Background
Lipsky Custom Home Builders Corp. retained Groundbreakers Contracting, Inc. as a subcontractor for a residential construction project in Asharoken, under a subcontract that included a mandatory arbitration clause. Lipsky paid Groundbreakers a $240,000 deposit. The property owner later terminated the project, and Lipsky sought return of the full deposit. Groundbreakers returned only $112,071.10, retaining $127,928.90 for work it claimed to have performed before termination. The parties submitted their dispute to arbitration.
At a preliminary hearing conference, both parties agreed to attempt resolution “on the papers” if possible, and the arbitrator scheduled a conference call to be held after written submissions to determine whether a virtual hearing would be necessary. The arbitrator indicated that “it is anticipated that the written submissions will be sufficient to enable the arbitrator to resolve the matter with a reasoned decision.” After receiving the parties’ written submissions — but without holding the scheduled conference call — the arbitrator issued an award on April 26, 2023, granting Lipsky $127,928.90 plus interest and attorneys’ fees.
Groundbreakers moved to vacate the award, and the Supreme Court, Suffolk County, agreed — vacating the award on the ground that the arbitrator was required to hold a hearing before issuing the decision. Lipsky appealed.
The Court’s Holding
The Appellate Division reversed and confirmed the arbitration award. Under CPLR Article 75, an arbitration award may be vacated only on narrow statutory grounds — including that the arbitrator “so imperfectly executed” the award that no definite, final decision was made. Arbitrators are given wide procedural latitude, and courts are not to second-guess arbitral procedure unless a fundamental right has been violated.
Here, the court found that the arbitrator did exactly what the parties had agreed to: both sides submitted their written arguments and documentary evidence, and the arbitrator issued a reasoned written decision. At the preliminary hearing, the arbitrator had made clear that written submissions were expected to be sufficient. The conference call that was scheduled was not promised as mandatory — it was a checkpoint to determine whether oral argument would be needed. Skipping that call after receiving adequate written submissions did not violate any arbitration requirement, and it certainly did not amount to the kind of “imperfect execution” that warrants vacatur under CPLR 7511.
Key Takeaways
- CPLR Article 75 grounds for vacating an arbitration award are narrow; courts will not vacate an award simply because the arbitrator chose to resolve the matter on papers rather than holding a formal hearing, when the parties had agreed to attempt resolution through written submissions.
- An arbitrator’s decision to skip a scheduled conference call after receiving full written submissions — without either side objecting at the time — is not a procedural failure that undermines the award.
- Parties who agree to resolve arbitration disputes “on the papers” assume the risk that the arbitrator may find written submissions sufficient; they cannot later use the absence of an oral hearing as a basis for vacatur.
Why It Matters
For New York construction practitioners who routinely include mandatory arbitration clauses in subcontracts, this decision reinforces the stability of arbitration awards under CPLR Article 75. When parties agree to a streamlined paper-based process — as happens frequently in smaller construction disputes where the cost of formal arbitration may exceed the amount in controversy — that agreement carries consequences: the arbitrator may hold the parties to their commitment and decide on the papers, and courts will confirm the resulting award.
The decision also serves as a caution against post-hoc procedural challenges. Once a party has participated in an arbitration and received an unfavorable award, attempts to vacate that award based on perceived procedural irregularities face a very high bar. If Groundbreakers believed a formal hearing was required, it should have objected when the arbitrator issued the award without holding the conference call — not years later in court.