The New York PromPT PaY acT - New York County Lawyers

Transcription

n s t i t u t e
I
N Y C L A - C L E
T he N ew Y ork P rompt P ay
A ct : A n U nderutilized
T ool for G etting Y our
C lient P aid
Prepared in connection with a Continuing Legal Education course presented
at New York County Lawyers’ Association, 14 Vesey Street, New York, NY
presented on Monday, September 9, 2013.
Program Co-Sponsors:
NYCLA’s Construction Law and Arbitration & ADR Committees
P r o g r a m F ac u l t y :
Neal Eiseman, Goetz Fitzpatrick LLP
Henry L. Goldberg, Goldberg & Connolly
Michael Marra, American Arbitration Association
Robert MacPherson, Gibbons P.C.
M o d e r at o r :
Joel Sciascia, Pavarini McGovern LLC
3 TRANSITIONAL & NON-TRANSITIONAL MCLE CREDITS:
This course has been approved in accordance with the requirements of the New York State Continuing Legal Education
Board for a maximum of 3 Transitional & Non-Transitional credit hours: 3 PP
This program has been approved by the Board of Continuing Legal Education of the Supreme Court of New Jersey for 3
hours of total CLE credit. Of these, 0 qualify as hours of credit for Ethics/Professionalism, and 0 qualify as hours of credit
toward certification in civil trial law, criminal trial law, workers compensation law and/or matrimonial law.
Information Regarding CLE Credits and Certification
The New York Prompt Pay Act: An Underutilized Tool for Getting Your Client
Paid
September 9, 2013; 6:00 PM to 9:00 PM
The New York State CLE Board Regulations require all accredited CLE
providers to provide documentation that CLE course attendees are, in fact,
present during the course. Please review the following NYCLA rules for
MCLE credit allocation and certificate distribution.
i.
You must sign-in and note the time of arrival to receive your
course materials and receive MCLE credit. The time will be
verified by the Program Assistant.
ii.
You will receive your MCLE certificate as you exit the room at
the end of the course. The certificates will bear your name and
will be arranged in alphabetical order on the tables directly outside
the auditorium.
iii.
If you arrive after the course has begun, you must sign-in and note
the time of your arrival. The time will be verified by the Program
Assistant. If it has been determined that you will still receive
educational value by attending a portion of the program, you will
receive a pro-rated CLE certificate.
iv.
Please note: We can only certify MCLE credit for the actual time
you are in attendance. If you leave before the end of the course,
you must sign-out and enter the time you are leaving. The time will
be verified by the Program Assistant. Again, if it has been
determined that you received educational value from attending a
portion of the program, your CLE credits will be pro-rated and the
certificate will be mailed to you within one week.
v.
If you leave early and do not sign out, we will assume that you left
at the midpoint of the course. If it has been determined that you
received educational value from the portion of the program you
attended, we will pro-rate the credits accordingly, unless you can
provide verification of course completion. Your certificate will
be mailed to you within one week.
Thank you for choosing NYCLA as your CLE provider!
New York County Lawyers’ Association
Continuing Legal Education Institute
14 Vesey Street, New York, N.Y. 10007 • (212) 267-6646
The New York Prompt Pay Act: An Underutilized Tool for Getting Your
Clients Paid
Monday, September 9, 2013; 6:00 PM to 9:00 PM
Moderator:
Joel Sciascia, Pavarini McGovern LLC
Faculty:
Neal Eiseman, Goetz Fitzpatrick LLC
Henry Goldberg, Goldberg & Connolly
Michael Marra, American Arbitration Association
Robert McPherson, Gibbons PC
AGENDA
5:30 PM – 6:00 PM
Registration
6:00 PM – 6:10 PM
Introductions and Opening Remarks
6:10 PM – 9:00 PM
Discussion
Page 1
1 of 9 DOCUMENTS
NEW YORK CONSOLIDATED LAW SERVICE
Copyright © 2013 Matthew Bender, Inc.
a member of the LexisNexis (TM) Group
All rights reserved
*** This section is current through 2013 released chapters 1-173, 176, 177, 179-181, 183-186, 188, 190, 192-194,
198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
GENERAL BUSINESS LAW
ARTICLE 35-E. CONSTRUCTION CONTRACTS
Go to the New York Code Archive Directory
NY CLS Gen Bus Article 35-E Note (2013)
Gen Bus Article 35-E Note
HISTORY:
Add, L 2002, ch 127, § 2, eff Jan 14, 2003 (see 2002 note below).
NOTES:
Editor's Notes
Laws 2002, ch 127, §§ 1 and 3, eff Jan 14, 2003, provides as follows:
Section 1. Legislative intent. The legislature finds that firms and organizations that provide construction services in
this state expect and deserve to be paid in a prompt and timely manner. By and large providers and receivers of such
services contract freely and, in good faith, meet their obligations in a timely and just manner. It is the intent of this
legislation to address those situations in which, contrary to existing contracts, payments for approved services are
unjustly delayed. Unjustified delays in paying construction contractors and material suppliers may discourage such
firms and organizations from doing business in this state. Consequently, it is the intent of this legislation to set default
standards for the payment of bills on construction contracts and in those situations where payments are not made within
time periods established in such contracts, authorize remedies including reasonable interest payments and circumstances
for stop work provisions. Consistent with accepted business practices and with sound principles of construction and
fiscal management, it is the intent of this legislation to encourage parties to construction contracts to make payments at
least as expeditiously as existing contracts require and further reduce existing payment processing time wherever
feasible, while at the same time permitting such entities to contract freely, perform proper and reasonable management
and financial oversight activities designed to ensure that construction services are provided in a safe, efficient and
fiscally prudent manner.
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NY CLS Gen Bus Article 35-E Note
§ 3. This act shall take effect on the one hundred eightieth day after it shall have become a law and shall apply to
construction contracts entered into on or after such date unless the construction contract is entered into as part of a
construction project for which a permit or permits have been issued and work has begun on such projects prior to the
effective date of this act.
2 of 9 DOCUMENTS
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198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
NY CLS Gen Bus § 756 (2013)
§ 756. Definitions
As used in this article:
1. "Construction contract" means a written or oral agreement for the construction, reconstruction, alteration,
maintenance, moving or demolition of any building, structure or improvement, or relating to the excavation of or other
development or improvement to land, and where the aggregate cost of the construction project including all labor,
services, materials and equipment to be furnished, equals or exceeds [fig 1] one hundred fifty thousand dollars. For the
purposes of this article a construction contract shall not include any such contract made and awarded by the state, any
public department, any public benefit corporation, any public corporation or official thereof, or a municipal corporation
or official thereof for construction, reconstruction, alteration, repair, maintenance, moving or demolition of any public
works project nor any contract with a contractor or subcontractor which is part of such project; or any such contract the
purpose of which is the construction, reconstruction, alteration, repair, maintenance, moving or demolition of an
individual one, two or three family residential dwelling or a residential tract development of one hundred [fig 2] or less
one or two family dwellings, or any residential construction project where the aggregate size of such project is [fig 3]
four thousand five hundred square feet or less, or any residential project of fewer than [fig 4] seventy-five units which
receives financial assistance from the federal government, the state or a municipal entity designed for households
earning an average of one hundred twenty-five percent of the housing and urban development agency area median
income.
2. "Contractor" means any person, firm, partnership, corporation, association, company, organization or other
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NY CLS Gen Bus § 756
entity, including a construction manager, or any combination thereof, which enters into a construction contract with an
owner.
3. "Owner" means any person, firm, partnership, corporation, company, association or other organization or other
entity, or a combination of any thereof, (with an ownership interest, whether the interest or estate is in fee, as vendee
under a contract to purchase, as lessee or another interest or estate less than fee) that causes a building, structure or
improvement, new or existing, to be constructed, altered, repaired, maintained, moved or demolished or that causes land
to be excavated or otherwise developed or improved.
4. "Subcontractor" means any person, firm, partnership, corporation, company, association, organization or other
entity, or any combination thereof, which is a party to a contract with a contractor or another subcontractor to perform a
portion of work pursuant to a construction contract.
5. "Material supplier" means any person, firm, partnership, corporation, company, association, or other organization
or entity, or any combination thereof, which is party to a contract with an owner, contractor or subcontractor, for the
provision of construction materials and/or equipment necessary to the completion of a construction contract.
6. "Notice." Any notice by the owner, contractor or subcontractor under this article shall be sent by facsimile and
reputable overnight courier and shall be deemed effective on the date sent.
HISTORY:
Sub 1, amd, L 2009, ch 417, § 2, eff Sept 8, 2009 (see 2009 note below).
The 2009 act deleted at fig 1 "two hundred fifty thousand dollars" at fig 2 "fifty", at fig 3 "nine thousand" and at fig 4
"one hundred fifty"
NOTES:
Editor's Notes
Page 4
Laws 2009, ch 417, § 6, eff Sept 8, 2009, provides as follows:
§ 6. This act shall take effect immediately and shall apply to construction contracts entered into after such date, except
those contracts entered into as part of a construction project for which a permit or permits have been issued and work
has begun on such projects prior to the effective date of this act.
LexisNexis 50 State Surveys, Legislation & Regulations
Real Estate Improvement Contracts
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285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
NY CLS Gen Bus § 756-a (2013)
§ 756-a. Obligations
It is the policy and purpose of this article to expedite payment of all monies owed to those who perform contracting
services pursuant to construction contracts. Except as otherwise provided in this article, the terms and conditions of a
construction contract shall supersede the provisions of this article and govern the conduct of the parties thereto.
1. Billing cycle. The parties to a construction contract may, by mutual agreement, establish a billing cycle for the
submission of invoices requesting payment for work performed pursuant to a construction contract. In the absence of an
agreement by the parties as to the billing cycle, the billing cycle shall be the calendar month within which the work is
performed.
2. Invoices.
(a) A contractor shall be entitled to invoice the owner for interim payments at the end of the billing cycle. A
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NY CLS Gen Bus § 756-a
contractor shall be entitled to submit a final invoice for payment in full upon the performance of all the contractor's
obligation under the contract.
(i) Upon delivery of an invoice and all contractually required documentation, an owner shall approve or
disapprove all or a portion of such invoice within twelve business days. Owner approval of invoices shall not be
unreasonably withheld nor shall an owner, in bad faith disapprove all or a portion of an invoice. If an owner declines to
approve an invoice or a portion thereof, it must prepare and issue a written statement describing those items in the
invoice that are not approved. An owner may decline to approve an invoice or portion of an invoice for:
(1) Unsatisfactory or disputed job progress;
(2) Defective construction work or material not remedied;
(3) Disputed work materials;
(4) Failure to comply with other material provisions of the construction contract;
(5) Failure of the contractor to make timely payments for labor including collectively bargained fringe benefit
contributions, payroll taxes and insurance, equipment and materials, damage to the owner, or reasonable evidence that
the construction contract cannot be completed for the unpaid balance of the construction contract sum; or
(6) Failure of the owner's architect to certify payment for any or all of the reasons set forth in this section so long
as the reasons are included in the owner's written statement of disapproval.
(ii) Upon delivery of an invoice and all contractually required documentation, a contractor or subcontractor shall
approve or disapprove all or a portion of such invoice within twelve business days. Contractor and subcontractor
approval of invoices shall not be unreasonably withheld nor shall a contractor or subcontractor, in bad faith, disapprove
all or a portion of an invoice. Nothing in this section shall prohibit the contractor or subcontractor, at the time of
application to the owner or contractor, from withholding such application to the owner or contractor for payment to the
subcontractor or material supplier for:
(3) Disputed work;
(4) Failure to comply with other material provisions of the construction contract; or
(5) Failure of the subcontractor to make timely payments for labor including collectively bargained fringe
benefit contributions; payroll taxes and insurance, equipment and materials, damage to contractor or another
subcontractor or material supplier, or reasonable evidence that the subcontract cannot be completed for the unpaid
balance of the subcontract sum.
(b) Nothing in this subdivision shall authorize the withholding of an application to the owner or contractor for the
payment to a subcontractor or material supplier when due to a delay in job progress by the owner, contractor or another
subcontractor or material supplier other than the applicant or applicant's subcontractor or material supplier.
3. Payment.
(a) The owner's payment of a contractor's interim and final invoices shall be made on the basis of a duly approved
invoice of work performed and the material supplied during the billing cycle.
(i) Unless the provisions of this article provide otherwise, the owner shall pay the contractor strictly in accordance
with the terms of the construction contract.
(ii) [fig 1] Payment of an interim or final invoice shall be due from the owner not later than thirty days after
approval of the invoice.
(iii) If payment by the owner is contingent upon lender approval, payment of a contractor's interim or final invoice
or the amount of loan proceeds disbursed by the lender for payment of the contractor's interim or final invoice shall be
due from the owner seven days after receipt by the owner of good funds except where the provisions of section seven
hundred fifty-six-d of this article applies.
(iv) An owner may withhold from an interim payment only an amount that is sufficient to pay the costs and
expenses the owner reasonably expects to incur in order to cure the defect or correct any items set forth in writing
pursuant to subparagraph (i) of paragraph (a) of subdivision two of this section, or in the alternative, to withhold an
amount not to exceed the line item amount appearing in the agreed schedule of values together with any change orders,
additions and/or deletions, if such schedule has been previously submitted, and/or an amount sufficient to cover
Page 6
liquidated damages as established in an agreed upon schedule in the construction contract.
(b) The contractor or subcontractor's payment of subcontractor or material supplier's interim or final invoice shall be
made on the basis of a duly approved invoice of the work performed and materials supplied during the billing cycle.
(i) Unless the provisions of this article provide otherwise, the contractor or subcontractor shall pay the
subcontractor strictly in accordance with the terms of the construction contract. Performance by a subcontractor in
accordance with the provisions of its contract shall entitle it to payment from the party with which it contracts.
Notwithstanding this article, where a contractor enters into a construction contract with a subcontractor as agent for a
disclosed owner, the payment obligation shall flow directly from the disclosed owner as principal to the subcontractor
and through the agent.
(ii) When a subcontractor has performed in accordance with the provisions of its construction contract, the
contractor shall pay to the subcontractor, and each subcontractor shall in turn pay to its subcontractors, the full or
proportionate amount of funds received from the owner for each subcontractor's work and materials based on work or
services provided under the construction contract, seven days after receipt of good funds for each interim or final
payment, provided all contractually required documentation and waivers are received.
(iii) A contractor or subcontractor may withhold amounts received from an owner in connection with an interim
payment due to a subcontractor or material supplier only such sums that are sufficient to pay the direct expenses as are
reasonable to correct deficiencies identified pursuant to subparagraph (ii) of paragraph (a) of subdivision two of this
section, or in the alternative, to withhold an amount not to exceed the line item amount appearing in the agreed schedule
of values, together with any change order, additions or deletions, if such schedule has been previously submitted [fig 1]
.
