The opinion of the court was delivered by: Mazzarelli, J.
Matter of McIver-Morgan, Inc. v Dal Piaz
Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Angela M. Mazzarelli,J.P. Karla Moskowitz Leland G. DeGrasse Sallie Manzanet-Daniels Darcel D. Clark, JJ.
Respondents appeal from the order of the Supreme Court, New York County (Milton A. Tingling, J.), entered March 26, 2012, which granted the petition to confirm an arbitration award. Massoud & Pashkoff, LLP, New York (Ahmed A. Massoud of counsel), for appellants. Feldman & Associates, PLLC, New York (Edward S. Feldman and Stephanie Feldman of counsel), for respondent. MAZZARELLI, J.P.
Respondents Christopher Dal Piaz and Elizabeth Schoelkopf (the Owners), engaged petitioner McIver-Morgan, Inc. (McIver) to design a major renovation of their townhouse. Promotional materials created by McIver reflect that it holds itself out as "a full service firm specializing in all facets of high-end residential interior design and architectural services." It is undisputed that McIver is a business, not professional, corporation, and that the entity does not have a license to practice architecture. McIver does, however, employ George Queral, who is a licensed, but not registered, architect. It also periodically uses an outside consultant, Robert Schwartz, a licensed and registered architect. Because Schwartz has many close contacts in the New York City Buildings Department and other related agencies, McIver recommended to the Owners that they use him on their project as an expediter who could sign and seal architectural drawings and then file them with the Buildings Department.
The written agreement between the Owners and McIver set forth the basic services, broken down into four phases, which the latter would provide. These included a "schematic design" phase in which McIver would prepare schematic design documents that illustrate the scale and relationship of the project components, including a conceptual site plan and preliminary building plans. The second phase was "design development" in which McIver would produce "plans," "drawings," and "outline specifications and other documents," as would evidence "the scope, relationships, forms, size, and appearance of the Project." The third stage was the "construction documents" phase in which McIver would provide, inter alia, "Drawings and Specifications that establish in detail the quality levels of materials and systems required for the Project." The final phase was for "contract administration services," in which McIver would essentially act as the Owners' representative during construction. The agreement expressly provided that "Consultants including but not limited to a Structural Engineer, a Mechanical Engineer, and a Surveyor may be required during Phase one, two, three and four. Services of Consultants will be coordinated by [McIver], paid for by the Owner[s] and included in the cost of Construction." The parties agreed that the Owners would pay McIver 15% of the overall "Construction Cost" for the project, which would be due in estimated 25% increments upon the completion of each of the four phases of the project. They further agreed to submit any disputes arising out of the agreement to an arbitrator.
At some point during the renovation, the Owners terminated the agreement based on McIver's alleged failure to perform in a timely fashion. McIver filed for arbitration. The Owners counterclaimed for, inter alia, restitution by McIver of $37,500 which the Owners claimed they paid to McIver for architectural services. They argued that public policy precluded McIver from charging for such services because it did not possess an architectural license. Before conducting a hearing, the arbitrator issued, at the parties' request, a preliminary order on the issue of arbitrability. The order stated, among other things, that the agreement for designer services was not invalid on public policy grounds, although McIver is not a licensed, registered architect. The arbitrator observed that the agreement's terms explicitly gave notice that outside "consultants, including ... a structural engineer, mechanical engineer, and a surveyor may be required," and that their "assistance" could be used on the project. The arbitrator also determined that McIver's "subsequent proposal that Mr. Schwartz, an RA [Registered Architect], be retained as a consultant to prepare and file' drawings with the Department of Buildings and the Landmarks Preservation Commission, assures that such services will be performed by an appropriately licensed professional, and is not inconsistent with the agreement's provision that other consultants ... may be required' nor contrary to the provisions of NY State Education Department regulations."
At the hearing that followed, Queral testified that he prepared architectural drawings for the project in question, but that Schwartz always reviewed them. He stated that "I e-mailed [Schwartz] the plans and then we talked on the phone and he would say, we have to change this or that, and so I would do it." It is apparent from Queral's testimony that Schwartz's recommended changes were substantive in nature. Schwartz also appeared at the arbitration hearing. He testified that he did not sign and seal the architectural drawings made by Queral until they were revised "to my satisfaction." Schwartz further stated, with respect to Queral, "When he's working with the drawings with me, he's working under my supervision, so I'm reviewing the plans and he's working under my supervision." Finally, although his testimony was somewhat equivocal on this point, Schwartz testified that he was "the architect" for the project.
The arbitrator found in favor of McIver on its claim for unpaid fees in the amount of $127,622.13, together with interest from the date the arbitration was filed. To the extent the Owners contended that McIver was not entitled to any compensation for any architectural services it rendered, the arbitrator referenced his preliminary order, wherein he denied the Owners' argument to strike the agreement on the basis that McIver provided architectural services without a license. The arbitrator further found that while the Owners had terminated the agreement for alleged untimely performance by McIver, the terms of the agreement did not specify a time-line for McIver's performance, but rather contained language allowing for time adjustments during the course of the project. The arbitrator noted that the evidence and testimony at the arbitration hearings indicated that "numerous" design changes requested by the Owners, including an increase in the scope of the project, had led to delays for re-design and a "higher than expected" cost for the project. Finally, the arbitrator found that the Owners terminated McIver at or about the completion of Phase 3 of the Project, and so it was only entitled to receive 75% of what it contended it was owed for that phase, since the drawings submitted to the Owners were incomplete and uncoordinated, and were lacking mechanical and structural engineering drawings.
McIver commenced this special proceeding to confirm the arbitrator's award. The Owners denied the material allegations in the petition, and asserted as grounds for denying confirmation of the award, and dismissal of the petition (which they sought by cross motion), that the agreement was "void as against public policy" based on McIver's lack of an architect's license; that McIver's conduct violated statutory law prohibiting and criminalizing such conduct (citing Education Law §§ 6512, 7300, 8300); and that the award was irrational. Supreme Court granted McIver's petition, adopting the reasoning in the petition.
Because of the great degree of deference afforded to arbitration awards, the available grounds for vacating them are extremely limited. Mere errors of law or fact reflected in an arbitration award are insufficient for a court to overturn it, since "the courts should not assume the role of overseers to mold the award to conform to their sense of justice" (Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 480 , cert dismissed 548 US 940 ). A court may only disturb the award "when it violates a strong public policy, is irrational or clearly exceeds a specifically enumerated ...