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Gary T dayOctober 17, 2019

Case #1

Matter of Bay Needle Care Acupuncture v Country-Wide Ins. Co., 2019 NY Slip Op 07249 (2d Dept. 2019)

(1) ”  The arbitrator stated that he found “no reasonable or credible evidence” establishing the defense, and he found in favor of Bay Needle. On Country-Wide’s appeal, a master arbitrator vacated the original arbitrator’s award and remitted the matter for a new hearing before a new arbitrator. The master arbitrator stated that the evidence of fraudulent incorporation presented by Country-Wide “was substantial.” Bay Needle commenced this proceeding pursuant to CPLR article 75 to vacate the master arbitrator’s award. The Supreme Court granted the petition, vacated the master arbitrator’s award, confirmed the original arbitrator’s award in favor of Bay Needle, and entered a judgment accordingly. Country-Wide appeals. “

(2) ” We agree with the Supreme Court that the master arbitrator exceeded his power in vacating the original arbitrator’s award after, in effect, weighing the evidence and coming to a different conclusion than the original arbitrator as to what that evidence proved (see Matter of Petrofsky [Allstate Ins. Co.], 54 NY2d 207, 212). As such, we agree with the court’s determination to vacate the master arbitrator’s award and to confirm the original arbitrator’s award in favor of Bay Needle “

(3) ” Moreover, as Bay Needle contends and Country-Wide concedes, Bay Needle is entitled to an attorney’s fee for this appeal pursuant to 11 NYCRR 65-4.10(j), to be fixed by the Supreme Court “

It is strange to see the Second Department wade into the no-fault arbitration realm. The master arbitrator found a lack of proof and remanded. Now, if the master arbitrator found as a matter of law that the evidence was insufficient and dismissed, then the outcome would be different. Well, it should be different.

Let us not forget about the attorney’s fees. Applicant is using the one remaining provision of the regulations that allows a non NY style PIP attorney fee.

Case #2

Matter of V.S. Care Acupuncture, P.C. v Country-Wide Ins. Co., 2019 NY Slip Op 07264 (2d Dept. 2019)

(1) “On appeal, a master arbitrator affirmed the original arbitrator’s award, finding that it was not arbitrary and capricious. V.S. then commenced this proceeding pursuant to CPLR article 75 to vacate the master arbitrator’s award. The Supreme Court granted the petition, vacated the master arbitrator’s award, and entered a judgment in favor of V.S. in the amount of the claim for no-fault benefits plus statutory interest, attorneys’ fees, and costs and disbursements. Country-Wide appeals.”

(2) Contrary to the Supreme Court’s determination, V.S. failed to demonstrate any grounds for vacating the master arbitrator’s award. A court reviewing the award of a master arbitrator is limited to the grounds set forth in CPLR article 75, which include, in this compulsory arbitration, the question of whether the determination had evidentiary support, was rational, or had a plausible basis .

(3)  “[t]he determination of the master arbitrator affirming the original arbitrator’s award had evidentiary support and was not irrational, it is not subject to vacatur by the courts (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 223-224; Matter of Acuhealth Acupuncture, P.C. v New York City Tr. Auth., 167 AD3d 869), even if the master arbitrator committed an error of law

The Falzone standard is exacting and problematic. While we want arbitrations to be the end and now the beginning of a new round of litigation, the “mere error of law” test does not advance public policy. All it does is insulate bad PIP and UM arbitration decisions from further review. Real people get hurt when arbitrators make up the law as they go along.

Case #3

Matter of V.S. Care Acupuncture, P.C. v Country-Wide Ins. Co., 2019 NY Slip Op 07265 (2d Dept. 2019)

(1) “A master arbitrator’s review powers, however, do include reviewing the facts to determine “whether or not the evidence is sufficient, as a matter of law, to support the determination of the arbitrator” (id. at 212). Here, there is no rational basis for the determination of the master arbitrator that the original arbitrator committed an error of law in rejecting Country-Wide’s fraudulent incorporation defense “

(2) “Moreover, as V.S. contends and Country-Wide concedes, V.S. is entitled to an attorney’s fee for this appeal pursuant to 11 NYCRR 65-4.10(j), to be fixed by the Supreme Court.”