(iv) If a contractor, after submitting an invoice to an owner under a construction contract, but before making a
payment to a subcontractor or material supplier for the subcontractor's or material supplier's performance covered by
such invoice, discovers that all or a portion of the payment otherwise due to the subcontractor or material supplier is
subject to withholding from the subcontractor or material supplier in accordance with the construction contract and the
conditions set forth in subparagraph (ii) of paragraph (a) of subdivision two of this section, then the contractor shall:
(1) As soon as practicable upon ascertaining the cause giving rise to a withholding, but prior to the due date for a
subcontractor or material supplier payment, furnish to the subcontractor or material supplier and the owner written
notice of withholding specifying conditions for withholding payment and identifying the amount to be withheld;
(2) Reduce the subcontractor's or material supplier's interim payment by an amount not to exceed the amount
specified in the notice of withholding; and
(3) Pay the subcontractor or material supplier amounts withheld within seven days after correction of the
identified subcontractor or material supplier performance deficiency and receipt of all required documentation and
waivers, unless the funds [fig 1] therefor must be obtained from the owner's next interim payment due to a reduction in
the contractor's billing directly resulting from the subcontractor's or material supplier's performance deficiency
identified in the notice of withholding.
(c) A written notice of any withholding under this subdivision shall be issued to a subcontractor or material supplier
specifying:
(i) The amount to be withheld;
(ii) The specific causes for withholding under the terms of the construction contract and pursuant to this
subdivision;
(iii) The remedial actions necessary to be taken by the subcontractor or material supplier in order to receive
payments of the amounts withheld; and
(iv) The documentation and waivers required.
4. Notice. A contractor or subcontractor shall disclose to a subcontractor, at the time the construction subcontract is
entered into, the due date for receipt of payments to the contractor or subcontractor from the owner or the contractor as
the case may be. If a contractor or subcontractor fails to accurately disclose the due date to a subcontractor, the
contractor or subcontractor shall be obligated to pay the subcontractor as though the due dates established in paragraph
(a) of subdivision three of this section were met by the owner. In addition, upon written request of a subcontractor, the
owner shall provide notice to such subcontractor within five days of making any interim or final payment to the
Page 7
contractor. The subcontractor's request shall remain in effect for the duration of the subcontractor's work on the project.
HISTORY:
Add, L 2002, ch 127, § 2, eff Jan 14, 2003 (see 2002 note below); amd, L 2009, ch 417, § 3, eff Sept 8, 2009 (see
2009 note below).
Opening par, amd, L 2009, ch 417, § 3, eff Sept 8, 2009 (see 2009 note below).
Sub 3, par (a), subpar (ii), amd, L 2009, ch 417, § 3, eff Sept 8, 2009 (see 2009 note below).
The 2009 act deleted at fig 1 "Unless otherwise agreed to by the parties, payment"
Sub 3, par (b), subpar (iii), amd, L 2009, ch 417, § 3, eff Sept 8, 2009 (see 2009 note below).
The 2009 act deleted at fig 1 ", and/or an amount sufficient to cover liquidated damages as established in an agreed
upon schedule in the construction contract"
Sub 3, par (b), subpar (iv), cl (3), amd, L 2009, ch 417, § 3, eff Sept 8, 2009 (see 2009 note below).
The 2009 act deleted at fig 1 "therefore"
NOTES:
Editor's Notes
Page 8
NY CLS Gen Bus § 756-b
4 of 9 DOCUMENTS
All rights reserved
198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
NY CLS Gen Bus § 756-b (2013)
§ 756-b. Remedies
1. (a) If any interim or final payment to a contractor is delayed beyond the due date established in paragraph (a) of
subdivision three of section seven hundred fifty-six-a of this article, the owner shall pay the contractor interest
beginning on the next day at the rate of one percent per month or fraction of a month on the unpaid balance, or at a
higher rate consistent with the construction contract.
(b) Notwithstanding any contrary agreement, if any interim or final payment to a subcontractor is delayed beyond
the due date established in paragraph (b) of subdivision three of section seven hundred fifty-six-a of this article the
contractor or subcontractor shall pay its subcontractor interest, beginning on the next day, at the rate of one percent a
month or fraction of a month on the unpaid balance, or at a higher rate consistent with the construction contract.
2. (a) (i) If an owner fails to approve or disapprove an invoice within the time limits established in subparagraph (i) of
paragraph (a) of subdivision two of section seven hundred fifty-six-a of this article, or to pay the contractor the
undisputed invoice amount within the time limits provided by paragraph (a) of subdivision three of section seven
hundred fifty-six-a of this article, the contractor may suspend contractually required performance, only after providing
the owner written notice and an opportunity to cure consistent with subparagraph (ii) of this paragraph.
(ii) A contractor intending to suspend performance on the construction contract for failure of the owner to make
timely payments or approvals within the time limits provided by this article must provide the owner written notice at
least ten calendar days before the contractor's intended suspension. Such notice shall:
(A) inform the owner that payment for undisputed invoice amounts have not been received; and
(B) state the intent of the contractor to suspend performance for non-payment.
If after the tenth calendar day following written notice the owner has not cured the deficiency, the contractor may
suspend performance.
(iii) A contractor shall not be deemed in breach of the construction contract for suspending performance pursuant to
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this section.
(b) (i) A subcontractor may suspend contractually required performance if any or all of the occurrences outlined in
clauses (A), (B) and (C) of this subparagraph occur and only after providing written notice and an opportunity to cure
consistent with subparagraph (ii) of this paragraph:
(A) If an owner fails to make timely payments for undisputed invoices within the time limits established by
subdivision three of section seven hundred fifty-six-a of this article for the subcontractor's work and the contractor also
fails to pay the subcontractor for the approved work;
(B) If an owner pays the contractor within the time limits established by subdivision three of section seven
hundred fifty-six-a of this article for undisputed invoices for work performed by the subcontractor but the contractor
fails to make payment to the subcontractor within the time frames established by this article for the subcontractor's
work;
(C) If an owner fails to approve or disapprove a portion of contractor's invoice for work performed by the
subcontractor within the time limits established in paragraph (a) of subdivision two of section seven hundred fifty-six-a
of this article;
(D) If a contractor or subcontractor fails to approve or disapprove a subcontractor's invoice within the time limits
established in paragraph (b) of subdivision three of section seven hundred fifty-six-a of this article; or
(E) If an owner fails to approve portions of the contractors' billing for work performed by the subcontractor within
the time limits established by this article and the reasons for such failure are not the fault of or directly related to the
subcontractor's work.
(ii) A subcontractor intending to suspend performance for failure to receive timely payments within the time limits
established pursuant to this article must provide both the owner and the contractor written notice at least ten calendar
days before the subcontractor's intended suspension. Such notice shall:
(A) inform the owner and the contractor that payment for undisputed billing amounts have not been received; and
(B) state the intent of the contractor to suspend performance for non-payment.
If after the tenth calendar day following written notice either the owner or the contractor has not cured the
deficiency, the subcontractor may suspend performance and/or attempt to resolve in compliance with subdivision three
of this section.
(iii) A subcontractor shall not be deemed in breach of the construction contract for suspending performance pursuant
to this section.
(iv) (A) A contractor or subcontractor that suspends performance as provided in this section shall not be required to
furnish further labor, materials or services until the contractor or subcontractor is paid the undisputed invoice amount at
the time period for completion as provided in the construction contract, or a final determination has been made in
compliance with subdivision three of this section and complied with. All of the time frames established within [fig 1]
this section shall be extended for the length of time performance was suspended. Payment of documented actual costs
incurred for re-mobilization resulting from suspension shall be negotiated between the parties.
(B) In the event of suspension of a construction contract, as provided in this article, all materials, equipment, tools,
construction equipment and machinery located at the job site shall remain the sole and exclusive property of the
contractor or subcontractor and shall be removed from the job site, if necessary, within a reasonable period of time.
Access to the contractor's or subcontractor's property shall not be unreasonably withheld.
3. (a) Upon receipt of written notice of a complaint (i) that an owner has violated the provisions of this article; (ii) that a
contractor has violated the provisions of this article; (iii) where a contractor alleges a subcontractor has violated the
provisions of this article; (iv) where a subcontractor alleges a contractor has violated the provisions of this article; (v)
where a subcontractor alleges that another subcontractor has violated the provisions of this article; (vi) where a
contractor or subcontractor alleges a material supplier has violated the provisions of this article; or (vii) where a
material supplier alleges a contractor or subcontractor has violated the provisions of this article; the parties shall attempt
to resolve the matter giving rise to such complaint.
(b) The written notice required under this section shall be delivered at or sent by any means that provides written,
Page 10
third-party verification of delivery to the last business address known to the party giving notice.
(c) If efforts to resolve such matter to the satisfaction of all parties are unsuccessful, the aggrieved party may refer
the matter, not less than fifteen days of the receipt of third party verification of delivery of the complaint, to the
American Arbitration Association for an expedited arbitration pursuant to the Rules of the American Arbitration
Association.
(d) Upon conclusion of the arbitration proceedings, the arbitrator shall submit to the parties his or her opinion and
award regarding the alleged violation.
(e) The award of the arbitrator shall be final and may only be vacated or modified as provided in article
seventy-five of the civil practice law and rules upon an application made within the time provided by section
seventy-five hundred two of the civil practice law and rules.
HISTORY:
Add, L 2002, ch 127, § 2, eff Jan 14, 2003 (see 2002 note below); amd, L 2009, ch 417, § 4, eff Sept 8, 2009 (see
2009 note below).
Sub 2, par (b), subpar (ii), cl (B), closing par, amd, L 2009, ch 417, § 4, eff Sept 8, 2009 (see 2009 note below).
Sub 2, par (b), subpar (iv), cl (A), amd, L 2009, ch 417, § 4, eff Sept 8, 2009 (see 2009 note below).
The 2009 act deleted at fig 1 "the construction contract of a contractor or subcontractor"
Sub 3, add, L 2009, ch 417, § 4, eff Sept 8, 2009 (see 2009 note below).
NOTES:
Editor's Notes
Page 11
Case Notes:
Because the work on a nursing home was completed two years before the effective date of N.Y. Gen. Bus. Law §
756-b, a subcontractor was not entitled to recover interest pursuant to the statute. Oakwood Realty Corp. v HRH Constr.
Corp. (2008, 2d Dept) 51 App Div 3d 747, 858 NYS2d 677.
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198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
NY CLS Gen Bus § 756-c (2013)
§ 756-c. Retention
By mutual agreement of the relevant parties an owner may retain a reasonable amount of the contract sum as
retainage. A contractor or subcontractor may also retain a reasonable amount for retainage so long as the amount does
not exceed the actual percentage retained by the owner. Retainage shall be released by the owner to the contractor no
later than thirty days after the final approval of the work under a construction contract. In the event that an owner fails
to release retainage as required by this article, or the contractor or subcontractor fails to release a proportionate amount
of retainage to the relevant parties after receipt of retainage from the owner, the owner, contractor, or subcontractor, as
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NY CLS Gen Bus § 756-c
the case may be, shall be subject to the payment of interest at the rate of one percent per month on the date retention was
due and owing.
HISTORY:
NOTES:
Editor's Notes
6 of 9 DOCUMENTS
All rights reserved
Page 13
NY CLS Gen Bus § 756-d
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285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
NY CLS Gen Bus § 756-d (2013)
§ 756-d. Exceptions for failure of lender to disburse funds
The date of payment required by the owner, the contractor and/or subcontractor pursuant to section seven hundred
fifty-six-a of this article, shall be extended to the seventh day after the owner, contractor or subcontractor, as the case
may be, receives loan proceeds necessary to make such payment in the event that:
1. the owner, contractor or subcontractor, as the case may be, has obtained a loan intended to pay for all or part of
the construction contract;
2. the owner, contractor or subcontractor, as the case may be, has timely requested disbursement of proceeds from
that loan; and
3. the lender is legally obligated to disburse such proceeds to the owner, contractor or subcontractor, as the case
may be, but has failed to do so in a timely manner.
HISTORY:
NOTES:
Editor's Notes
Page 14
NY CLS Gen Bus § 756-d
7 of 9 DOCUMENTS
All rights reserved
198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
NY CLS Gen Bus § 756-e (2013)
§ 756-e. Exceptions for lower Manhattan reconstruction
The provisions of this article shall not apply to any construction contracts for the reconstruction, alteration, moving or
demolition of any building, structure or improvement, or relating to the excavation of or any development or
improvement to land in and around the world trade center necessitated by the September eleventh, two thousand one
terrorist attack on such center.
HISTORY:
NOTES:
Editor's Notes
Page 15
NY CLS Gen Bus § 756-e
8 of 9 DOCUMENTS
All rights reserved
198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
§ 757. Void provisions
Page 16
The following provisions of construction contracts shall be void and unenforceable:
1. A provision, covenant, clause or understanding in, collateral to or affecting a construction contract, with the
exception of a contract with a material supplier, that makes the contract subject to the laws of another state or that
requires any litigation, arbitration or other dispute resolution proceeding arising from the contract to be conducted in
another state.
2. A provision, covenant, clause or understanding in, collateral to or affecting a construction contract stating that a
party to the contract cannot suspend performance under the contract if another party to the contract fails to make prompt
payments under the contract.
3. A provision, covenant, clause or understanding in, collateral to or affecting a construction contract stating that
expedited arbitration as expressly provided for and in the manner established by section seven hundred fifty-six-b of
this article is unavailable to one or both parties.
4. A provision, covenant, clause or understanding in collateral to or affecting a construction contract establishing
payment provisions which differ from those established in subdivision three of section seven hundred fifty-six-a and
section seven hundred fifty-six-b as applicable.
HISTORY:
NOTES:
Editor's Notes
Page 17
9 of 9 DOCUMENTS
All rights reserved
198-202, 204-207, 213, 224, 227, 234, 237, 239-247, 250-255, 257-259, 261-264, 266, 268-277, 279, 280-283,
285-287, 290, 291, 293, 295, 296, 298-301, 303, 305-308 ***
§ 758. Severability
If any clause, sentence, paragraph, subdivision or part of this article, or the application thereof to any person or
circumstance, shall be adjudged by any court of competent jurisdiction to be invalid or unconstitutional, such judgment
shall not affect, impair or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence,
paragraph, subdivision or part of this article, or in its application to the person or circumstance, directly involved in the
controversy in which such judgment shall have been rendered.
