CBA Industries, Inc. v. Circulation Management, Inc.

179 A.D.2d 615, 578 N.Y.S.2d 234, 1992 N.Y. App. Div. LEXIS 202

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: January 13, 1992
• Status: Published

Opinions

On November 30, 1988, the plaintiff entered into an agreement to purchase the accounts, contract rights, and assets of Circulation Management, Inc. The asset purchase agreement contained a provision requiring any dispute arising under the agreement to be resolved by arbitration, and expressly provided that "[t]he expense of the arbitration shall be borne equally by the parties to the arbitration, provided that each shall pay for and bear the cost of its own experts, evidence and legal counsel”.

The plaintiff subsequently commenced the instant action against the defendant corporation and its sole shareholder, alleging that they had breached the asset purchase agreement by failing to provide a true and accurate depiction of the corporation’s financial condition. The Supreme Court directed the parties to proceed to arbitration pursuant to the purchase agreement, and, following a hearing, the arbitrator concluded that the defendants had breached the agreement by providing incomplete and misleading financial information about two of the corporation’s major accounts. The arbitrator awarded the plaintiff compensatory damages in the sum of $100,000, and counsel fees and costs in the sum of $44,508.52. Although the Supreme Court thereafter confirmed the award of compensatory damages to the plaintiff, it modified the arbitration award by deleting the requirement that the defendants pay the plaintiff’s counsel fees and costs. We affirm.

A determination by an arbitrator who has the power to interpret the parties’ contract will be set aside only if it is " 'completely irrational’ * * *’ or where the document expressly limits or is construed to limit the powers of the arbitrators, hence, narrowing the scope of arbitration’ ” (Rochester City School Dist. v Rochester Teachers Assn., 41 NY2d 578, 582, quoting Matter of National Cash Register Co. [Wilson], 8 NY2d 377, 383, and Lentine v Fundaro, 29 NY2d 382, 385; cf., Matter of Ploen v Monticello Cent. School Dist., 160 AD2d 879, 880). Contrary to the plaintiff’s contention, the arbitration clause in the parties’ agreement, which provided that each party would bear its own costs and legal expenses, constituted an express limitation on the arbitrator’s power. Moreover, while an arbitrator’s fee and other expenses incurred in the arbitration may be recovered in the award, attorneys’ fees are specifically excluded (CPLR 7513) unless they are expressly provided for in the arbitration agreement (see, Grossman v Laurence Handprints — N.J., 90 AD2d 95, 101). Accordingly, awarding of counsel fees and costs was beyond the scope of the arbitrator’s power in this case (see, CPLR 7511 [c] [2]; 7513; Matter of Board of Educ. v DoverWingdale Teachers’ Assn., 61 NY2d 913).

Upon our review of the record, we further find that the arbitrator’s determination that the defendants were liable for breach of the parties’ contract was not without a rational basis. Thus, the award of compensatory damages was properly confirmed (see, Matter of Silverman [Benmor Coats] 61 NY2d 299, 308; Matter of Zeller & Goldschmidt v Cooper, Selvin & Strassberg, 167 AD2d 548, 549).

We have examined the remaining contentions raised by the defendants in their cross appeal, and find that they are without merit. Kunzeman, J. P., Eiber and O’Brien, JJ., concur.