Granite Worsted Mills, Inc. v. Aaronson Cowen, Ltd., 25 N.Y.2d 451 (1969)
An arbitrator exceeds their power when they render an award that ignores an express provision of the contract limiting damages, particularly when the award’s face reveals this disregard.
Summary
Granite Worsted Mills (Seller) and Aaronson Cowen (Buyer) entered into sales agreements with arbitration and damage limitation clauses. A dispute arose over defective goods, and the arbitrator awarded the Buyer damages exceeding the contract’s limitation. The Seller sought to vacate the award, arguing the arbitrator exceeded their powers. The New York Court of Appeals held that the arbitrator did exceed their powers by ignoring the contractual damage limitations, as the award demonstrated a clear disregard for the agreed-upon terms.
Facts
The Seller made two sales of cloth to the Buyer for sport coat manufacturing. Each sale included a broad arbitration clause and a clause limiting the buyer’s damages for defective goods. The total purchase price for both sales was less than $1,000, but the Buyer claimed damages exceeding $7,000 due to defects. The sales agreement limited damages to the difference in value between the goods specified and the goods actually delivered and explicitly excluded consequential damages.
Procedural History
The Buyer initiated arbitration. The arbitrator awarded $3,780.51 to the Buyer. The Seller moved to vacate the award at Special Term, arguing the arbitrator exceeded their powers by awarding damages beyond the contractual limit. Special Term granted the motion to vacate. The Appellate Division reversed, holding that the arbitrator had not exceeded their powers given the broad arbitration clause. Justice Steuer dissented, arguing that the arbitrator effectively made a new contract. The Court of Appeals then reviewed the Appellate Division’s decision.
Issue(s)
Whether an arbitrator exceeds their power under CPLR 7511(b)(1)(iii) when the arbitration award, on its face, disregards an express contractual provision limiting damages.
Holding
Yes, because when an arbitrator makes an award that, on its face and without mentioning the reason, ignores an express provision of the contract limiting damages, the arbitrator exceeds their powers, thereby warranting vacatur of the award.
Court’s Reasoning
The Court of Appeals stated that an arbitrator’s award may be vacated only on statutory grounds, including when the arbitrator exceeds their power. While simple errors of fact or law are insufficient, the court distinguished this case by highlighting that the award’s face demonstrated a clear disregard for the contractual damage limitations. The court cited Matter of Stange v. Thompson-Starrett Co., where an award was vacated because it repudiated contract terms related to price adjustment. Although Matter of Deering Milliken & Co. (Boepple Sportswear Mills) suggested a ‘mere possibility’ of exceeding powers isn’t enough to vacate, this case presented a blatant disregard. The court emphasized that the award was more than $3,700, while the total purchase price was only $984. The court rejected the speculation that the arbitrator might have found the damage limitation clause unconscionable, stating that the award was silent on the matter. The court noted that while an arbitrator can refuse to enforce a damage limitation clause based on unconscionability, “what is required, however, is that the award indicate that he has in fact deliberately and intentionally exercised that power so that judicial review can proceed without the need for speculation as to what has in fact occurred in the arbitral tribunal.” The Court concluded that without such an indication, it must be assumed the arbitrator exceeded their powers.