HISTORY:
NOTES:
Editor's Notes
Page 18
INDEX NO. 651927/2013
FILED: NEW YORK COUNTY CLERK 07/26/2013
NYSCEF DOC. NO. 37
RECEIVED NYSCEF: 07/26/2013
SUPREME COURT OF THE STATE OF NEW YORK- NEW YORK COUNTY
PRESENT:
0. PETER SHERWOOD
PART
49
Justice
SOUTHGATE OWNERS CORP.,
651927/2013
INDEX NO.
Petitioner,
MOTION DATE
-against-
001
MOTION SEQ. NO.
KNS BUILDING RESTORATION INC.,
MOTION CAL. NO.
Respondent.
The following papers, numbered 1 to _ _ _ were read on this motion to stay arbitration.
PAPERS NUMBERED
Notice of Motion/ Order to Show Cause -Affidavits - Exhibits ...
Answering Affidavits- E x h i b i t s - - - - - - - - - - - - - Replying A f f i d a v i t s - - - - - - - - - - - - - - - - - - -
-c;;z
Cross-Motion:
Yes
No
0
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Upon the foregoing papers, it is ordered that this motion to stay arbitration is decided
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in accordance with the accompanying decision and order.
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0. PETERS!JERWOOD,
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: PART 49
------------------------------------------------------------------------)(
SOUTHGATE OWNERS CORP.,
Petitioner,
DECISION AND ORDER
Motion Seq. 001
-againstIndex No.: 651927/2013
KNS BUILDING RESTORATION INC.,
Respondent.
-----------------------------------------------------------------------)(
0. PETER SHERWOOD, J.S.C.:
Petitioner, Southgate Owners Corp. ("Southgate), which is a housing cooperative that
hired respondent, KNS Restoration, Inc. ("KNS"), to make repairs to the premises, seeks to
stay arbitration of KNS's claim for payment of $78,802.00. KNS asserts that the claim is for
an undisputed amount of monies owed for services rendered pursuant to the terms of a
construction contract between Southgate and KNS. Thus the claim is arbitiable under the New
York Prompt Payment Act, General Business Law§ 756-b(3)(c) (the "PPA") even though the
Standard Form American Institute of Architects Agreement("AIA Contract") the parties
signed was modified to delete the arbitration clause.
KNS asserts that pursuant to the provisions of GBL §756-b, the claim is subject to
mandatory arbitration. Southgate maintains that the parties agreed expressly not to arbitrate
and that the PP A does not entitle KNS to arbitration of the dispute because the PPA concerns
payment of undisputed amounts and the amount demanded in this case is a disputed amount
due to multiple defaults by KNS. Southgate states that KNS defaulted on the contract by, inter
alia (1) failing to provide adequate labor, equipment and materials to complete the work
within the time provided for in the contract; (2) misrepresenting its use of subcontractors; (3)
failing to obtain prior approval of subcontractors; (4) failing to make payments to
subcontractors consistent with the Lien Law and the PP A; (5) failing to provide supervision
consistent with contract requirements; and (6) failing to provide documents, including (a)
copies of subcontractor agreements, (b) proof of subcontractor's insurance, (c) warranties, (d)
lien waivers from all subcontractors and suppliers, and (e) project closeout documents.
Southgate adds that during the course of the contract it was required to issue five (5) separate
notices of contract breach as well as a Final Notice, none of which have been cured.
KNS argues that the issue of arbitrability should be referred to the arbitrator. The
court disagrees. Although questions concerning matters such as whether a party's claims fall
within the scope of the parties arbitration agreement, whether conditions precedent to
arbitration have been waived or whether an arbitration demand was timely filed are for the
arbitrator to decided, (see, e.g.[Matter of Diamond Waterproofing Systems, Inc. v 55 Liberty
Owners Corp., 4 NY3d 247,252 [2005]; 2P1 CenturyNorthAmer. Ins. Co. v Douglas, 105 AD3d
463 [1'1 Dept 2013]), the threshold issue of whether the parties have agreed to arbitrate or
otherwise are bound to arbitrate, is a matter for the courts to decide (see CPLR 7503[a];
Nationwide General Ins. Co. v Investors Ins. Co., 37 NY2d 91, 95[1975]; Cheng v Oxford Health
Plans, Inc., 15 AD3d 207, 208 [1'1 Dept 2005]).
The PP A is intended to encourage the prompt payment of undisputed amounts owed
to construction contractors and subcontractors. GBL §756-a states that its "purpose ... is to
expedite payment of all monies owed to those who perform contracting services pursuant to
construction contracts". The law is not intended to trump the terms of agreements of parties
to construction contracts. The law provides that "[e]xcept as otherwise provided in this article,
the terms and conditions of a construction contract shall supercede the provisions of this
article and govern the conduct ofthe parties.". The law requires that invoices be approved or
disapproved in a timely fashion and defines the permissible grounds for disapproval (see GBL
§756-a[2] [a] [i]).
In this case, KNS submitted payment applications numbers 5 and 6 on November 29,
2012 and December 27, 2012 respectively. Southgate issued timely responses on December 6,
2012 and January 15,2013 respectively, declining to approve specific items of work. Southgate
states that it paid $155,961 of the contract price and that KNS had asserted an outstanding
balance of$125,800. Apparently, KNS has adjusted its payment request and now seeks only
$78,802. Southgate continues to dispute this amount.
GBL §756-b sets forth a timetable for payment of undisputed invoice amounts and
requires payment of interest at the rate of one percent per month for late payment (see GBL
Page 2 of 3
§756-b[i]). It also establishes a timetable and procedure for contractors to give notice and to
suspend performance for non-payment of undisputed amount without fear of being held in
breach of contact (see GBL §756-b(2]).
Pursuant to GBL §756-b(3), an aggrieved party may give written notice of a complaint
"that the owner has violated the provisions ofthis article" and requires that "the parties shall
attempt to resolve the matter giving rise to such complaint". If negotiations fail, "the
aggrieved party may refer the matter ... for an expedited arbitration". GBL §756-b(3)(c).
These provisions do not purport to require parties to construction contracts to forego
the traditional right of contracting parties to choose whether to litigate disputed claims or to
submit disputed claims to arbitration. The PP A applies to undisputed invoices only. The
terms and conditions of the modified AlA Contract continue to govern disputed invoices (see
GBL §576-a). The contract of the parties in this case expressly excludes arbitration as the
vehicle for resolution of disputed matters. Accordingly, the petition must be granted. It is
ORDERED and ADJUDGED that the petition to stay arbitration of the disputed
invoices at issue in this case is GRANTED; and it is further
ORDERED and ADJUDGED that the demand for arbitration, American Arbitration
Association claim number 002-MWX-GDC, is hereby permanently STAYED.
ENTER,
DATED: July 24, 2013
_
.
&·~~
0.
Page 3 of 3
TER SHERWOOD
J.S.C.
8/1/13
New York Law Journal: Southgate Owners Corp v KNS Building Restoration 651927 2013
ALM Properties, Inc.
Page printed from: New York Law Journal
Back to Decision
Southgate Owners Corp. v. KNS Building
Restoration, 651927/2013
Supreme Court, New York County, Part 49
651927/2013
New York Law Journal
2013-07-31 09:04:47.0
Cite as: Southgate Owners Corp. v. KNS Building Restoration, 651927/2013, NYLJ 1202613014594, at
*1 (Sup., NY, Decided July 24, 2013)
651927/2013
Justice O. Peter Sherwood
Decided: July 24, 2013
DECISION AND ORDER
*1
Petitioner, Southgate Owners Corp. ("Southgate), which is a housing cooperative that hired respondent,
KNS Restoration, Inc. ("KNS"), to make repairs to the premises, seeks to stay arbitration of KNS's claim
for payment of $78,802.00. KNS asserts that the claim is for an undisputed amount of monies owed for
services rendered pursuant to the terms of a construction contract between Southgate and KNS. Thus
the claim is arbitiable under the New York Prompt Payment Act, General Business Law §756-b(3)(c) (the
"PPA") even though the Standard Form American Institute of Architects Agreement("AIA Contract") the
parties signed was modified to delete the arbitration clause.
KNS asserts that pursuant to the provisions of GBL §756-b, the claim is subject to mandatory arbitration.
Southgate maintains that the parties agreed expressly not to arbitrate and that the PPA does not entitle
KNS to arbitration of the dispute because the PPA concerns payment of undisputed amounts and the
www.newyorklawjournal.com/CaseDecisionFriendlyNY.jsp?id=1202613014594#
1/3
8/1/13
amount demanded in this case is a disputed amount due to multiple defaults by KNS. Southgate states
that KNS defaulted on the contract by, inter alia (1) failing to provide adequate labor, equipment and
materials to complete the work within the time provided for in the contract; (2) misrepresenting its use of
subcontractors; (3) failing to obtain prior approval of subcontractors; (4) failing to make payments to
subcontractors consistent with the Lien Law and the PPA; (5) failing to provide supervision consistent
with contract requirements; and (6) failing to provide documents, including (a) copies of subcontractor
agreements, (b) proof of subcontractor's insurance, (c) warranties, (d) lien waivers from all
subcontractors and suppliers, and (e) project closeout documents.
*2
Southgate adds that during the course of the contract it was required to issue five (5) separate notices of
contract breach as well as a Final Notice, none of which have been cured.
KNS argues that the issue of arbitrability should be referred to the arbitrator. The court disagrees.
Although questions concerning matters such as whether a party's claims fall within the scope of the
parties arbitration agreement, whether conditions precedent to arbitration have been waived or whether
an arbitration demand was timely filed are for the arbitrator to decided, (see, e.g. [Matter of Diamond
Waterproofing Systems, Inc. v. 55 Liberty Owners Corp., 4 NY3d 247, 252 [2005]; 21st Century North
Amer. Ins. Co. v. Douglas, 105 AD3d 463 [1st Dept 2013]), the threshold issue of whether the parties
have agreed to arbitrate or otherwise are bound to arbitrate, is a matter for the courts to decide (see
CPLR 7503[a]; Nationwide General Ins. Co. v. Investors Ins. Co., 37 NY2d 91, 95 [1975]; Cheng v. Oxford
Health Plans, Inc., 15 AD3d 207, 208 [1st Dept 2005]).
The PPA is intended to encourage the prompt payment of undisputed amounts owed to construction
contractors and subcontractors. GBL §756-a states that its "purpose…is to expedite payment of all
monies owed to those who perform contracting services pursuant to construction contracts". The law is
not intended to trump the terms of agreements of parties to construction contracts. The law provides that
"[e]xcept as otherwise provided in this article, the terms and conditions of a construction contract shall
supercede the provisions of this article and govern the conduct of the parties.". The law requires that
invoices be approved or disapproved in a timely fashion and defines the permissible grounds for
disapproval (see GBL §756-a[2][a][i]).
In this case, KNS submitted payment applications numbers 5 and 6 on November 29, 2012 and
December 27, 2012 respectively. Southgate issued timely responses on December 6, 2012 and January
15, 2013 respectively, declining to approve specific items of work. Southgate states that it paid $155,961
of the contract price and that KNS had asserted an outstanding balance of $125,800. Apparently, KNS
has adjusted its payment request and now seeks only $78,802. Southgate continues to dispute this
amount.
GBL §756-b sets forth a timetable for payment of undisputed invoice amounts and requires payment of
interest at the rate of one percent per month for late payment (see GBL
*3
§756-b[i]). It also establishes a timetable and procedure for contractors to give notice and to suspend
performance for non-payment of undisputed amount without fear of being held in breach of contact (see
GBL §756-b[2]).
2/3
8/1/13
Pursuant to GBL §756-b(3), an aggrieved party may give written notice of a complaint "that the owner has
violated the provisions of this article" and requires that "the parties shall attempt to resolve the matter
giving rise to such complaint". If negotiations fail, "the aggrieved party may refer the matter…for an
expedited arbitration". GBL §756-b(3)(c).
These provisions do not purport to require parties to construction contracts to forego the traditional right
of contracting parties to choose whether to litigate disputed claims or to submit disputed claims to
arbitration. The PPA applies to undisputed invoices only. The terms and conditions of the modified AIA
Contract continue to govern disputed invoices (see GBL §576-a). The contract of the parties in this case
expressly excludes arbitration as the vehicle for resolution of disputed matters. Accordingly, the petition
must be granted. It is
ORDERED and ADJUDGED that the petition to stay arbitration of the disputed invoices at issue in this
case is GRANTED; and it is further
ORDERED and ADJUDGED that the demand for arbitration, American Arbitration Association claim
number 002-MWX-GDC, is hereby permanently STAYED.
DATED: July 24, 2013
ENTER
3/3
Touro Law Review
Volume 28 | Number 1
Article 12
7-18-2012
The Privatization of Civil Justice: An Exposition on
New York's Prompt Payment Law and Its
Imposition of Mandatory Arbitration
James M. Tsimis
Follow this and additional works at: http://digitalcommons.tourolaw.edu/lawreview
Part of the Dispute Resolution and Arbitration Commons
Recommended Citation
Tsimis, James M. (2012) "The Privatization of Civil Justice: An Exposition on New York's Prompt Payment Law and Its Imposition of
Mandatory Arbitration," Touro Law Review: Vol. 28: No. 1, Article 12.
Available at: http://digitalcommons.tourolaw.edu/lawreview/vol28/iss1/12
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Tsimis: The Privatization of Civil Justice
THE PRIVATIZATION OF CIVIL JUSTICE: AN EXPOSITION
ON NEW YORK’S PROMPT PAYMENT LAW AND ITS
IMPOSITION OF MANDATORY ARBITRATION
James M. Tsimis*
I.
INTRODUCTION
In a world of constant flux and fluctuation, one rule generally
remained invariable: arbitration required the mutual assent of both
parties. It seems, however, that all good and simple things come to
an end. In 2009, the New York State legislature amended the Prompt
Payment Law with the objective of establishing a default rule that
prescribes the manner with which providers of construction services
are compensated for the work and services they provide.1 The legislature observed that, generally, those who receive construction services and the providers that render them “contract freely and, in good
faith, meet their obligations in a timely and just manner.”2 Nevertheless, the crux of the legislation addresses the concern of undue delay
*
J.D. Candidate, 2012, Touro College, Jacob D. Fuchsberg Law Center. 2009, Stony
Brook University, B.A. in Anthropology. I wish to thank my supportive family and friends
for a lifetime of unwavering encouragement and understanding in all my endeavors, but especially so over the last two years. Additionally, I would like to thank Michael Mulqueen
who was the impetus and inspiration for this Comment and whose support was steadfast during my summer under his tutelage. Finally, I must thank Timothy Riselvato, as well as the
rest of the talented Touro Law Review staff, who were integral to this Comment‟s publication.
