164 A.D.2d 817 | N.Y. App. Div. | 1990
Order and judgment (one paper) of the Supreme Court, New York County (Edward J. Greenfield, J.), entered on March 21, 1990, which denied petitioner’s application to confirm an arbitration award, granted respondent’s cross motion to vacate the award, directed the parties to proceed to arbitration before a different panel of arbitrators and dismissed the petition, is unanimously affirmed, with costs and disbursements.
Respondent and petitioner’s predecessor entered into an agreement pursuant to which a solid waste incinerator facility would be constructed, and respondent would deliver solid waste to the facility for a period of 20 years. The contract provides that respondent pay a "tipping fee” for each ton of solid waste delivered for processing, the amount to be calculated annually by means of a formula set forth in the agreement. In addition, a cap is placed on the tipping fee equal to 94% of said fee "charged to outside users during the same
In January of 1988, petitioner offered calculations as to the tipping fee without making reference to that of the Town of Hempstead. Respondent protested on the ground that the calculations far exceeded the 94% of the Town of Hempstead tipping fee charged to municipalities located within the town’s geographical boundaries and thereafter paid petitioner a lower amount. When negotiations failed to resolve the dispute, petitioner demanded arbitration and compensatory damages of $343,358.84 plus interest, alleging that it was entitled to payment in full on its invoices as charged. Moreover, it sought a declaration that the Town of Hempstead’s transfer stations were closed to "outside users of [respondent’s] class” and, since the Town of Hempstead no longer permitted municipalities outside its political jurisdiction to use its transfer stations, that the cap provision was inapplicable. Respondent answered and asserted various defenses, including, in part, that the claims were not arbitrable.
Respondent thereafter commenced a special proceeding to stay arbitration, which was subsequently dismissed as untimely (City of Long Beach v Catalyst Waste-to-Energy Corp., 144 Misc 2d 119). The parties then proceeded to arbitration before three arbitrators, none of whom had been appointed by them. At a preliminary hearing, the arbitrators ruled that there were arbitrable issues and directed the parties to proceed with an evidentiary hearing. A prearbitration order listed three questions to be decided: (1) whether the issues presented were arbitrable, (2) whether the Town of Hemp-stead transfer station was closed to "outside users of [respondent’s] class”, and (3) the relief or damages to which petitioner was entitled.
Four evidentiary hearings were conducted. Prior to the first, it was agreed that the arbitrators would be paid $500 for each hearing day after the first. Petitioner presented its case during the first two days. Before the third day of hearings, the arbitrators sought an increase in daily fees to $2,000 each per day. The request was presented by the AAA Tribunal Admin
On the fourth day of the evidentiary hearings, petitioner brought in a rebuttal witness and also recalled a witness to testify with respect to "bulk waste”. Respondent complained that the topic was outside the scope of the prearbitration order but the testimony was, nonetheless, admitted. Respondent now urges that one of the arbitrators stated that it would be an improvident use of time to introduce evidence concerning this issue since the amount involved was minor in comparison to the main claim, suggesting that the parties settle this matter without an additional hearing. Respondent then stipulated to certain deliveries of miscellaneous waste. After the fourth hearing had been completed, the Director telephoned petitioner’s attorney and requested that the latter’s client agree to a $700 per day increase for each arbitrator. Petitioner did so, and the understanding was set forth in a letter dated July 20, 1989, which writing also declared that the arbitrators would not be told about the source of the fees. Respondent only learned of this agreement as a result of its cross motion in the Supreme Court to vacate the arbitration award.
Submissions were thereafter presented. Petitioner asserted its current claim in a letter dated August 18, 1989. The ensuing unanimous award gave petitioner the amount asked for in the letter and directed the parties to pay fees, expenses and compensation, including the arbitrators’ increases, in equal shares. Petitioner subsequently moved to confirm the award. Respondent cross-moved to vacate pursuant CPLR 7511 (b) (1), contending that there had been misconduct in the
On appeal, petitioner asserts, in part, that the demand for additional compensation and the ex parte communications did not constitute prejudicial misconduct. In that regard, while a request for additional compensation is not misconduct per se, "this practice is contrary to public policy and should not be sanctioned. Parties should not be placed in a position where they feel compelled to accede to the demands of the arbitrators for fear of adverse consequences” (Matter of Double-M Constr. Corp. v Central School Dist. No. 1, 61 AD2d 982, 983, lv denied 45 NY2d 709). This is especially the situation where, as herein, the request was conveyed prior to the completion of evidentiary hearings (see, Matter of Fischer [Queens Tel. Secretary], 106 AD2d 314). Further, the ex parte communications between the parties and the arbitrators violated AAA rules forbidding such direct contacts and warranted vacatur of the award (see, Matter of Goldfinger v Lisker, 68 NY2d 225). Notwithstanding petitioner’s assertion that there is no indication of prejudice, the actions of the arbitrators herein give the appearance of impropriety (see, Matter of Elia Bldg. Co. [County of Niagara], 8 AD2d 684). It is only necessary to demonstrate the potential for bias to find misconduct (see, Matter of Stevens & Co. [Rytex Corp.] 41 AD2d 15, 18, affd 34 NY2d 123). As was aptly observed by Justice Kassal, concurring in Matter of Fischer (supra, at 315-316), "basic, fundamental principles of justice require complete impartiality on the part of the arbitrator and mandate that the proceedings be conducted without any appearance of impropriety”. Concur— Murphy, P. J., Ross, Milonas, Kassal and Wallach, JJ.