Matter of Bernstein v. On-Location, Inc., 40 N.Y.2d 749 (1976)

Arbitration awards are subject to very limited judicial review, and errors of law or fact made by arbitrators are generally not grounds for overturning an award.

Summary

This case concerns a dispute over an arbitration award between a subcontractor (Bernstein) and an owner (On-Location, Inc.). The central issue was whether the arbitrators exceeded their authority by including a $138,500 item in their accounting, even if it had been previously paid. The Court of Appeals held that the arbitration award was enforceable, emphasizing the extremely limited scope of judicial review of arbitration decisions. The Court reasoned that even if the arbitrators made errors in their accounting, such errors are beyond judicial correction, as the subject of the controversy was always how much the owner still owed, on balance, to the subcontractor.

Facts

A dispute arose between Bernstein, a subcontractor, and On-Location, Inc., the owner, regarding an outstanding balance. The parties submitted their dispute to arbitration. The arbitration submission, as well as the Appellate Division’s order preceding the final arbitration award, made indirect reference to the items of claim. The arbitration aimed to determine the amount of money due to the subcontractor from the owner.

Procedural History

The case involved multiple stages of arbitration and judicial review. The arbitrators issued a third and final award, clarifying the amount due to the subcontractor as $181,895.63. The Appellate Division affirmed the award. The owner appealed to the Court of Appeals, arguing that the arbitrators exceeded their authority. The Court of Appeals affirmed the Appellate Division’s order.

Issue(s)

Whether the arbitrators exceeded the scope of the resubmitted issues by including a $138,500 item in their accounting, even if that item had been previously paid, and whether any errors made by the arbitrators in the accounting are subject to judicial review.

Holding

No, because the subject of the controversy was always how much the owner still owed, on balance, to the subcontractor, and the fact-finding and law determination process by the arbitrators is beyond judicial review or correction. Any errors made by the arbitrators in their accounting, whether of fact or law, are beyond review.

Court’s Reasoning

The Court of Appeals emphasized the limited scope of judicial review in arbitration matters, citing Matter of Associated Teachers of Huntington v Board of Educ., 33 NY2d 229, 235. The court stated that “the fact-finding and law determination process by the arbitrators is beyond judicial review or correction.” The court reasoned that the core issue was the outstanding balance owed by the owner to the subcontractor. The arbitrators determined that the debit balance due to the subcontractor was $181,895.63. The court clarified that even if the $138,500 item had been previously paid, the arbitrators were tasked with reconstructing the account between the parties, debiting costs and crediting payments. The court concluded that the owner could not challenge the award by arguing that the arbitrators exceeded the scope of the resubmitted issues, as that would indirectly accomplish an impermissible review of the arbitrators’ factual and legal determinations. As the court stated, “If they made any errors in the accounting, whether of fact or law, they are beyond review, and, of course, there is no record before this court to show whether the arbitrators made any error or were correct.”