1
Editor‟s Notes to N.Y. GEN. BUS. LAW § 756 (CONSOL. 2010) (describing legislative intent).
2
Id. Most sophisticated construction contracts are, at a minimum, fundamentally derived
from form contracts as provided for by the American Institute for Architects, and most—if
not all—include arbitration provisions. Gerald Lebovits & Lucero Ramirez Hidalgo, Alternative Dispute Resolution in Real Estate Matters: The New York Experience, 11 CARDOZO J.
CONFLICT RESOL. 437, 451 n.41 (2010). Where a contract exists that dictates the terms between the parties, the default rules of the Prompt Payment Law need not apply. Editor‟s
Notes to GEN. BUS. § 756.
323
Produced by The Berkeley Electronic Press, 2012
1
Touro Law Review, Vol. 28 [2012], No. 1, Art. 12
324
TOURO LAW REVIEW
Vol. 28
of payments for approved services in the construction industry.3
Moreover, the law provides for the authorization of “remedies including reasonable interest payments and circumstances for stop work
provisions.”4 The legislature explained that:
it is the intent of this legislation to encourage parties to
construction contracts to make payments at least as
expeditiously as existing contracts require and further
reduce existing payment processing time wherever
feasible, while at the same time permitting such entities to contract freely, perform proper and reasonable
management and financial oversight activities designed to ensure that construction services are provided in a safe, efficient and fiscally prudent manner.5
Thus, for private construction projects worth over $150,000,6
this law is designed to assuage the anxieties of those engaging in, and
soliciting the business of, construction providers. This law is an
attempt to promote a market with safeguards and regulation. This
law assures that compensation is justly dispersed. Yet this law, the
author argues, is unconstitutional.
While the Prompt Payment Law is not wholly egregious, its
flagrancy nevertheless stems from section 756-b.7 The statute provides that any violation of the prompt payment conditions may be
settled by “binding arbitration at the request of the „aggrieved party. ‟ ” 8 The statute provides as follows: First, violations must be
brought to the written attention of the party who is alleged to have
violated the statute by the other “aggrieved” party who claims the violation.9 After receipt of that notice, the parties should attempt to re3
Id. Timely payments create a more productive and efficient work environment and can
drastically reduce both external and internal transactional costs. Id.
4
Id. Stop work provisions allow the contractor or subcontractor to do as the name suggests—stop work—but more importantly, it gives the construction provider leverage against
the party with whom disagreement or conflict exists because stopping work will inevitably
incur additional expenses on behalf of the defaulting party.
5
Id. (describing legislative intent).
6
Editor‟s Notes to N.Y. GEN. BUS. LAW § 756. The previous version of the Prompt Payment Law called for the price of the project to be $250,000 or greater so as to trigger the statute. N.Y. GEN. BUS. LAW § 756 (2002), amended by N.Y. GEN. BUS. LAW § 756 (2009).
7
N.Y. GEN. BUS. LAW § 756-b.
8
Neal M. Eiseman & Robert J. MacPherson, Mandatory Arbitration in Construction
Payment Disputes, 243 N.Y. L.J. 4, 4 (2010).
9
N.Y. GEN. BUS. LAW § 756-b(3)(a).
http://digitalcommons.tourolaw.edu/lawreview/vol28/iss1/12
2
2012
THE PRIVATIZATION OF CIVIL JUSTICE
325
solve the matter on their own volition.10 In the event that no resolution can be agreed upon, the “aggrieved” party then has fifteen days
from the time the other party receives the written notice to initiate “an
expedited arbitration pursuant to the Rules of the American Arbitration Association.”11
Quite obviously, the procedure just described is inherently
problematic. For instance, the party receiving the notice may not
consent to the arbitration—that is, he may not wish to waive his right
to a jury trial should one be afforded to him. Furthermore, any existing contract between the parties, whether memorialized in written
form or not and absent provisions to the contrary, may implicitly and
impliedly reflect that any disputes arising from or relating to the contract shall be resolved in a court of law.12 Irrespective of those underlying contractual connotations, however, the arbitrator, according to
the statute, will then render his or her decision to the parties with respect to the alleged violation, and “the award of the arbitrator shall be
final,”13 leaving the only effective means of vacating the arbitrator‟s
final decision by way of C.P.L.R. Section 7501.14 Thus, this provision of the Prompt Payment Law provides for the aggrieved party‟s
redress at the expense of the other party‟s constitutional rights.
Adding teeth to this provision, section 757 states that any
proviso “affecting a construction contract [which states] that expedited arbitration as expressly provided for and in the manner established by section seven hundred fifty-six-b of this article is unavaila-
10
Id. at § 756-b(3)(a)(vii) (“Upon receipt of written notice of a complaint . . . the parties
shall attempt to resolve the matter giving rise to such complaint.”).
11
N.Y. GEN. BUS. LAW § 756-b(3)(c).
12
See Eiseman & MacPherson, supra note 8 (describing the way in which a party compelled to arbitrate may not have contemplated it at all).
13
N.Y. GEN. BUS. LAW § 756-b(3)(e).
14
See id.; N.Y. C.P.L.R. § 7501 (CONSOL. 2010). Section 7501 states:
A written agreement to submit any controversy thereafter arising
or any existing controversy to arbitration is enforceable without
regard to the justiciable character of the controversy and confers
jurisdiction on the courts of the state to enforce it and to enter
judgment on an award. In determining any matter arising under
this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass
upon the merits of the dispute.
N.Y. C.P.L.R. § 7501. A looming question, therefore, is what if the parties never agreed to
arbitrate?
3
326
TOURO LAW REVIEW
Vol. 28
ble to one or both parties” is void and unenforceable.15 As a result,
any party attempting to circumvent the statute‟s imposition of arbitration is frustrated by section 757.
Forcing parties to mandatory, binding arbitration runs counter
to parties‟ rights to a jury trial and due process as provided for in both
the Federal and New York Constitutions.16 Therein lies the irony,
however: the Prompt Payment Law is clearly a statute that is designed to reduce the burden of the courts by encouraging arbitration—yet its intrinsic egregiousness may well thrust the parties into
the very courts it was designed to prevent them from entering. A
contractor or owner will very likely contest the validity of the law‟s
draconian imposition of arbitration.
For these reasons, this article will expose the Prompt Payment
Law‟s brazen constitutional transgressions. Section II will offer a
backdrop of the three alternative dispute resolution mechanisms that
are most prevalent, and will discuss that which differentiates them.
Section III exposes how companies utilize arbitration to their advantage, and how it is sometimes an abuse of constitutional rights. Section IV endeavors to chronicle the Supreme Court‟s preference for
arbitration, its influence on New York, and how arbitration is adverse
to the Seventh Amendment and New York‟s analog, as well as the
due process implications of both Federal and New York‟s Constitutions. Finally, Section V concludes this Article with a proposition for
how arbitration should be interpreted and where it fits in the twentyfirst century.
II.
THE TOOLS OF THE TRADE THAT COMPRISE ALTERNATIVE
DISPUTE RESOLUTION
Negotiation
Arbitration is but one tool in a vast toolbox of alternative dispute resolution devices available to resolve conflicts between contracting parties. Negotiation and mediation are two other popular
dispute resolution techniques that are effective, but do not have the
same consequence as does arbitration, namely because they are non15
N.Y. GEN. BUS. LAW § 757(3) (CONSOL. 2010).
See Eiseman & MacPherson, supra note 8 (foreseeing a string of litigation due to the
constitutional implications of the Prompt Payment Law).
16
4
2012
327
binding.17 Negotiation, for instance, can be rather informal because it
occurs between the parties with no outside help.18 Moreover, negotiations need not take place only when a problem arises; often, terms
are bargained for through some form of negotiation before a contract
is even executed.19 The relationship between parties can consist of a
constant ebb and flow of negotiations, and it does not matter whether
or not a contract has already been signed. The reality is that most
transactions revolve around some form of negotiation, and in the context of dispute resolution, it is a simple yet effective tool that may result in an expeditious solution.20
Mediation
Slightly more formal is the dispute resolution tool of mediation, which, by its nature, requires not only the parties at the table,
but also a neutral third person facilitating a civil and objective resolution.21 Hence, mediation is frequently called “facilitated negotiation.”22 Often, courts will require some form of mediation prior to
filing with the court, which, in such a context, provides a valuation
for what a case is worth.23
In order for mediation to be successful, the parties must truly
intend to make amends.24 A mediator‟s role is to encourage open
communication between the disputing parties so as to come to a mutual resolution.25 Rather than impressing upon the parties a halfhearted resolution, the mediator‟s goal is to inspire a creative solution
17
Lebovits & Hidalgo, supra note 2, at 439-41 (discussing the pros and cons of negotiation, mediation and arbitration). The authors further note that, with regard to negotiation,
“[t]he parties in dispute attempt to reach an agreement using their negotiating skills and leverage.” Id. at 439.
18
Id.
19
Id.
20
Id. (“The advantage of negotiation over other ADR techniques is that parties that negotiate can eliminate the cost associated with a third-party neutral (if any) and overcome adversarial bias.”).
21
Lebovits & Hidalgo, supra note 2, at 440-41.
22
Id. at 440; see also Leonard L. Riskin, Understanding Mediators’ Orientations, Strategies, and Techniques, 1 HARV. NEGOT. L. REV. 7, 13 (1996).
23
Lebovits & Hidalgo, supra note 2, at 440.
24
Id. at 441 (stating that the parties must have a “genuine intention to reach an agreement
[otherwise] mediation will fail. Mediation is not advisable when . . . one side is unreasonable, when one side has a decidedly superior legal position, or when the parties are so antagonistic that concessions between them are not viable.”).
25
Id. at 440.
5
328
TOURO LAW REVIEW
Vol. 28
that is satisfactory to all the parties involved.26 Any conclusion to the
conflict between the parties as a result of mediation will only be the
product of voluntary, consensual agreement.27 Thus, mediation maintains the spirit of willingness associated with negotiation, but is more
structured and formal.
Arbitration
Finally, in the continuum of formality of dispute resolution
tools, arbitration is the most formal and consequential—it is binding
adjudication.28 There are, indeed, compelling benefits associated
with voluntary arbitration. First, the parties must agree that if a dispute were to arise between them during the life of the contract, then
arbitration would be the choice of adjudication to which they would
agree to resolve the conflict. Therefore, when a signed agreement between parties contains an arbitration clause, it is presumably there
because it was consensually approved by them, and is thus, voluntary. The venue of the arbitration, the neutral arbitrator, and the rules
which shall govern are matters which should be mutually agreed
upon by the parties.29
Secondly, arbitration is private and the decision of the arbitrator is not made public.30 For those who cherish their privacy, arbitration can be an invaluable alternative. Finally, arbitration is a more
expeditious process than litigation, and as a result, arbitration is, by
and large, faster and cheaper—a benefit that does not require further
explanation.31 Beware, however, because the old adage, “you get
what you pay for,” rings especially true here.
26
Id.; see also James J. Alfini, Mediation as a Calling: Addressing the Disconnect Between Mediation Ethics and the Practices of Lawyer Mediators, 49 S. TEX. L. REV. 829, 831
(2008) (“[S]elf-determination . . . is the one value that distinguishes mediation from other
dispute resolution processes.”).
27
Lebovits & Hidalgo, supra note 2, at 441.
28
Id. (“The arbitrators‟ ruling or award is ultimately binding on the parties just as it were
rendered by a court as a final judgment.”).
29
Soia Mentschikoff, Commercial Arbitration, 61 COLUM. L. REV. 846, 849 (1961) (calling this type of arrangement “individuated arbitration, [wherein] the making of all arrangements, including the procedures for arbitration, rests entirely with the parties concerned”).
30
Id. In addition to the privacy that arbitration provides, there is also the fact that experts
in the relevant field act as arbitrators in the matter, as well as “the random acceptance by
many businessmen of the idea that arbitration is faster and less expensive than court action.”
Id.
31
Id.
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In any event, that which most differentiates negotiation and
mediation from arbitration is that the latter‟s effects are binding; that
is, a party may not appeal the arbitrator‟s decision in a court of law.32
Arbitration has its own set of rules, and as such, it need not follow
substantive law.33 Arbitration does not have the power to hold parties
in contempt or award punitive damages.34 An arbitrator can essentially employ his subjective notions of justice, without any rationality, yet purport to be objective in his outcome. To much dismay, these
truths are what the Supreme Court and the New York Court of Appeals favor.35
Exposing Arbitration: The “Repeat” Theories
Aside from the intuitive problems that are inherent with arbitration, there are two other understated issues that warrant attention.
First is the “repeat provider” theory, which explains that organizations that repeatedly provide arbitration services for companies that
include arbitration clauses in contracts with consumers and employees do not have a financial incentive to arbitrate dispassionately,
but rather to settle cases before them in a manner that is most beneficial to the companies that ultimately pay the arbitration fees. 36 The
American Arbitration Association and the National Arbitration Forum are but two arbitration organizations that have agreements with
32
In reality, a party may in fact appeal an arbitrator‟s award, but under only under limited
circumstances as prescribed by C.P.L.R. Article 75. See, e.g., N.Y. C.P.L.R. § 7511
(CONSOL. 2010).
33
See Matthew Savare, Clauses in Conflict: Can an Arbitration Provision Eviscerate a
Choice-of-Law Clause?, 35 SETON HALL L. REV. 597, 598 (2005); see also Lentine v. Fundaro, 278 N.E.2d 633, 635 (N.Y. 1972) (“Absent provision to the contrary in the arbitration
agreement, arbitrators are not bound by principles of substantive law or rules of evidence.”).
34
Lawrence N. Gray, Judiciary and Penal Law Contempt in New York: A Critical Analysis, 3 J.L. & POL‟Y 81, 84-86 (1994) (noting that only judges can hold a party in contempt).
35
See generally, Moses H. Cone Mem‟l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 5
(1983) (discussing the finality and binding effect of arbitration decisions); Weinrott v. Carp,
298 N.E.2d 42, 45 (N.Y. 1973) (“ „Once it be ascertained that the parties broadly agree to
arbitrate a dispute arising out of or in connection with the agreement, it is for the arbitrators
to decide what the agreement means and to enforce it according to the rules of law which
they deem appropriate in the circumstances.‟ ” (quoting Matter of Exercycle Corp. (Maratta),
174 N.E.2d 463, 464 (N.Y. 1961))).
36
Jean R. Sternlight, Creeping Mandatory Arbitration: Is It Just?, 57 STAN. L. REV. 1631,
1650 (2005) [hereinafter Sternlight, Creeping Mandatory Arbitration] (“Arbitration organizations . . . are now competing to provide arbitration services for particular companies that
require their consumers to arbitrate future disputes. . . . Obviously, once an entity is named
as the provider, financial benefits accrue to that provider.”).
