In re Glasser

• Decision Date: 09 February 2010
• Citation: 896 N.Y.S.2d 311,2010 N.Y. Slip Op. 00898,70 A.D.3d 443
• Court: New York Supreme Court — Appellate Division
• Parties: In re LEVIN & GLASSER, P.C., Plaintiff–Respondent,v.KENMORE PROPERTY, LLC, Respondent–Appellant.

70 A.D.3d 443

896 N.Y.S.2d 311

2010 N.Y. Slip Op. 00898

In re LEVIN & GLASSER, P.C., Plaintiff–Respondent,

v.KENMORE PROPERTY, LLC, Respondent–Appellant.

Supreme Court, Appellate Division, First Department, New York.

Feb. 9, 2010.

Norman A. Olch, New York, for appellant.Levin & Glasser, P.C., New York (Steven I. Levin of counsel), for respondent.SAXE, J.P., BUCKLEY, McGUIRE, DeGRASSE, FREEDMAN, JJ.

Judgment, Supreme Court, New York County (Lottie E. Wilkins, J.), entered November 19, 2007, confirming an arbitration award of $280,000 in favor of petitioner and, insofar as appealed from as limited by the briefs, dismissing respondent's counterclaim to recover certain funds that had been held in escrow by petitioner, and awarding petitioner prejudgment interest, costs and disbursements, unanimously reversed, on the law with costs, the awards of interest, costs and disbursements in favor of petitioner vacated, respondent's counterclaim reinstated, respondent awarded the amount over $280,000 in the escrow account as of March 13, 2007, with interest from that date, and petitioner directed to return to respondent any amount over $280,000 paid by respondent in satisfaction of the judgment, with interest from the date of payment. The matter is remanded for settlement of an amended judgment in accordance herewith.

The petitioner law firm was the claimant in an arbitration proceeding against respondent, its former client, under the Fee Dispute Resolution Program (Rules of Chief Admin. Of Cts. [22 NYCRR] part 137). By an award dated February 13, 2007, the arbitrators awarded petitioner $280,000 in fees and disbursements, roughly $30,000 less than petitioner claimed it was owed. At the time the fee dispute arose, petitioner was holding in escrow $402,128.60 in settlement proceeds from the underlying litigation in which it represented respondent. Prior to the arbitration hearing taking place, petitioner sent respondent a check for $92,266.03, retaining in escrow $309,862.57, the amount it claimed it was owed in fees and disbursements.

Petitioner commenced the instant proceeding to confirm the award and requested that the judgment confirming the award include interest at the statutory rate of 9% from the date it claimed the fees and disbursements were due, December 23, 2005 (the date of its final bill). By a judgment entered November 19, 2007, Supreme Court confirmed the award and directed that interest be paid from December 23, 2005, which it calculated to be $48,052.60. Because the amount awarded with interest was greater than the amount held in escrow, respondent was required to pay an additional sum to petitioner to satisfy the judgment. Respondent contends, and we agree, that the court erred in awarding interest prior to the date of the award.

We have previously held that “[i]n a contract dispute brought before an arbitrator the question of whether interest from the date of the breach of the contract should be allowed in an arbitration award is a mixed question of law and fact for the arbitrator to determine” ( Matter of Gruberg [Cortell Group], 143 A.D.2d 39, 39, 531 N.Y.S.2d 557 [1988], citing Matter of Penco Fabrics [Louis Bogopulsky, Inc.], 1 A.D.2d 659, 146 N.Y.S.2d 514 [1955] [“The question whether interest was to be allowed on the award from the date when payment of the invoices was found to be due was for the arbitrators to determine”] ).

We perceive no basis for coming to a different conclusion with respect to arbitrations under the Fee Dispute Resolution Program. To be sure, the Rules of the Chief Administrator do not authorize an award of pre-award interest. But neither do they forbid it and, for several reasons, we think the silence of the Rules on this subject is an insufficient basis for concluding that the arbitrators have no authority to award pre-award interest. First, “ the cases grant arbitrators broad authority to resolve disputes” ( Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88, 93, 571 N.Y.S.2d 686, 575 N.E.2d 104 [1991]; see also Matter of Board of Educ. of Norwood–Norfolk Cent. School Dist. [ Hess ], 49 N.Y.2d 145, 152, 424 N.Y.S.2d 389, 400 N.E.2d 329 [1979]

[“to achieve what the arbitration tribunal

believes to be a just result, it may shape its remedies with a flexibility at least as unrestrained as that employed by a chancellor in equity”] ). Accordingly, the legally significant fact is the absence of a provision in the Rules prohibiting, rather than the absence of one authorizing, the award of pre-award interest ( see Hunter v. Glenwood Mgt., 156 A.D.2d 310, 311, 549 N.Y.S.2d 378 [1989] [“an arbitrator's power to resolve a dispute properly before him is ordinarily plenary unless expressly limited by the terms of the agreement to arbitrate”] ).

In addition, to conclude that arbitrators under the Fee Dispute Resolution Program lack that authority would make little sense, as it would invite, as it did here, subsequent judicial proceedings whenever attorneys prevail in an arbitration. Judicial proceedings would be necessary for attorneys to vindicate their right under CPLR 5001, on a claim for breach of contract, to interest on the sum awarded “computed from the earliest ascertainable date on which the ... cause of action existed and if that date cannot be ascertained with precision, ... from the earliest time at which it may be said the cause of action accrued” ( Ogletree, Deakins, Nash, Smoak & Stewart v. Albany Steel, 243 A.D.2d 877, 880, 663 N.Y.S.2d 313 [1997] [internal quotation marks omitted] ). Moreover, in some cases those judicial proceedings would be at least partially duplicative of the arbitral proceedings, contrary to both a principal purpose of arbitration, the swift and efficient resolution of disputes ( see Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co. of Am., 37 N.Y.2d 91, 95, 371 N.Y.S.2d 463, 332 N.E.2d 333 [1975] ), and the summary nature of a special proceeding pursuant to CPLR 7510 to confirm an arbitration award ( see Matter of Bernstein Family Ltd. Partnership v. Sovereign Partners, L.P., 66 A.D.3d 1, 8, 883 N.Y.S.2d 201 [2009] ). After all, the parties may disagree about the date from which interest should run, and resolving such disputes may require the court to become familiar with the underlying controversy ( see e.g. Ogletree, 243 A.D.2d at 880, 663 N.Y.S.2d 313).

Given that the arbitrators had authority to award pre-award interest and made no such award, we would be required to reverse so much of the judgment as directed payment of pre-award interest if petitioner sought pre-award interest from the arbitrators ( see Matter of Gruberg, 143 A.D.2d 39 at 39, 531 N.Y.S.2d 557 [“on a motion to confirm an arbitration award, if the award is silent on the question of prejudgment interest, a court is not entitled to award such interest. Rather, ‘upon confirmation of an arbitrator's award, interest should be provided from the date of the award’ ”] ). Respondent contends that petitioner did seek pre-award interest, and relies in...