dated September 9, 2003, asked the arbitrator to reject the request on the ground that the arbitrator's award of June 23, 2003 is final and binding, as per Art. 8.03(c) of the contract. Petitioner also asserted that Art. 8.03(c) of the contract requires that any claim arising under the contract must be submitted to the arbitrator "within the time specified in the contract or, if no time is specified, within ten (10) days of the determination which is the subject of the dispute." Respondent's request for reargument was submitted 53 days after the arbitrator's decision.

On October 27, 2003, the arbitrator held a hearing regarding respondent's request for reargument. Petitioner again asserted that the decision of June 23, 2003 was final and binding.

Thereafter, in a letter dated January 15, 2004, the arbitrator requested that petitioner submit additional documentation "of overhead and any other expenses or costs which it believes are recoverable as a result of NYCTA's breach . . . of the Contract." In the same letter, the arbitrator informed the parties that she would be consulting with an auditor from the Division of Audit Services of the MTA to assist her review of the award granted in her June 23, 2003 decision. By Order to Show Cause dated February 23, 2004, petitioner moved for an order confirming the arbitration award of June 23, 2003, as well as a temporary restraining order, preliminary and permanent injunction enjoining respondent from "attempting or continuing to attempt to seek reconsideration, re-argument or rehearing of the merits underlying the Arbiter's award."

Courts are required to review arbitration awards with a great deal of deference for the artibitrator's decision: The resolution of a dispute properly submitted to arbitration will not so readily be disturbed by the courts. Indeed, an arbitrator's interpretation of the parties' contract is impervious to judicial challenge even where 'the apparent, or even the plain, meaning of the words' of the contract has been disregarded. . . . The arbitrator's determination may even entail a misapplication of substantive rules of law and still be not subject to being vacated unless the court concludes that it is totally irrational or violative of a strong public policy.

Maross Constr. v. Cent. Regional Transp., 66 N.Y.2d 341, 346 (1985) (internal citations omitted). See also CPLR § 7510; Engel v. Refco, Inc., 193 Misc.2d 91, 105 (Sup.Ct. N.Y. Cty. 2002). Here, the arbitrator rendered a decision, on June 23, 2003, which was based upon an interpretation of the parties' contract that favored petitioner. Notwithstanding respondent's attempt to characterize that decision as merely an "initial determination," Articles 8.03(c) and 8.06 of the parties' contract specify, respectively, that "[t]he decision of the Arbiter shall be final and binding on both parties," absent a judicial determination that the arbitrator's decision was "arbitrary, capricious or [lacking in] a rational basis." As the arbitrator's decision was based upon a hearing at which both parties had the opportunity to present evidence, and the decision itself reflects the arbitrator's careful consideration of the arguments made, there is no basis warranting vacatur of the arbitrator's decision of June 23, 2003.

"[A]n agency action is final when the decisionmaker arrives at a 'definitive position on the issue that inflicts an actual, concrete injury.'" Stop-the-Barge v. Cahill, 1 N.Y.3d 218, 223 (2003) ( citing Essex County v. Zagata, 91 N.Y.2d 447, 453 [1998]).

Respondent's argument, that it declined to submit evidence to the arbitrator as to damages because the contract required the arbitrator to submit the question of damages to the project's engineer in the event she found respondent liable, is contradicted by the contract itself. Article 8.03(b)(2), which provides the details for dispute resolution procedures following the engineer's initial decision, specifies that "except where the parties agree to elect resolution . . . [of the dispute] by the Chief Engineer, the parties hereby authorize the Authorities Contractual Disputes Review Board (CDRB) to render a final and binding decision". . . . This provision neither requires nor authorizes the arbitrator to refer the damages issue back to the engineer for final determination. Furthermore, the arbitrator's decision clarifies that it is this subdivision of the contract under which she rendered her decision, and not Article 8.03(b)(1), which provides for "final and binding" decision by the Chief Engineer as to disputes which are "in whole or primary part . . . technical issue(s)." The fact that respondent did not submit evidence to the arbitrator does not support a finding that the arbitrator's decision was arbitrary, capricious, or without a rational basis.

Thus, the question at bar is whether, and when, it is within an arbitrator's power to modify its own "final and binding" decision. In that regard, it is significant that the only contract provision which might arguably provide respondent with a clearly-defined right to submit a reargument motion to the arbitrator is Article 8.03(c), which requires that disputes here, a dispute over the arbitrator's award be initiated by a written request for arbitration within ten days of the "determination which is the subject of the Dispute." Under this clause, however, respondent's submission of a reargument request, 53 days after the arbitrator had rendered her decision, was untimely.