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various large companies that name them as the provider of their arbitration services.37 These organizations earn fees, either as a percentage of the amount charged by the arbitrators or, at the very least,
administrative fees.38 However one rationalizes it, the arbitration organizations and the companies that hire them are very likely to get a
gluttonous slice of some financial pie.
The second trend is known as the “repeat player” bias.39 As
the name suggests, the companies that repeatedly include arbitration
clauses in their contracts are more likely to arbitrate against a multitude of customers or employees.40 The companies thus garner much
more experience and inevitably become more adept at handling the
arbitration proceedings.41 Conversely, consumers and employees are
less likely to arbitrate a matter more than once in their lifetime as opposed to a large company, and the “repeat player” theory suggests
that familiarity with the process can either be beneficial or detrimental to the success of the arbitration, depending on which side of the
table one sits.42
Notwithstanding the benefits of arbitration when it is chosen
voluntarily between parties, the negatives associated with involuntary
mandatory arbitration are too severe to be forced on any party by statute. The language of the Prompt Payment Law reads that the aggrieved party has the option to arbitrate, as evidenced through the use
of the non-mandatory language of “may.”43 Proponents of the statute
may argue that this language mitigates the mandating effect that the
statute imposes on the other party because it is ultimately the ag-
37
Id.
Id. (“[P]roviders have a financial incentive to make sure that the company is pleased
with the results in arbitration.”).
39
Id.
40
Id.
41
Sternlight, Creeping Mandatory Arbitration, supra note 36, at 1651.
42
Id. at 1651; see also Lisa B. Bingham, On Repeat Players, Adhesive Contracts, and the
Use of Statistics in Judicial Review of Employment Arbitration Awards, 29 MCGEORGE L.
REV. 223, 239 (1998) (“[T]he perception of fairness is as important as the reality”).
43
N.Y. GEN. BUS. LAW § 756(b)(3)(c) (2010). The relevant portion of the statute is reproduced here:
If efforts to resolve such matter to the satisfaction of all parties are unsuccessful, the aggrieved party may refer the matter, not less than fifteen
days of the receipt of third party verification of delivery of the complaint, to the American Arbitration Association for an expedited arbitration pursuant to the Rules of the American Arbitration Association.
Id.
38
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grieved party‟s choice. This argument, of course, has no merit. It is
the statute which enables the aggrieved party to force the other to arbitrate in the first place.44 Without this language, the aggrieved party
would not have the statutory option to single-handedly arbitrate, and
might otherwise go to court as previously imagined by the parties.
If the parties do not negotiate a conflict resolution clause in
their contract voluntarily, arbitration should not be intrusively imposed on any party by the legislature, and should not be the default
rule under any circumstances. The Prompt Payment Law violates the
right to a jury trial and the right to due process, both of which are
guaranteed by the United States Constitution.45
III.
CONSTITUTIONAL PROTECTIONS OPTIONAL
Today‟s backdrop of civil litigation is drastically different
than the backdrop existing when the Constitution was drafted. The
Constitution guarantees that civil litigants have a right to due process
of law46 and the right of trial by jury.47 More modern statutes and
rules assure that the parties in litigation conduct discovery in order to
inform the opposing parties of the other‟s evidence and to limit surprises in court as much as possible.48 A neutral judge or jury then
hears the facts and weighs the evidence, and judgment is rendered
based on the pertinent law.49 If the losing party finds that error was
made, he can appeal to a higher court which can review the law as
applied to the facts, and if substantial error is found, the higher court
can reverse the judgment.50 The process just summarized describes
the judicial system, which affords an even playing field for all parties
44
See id. (stating that the aggrieved party is responsible for referring the matter to the
American Bar Association).
45
U.S. CONST. amend. VII; U.S. CONST. amend. XIV § 1.
46
U.S. CONST. amend. XIV (“[N]or shall any State deprive any person of life, liberty, or
property, without due process of law.”).
47
U.S. CONST. amend. VII.
In Suits at common law, where the value in controversy shall exceed
twenty dollars, the right of trial by jury shall be preserved, and no fact
tried by a jury, shall be otherwise reexamined in any Court of the United
States, than according to the rules of the common law.
Id.
48
FED. R. CIV. P. 26(b).
49
See generally, Right to a Jury Trial, 37 GEO. L.J. ANN. REV. CRIM. PROC. 519 (2008)
(discussing the Sixth Amendment right to a fair and neutral jury).
50
See FED. R. APP. P. 3 (explaining the process for appeal as of right).
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involved, thereby assuring just outcomes.
Times change, and with time so did the application of those
aforementioned constitutional rights. Many contracts today contain
alternative dispute resolution provisions.51 The “alternative” is a
binding resolution outside of the so-called cumbersome court system,
but it is not always justice. Companies, small and large alike, include
such provisions in their employment contracts because it is often less
expensive to arbitrate than it is to engage in the prolonged and expensive process of filing a lawsuit. Employees who sign these contracts,
however, have little option but to agree to these provisions because
the initial offers are presented to them in a “take it or leave it” fashion. Oftentimes, some form of arbitration is agreed to even though
there may exist a huge disparity of bargaining power between the
parties.52
Proponents of arbitration claim that it is preferred over litigation because it is less expensive, especially for an employee bringing
suit against a large corporation who might have refused to do so if
faced with the prohibitive expense of hiring an attorney and filing a
lawsuit. Nonetheless, the expense is still high for less affluent employees that bring arbitration against their employer “big-company”
because arbitrators may charge up to $5,000 per day in certain instances.53 Moreover, attorney‟s fees are not recoverable in arbitration.54 It is even more expensive when one considers the inferior value one receives through arbitration as opposed to the value one
receives from litigating in court, where the arbiter is a truly neutral
judge bound by the law of the land.
Ultimately, however, parties under these employmentcontract circumstances agree to them and are bound by them—that is,
51
See Sternlight, Creeping Mandatory Arbitration, supra note 36, at 1639 (“It is difficult
to assess how common mandatory arbitration clauses have become, but they certainly seem
ubiquitous.”).
52
See, e.g., Brennan v. Bally Total Fitness, 198 F. Supp. 2d 377, 382 (S.D.N.Y. 2002)
(“While inequality in bargaining power between employers and employees is not alone sufficient to hold arbitration agreements unenforceable, such inequality, when coupled with
high pressure tactics that coerce an employee's acceptance of onerous terms, may be sufficient to show that an employee lacked a meaningful choice.” (internal citations omitted)).
53
See Christopher R. Drahozal, Arbitration Costs and Contingent Fee Contracts, 59
VAND. L. REV. 729, 738 (2006) (illustrating arbitrators‟ fees from the American Arbitration
Association in Table 1).
54
See Sternlight, Creeping Mandatory Arbitration, supra note 36, at 1641-43 (“Companies are increasingly using their arbitration clause not only to require arbitration but also to
further limit consumers‟ procedural and even substantive rights.”).
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a prospective employee has the opportunity to walk away from a contract before signing it, or at least attempt to amend a clause so as to
tip it more in her favor. The employee is ostensibly cognizant of the
possibility of arbitration because of its mention in the contract, and
when such a contract is signed in an employment setting, there is less
sympathy for the employee because she presumably knew the risks
beforehand. Accordingly, employment arbitration agreements are often upheld in the name of efficiency and in accord with precedent.55
Notwithstanding the Constitution‟s limitations, however,
some state legislatures enacted legislation that not only promote arbitration, but, in fact, mandate it.56 Arbitration essentially embodies the
privatization of the judicial system.57 Such privatization runs counter
to the safeguards that the Constitution provides and is an egregious
violation thereto. As one commentator put it, “[the Constitution]
precludes the state from helping one party require another to give up
her day in court in favor of an arbitration process that is unfair or that
deprives an unwitting party of her right to a jury or a life-tenured
judge.”58 This succinctly encapsulates what the New York State Legislature has done through the Prompt Payment Act.
IV.
THE PROMPT PAYMENT LAW AND ARBITRATION IN A
CONSTITUTIONAL CONTEXT
Interpreting the Securities Act of 1933, the Supreme Court
decided Wilko v. Swan,59 where it ruled that arbitration is less protective than litigation.60 The Court further stated that arbitration requires
55
See Jean R. Sternlight, Rethinking the Constitutionality of the Supreme Court’s Preference for Binding Arbitration: A Fresh Assessment of Jury Trial, Separation of Powers, and
Due Process Concerns, 72 TUL. L. REV. 1, 18-19 (1997) [hereinafter Sternlight, Rethinking]
(“Courts have apparently been so impressed by the value of arbitration that they have abandoned their purported practice of interpreting a statute according to its plain meaning, in order to favor arbitration over litigation.”).
56
Pennsylvania is the only state thus far that has legislation that compels parties to arbitrate regardless of either party‟s willingness to do so. See 55 A.L.R.2d 432 (Originally published in 1957).
57
Sternlight, Rethinking, supra note 55, at 6.
58
Id. at 12-13 (noting that courts should honor an arbitration agreement between two
businessmen who voluntarily decide to partake in it, but should otherwise be weary of arbitration agreements wherein one party signs it unwittingly or without the full understanding
that his substantive rights will be abridged).
59
346 U.S. 427 (1953), overruled by Rodriguez de Quijas v. Shearson/Am. Exp., Inc., 490
U.S. 477, 484 (1989).
60
Id. at 436 (indicating that a substantial curbing of constitutional protections comes with
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subjective findings that must not only be determined, but also applied
“without judicial instruction on the law” and that the arbitrator‟s
award “may be made without explanation of their reasons and without a complete record of their proceedings, [and that] the arbitrators‟
conception of the legal meaning of such statutory requirements as
„burden of proof,‟ „reasonable care‟ or „material fact,‟ . . . cannot be
examined.”61 Since then, the Court has taken a stance in diametric
opposition to its reasoning in Wilko. In the ensuing years, the Court
began to flirt with the idea of enforcing arbitration clauses between
two business entities of equal sophistication.62 Thirty-six years later,
in 1989, the Court finally cemented its slow shift from skepticism of
arbitration to the favorable attitude it harbors toward it today.63
Construction matters offer a particularly salient backdrop for
showcasing the Supreme Court‟s current preference for arbitration.
In 1983, the Court first articulated its broad consent of the use of arbitration over litigation in Moses H. Cone Memorial Hospital v. Mercury Construction Corp.64 There, two parties, a contractor and a hospital, entered into a contract which called for arbitration as the avenue
for which to resolve disputes between them.65 Mercury, the contractor, attempted to initiate such an arbitration proceeding pursuant to its
allegation that the hospital owed it damages for causing delays in
construction.66 The hospital filed a lawsuit, however, to thwart Mercury‟s attempt from initiating arbitration as delineated in the contract.67 The hospital‟s main contentions were that, “Mercury‟s claim
was without factual or legal basis and that it was barred by the statute
of limitations[,]” and that “Mercury had lost any right to arbitration
under the contract due to waiver, laches, estoppel, and failure to make
a timely demand for arbitration,” and sought as relief “a declaration
arbitration).
61
Id.
62
See, e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506, 520-21 (1974) (ruling that, in a
claim between the two American and German companies, arbitration in this international
commercial context is favorable due to social policy concerns).
63
Rodriguez de Quijas, 490 U.S. at 481 (“ „By agreeing to arbitrate a statutory claim, a
party does not forgo the substantive rights afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial, forum.‟ ”) (quoting Mitsubishi Motors Corp.
v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)).
64
460 U.S. 1 (1983).
65
Id. at 4-5.
66
Id. at 7.
67
Id.
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that there was no right to arbitration [and] a stay of arbitration.”68
The Supreme Court ruled that because the growing trend was leaning
toward favoring arbitration,69 laches and estoppel should be interpreted narrowly as defenses to arbitration, and that the arbitration
provision would prevail.70
In justifying its obtuse alignment with arbitration over the
constitutionally-provided-for right to litigation, the Court expanded
its 1967 decision in Prima Paint Corp. v. Flood & Conklin Manufacturing Corp.,71 where it first determined that fraud in the inducement
was an arbitrable issue according to the United States Arbitration
Act.72 In Moses, the Court expounded on this basis, stating that:
[Since Prima Paint Corp.,] courts of appeals have . . .
consistently concluded that questions of arbitrability
must be addressed with a healthy regard for the federal
policy favoring arbitration. We agree. The Arbitration Act establishes that, as a matter of federal law,
any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration, whether the
problem at hand is the construction of the contract
language itself or an allegation of waiver, delay, or a
like defense to arbitrability.73
The Supreme Court of the United States allowed the lower courts to
effectively dictate its ruling. Commentators have astutely pointed
out, however, that although federal policy “favoring arbitration” more
accurately stands for the proposition that arbitration is a valuable alternative, the Supreme Court here made it unambiguously clear that it
supports the policy of favoring arbitration over litigation.74 Moreo68
Id.
Moses, 460 U.S. at 24.
The Arbitration Act establishes that, as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration, whether the problem at hand is the construction of
the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.
Id. at 24-25.
70
Id.
71
388 U.S. 395 (1967).
72
Id. at 406 (“Federal courts are bound to apply rules enacted by Congress with respect to
matters-here, a contract involving commerce-over which it has legislative power.”).
73
Moses, 460 U.S. at 24-25 (emphasis added).
74
Sternlight, Rethinking, supra note 55, at 18.
69
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ver, the Court stated that any hesitation of whether arbitration is appropriate should nevertheless be tipped in its favor.75 Surely this is
not the voice of reason or justice, nor one that could have been anticipated by the founders of this nation. Even so, the favor of arbitration
remains the prevailing sentiment—one which is supported by not one
scintilla of sound reasoning, but one that is nonetheless perpetuated
by courts‟ reference to Moses.
Once this ruling was handed down and it became clear that
the Supreme Court favored arbitration, companies across the gamut
started to implement arbitration clauses in their employment and consumer contracts.76 Companies have since sought arbitration in order
to escape the niceties of litigation—jury awards, punitive damages,
meaningful discovery, class actions, and of course, publicity.77
Moreover, companies design arbitration clauses that further curb the
procedural and substantive rights of consumers and employees.78 For
instance, some clauses have shortened statutes of limitations, others
require claims to be filed in distant forums, and still others bar particular forms of relief (e.g., injunctive relief or attorney‟s fees).79
State courts have followed suit, and the New York State legislature, autonomous as it may be in the scheme of federal policy, does
not legislate in a vacuum. It undoubtedly takes into account the policy considerations of the federal government, as evidenced by the arbitration provision of the prompt payment statute. A legislature does
not make laws it foresees will be overturned; it presumably contemplates the laws‟ consequences and enacts them responsibly. Here, the
statutorily mandated arbitration provision is the progeny of the federal government‟s misguided philosophy that arbitration is favorable
over litigation.
