Maross Construction, Inc. v. Central New York Regional Transportation Authority, 66 N.Y.2d 341 (1985)
A broad arbitration clause in a contract empowers the arbitrator (here, the architect) to resolve all contractual disputes submitted by the parties, and that determination is binding, even if it conflicts with another provision in the contract, so long as the determination is not irrational or violative of public policy.
Summary
Maross Construction contracted with the Central New York Regional Transportation Authority (Authority) for a liquid handling systems project. A dispute arose over who was responsible for supplying and installing fiberglass tanks. The contract documents were ambiguous, with some indicating the general contractor was responsible and others indicating Maross was. Maross modified the contract to disclaim responsibility, but the Authority signed it without comment. The architect, empowered by a broad arbitration clause, determined Maross was responsible. Maross sued, seeking a declaration it was not responsible. The Court of Appeals held that the architect’s decision was binding because the arbitration clause was broad, and the decision was not irrational.
Facts
The Authority requested bids for a liquid handling systems contract for a bus garage. Maross noted an ambiguity in the bid documents: drawings indicated the general contractor was responsible for fiberglass tanks, but specifications assigned that responsibility to the liquid handling systems contractor. The architect stated the specifications took precedence. Maross submitted the lowest bid and was awarded the contract. Maross added a clause to the signed agreement stating it was not responsible for the tanks. The Authority signed the agreement without objecting to the modification. The “Contract Documents” listed in the agreement included specifications requiring Maross to supply and install the tanks.
Procedural History
When a dispute arose, the Authority requested the architect to resolve it, pursuant to the contract’s broad arbitration clause. The architect ruled Maross was responsible for the tanks. Maross then sued for a declaratory judgment. Special Term granted summary judgment to the Authority. The Appellate Division reversed, granting summary judgment to Maross, finding the Authority bound by Maross’s disclaimer and that the architect’s authority extended only to factual disputes. The Court of Appeals reversed the Appellate Division’s decision.
Issue(s)
Whether a broad arbitration clause empowering an architect to resolve all contractual disputes binds the parties to the architect’s determination, even if it conflicts with another contract provision.
Holding
Yes, because the parties agreed to a broad arbitration clause, and the architect’s determination was not totally irrational or violative of public policy.
Court’s Reasoning
The court emphasized the strong public policy favoring arbitration as a means of resolving disputes efficiently. The court stated that where parties clearly agree to arbitrate, they relinquish their right to litigate in court. The court noted that unless a specific restriction upon arbitral authority is enumerated, no limitation upon either factual or legal dispute resolution will be inferred from a broadly worded contractual provision calling for arbitration of all disputes. The court quoted the contract’s arbitration provision, which authorized the Architect “to decide all questions of any nature whatsoever arising out of, under or in connection with… this Contract, and his decisions shall be conclusive, final and binding on the parties.”
The Court found that the architect’s determination was not “totally irrational.” Even if the architect disregarded the added language by Maross, there was a rational basis for the decision. Prior to bidding, Maross knew the Authority’s intention and the architect’s interpretation. The court explained that the principle of contra proferentem (interpreting ambiguities against the drafter) does not override the test of rationality applied to an arbitrator’s award.
The court reasoned that even if the arbitrator failed to pass upon an arguably relevant issue or piece of evidence, that is considered a matter of arbitral judgment and is not judicially reviewable unless the determination is rendered totally irrational.
The court emphasized the all-encompassing language used to describe the architect’s arbitral authority. The court stated, “Contrary to the holding at the Appellate Division, such a broad arbitration provision is not limited to the resolution of mere factual questions but, rather, includes within its scope the interpretation of the legal meaning of the contract.”