A judge has vacated an arbitration award in a more than $42 million dollar dispute, faulting the arbitrators for exceeding their authority and for meeting on a Sunday—in violation of a little-known state law.
Pointing to Judiciary Law §5, which says "a court shall not be opened, or transact any business on Sunday" except for certain instances, Brooklyn Supreme Court Justice Edgar Walker wrote in Bauer v. Bauer, 507082/13, "Arbitration is a judicial proceeding and arbitrators perform a judicial function. As such, Judiciary Law §5 has been held to apply to arbitration proceedings. Accordingly, the arbitration proceedings and award herein are void upon the ground that at least one hearing was held on a Sunday."
The June 16 ruling arose from a dispute between six siblings over the distribution of life insurance policies, stocks, bond and other assets of their deceased mother, Gertrude. The dispute also pertained to real estate holdings.
In January 2012, the siblings agreed to resolution via an arbitration tribunal that based their decisions on Torah Law and "psharah," which is the Hebrew term for compromise.
The panel held hearings over four days, including Jan. 13, 2013, which was a Sunday.
The panel issued its final order and award in August 2013. Attempting to divvy up equal awards, it divided ownership of the properties and gave money awards to the six parties.
The panel, on its own initiative, included a provision saying that if any party unsuccessfully tried to reverse or modify the award, the individual would be responsible for the other parties' legal fees.
One sibling, Ruth, asked the court to confirm the arbitration award. Four other siblings moved to vacate the award and one did not participate in the challenge.
The opposing siblings argued the panel impermissibly ruled on Gertrude's estate though estate distribution was not a controversy that could be arbitrated. Moreover, the siblings said the panel took up matters not submitted for arbitration, exceeding their authority. They also noted that hearings took place on one or more Sundays.
In his ruling, Walker said the award "indisputably" included an distribution of Gertrude's estate.
Though portions of a partially valid award could be upheld, Walker said, "this does not apply where the valid and invalid portions are inextricably intertwined."