The New York legislature passed the Prompt Payment statutes
75
Moses, 460 U.S. at 26 & n.34. Yet, the Court acknowledges that:
[t]he Arbitration Act is something of an anomaly in the field of federalcourt jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does
not create any independent federal-question jurisdiction under 28 U.S.C.
§ 1331 (1976 ed., Supp. IV) or otherwise.
Id. at 26 n.32.
76
Sternlight, Creeping Mandatory Arbitration, supra note 36, at 1638 (noting that “businesses jumped on the opportunity” to force arbitration in contexts that previously might not
have been enforced).
77
Id.
78
Id. at 1641.
79
Id. at 1641-42.
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with provisions mandating arbitration because the national trend had
been leaning in that direction in recent years.80 This trend is largely
due to the Supreme Court perpetuating a skewed interpretation of the
Federal Arbitration Act (“FAA”). When Congress enacted the FAA
in 1925, the original intention was to allow two parties of equal sophistication to engage in arbitration instead of litigation.81 The Court,
however, has since interpreted the FAA to mean that it allows large,
sophisticated companies to take advantage of less powerful parties
who have no choice but to adhere to the former‟s contracts in a “take
it or leave it” fashion.82 Admittedly, the enforcement of agreements
between parties of the same sophistication that bargain for arbitration
as the means by which to resolve their disputes is not problematic.
To imagine, however, that a legislature would enact a statute that
practicably mandates arbitration is an unfortunate legal reality disconnected from rationality.
A.
The Seventh Amendment and New York’s Analog
State courts have enforced mandatory arbitration agreements
as if the agreements were between two voluntary parties.83 Similarly,
the Prompt Payment Law compels parties into arbitration from
agreements that merely contemplated litigation. This imposition of
arbitration is unconstitutional because it deprives the party of the
right to a hearing by jury under the Seventh Amendment and its New
York analog.84
The Seventh Amendment challenge can only be made if the
case is brought in federal court, under common law, and for damages
of twenty dollars or more.85 To call on a state‟s Seventh Amendment
80
See, e.g., Moses, 460 U.S. at 24 (noting the “liberal federal policy favoring arbitration
agreements”).
81
See Sternlight, Creeping Mandatory Arbitration, supra note 36, at 1636 (“Until quite
recently, . . . arbitration agreements were not used by U.S. businesses to require consumers,
employees, franchisees, or other weaker parties to resolve disputes through private arbitration rather than in court.”).
82
Id.
83
See id. at 1642 (noting that courts are not persuaded by the fact that arbitration agreements with small print or in a form contract constitute grounds for nullifying them); see also
Harris v. Green Tree Fin. Corp., 183 F.3d 173, 177-78 (3d Cir. 1999) (recognizing the validity of the contract in question wherein the arbitration clause was in fine print and inconspicuously placed toward the back and bottom of the agreement).
84
U.S. CONST. amend. VII; N.Y. CONST. art. I, § 2.
85
U.S. CONST. amend. VII.
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analog, the challenger must further ensure that the Federal Arbitration
Act does not preempt the relevant state statute.86
The New York State Constitution provides that “[t]rial by jury
in all cases in which it has heretofore been guaranteed by constitutional provision shall remain inviolate forever; but a jury trial may be
waived by the parties in all civil cases in the manner to be prescribed
by law.”87 The State Constitution further provides that “[t]he legislature may enact laws, not inconsistent herewith, governing the form,
content, manner and time of presentation of the instrument effectuating such waiver.”88 Notwithstanding the Constitution‟s permission to
the legislature in delineating statutory waiver requirements, there is
no statute that expressly defines the criteria for which a waiver of
jury trial in civil cases must be obtained.89 New York courts, however, as well as most other state and federal courts, have prescribed the
manner with which the right to a jury trial in civil cases may be
waived.90 The waiver of a civil jury trial must be clear, unequivocal,
and explicit so as to leave no room for uncertainty regarding the parties‟ intentions.91
The Prompt Payment Law requires that written notice be given of the complaint the aggrieved party has against the other party,
and that after such notice is given, “the parties shall attempt to resolve the matter giving rise to such complaint.”92 The written notice
must be delivered, with third-party verification, to the last business
address known to the party giving notice of the complaint.93 The
question remains whether this effectuates a waiver as defined by the
courts. It is doubtful that a mere letter of complaint by one party to
86
Sternlight, supra note 36, at 1646.
N.Y. CONST. art. I, § 2 (emphasis added).
88
Id.
89
N.Y. C.P.L.R. § 4101 (MCKINNEY 2010) lists the actions for which issues of fact shall
be tried by a jury, unless a jury trial is waived. They are: (1) where a party is able to prove a
judgment for a sum of money; (2) for “an action of ejectment; for dower; for waste; for abatement of and damages for a nuisance; to recover a chattel”; (3) any other action provided
for by the New York Constitution. N.Y. C.P.L.R. § 4101(1)-(3). Waiver of jury trial in
criminal cases is governed by N.Y. CRIM. PROC. § 320.10 (McKinney 2010).
90
Jean R. Sternlight, The Rise and Spread of Mandatory Arbitration as a Substitution for
the Jury Trial, 38 U.S.F. L. REV. 17, 25 (1991) [hereinafter Sternlight, Rise and Spread].
91
Edsaid Realty Corp. v. Samuels, 92 N.Y.S.2d 897, 899 (N.Y. City Ct. 1949) (“While
parties may unquestionably, by agreement, waive the constitutional right of trial by jury in
civil cases, the waiver must be clear and explicit, and must leave no room for doubt as to the
intention of the parties.”) (emphasis added).
92
N.Y. GEN. BUS. LAW § 756(b)(3)(a).
93
Id. § 756 (b)(3)(b).
87
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another constitutes waiver of a jury trial for the other party, but the
subsequent provision of the Prompt Payment Law introduces the arbitration provision: “the aggrieved party may refer the matter, not
less than fifteen days of the receipt of third party verification of delivery of the complaint, to the American Arbitration Association for an
expedited arbitration pursuant to the Rules of the American Arbitration Association.”94 The party who was served with the letter is thus
placed in an inferior position because the “aggrieved” party has at its
disposal the statutory mandate to arbitrate. As one commentator put
it, “there is a great difference between a legislature mandating arbitration and a private company doing the same.”95
B.
Framework for Arbitration in New York Practice:
Article 75
Article 75 of the Civil Practice Law and Rules (“CPLR”) defines the scope of arbitration between private contracting parties and
allows for judicial oversight over the process.96 Prior to the enactment of Article 75 of the CPLR in 1920, there existed a judicial hostility toward arbitration among the courts.97 Thus, the advent of
CPLR Article 75 ushered in an era of refreshed judicial philosophy,
one that welcomed the new procedural guidelines that made arbitration more attractive. As a result, the Court of Appeals, mirroring its
federal counterpart,98 now favors arbitration as the best alternative to
the judicial forum for dispute resolution.99 Part of the appeal for arbitration is that it results in expeditious resolutions that are often less
94
Id. § 756 (b)(3)(c).
96
See N.Y. C.P.L.R. § 7511 (explaining how a party can vacate or modify an arbitration
award as determined by a judge).
97
See, e.g., Meacham v. Jamestown, F. & C.R. Co., 105 N.E. 653, 654-55 (N.Y. 1914).
[A] distinction [has been] made between the provisions of a contract
providing that before a right of action shall accrue certain facts shall be
determined, or amounts or values ascertained, and an independent covenant or agreement to provide for the adjustment and settlement of all
disputes and differences by arbitration to the exclusion of the courts.
Id. at 654.
98
See, e.g., Moses, 460 U.S. at 24.
99
Weinrott v. Carp, 298 N.E.2d 42, 47 (N.Y. 1973) (“The result we suggest in this case is
consistent with the policy adopted by the Federal courts, and is significant since the Federal
arbitration statute is almost identical to, and is derived from, our own arbitration statute.”).
95
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expensive and more private.100
Notwithstanding the extreme favorability for arbitration, there
exists a tension between the disadvantages it places on parties—
resulting from the surrendering of significant procedural rights intrinsic in arbitration—with any recognized benefits. In Silverman v.
Benmor Coats, Inc.,101 for example, the Court of Appeals is disheartened that,
[A]bsent [a] provision in the arbitration clause itself,
an arbitrator is not bound by principles of substantive
law or by rules of evidence. He may do justice as he
sees it, applying his own sense of law and equity to the
facts as he finds them to be and making an award reflecting the spirit rather than the letter of the agreement, even though the award exceeds the remedy requested by the parties. His award will not be vacated
even though the court concludes that his interpretation
of the agreement misconstrues or disregards its plain
meaning or misapplies substantive rules of law, unless
it is violative of a strong public policy, or is totally irrational, or exceeds a specifically enumerated limitation on his power. Nor will an arbitration award be
vacated on “ „the mere possibility‟ ” that it violates an
express limitation on the arbitrator‟s power.102
Through this excerpt of Silverman, it is clear that the New
York Court of Appeals substantially mirrored its apprehension toward arbitration as the Supreme Court did in Wilko 31 years earlier.
Therefore, due to the substantial curbing of procedural rights, courts
still serve a chaperoning function when a party calls for judicial intervention. When a party solicits the involvement of a court, the law
addresses these preliminary threshold issues: whether there actually
was a valid arbitration agreement that contemplated the matters to be
arbitrated;103 whether the applicable statute of limitations has
100
Sablosky v. Edward S. Gordon Co., 535 N.E.2d 643, 646 (N.Y. 1989) (“Although a
party gives up an important right when it agrees to submit a dispute to arbitration, such proceedings are not less effective in discovering the truth than are judicial proceedings and it is
not, as a matter of public policy, per se unfair to give one party the right to select them.”).
101
461 N.E.2d 1261 (N.Y. 1984).
102
Id. at 1266 (internal citations omitted) (quoting Matter of Tilbury Fabrics v. Stillwater,
Inc., 435 N.E.2d 1093, 1094 (N.Y. 1982)).
103
N.Y. C.P.L.R. § 7503(a) (MCKINNEY 2010) (“Where there is no substantial question
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lapsed;104 whether the award was procured through “corrupt, fraud or
misconduct”;105 and the impartiality of the arbitrator106 or the arbitrator exceeding his authority.107 This list is illustrative rather than exhaustive, as the courts also take into consideration whether the issue
is arbitrable as per prevailing public policy.
Perhaps the principal concern courts must first grapple with
before compelling parties to arbitrate is to determine if, in fact, there
existed such an agreement to arbitrate. A higher degree of scrutiny is
required for arbitration agreements as compared to ordinary contracts.108 The Court of Appeals has stated that:
[t]he reason for this requirement, quite simply, is that
by agreeing to arbitrate a party waives in large part
many of his normal rights under the procedural and
substantive law of the State, and it would be unfair to
infer such a significant waiver on the basis of anything
less than a clear indication of intent.109
Thus, the Court of Appeals would agree that certain sacrosanct rights are taken away from parties who arbitrate disputes, and
that opaqueness of terms in an agreement to arbitrate makes it inherently ineffective. For these reasons, an agreement to arbitrate must
be “express, direct, and unequivocal as to the issues or disputes to be
submitted to arbitration. But, once there is agreement or submission
to arbitration, the scope of the arbitrators is unlimited and, with very
limited exceptions, unreviewable.”110 Consequently, the power
whether a valid agreement was made or complied with . . . .”).
104
N.Y. C.P.L.R. § 7502(b) (MCKINNEY 2010) (“If, at the time that a demand for arbitration was made or a notice of intention to arbitrate was served, the claim sought to be arbitrated would have been barred by limitation of time had it been asserted in a court of the
state, a party may assert the limitation as a bar to the arbitration . . . .”).
105
N.Y. C.P.L.R. § 7511(b)(1)(i) (McKinney 2010).
106
Id. § 7511(b)(1)(ii).
107
Id. § 7511(b)(1)(iii).
108
See, e.g., Marlene Indus. Corp. v. Carnac Textiles, Inc., 380 N.E.2d 239, 242 (N.Y.
1978) (“It has long been the rule in this State that the parties to a commercial transaction
„will not be held to have chosen arbitration as the forum for the resolution of their disputes in
the absence of an express, unequivocal agreement to that effect; absent such an explicit
commitment neither party may be compelled to arbitrate.‟ ” (quoting Matter of Acting Supt.
of Schools of Liverpool Cent. Sch. Dist. (United Liverpool Faculty Assn.), 369 N.E.2d 746,
748 (N.Y. 1977)).
109
Id.
110
Gangel v. N. DeGroot, PVBA, 362 N.E.2d 249, 250 (N.Y. 1977) (citing Weinrott v.
Carp, 298 N.E.2d 42, 46 (N.Y. 1973)).
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vested with the arbitration process is so potent that it is not something
that should be wielded menacingly by powerful parties, nor used as
leverage to manipulate opponents, as a means of procuring a resolution through a process which is intrinsically less stringent. Perhaps
more importantly, a legislature should not mandatorily impose arbitration on any party, as the New York legislature does with the
Prompt Payment Law.
In construing arbitration clauses, courts have balanced the legality of the arbitration clause in the context of the entire contract—
that is to say, whether the clause is valid. The issue of validity arises
most often with contracts that contain very broad arbitration clauses.
The leading New York case on the issue is Weinrott v. Carp,111 where
the Court of Appeals held that arbitration clauses are separable from
the contract in its entirety if portions of the contract were found to be
invalid.112 The contention in Weinrott was that because the overall
contract was induced by fraud, so too should the arbitration clause be
struck down as fraudulent.113 The Court, however, provided that:
The CPLR arbitration provisions (CPLR 7501 et seq.)
evidence a legislative intent to encourage arbitration.
Certainly the avoidance of court litigation to save the
time and resources of both the courts and the parties
involved make this a worthwhile goal. One way to
encourage the use of the arbitration forum would be to
prevent parties to such agreements from using the
courts as a vehicle to protract litigation. This conduct
has the effect of frustrating both the initial intent of the
parties as well as legislative policy. In the case at bar,
there were 21 hearings and 2,750 pages of testimony.
111
298 N.E.2d 42 (N.Y. 1973).
Id. at 47 (“[W]e now hold that an arbitration provision of a contract is separable, the
agreement to arbitrate would be „valid‟ even if the substantive portions of the contract were
induced by fraud.”).
