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A01370 Summary:

COSPNSRTitone, Dinowitz, Seawright, Sepulveda, Colton, Abinanti
Amd 7511, CPLR
Authorizes the vacating of an arbitration award on the basis of arbitrator disregard of the law.
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A01370 Actions:

01/11/2017referred to judiciary
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A01370 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
SPONSOR: Weinstein (MS)
  TITLE OF BILL: 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   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.   EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER: This bill would provide needed clarification to CPLR 7511 and the limit- ed circumstances under which an arbitration award may be vacated.   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, Fifth 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".   internal citations omitted 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: 2016: A.9993 - PA   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.   EFFECTIVE DATE: This bill shall take effect on the one hundred eightieth day after it shall become law.
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A01370 Text:

                STATE OF NEW YORK
                               2017-2018 Regular Sessions
                   IN ASSEMBLY
                                    January 11, 2017
          DA, COLTON, ABINANTI -- Multi-Sponsored by -- M. of A. CAHILL --  read
          once and referred to the Committee on Judiciary
        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

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
     1    Section  1.  Subparagraph  (iv)  of  paragraph 1 of subdivision (b) of
     2  section 7511 of the civil practice law and rules is amended  and  a  new
     3  subparagraph (v) is added to read as follows:
     4    (iv) failure to follow the procedure of this article, unless the party
     5  applying  to vacate the award continued with the arbitration with notice
     6  of the defect and without objection[.]; or
     7    (v) the arbitrator evidenced  a  manifest  disregard  of  the  law  in
     8  rendering the award.
     9    § 2. This act shall take effect on the one hundred eightieth day after
    10  it shall have become a law.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
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