BILL NUMBER: S2396

SPONSOR: HOYLMAN
 
TITLE OF BILL:

An act to amend the civil practice law and rules, in relation to vacat-
ing arbitration awards on the basis of arbitrator disregard of the law

 
PURPOSE OF BILL:

To permit an arbitration award to be vacated as a result of an
arbitrator's manifest disregard of the law.

 
SUMMARY OF PROVISIONS OF BILL:

This bill would add a new subdivision to CPLR 7511, which would permit
an arbitration award to be vacated due to arbitral manifest disregard of
law.

 
JUSTIFICATION:
              

Under existing law, an arbitration award can be vacated if "completely
irrational", a high standard for the losing arbitral litigant to over-
come. As noted by Professor Siegel, even an arbitrator's "manifest
disregard of the law" is not a basis for vacating an award in New York
State. New York Practice, Firth Edition, Sec. 602. While arbitration can
be a useful tool for persons to settle disputes in a more timely and
cost-effective way, such resolutions should not be totally divorced from
applicable standards of law.

Thus, a measured and prudent way in which arbitrators should be required
to reasonably follow applicable legal standards in resolving disputes
would be permit awards to be vacated if arbitrators evidence a "manifest
disregard of the law".

This standard has been used in federal practice for many years as a
basis to vacate arbitration awards. In fact, the Circuit Court of
Appeals, Second Circuit has well-honed this standard as follows:

"...first, whether the governing law alleged to have been ignored by the
arbitrators was well defined, explicit, and clearly applicable, and,
second, whether the arbitrator knew about the existence of a clearly
governing legal principle but decided to ignore it or pay no attention
to it".

Schwartz v. Merrill Lynch & Co., Inc., 665 F. 3d 444 (2011).

In setting such a clear standard of law for the vacating of arbitration
awards, this bill would provide greater clarity to the Courts in deter-
mining whether an award would be subject to vacatur due to failure to
follow applicable law. Such a standard would also compel arbitrators to
make a good faith and reasonable attempt to follow provisions of
substantive law, which they presently are not required to do.

 
LEGISLATIVE HISTORY:

2017-18: S.6060 (Avella) - Died in Codes

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law.