113
Id. Notice the Court‟s tone when addressing appellant‟s legal contention:
As often happens in this type of case, appellants moved to stay the arbitration on the ground that there was fraud in the inducement of the contract. Although appellants‟ contention was „not supported by the record
and is refuted by documentary evidence‟, the arbitration continued to be
stayed while that preliminary issue laboriously worked its way through
the New York court system. Finally, after the issue fell exhausted at the
Court of Appeals, the arbitration hearings commenced.
Id. (internal citation omitted).
112
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If not for the arbitration, that entire burden would have
been placed on our court system. Indeed, had the case
been tried in the formality of the courtroom, it would
have taken longer to dispose of than it did before the
arbitrators. A broad arbitration clause should be given
the full effect of its wording in order to implement the
intention of the parties. Of course, where a form contract is involved or an arbitration provision seems to
be less than broad, a court should give the provision
and the circumstances surrounding its inclusion in the
contract great scrutiny. As a general rule, however,
under a broad arbitration provision the claim of fraud
in the inducement should be determined by arbitrators.114
With that ruling, the Court of Appeals thus aligned New
York‟s arbitration policy with that of the Federal government‟s.115
This ruling effectively means that the validity of the agreement referred to in CPLR 7503(a) and (b) relates only to the arbitration provision itself, and not with the contract as a whole, on account of the
arbitration provision‟s severability. Ultimately, this means that an
arbitration provision in an invalid contract will be given effect irrespective of the alleged invalidity or illegality of substantive portions of
a contract.116 The Court defends its holding by stating that any contrary ruling would defeat the twin aims of arbitration: “speed and finality.”117
114
Id. at 47-48.
Weinrott, 298 N.E.2d at 47 (holding that “[t]he result we suggest in this case is consistent with the policy adopted by the Federal courts.”).
116
Id. at 46.
When the parties to a contract have reposed in arbitrators all questions
concerning the „validity, interpretation or enforcement‟ of their agreement, they have selected their tribunal and no doubt they intend it to determine the contract's „validity‟ should the necessity arise. Judicial intervention, based upon a nonseparability contract theory in arbitration
matters prolongs litigation, and defeats, as this case conclusively demonstrates, two of arbitration's primary virtues, speed and finality.
Id. at 47.
117
Id.
115
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Article 75 and the Federal Arbitration Act: In
Cahoots?
The preference of the United States Supreme Court, Congress,
the New York Court of Appeals, and the New York legislature for
arbitration over litigation is inherently unconstitutional. Never did
our framers envision the privatization of our justice system, and yet
mandatory arbitration is the most favored mechanism by which to
dispense it, at both the federal and state level.
The concept that the Federal Arbitration Act (“FAA”) is supreme and thus preempts certain state laws is not a novel one.118 Yet
the boundaries of FAA preemption are not obvious, and while the
Supreme Court has held that the FAA does not cover the entire field
of arbitration, it does, in fact, preempt state laws that frustrate the
FAA‟s objectives.119 It would therefore seem imprudent for a state
legislature to enact laws contrary to the FAA. Moreover, so long as
the FAA covers the particular arbitration field in question, it does not
matter whether the case is brought in federal or state court. 120 The
Court has differentiated between cases where state laws have invalidated arbitration clauses on the basis of unconscionability or fraud,121
and state laws that substantively and procedurally invalidate arbitration contracts.122
The New York Court of Appeals acknowledges this relationship and has held that “[a] further basic principle . . . is the corollary
tenet that, in situations where the FAA is applicable, it preempts State
law on the subject of the enforceability of arbitration clauses.”123 The
FAA is unique in that it does not grant exclusive jurisdictional authority to the federal courts, thus enabling non-diverse claimants to
118
Sternlight, Rise and Spread, supra note 90, at 35. The author points out that while
those who oppose mandatory arbitration argue that it infringes on state constitutional jury
trial rights, supporters of arbitration argue that the FAA nevertheless preempts certain state
constitutional rights. Id. The author argues, however, that, “it would be inappropriate to
hold that the FAA preempts general jury trial waiver provisions.” Id.
119
Id. at 35-36 (citing Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 477-78 (1989)).
120
See, e.g., Perry v. Thomas, 482 U.S. 483, 489-90 (1987) (“ „We see nothing in the
[Federal Arbitration] Act indicating that the broad principle of enforceability is subject to
any additional limitations under state law.‟ ” (quoting Southland Corp. v. Keating, 465 U.S.
1, 11 (1984))).
121
See, e.g., Doctor‟s Assocs. v. Casarotto, 517 U.S. 681, 687 (1996).
122
Sternlight, Rise and Spread, supra note 90, at 36.
123
Fletcher v. Kidder, Peabody & Co., 619 N.E.2d 998, 1001 (N.Y. 1993).
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rely on the FAA in state court.124
Nevertheless, the broad scope with which the FAA is applied
should be viewed with skepticism and caution. This federal act
should not be construed in a manner so broad that it would preempt
even state constitutional protections, namely the right to a jury trial.
The inherent right to a jury trial and arbitration must be viewed in
harmony and not with the mindset that they have competing interests.
Ultimately, the excessive favor for arbitration should be balanced,
and perhaps curtailed, with the deference that is due to New York‟s
constitutional guarantee to a jury trial.
A prime example comes from Montana in Kloss v. Edward D.
Jones & Co.,125 where the Montana Supreme Court prevented the
preemption of Montana law by the FAA on the basis that a contractual waiver of basic constitutional guarantees was one which applied
in various contexts, not merely in the construction of arbitration provisions.126 Thus, the Montana law was construed broadly, as a general provision, and was not preempted by the FAA.127 So too should
New York law be interpreted.
By interpreting the FAA the way the Supreme Court currently
does, it perpetuates a philosophy that is counter to the underlying
constitutional principles that founded this nation: the right to jury trial, due process in courts of law, and neutral, unbiased judges.128
D.
Sheer Nature of Statute Creates a State Action
In order to establish “state action” for implicating arbitration
on due process grounds, there must be evidence proffered that a federal or state government directly aided in a constitutional violation.129
Thus, it is obvious that when a state statute is questioned, like the
Prompt Payment Law is here, there is no need for a scrupulous examination of the circumstances that give rise to the violation because
124
See Moses, 460 U.S. at 25.
54 P.3d 1 (Mont. 2002).
126
Id. at 15-16.
127
Id. at 16 (“The Supreme Court has . . . held . . . that if a state law governs . . . the validity, revocability and enforceability of contracts in general then generally applicable contract
defenses, such as fraud, duress or unconscionability, may be applied to invalidate arbitration
agreements without contravening Section 2 of the FAA.”).
128
129
Id. at 40.
125
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the source is readily apparent.130 In the instant controversy, the
Prompt Payment Law expressly permits private parties with contracts
valued at $150,000 or higher to engage in binding arbitration.131 Statutory compulsion to arbitrate is state action and is a violation of constitutional canons as delineated in the due process clauses of the State
Constitution132 and the Fourteenth Amendment of the Federal Constitution.133
There exists among the Supreme Court jurisprudence a plethora of cases that hold when the conduct of private entities are so
entwined with the actions of public institutions that the private conduct may be deemed state action.134 State legislatures that pass laws
impressing arbitration on parties does indeed constitute state action,
and the Prompt Payment Law is a manifestation of a deliberate and
meticulous attempt by the state to deter parties from exercising their
constitutional rights. Congress enacts laws, which is a direct form of
state action, but in the same vein, the Supreme Court espouses its preference for arbitration over litigation through its jurisprudence, also a
manifestation of state action.135 Therefore, a colorable argument exists for state action on behalf of the legislature and the judiciary regarding the overt favorability of arbitration on both the federal and
state levels.
Sharrock v. Dell Buick-Cadillac, Inc.136 is a telling case where
the New York Court of Appeals held that certain provisions of the
Lien Law failed to comport with “traditional notions of procedural
due process embodied in the State Constitution, as they deprive[d]
130
Id.
N.Y. GEN. BUS. LAW § 756(b)(3)(c) (“If efforts to resolve such matter to the satisfaction of all parties are unsuccessful, the aggrieved party may refer the matter . . . to the American Arbitration Association for an expedited arbitration . . . .”).
132
N.Y. CONST. art. I, § 6.
133
U.S. CONST. amend. XIV.
134
See, e.g., Lugar v. Edmondson Oil Co., 457 U.S. 922, 933 (1982) (holding that where a
state statute authorized a private party to commandeer private property with the assistance of
a public official, the private party had a colorable claim against him under the Due Process
Clause of the Fourteenth Amendment); Burton v. Wilmington Parking Auth., 365 U.S. 715,
726 (1961) (holding that a private restaurant was so intimately linked to a public parking facility that the restaurant's denial of service to African-American patrons was forbidden under
the Constitution). But see Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 166 (1978) (holding
that no state action existed where a private warehouse used self-help to recoup monies owed
it).
135
See, e.g., Moses, 460 U.S. 1, 29 (“[T]he Court acted within its authority in deciding the
legal issues presented in order to facilitate the prompt arbitration that Congress envisaged.”).
136
379 N.E.2d 1169 (N.Y. 1978).
131
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the owner of the vehicle of a significant property interest without
providing any opportunity to be heard.”137 Sharrock‟s husband had
taken her Cadillac to the defendant, Dell Buick-Cadillac, Inc., to replace the engine for a total of $225.138 There was no mention of the
storage charges that Sharrock would incur should the car not be
picked up immediately.139 Meanwhile, the original engine that was
installed was defective and had to be replaced, but by that time Sharrock‟s husband had been hospitalized and he was unable to continue
communicating with the shop with regard to the repair of the car.140
Soon thereafter, plaintiff received a “Notice of Lien and Sale” pursuant to the Lien Law.141 After storage fees brought the price of the
repair up to $502, plaintiff was urged to pay the price or sell the vehicle, which prompted the suit.142
The Court of Appeals held that in order to determine whether
the Due Process Clause of the Fourteenth Amendment was violated,
the pivotal issue was whether the State involved itself in what would
have otherwise been private action.143 Private conduct alone does not
qualify as state action, no matter how reprehensible the conduct.144
There must be a sufficient relation and nexus between the conduct
and a public entity so as to call upon the state action doctrine.145 The
Court cautioned, however, that “the mere fact that an activity might
not constitute State action for purposes of the Federal Constitution
does not perforce necessitate that the same conclusion be reached
when that conduct is claimed to be violative of the State Constitution.”146 Indeed, it found that the garageman‟s conduct did not violate the Due Process Clause of the Fourteenth Amendment, but it
137
Id. at 1171.
Id.
139
Id.
140
Id.
141
Sharrock, 379 N.E.2d at 1171.
142
Id. at 1171-72.
143
Id. at 1172 (“The threshold question in any judicial inquiry into conduct claimed to be
violative of the due process clause of the Fourteenth Amendment is whether the State has in
some fashion involved itself in what, in another setting, would otherwise be deemed private
activity.”).
144
Id. (“Purely private conduct, however egregious or unreasonable, does not rise to the
level of constitutional significance absent a significant nexus between the State and the actors or the conduct.”).
145
Id. (“[I]t is settled that where the impetus for the allegedly unconstitutional conduct is
private, the State must have „significantly involved itself‟ in order for that action to fall within the ambit of the Fourteenth Amendment.”) (internal citations omitted).
146
Sharrock, 379 N.E.2d at 1173.
138
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did in fact offend the due process clause of the New York Constitution.147
After clarifying the difference between the State Constitution‟s due process clause with that of the Fourteenth Amendment in
the Federal Constitution, the Court wrote:
State Constitutions in general, and the New York Constitution in particular, have long safeguarded any
threat to individual liberties, irrespective of from what
quarter that peril arose. Thus, as early as 1843, Justice
Bronson, in speaking of the due process clause of our
State Constitution, noted: “The meaning of the section
then seems to be, that no member of the state shall be
disfranchised, or deprived of any of his rights and privileges, unless the matter be adjudged against him
upon trial and according to the course of the common
law. It must be ascertained judicially that he has forfeited his privileges, or that some one [sic] else has a
superior title to the property he possesses, before either of them can be taken from him.”148
The Court determined that the Constitutional protections afforded by
the New York Constitution were triggered when there was no judicial
oversight of the conduct of the garageman for which the Lien Law
permitted him disposal of Sharrock‟s property without adequate notice to Sharrock.149 The State, the Court held, had so entwined itself
with the private actor, here the garageman, that the Court was compelled to deem the provisions of the Lien Law as unconstitutional.150
147
Id. The Court reasoned that:
[T]he mere fact that an activity might not constitute State action for purposes of the Federal Constitution does not perforce necessitate that the
same conclusion be reached when that conduct is claimed to be violative
of the State Constitution. Indeed, on innumerable occasions this court
has given our State Constitution an independent construction, affording
the rights and liberties of the citizens of this State even more protection
than may be secured under the United States Constitution.
Id.
148
Id. at 1174 (quoting Taylor v. Porter & Ford, 4 Hill 140, 146 (1843)).
Id.
150
Sharrock, 379 N.E.2d at 1174 (reasoning that state action, as manifested by the Lien
Law, “compels the conclusion that New York has so entwined itself into the debtor-creditor
relationship as to constitute sufficient and meaningful State participation which triggers the
protections afforded by our Constitution”).
149
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Thus, so too should the Court of Appeals render section 756-b
of the Prompt Payment Law unconstitutional. Forcing arbitration is a
direct violation of both the Federal and State constitutions because it
deprives the parties of their day in court by obliging one party to
force the other to arbitrate. In addition to the Prompt Payment Law
being a violation of the Due Process Clause of both the Federal and
State Constitutions, the next section will expound upon how the arbitration provision of the statute is unconstitutionally vague with regard
to waiver of the right to jury trial.
What Constitutes Waiver of Jury Trial?
The right to a jury trial is fundamental, both under federal and
state law.151 The Supreme Court established a four-prong test to determine when there is a valid constitutional right in civil matters.152
These factors are derived from Fuentes v. Shevin,153 where the Court
scrutinized the clarity of the waiver of the right to jury trial, 154 the sophistication of the parties,155 whether the waiver was voluntary,156
and the substantive fairness of the waiver.157 Although New York
has similar considerations regarding the waiver of jury trial in civil
and criminal contexts,158 these factors should be at the forefront of the
discussion with respect to the Prompt Payment Law notice-provision.
The waiver of constitutional rights by the courts is dealt with
in an apathetic manner. The New York Constitution states that a civil
jury trial may be waived by “the manner to be prescribed by law.”159
Yet the legislature has not created a statute expressly discussing the
manner with which one can waive the right to jury trial in civil cases.
