68 N.Y.2d 225 | NY | 1986
OPINION OF THE COURT
In the circumstances of this case, the private communication between the arbitrator and one party-litigant, which
I.
In 1981, Abraham Goldfinger and Leo Lisker, both members of a trade organization called the Diamond Dealers Club (DDC), became embroiled in a controversy involving diamond transactions. Pursuant to the DDC bylaws,
Thereafter, Weinman, on his own initiative, and without the knowledge or consent of Lisker or the other arbitrators, engaged Goldfinger in conversation in an attempt "to force Mr. Goldfinger to break down and change his story”, and "to break Goldfinger down from his original claim” of $500,000, on the assumption that if Goldfinger in fact had refused a $70,000 settlement offer from Lisker, then Goldfinger would not "break down”. According to Weinman, Goldfinger remained steadfast, handling himself in Weinman’s words "to my satisfaction”. The Referee concluded that the communications between Weinman, Horowitz and Goldfinger, although they concerned the pendency of the hearing, did not concern the subject matter of the underlying dispute and therefore did not rise to the level of misconduct.
Lisker argues that Weinman pursued a private conversation with Goldfinger in part to test Goldfinger’s credibility and in part to evaluate the amount of Goldfinger’s claim in view of the conflicting evidence about who offered to settle the case with whom. Lisker maintains that the Referee erred in concluding that credibility of a party is not central to the su]b
II.
Our State has long sanctioned arbitration as an effective alternative method of settling disputes (CPLR art 75; Civ Prac Act art 84; Code Civ Pro, ch XVII, tit VIII; Rev Stat of NY, part III, ch VIII, tit XIV [1829]). Those engaged in commercial affairs have routinely resorted to arbitration for an expeditious resolution of their disputes by persons with a practical knowledge of the subject area (Matter of Siegel [Lewis], 40 NY2d 687, 689; Matter of Webster v Van Allen, 217 App Div 219, 221), and as long as arbitrators act within their jurisdiction, their awards will not be set aside because they have erred in judgment either upon the facts or the law (CPLR 7501; Matter of Silverman [Benmor Coats], 61 NY2d 299; Matter of Associated Teachers v Board of Educ., 33 NY2d 229; Fudickar v Guardian Mut. Life Ins. Co., 62 NY 392, 400). Courts are reluctant to disturb the decisions of arbitrators lest the value of this method of resolving controversies be undermined (Matter of Siegel [Lewis], 40 NY2d, at p 689, supra; Fudickar v Guardian Mut. Life Ins. Co., 62 NY, at p 400, supra). Precisely because arbitration awards are subject to such judicial deference, it is imperative that the integrity of the process, as opposed to the correctness of the individual decision, be zealously safeguarded.
Arbitration by its nature contemplates a less formal environment than the judicial forum (see, Matter of Silverman
Although courts generally will not interfere with the judgment of arbitrators, arbitration awards are not to be confirmed without question where there is evidence of misconduct prejudicing the rights of the parties. CPLR 7511 provides in pertinent part that an arbitration award shall be vacated if the court finds that the rights of the complaining party were prejudiced by corruption, fraud, or misconduct in procuring the award (see generally, Rothstein, Vacation of Awards for Fraud, Bias, Misconduct and Partiality, 10 Vand L Rev 813). While arbitrators often are chosen because of their expertise in a particular area (Matter of Siegel [Lewis], 40 NY2d, at p 690, supra; 8 Weinstein-Korn-Miller, NY Civ Prac [J 7506.18) and are generally permitted independent recourse to third-party sources when necessary to confirm technical information (Matter of Gerli & Co. v Heineman Corp., 258 NY 484, 488; Matter of A. M. Pearlman, Inc. [Raycrest Mills], 280 App Div 744, 749) or to further focus their expertise on a particular point, for an arbitrator to privately consult a party-litigant without the knowledge or consent of the other party to the proceeding raises serious concerns as to whether the award was procured by improper means.
While the bylaws of the DDC authorize arbitrators to "investigate the facts charged in the complaint”, it does not follow that the bylaws sanction the kind of private communications that occurred between Weinman and Goldfinger and Horowitz.
For the foregoing reasons, the order of the Appellate Division should be reversed, the motion to confirm the award denied, and the cross motion to vacate the award granted. Chief Judge Wachtler and Judges Meyer, Simons, Kaye, Titone and Hancock, Jr., concur.
Order reversed, with costs, motion to confirm the arbitration award denied, and motion to vacate the award granted.
. Article XII, § 1 (a) of the DDC bylaws provides in pertinent part that "[a]ny member having any claim arising out of or related to the diamond business * * * must submit to adjudication by the tribunals of Diamond Dealers Club”.
. In his cross motion to vacate the award, and in his brief to this court, Lisker alleges that the arbitrators were guilty of misconduct by engaging in private communications with Goldfinger, a party-litigant; by engaging in communications with various third parties in the absence of the party-litigants; by refusing to allow Lisker to present certain witnesses on the ground that they were his relatives or employees; by refusing to allow Lisker to transcribe the proceedings; and by allegedly violating the DDC bylaws by disregarding the applicable Statute of Limitations. We find the claim regarding the private communications to be dispositive and therefore need not consider the others.
. It is not clear from the record who approached whom. According to Goldfinger, Horowitz approached Weinman with the story as part of a plan orchestrated by Lisker himself. At the hearing before the Referee, Horowitz testified that Weinman and he found themselves coincidentally in an office they both frequented, and Weinman began talking about the difficulties of the arbitration which led to the complained of communication.
. Article XII, § 12 (a) of the DDC bylaws provides in pertinent part that the "Arbitration Committee, acting in each case, shall have the authority and power to investigate the facts charged in the complaint”.
. See, Matter of Siegel (Lewis), 40 NY2d 687; see, e.g., Code of Judicial Conduct, canon 3, which provides that a Judge should neither initiate nor consider ex parte or other communications concerning a pending or impending proceeding.
. It is instructive to note that in the news journal of the DDC for January 1982, the month following the month in which this award was issued, the chairman of the board of the DDC wrote an article condemning the kind of communications under consideration here as having the potential for distorting the impartiality of the arbitrator.