One Danger of Challenging an Arbitration Award in New York
Image: Stuart Miles/FreeDigitalPhotos
If you lost at arbitration and think there's nothing to lose by challenging the award, think again.
At least that's the message coming from New York's Federal courts as of late. Apparently, you run the risk of getting sanctioned, and assessed the other side's legal fees incurred in having to oppose the motion - at least according to the attorneys on the receiving end of those sanctions.
But let's not be alarmists; the reason that the Federal courts have awarded sanctions is because they believed the motions made in some of these cases were completely without merit. To that end, 28 U.S.C §1927 provides: "Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct."
A word of caution is in order here: courts may be more apt to find these motions "frivolous" in the context of motions to vacate awards post- arbitration than elsewhere for a fairly simple reason: the standard for vacating the award is very difficult to achieve.
For example, New York law is clear that unless the agreement to arbitrate provides to the contrary, arbitrators are not bound by principles of substantive law or by the rules of evidence, but may do justice as they see fit, applying their own sense of law and equity to the facts as they find them to be. Brown & Williamson Tobacco v. Chesley, 7 AD3d 368, 372 (1st Dept. 2004). As another appellate court stated, "A court should not set aside an arbitrator's award for errors of law or fact unless that award is so irrational that vacatur must result." Matter of Empire Mut. Ins. Co. v. Jones, 151 A.D.2d 754 (2d Dept.1989).