Moreover, to the extent that this arbitration is governed by Article 75 of the CPLR, respondent's motion for reargument was similarly untimely, as CPLR § 7509 requires that all requests for modification of arbitration awards be presented within twenty days after the decision.

Respondent argues that the procedure for dispute resolution outlined in the contract is something other than an arbitration procedure and is not, therefore, governed by Article 75 or, presumably, its 20-day time limit on requests to modify an award. In support of this argument, respondent notes that Article 8.06 of the contract provides that "[a]ny final determination of the Arbiter with respect to a Dispute initiated pursuant to Article 8.03 shall be subject to review solely in the form of a challenge . . . under Article 78 of the New York Civil Practice Law and Rules". . . . Respondent's argument, however, is unavailing.

First, the alternate dispute resolution clause found in the NYCTA's contracts has already been defined as a compulsory arbitration clause. See, e.g., Westinghouse Elec. Corp. v. New York City Transit Auth., 82 N.Y.2d 47 (1993); Lovisa Constr. v. Metropolitan Transp. Auth., 225 A.D.2d 740, 741 (2nd Dept. 1996). The Court of Appeals has found that, in compulsory arbitration cases, CPLR article 75 is not superseded by Article 78, but incorporates the Article 78 "arbitrary and capricious" standard of review as one of the bases for vacatur of an award. Petrofsky v. Allstate Ins. Co., 54 N.Y.2d 207, 211 (1981).

As noted above, respondent did not meet either the 10-day time limit in the parties' contract, or Article 75's 20-day time limit for requesting modification of an arbitration award.

Moreover, even if Article 78's more liberal time limits applied to respondent's request for reargument, respondent has failed to so move within four months of the arbitrator's decision, see Article 78 and CPLR § 217(1) and would, therefore, be time-barred under Article 78, as well, from seeking reargument of the arbitration award.

Even if the contract contained some ambiguity regarding the arbitrator's authority to entertain a motion for reargument, such ambiguity must be construed against the NYCTA as drafter of the contract. See 151 West Assoc. V. Printsiples Fabric Corp., 61 N.Y.2d 732, 732-33 (1984). Had the NYCTA wished to ensure the arbitrator's authority to hear reargument as to decisions otherwise labelled, within the contract, as "final and binding," it was incumbent upon the NCYTA to include such an explicit provision in the contract. "A court may not rewrite into a contract conditions the parties did not insert or, under the guise of construction, add or excise terms." Marine Associates, Inc. v. New Suffolk Dev. Corp., 125 A.D.2d 649, 652 (2d Dept. 1986) (emphasis supplied) ( citing Slatt v. Slatt, 64 N.Y.2d 966 (1985) (other citations omitted).

The purpose of arbitration is to avoid protracted litigation. To permit reargument of the arbitrator's decision in the absence of an explicit contractual agreement between the parties to do so would thwart that purpose. See Instituto de Resseguros do Brasil v. First State Ins. Co., 221 A.D.2d 266, 267 (1st Dept. 1995). Consequently, in the absence of a timely motion to vacate the arbitration award pursuant to CPLR § 7509, or to challenge the arbitration award under Article 8.03(c) of the contract itself, and absent any proof that the arbitrator's decision of June 23, 2003 was arbitrary or capricious, or otherwise irrational, this court defers to that decision and confirms the arbitration award.

Accordingly, it is

ORDERED that the motion to confirm the arbitration award of June 23, 2003 is hereby granted, upon proof by affirmation of petitioner's counsel that the arbitrator has received notice of this decision by service of a copy of this order; and it is further

ORDERED that respondent is enjoined from further seeking review of the arbitration award of June 23, 2003 by motion to reargue before the arbitrator.

This shall constitute the decision and order of the court.


Summaries of

Phoenix Mar. Co., Inc. v. New York City Tr. Auth.

Supreme Court of the State of New York, New York County
Jun 16, 2004
2004 N.Y. Slip Op. 50881 (N.Y. Sup. Ct. 2004)
Case details for

Phoenix Mar. Co., Inc. v. New York City Tr. Auth.

Case Details

Full title:PHOENIX MARINE CO., INC., D/B/A PHOENIX MARINE Plaintiff, v. NEW YORK CITY…

Court:Supreme Court of the State of New York, New York County

Date published: Jun 16, 2004

Citations

2004 N.Y. Slip Op. 50881 (N.Y. Sup. Ct. 2004)

Citing Cases

Excel Group v. New York City Transit Authority

" Pursuant to article 8.03, technical disputes were to be referred to the defendant's "Chief Engineer" and…

Excel Group v. New York City Transit Auth

" Pursuant to article 8.03, technical disputes were to be referred to the defendant's "Chief Engineer" and…