What's happening
This bill allows New York courts to vacate arbitration awards if an arbitrator shows a manifest disregard for the law.
Why it matters
Strengthens judicial oversight of arbitration. By allowing courts to vacate awards where arbitrators blatantly ignore applicable law, the bill gives individuals and businesses a potential safeguard against extreme or unjust arbitration outcomes.
Raises the legal standard for arbitrators. Arbitrators in New York will now have to take extra care to apply the law correctly, knowing that a clear and deliberate legal error could lead to their decision being overturned.
Could impact contract and employment disputes. Since arbitration is common in commercial and employment contracts, this change may make arbitration less final, giving parties more leverage to challenge unfair results and potentially altering how disputes are settled.
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Who cares
Headline styles
Let Courts Overturn Bad Arbitration
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to judiciary
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Let Courts Overturn Unlawful Arbitration
In Senate Committee · Judiciary · Sponsor Helene Weinstein
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2396
2019-2020 Regular Sessions
IN SENATE
January 24, 2019
Introduced by Sen. HOYLMAN -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary
AN ACT to amend the civil practice law and rules, in relation to vacating arbitration awards on the basis of arbitrator disregard of the law
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subparagraph (iv) of paragraph 1 of subdivision (b) of section 7511 of the civil practice law and rules is amended and a new subparagraph (v) is added to read as follows:
(iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection[.]; or
(v) the arbitrator evidenced a manifest disregard of the law in rendering the award.
§ 2. This act shall take effect on the one hundred eightieth day after it shall have become a law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00874-01-9
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
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.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.