Board of Educ. v. Christa Constr., 80 N.Y.2d 1031 (1993)
Arbitration clauses are generally enforceable in New York, and disputes should be submitted to arbitration unless a strong public policy reason exists to preemptively stay the arbitration.
Summary
This case addresses the enforceability of arbitration agreements when a potential public policy violation is asserted. The Court of Appeals held that a dispute between a school district and a construction company should be submitted to arbitration, despite the school district’s claim that the contract was void due to potential expenditure exceeding lawful appropriations. The Court emphasized New York’s preference for arbitration as a dispute resolution method and stated that challenges based on public policy should be addressed after arbitration, not to preempt it.
Facts
A construction company and a board of education entered into a contract. A dispute arose, and the construction company sought arbitration based on a clause in the contract. The board of education argued that the contract was void because enforcing it through arbitration would result in expenditures exceeding lawfully appropriated amounts, violating Education Law § 1718 (1).
Procedural History
The Supreme Court ordered the parties to arbitrate. The Court of Appeals affirmed this order, holding that the dispute should proceed to arbitration.
Issue(s)
Whether a contractual dispute between a school district and a contractor should be stayed from arbitration based on the school district’s assertion that the contract is void due to potential violations of public policy.
Holding
No, because arbitration is a favored method of dispute resolution in New York, and the public policy exception is a limited one not applicable in this case.
Court’s Reasoning
The Court reasoned that arbitration is a favored method of dispute resolution in New York, and courts should interfere as little as possible with the freedom of consenting parties to submit disputes to arbitration. While arbitration may be challenged on public policy grounds, this is a limited exception. The Court stated, “While arbitration may be challenged on public policy grounds, that is a limited exception which is not applicable here.” The Court implied that the public policy argument could be raised in a motion to vacate or confirm the award after arbitration, stating a party may address public policy concerns “subsequently on a motion to vacate or confirm the award, if such an award is in fact made.”