(1)  “The arbitrator, upon refusing to consider Country-Wide’s defenses on the ground that Country-Wide’s submissions to the arbitrator were late, with no excuse for their lateness, found in favor of Acuhealth. On Country-Wide’s appeal, the master arbitrator vacated the award and issued a new award in favor of Country-Wide based on the defense that Acuhealth was fraudulently incorporated, which the original arbitrator had refused to consider on the ground that it was untimely submitted. “

(2) ” Acuhealth then commenced this proceeding pursuant to CPLR article 75 to vacate the master arbitrator’s award. The Supreme Court granted Acuhealth’s petition, vacated the master arbitrator’s award in favor of Country-Wide, and confirmed the original arbitrator’s award in favor of Acuhealth. Country-Wide appeals.”

(3) ” An arbitrator acts within his or her discretionary authority by refusing to entertain late submissions (see Matter of Global Liberty Ins. Co. v Coastal Anesthesia Servs., LLC, 145 AD3d 644, 645; Matter of Mercury Cas. Co. v Healthmakers Med. Group, P.C., 67 AD3d 1017, 1017; Matter of Green v Liberty Mut. Ins. Co., 22 AD3d 755, 756). Here, in rejecting the original arbitrator’s proper exercise of his discretionary authority, and in passing, de novo, upon factual questions concerning the validity of Country-Wide’s defense that Acuhealth was fraudulently incorporated (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 320-321), the master arbitrator exceeded his power .”

I highlighted the “with no excuse for their lateness” but if you read Coastal Anesthesia, you can have the best law office failure excuse and the Courts will show no mercy. Here, the Court invaded the arbitration system and said it was not proper to substitute your discretion for that of the lower arbitrator. The Second Department acts in strange ways as to the defects in the arbitration system it will stick its head out and invade and the ones it won’t.

Case #4: The grand finale

Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 2019 NY Slip Op 07246 (2d Dept. 2019)

(1 “A court reviewing the award of a master arbitrator is limited to the grounds set forth in CPLR article 75, which include, in this compulsory arbitration, the question of whether the determination had evidentiary support, was rational, or had a plausible basis (see Matter of Petrofsky [Allstate Ins. Co.], 54 NY2d 207, 212). Notably, the master arbitrator’s review power is broader than that of the courts’ because it includes the power to review for errors of law (seeid. at 211-212; 11 NYCRR 65-4.10[a][4]). In contrast, the courts “generally will not vacate an arbitrator’s award where the error claimed is the incorrect application of a rule of substantive law, unless it is so irrational as to require vacatur” (Matter of Smith [Firemen’s Ins. Co.], 55 NY2d 224, 232 [citations and internal quotation marks omitted]; see Matter of Liberty Mut. Ins. Co. v Spine Americare Med., 294 AD2d 574, 576 “

You will note that the First Department disagreed with the above statement: Matter of Global Liberty Ins. Co. v McMahon, 172 A.D.3d 500, 501 (1st Dept. 2019 (“Accordingly, because CPT Assistant is incorporated by reference into the CPT book, which is incorporated by reference into the Official New York Workers’ Compensation Medical Fee Schedule applicable to this claim under the No-Fault Law, the award rendered without consideration of CPT Assistant is incorrect as a matter of law (see 11 NYCRR 65-4.10[a][4])“)

(2) “Here, since Country-Wide submitted evidence tending to support its fraudulent incorporation defense, it cannot be said that the determination of the master arbitrator affirming the original arbitrator’s award lacked evidentiary support. Nor can it be said that the determination to affirm the original arbitrator, who supported her determination with reasons based on the evidence, lacked a rational basis. Thus, even if it was an error of law to conclude that Country-Wide proved its defense as a matter of law (seeNationwide Affinity Ins. Co. of Am. v Acuhealth Acupuncture, P.C., 155 AD3d 885, 886-887), the master arbitrator’s determination is not subject to vacatur by the courts on the mere basis of that error of law “

(3) “Notably, this Court’s decision in Nationwide Affinity, which is contrary to the conclusion of the master arbitrator in this case, was not published until after the master arbitrator’s award was rendered. Moreover, Country-Wide submitted evidence in support of its defense which, while inadmissible, could be considered by the original arbitrator in this case, who, unlike a court deciding a summary judgment motion like that at issue in Nationwide Affinity, was not bound by the rules of evidence “

This last case on GT day was remarkable. The Appellate Division finally told us that it does not have 4.10(a)(4) power, while the First Department said otherwise. Next, it allowed an award that violated settled precedent to stand. And finally, the Court for the first time I can remember explicitly held that an arbitrator is not bound by the rules of evidence. The flip side is that an arbitrator who demands compliance with the rules of evidence may run afowl of this rule? It is a hard one to tell, and I do not know the answer.

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