Tuesday, July 14, 2009

Arbitration Award: First Department Reverses Itself and Adopts Second Department View

There is no en banc procedure in the four New York State Appellate Divisions as there is in the United States Courts of Appeals. As a result, when a panel of an Appellate Division issues a ruling it becomes Department precedent and will be followed by later panels until the New York Court of Appeals rules otherwise, or, if the ruling involves the interpretation of stature, the Legislature changes the law.

Today, however, in a major opinion interpreting when a court must confirm an arbitration award under CPLR § 7510, a panel of the the Appellate Division, First Department, rules that it will not follow First Department precedent, but will instead adopt a Second Department ruling to decide the case before the panel. Today's ruling, In re Bernstein Family Limited Partnership v. Sovereign Partners, L.P., can be found here.

In Organization of Staff Analysts v. City of New York, 277 A.D.2d 23 (2000), the First Department had ruled that the lower court correctly dismissed as moot a petition to confirm an arbitration award because the award had been completely satisfied. In Mtr. of Allstate Ins. Co. v. Dental Health Care, P.C., 24 A.D.3d 437 (2005), the Second Department reached the opposite conclusion, ruling that under CPLR § 7510 a party is entitled to confirmation of an arbitration award regardless of the fact that there has been compliance with the award.

In today's ruling the First Department panel concludes that the Second Department is correct, and it declines to follow its own precedent in Organization of Staff Analysts.

Today's ruling offers three reasons for rejecting First Department precedent. First, the panel states that the reliance in Organization of Staff Analysts on a particular section of the CPLR was "misplaced." Second, the panel acknowledges that the Second Department's reading of CPLR § 7510 better conforms to the plain words of the statute than Organization of Staff Analysts. But it is the third reason is that startling.

Today's decision states that the parties in Organization of Staff Analysts "did not alert this Court" to the fact that the Court of Appeals affirmed a Fourth Department ruling which had reached the opposite conclusion from Organization of Staff Analysts. The Court of Appeals ruling, however, came in 1983, or 17 years prior to Organization of Staff Analysts.

The acknowledgement that the First Department was unaware of a Court of Appeals ruling is, of course, disturbing. Plainly the attorneys can be faulted because they did not "alert" the First Department that the Court of Appeals had affirmed the Fourth Department ruling 17 years before. But today's decision is an implicit acknowledgment that the First Department itself had not shepardized the Fourth Department decision when it decided Organization of Staff Analysts in 2000.

The message here is clear: busy appellate courts do rely on the work of appellate counsel, and however careful a court is, something important can slip past it if not brought to its attention by appellate counsel.

Finally, today's ruling is a good example of when an Appellate Division panel should decline to follow Department precedent. Court of Appeals authority belatedly has been brought to its attention, and the decisions in other Departments correctly apply that authority. There is no point in waiting for the Court of Appeals to say First Department precedent is wrong.

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