Schiferle v. Capital Fence Co., Inc.
155 A.D.3d 122
| N.Y. App. Div. | 2017Background
- Plaintiff (William Schiferle) sued his brother's company, Capital Fence Co., for unpaid commissions and a Labor Law article 6 wage claim; the case was pending in Supreme Court.
- Parties agreed to binding arbitration pursuant to CPLR Article 75 and signed an arbitration agreement that included paragraph 9 addressing fees: parties bear their own costs, but the arbitrator could award Labor Law §198 attorney's fees to plaintiff.
- The arbitrator awarded plaintiff $40,942.54 in unpaid commissions, denied pre-award interest, and declined to award attorney's fees.
- Plaintiff moved to vacate/modify the arbitration award arguing the arbitrator ignored mandatory §198 attorney’s fees and CPLR pre-judgment interest; Supreme Court denied the motion.
- On appeal, the Fourth Department considered whether a wage claimant can waive §198 attorney’s fees and whether the arbitrator exceeded power, violated public policy, or manifestly disregarded the law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitrator exceeded a contractual limitation by treating §198 fees as discretionary | The arbitration clause did not permit discretion; arbitrator ignored the agreement and denied mandatory fees | Paragraph 9 expressly allowed the arbitrator discretion and preserved a possible §198 award; arbitrator complied with the contract | Denied — the agreement unambiguously gave the arbitrator discretion; no contractual limit exceeded |
| Whether denying §198 fees contravened strong public policy protecting wage claimants | Schiferle: §198 automatically entitles prevailing wage claimants to fees; refusal violates public policy and undermines Article 6 | Capital Fence: plaintiff waived §198 fees in the arbitration agreement; enforcing the waiver does not offend public policy here | Denied — waiver of §198 fees is permissible; enforcement here did not violate public policy given voluntary, retrospective bargain between parties |
| Whether the arbitrator manifestly disregarded well‑defined law (§198) by denying fees | Arbitrator ignored clear statutory mandate for fees under §198 | Arbitrator acted consistently with parties’ waiver and contractual discretion; no manifest disregard of an unwaived right | Denied — no manifest disregard because the statutory right had been validly waived in the arbitration agreement |
Key Cases Cited
- Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471 (N.Y. Ct. App.) (arbitral awards entitled to judicial deference; manifest disregard standard discussed)
- Matter of New York City Tr. Auth. v. Transport Workers' Union of Am., 6 N.Y.3d 332 (N.Y. Ct. App.) (arbitrator exceeds power if transgressing specific contractual limits)
- Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (U.S.) (arbitrator cannot impose class arbitration where bilateral agreement exists; discussion of arbitrator power)
- Matter of New York State Corr. Officers & Police Benevolent Assn. v. State of New York, 94 N.Y.2d 321 (N.Y. Ct. App.) (award violative of public policy will be vacated)
- DeGaetano v. Smith Barney, Inc., 983 F. Supp. 459 (S.D.N.Y.) (refused to enforce arbitration fee waiver made a condition of employment; public‑policy concern about effective vindication of statutory rights)