The prerequisite for arbitration according to General Business Law
151
See U.S. CONST. amend. VII; N.Y. CONST. art. I, § 2.
Sternlight, Rethinking, supra note 55, at 57-58.
153
407 U.S. 67 (1972).
154
Id. at 95-96 (dismissing waiver that was in fine print where party failed to explain why
there could not be a hearing).
155
Id. at 95 (declining waiver where parties had unequal bargaining power).
156
Id. at 95-96 (rejecting waiver for which sale was allegedly conditioned upon).
157
Id. at 95 (highlighting the importance of whether the party received anything in return
for the waiver).
158
People v. Page, 665 N.E.2d 1041, 1044 (N.Y. 1996) (“The history of the constitutional
waiver provision thus establishes that the requirement that the defendant execute a signed,
written waiver was considered critical to securing a knowing, intelligent and voluntary waiver of the right to trial by jury.”).
159
N.Y. CONST. art. I, § 2.
152
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section 756-b is for the aggrieved party to notify the other party by a
written notice.160
It is unclear what the receiving party must do with the notice
if it does not wish to arbitrate, or if the party is silent altogether. The
intent of the legislature regarding the written notice required under
section 756-b is unknown. If the written notice is intended to act as a
waiver of jury trial rights, this is simply inadequate because the provision of the statute merely requires that the written notice contain
the details of the complaint.161 There is no mention of a waiver of
jury trial for the receiving party. Yet the statute continues on to provide for arbitration at the behest of the aggrieved party, which has the
effect of backing the other party into a corner. Since arbitrators are
given great deference, and absent any blatant misconduct during the
proceeding, there is little a protesting party can do once the arbitration proceeding has commenced.
The arbitration provision of the statute is an exemplification
of misconduct by the New York State government, thereby qualifying
the statute as state action in violation of the Due Process Clause and
the right to a jury trial guaranteed by the Constitution. Furthermore,
in evaluating arbitration provisions, courts should presume against
waiver when constitutional rights are involved, unless it is explicit
and clear that the party is waiving his right.162 New York courts follow the same presumption.163 It is therefore irrational to assume that
a simple written notification of a complaint by the aggrieved party to
the other is a waiver of the other party‟s constitutional right to a jury
trial. If the contract between the parties is silent as to conflict resolution, and the aggrieved party sends notice of arbitration in accordance
with the statute, what is the extent to which the party needs to acquiesce? What if the party who is served with the notice does not
consent to arbitrate? There is nothing in the statute that states the arbitration must be consensual—may the matter then proceed to litigation if it is not? These are but a few uncertainties, the answers for
which the Prompt Payment Law does not provide.
160
161
162
163
N.Y. GEN. BUS. LAW § 756-b(3)(b).
See N.Y. GEN. BUS. LAW § 756-b(3)(a)-(c).
Fuentes, 407 U.S. at 94-95, 95 n.31.
Edsaid Realty Corp., 92 N.Y.S.2d at 899.
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351
CONCLUSION
Binding arbitration is not without purpose in the twenty-first
century. When parties agree to be bound by alternative dispute resolution mechanisms to resolve disputes, it is indeed a swift means for
reaching a conclusion. Nevertheless, it is of utmost importance that,
in the context the Prompt Payment Law, we do not allow legislatures
to statutorily impose mandatory binding arbitration.
Courts, unlike legislatures, have a natural inclination to “prefer” and “favor” arbitration over litigation because of the caseload it
deflects from their dockets. While that is not a wholly illegitimate
reason, it flirts dangerously close with overlooking many unconstitutional arbitration clauses and statutes simply by virtue of courts favoring them. It is imperative that society put this issue on the forefront of legal discourse so that statutorily mandated arbitration does
not pervade other aspects of the law that intimately affect our lives—
lest we forget that arbitration is not consensual when parties are mandated by the government to partake in it.
In summation, the Due Process Clause of both the Federal and
New York Constitutions are violated by the Prompt Payment Law, as
well as the parties‟ right to a jury trial, also guaranteed by both constitutions. The Prompt Payment Law represents multiple constitutional violations under the guise and guile of lessening the influx of
cases in the court system, but does so at the expense of parties‟ constitutional rights. The implications of this legislation, and all like it,
are profound: this republican society in which we live, and the capitalistic tenet by which it is propelled is lessened by such governmental
regulation to the extent that it will not endure long after government
dictates the intimate matters of private parties in contract.
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Duane Morris LLP - Amendments to New York Prompt Payment Act Broaden Enforcement
ALERTS AND UPDATES
Amendments to New York Prompt Payment Act Broaden Enforcement
March 5, 2010
On September 8, 2009, New York Gov. David Paterson signed into law amendments to the state's Prompt Payment
Act (the "Act") intended to create broader enforcement mechanisms for the benefit of contractors,
subcontractors, suppliers and laborers. New York's General Business Law was revised to ensure that contractors,
subcontractors and suppliers are timely paid for completed work on private construction projects, and the state's
Labor Law was revised to allow complaints to the New York State Commissioner of Labor of nonpayment of wages
arising from violations of the Act. The following are the more noteworthy changes.
The Policy of the Act Is Recited
The purpose of the Act, to ensure that payments required by private construction contracts are made in a timely
manner, is now spelled out in the statute by the addition of the following language:
It is the policy and purpose of this article to expedite payment of all monies owed to those who perform
contracting services pursuant to construction contracts.1
The Reach of the Act Is Expanded
The reach of the Act was broadened to include smaller construction contracts and smaller projects. The definition
of a construction contract was changed to include any contract whose aggregate price equals or exceeds
$150,000. Previously, to invoke the protections of the statute, the price of the contract had to be $250,000 or
greater. Thus, the statute, as amended, lowers the cost threshold price of applicable construction contracts from
$250,000 to $150,000.2 The new amendments also broaden the definition of a construction contract by: (1) lowering
the aggregate size threshold for residential construction projects from 9,000 square feet to 4,500 square feet or
less; (2) lowering the number of applicable residential public housing units from 150 to 75 units; and (3) lowering the
number of applicable residential tract developments from 150 one- or two-family dwellings to 100 such dwellings.3
Timely Payment Rules Are Not Optional
The Act, as amended, no longer permits parties to contractually opt-out of the statute's payment requirements.4
The party to whom an invoice is submitted has 12 days to approve or disapprove all or a portion of the invoice by a
written statement describing the items not approved.5 The statute lists the reasons for which an owner may not
approve an invoice or portion of one,6 and for which a contractor or subcontractor may not approve an invoice or
portion of one.7 The amendments do not preclude parties from contractually changing the time frame for reviewing
an invoice or modifying the reasons for endorsing or rejecting an invoice. However, once approved, an invoice must
be paid within the statutory time frames. An owner must tender payment of an invoice, including final payment,
within 30 days of an invoice's approval.8 A contractor or subcontractor must tender payment to its subcontractor
of the proportionate amount paid by the owner for the subcontractor's work within 7 days of having received
payment for the work.9 The parties cannot change by contract the 30-day and 7-day payment periods.10
If the owner, contractor or subcontractor fails to timely pay an invoice within the time frame set forth in the
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statute, interest accrues beginning the day after payment is due.11 The new amendments to the Act also prohibit
parties from contractually opting-out of the obligation to pay interest.12
It is important to note that the General Business Law's new section 757 subdivision 4, which identifies provisions of
contracts which are void and unenforceable, reads:
A provision, covenant, clause or understanding in collateral to or affecting a construction contract
establishing payment provisions which differ from those established in subdivision three of section seven
hundred fifty-six-a and section seven hundred fifty-six-b as applicable.13
An initial reading may raise the question of whether the limiting reference to "subdivision 3" is applicable to section
756-b. However, a better reading of the statute may be that it intends to include all of section 756-b.
Liquidated Damages Are No Longer Deductible
A contractor or subcontractor can no longer withhold monies from payments due a subcontractor or supplier to
cover liquidated damages.14 A contract clause that provides otherwise is void and unenforceable.15 Prior to being
amended, the statute provided that a contractor or subcontractor could withhold from an interim payment to a
subcontractor or supplier an amount sufficient to cover liquidated damages set forth in the parties' agreement. The
owner's right to withhold from an interim payment an amount sufficient to cover liquidated damages set forth in the
parties' agreement is unaffected.16
Arbitration of Payment Disputes May Be Required by the Aggrieved Party
The amendments allow a contractor, subcontractor or supplier to use arbitration as a permissive remedy for
nonpayment. Where an owner, contractor or subcontractor does not make a timely payment, the aggrieved
contractor, subcontractor or supplier can resort to binding arbitration to resolve the payment dispute. The
nonpaying party can be required to participate in binding arbitration under the auspices of the American
Arbitration Association.17 First, the aggrieved party must provide written notice of nonpayment and attempt to
resolve the matter. If a resolution is not reached by the parties within 15 days, the contractor, subcontractor or
supplier has the option of mandating expedited and binding arbitration.18 The parties may not contract to opt out
of the arbitration requirement.19
In short, arbitration is no longer a mutually agreed-upon means to resolve private construction disputes. An owner,
contractor or subcontractor can now be required to enter into binding arbitration, even if its construction
contract does not contain an arbitration provision.
Labor Law Provisions
The amendments also revise section 196-a of the Labor Law to allow employees and labor unions to file complaints
with the Commissioner of Labor regarding failure to pay wages arising from alleged violations of the Act.
Effective Date of Amendments
The amendments became effective on September 8, 2009, and apply to private construction contracts entered into
after the effective date, excluding contracts for projects for which permits had been issued and work had begun
prior to the effective date.
Conclusion
The Act as amended maintains its stated purpose of expediting payment to those who perform contracting services
pursuant to construction contracts. However, the new amendments also furnish aggrieved parties with the
mechanisms that had not existed in the statute to ensure timely payment for completed work.
For Further Information
If you have any questions regarding this Alert or would like more information, please contact Jose A. Aquino,
Richard P. Dyer, any member of the Construction Group or the attorney in the firm with whom you are regularly in
contact.
2/3
8/1/13
Notes
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
N.Y. Gen. Bus. Law § 756-a (Consol. 2010).
§ 756(1).
Id.
§ 757(4).
§ 756-a(2)(a)(i) & (ii).
§ 756-a(2)(a)(i)(1)-(6).
§ 756-a(2)(a)(ii)(1)-(5).
§ 756-a(3)(a)(ii).
Id.
§ 757(4).
§ 756-b(1)(a) & (b).
§ 757(4).
Id. (emphasis added).
§ 756-a(3)(b)(iii).
§ 757(4).
§ 756-a(3)(a)(iv).
§ 756-b(3).
Id.
§ 757(3).
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor
should be construed, as legal advice. For more information, please see the firm's full disclaimer.
Duane Morris LLP & Affiliates. © 1998-2013 Duane Morris LLP. Duane Morris is registered service mark of Duane Morris LLP.
3/3
NEW YORK’S AMENDED PROMPT PAYMENT ACT
NEW LEGISLATION SHOULD ACTUALLY FACILITATE TIMELY
PAYMENT ON PRIVATE CONSTRUCTION PROJECTS
There is a new weapon against late payments from owners and general contractors on
private construction projects in New York. A recently enacted statute amends the Labor
Law and General Business Law in relation to the payments on private construction
projects. The purpose of the law was to “beef up” the existing, less than successful,
Prompt Payment Act and to make available greater enforcement procedures for
tradesman, materialmen, contractors and subcontractors.
New York previously enacted a Prompt Payment Act for construction work on private
projects in New York in July 2002, however, that law was the target of much criticism for
its lack of any meaningful enforcement mechanisms. Unlike the previous Act, the new
Prompt Payment Act actually has “teeth” and may provide a more effective set of
weapons against late payments. The following are a few of the more meaningful
provisions of the new Prompt Payment Act.
Minimum 30 Day Payment Rule
The new Act establishes the maximum time period, 30 days, in which an owner may
make payment on an interim or final invoice, which cannot be changed by the parties
even if they mutually agree otherwise in their contract. Under the previous Act,
payments were required to be made within 30 days, but parties were also free to contract
as they desired on their payment provisions, which meant that the payment terms of the
construction contract superseded the provisions of the Prompt Payment Act, thereby
diminishing any effectiveness the old Act may have had.
No L/Ds on Interim Payments
The new Act also prohibits contractors and subcontractors from withholding
“anticipated” liquidated damages from payments due a subcontractor, tradesman or
materialman. Such withholding for liquidated damages was permitted under the previous
Act in an amount established in the agreed upon schedule in the parties’ contract.
STAHLG NYS AmendedPrompt Pay Article Dec09.doc - 2/22/2010 (6:12 PM)
Binding Expedited Arbitration
Finally, and perhaps most importantly, the new Prompt Payment Act provides that, where
an owner and/or contractor fails to make payment on an invoice within the required time
period, the contractor and/or subcontractor may resort to expedited, binding arbitration to
resolve the late payment dispute. This is significant. By contrast, under the previous
Act, the only remedy for contractors and subcontractors was to hope to eventually collect
interest from the owner and/or suspend performance.
Now, in addition to collecting interest on late payments and in lieu of suspending
performance, a contractor/subcontractor may first provide written notice of a complaint
of late payment and attempt to resolve the matter giving rise to the complaint. If such
resolution efforts are unsuccessful, the contractor/subcontractor may refer the matter after
15 days to the American Arbitration Association for expedited arbitration. Significantly,
as indicated, the award of the arbitrator shall be final and binding on the parties.
G&C Commentary:
The new Prompt Payment Act is certainly an improvement over the ineffective previous
Act and may actually be an effective tool for subcontractors to ensure the timely payment
of their invoices. In fact, it has the potential to dramatically change the “balance of
power” along the construction payment food chain in the private sector. In particular, the
provision allowing for expedited, binding arbitration could substantially limit the time it
takes for disputes over payments to be resolved, during which time subcontractors
typically go without payment.
However, it is important to remember that, even though you may now resort to arbitration
for late and/or non-payment of invoices, you must still comply with all the notice and
recordkeeping requirements set forth in your contract in order to preserve your rights to
make claims and avoid any waiver of claims you may have against the contractor and/or
owner. In addition, before resorting to arbitration, it is important that you do your
homework and determine the alleged reason as to why you have not been paid. You also
need to establish a paper trail evidencing your receivable which can be used to prove
your case at the arbitration. You do not want to go into arbitration only to find out the
contractor/owner has a legitimate, or even pretextual, reason for not making payment,
one that may have been easily remedied or disproved prior to the arbitration.
Upcoming STA Breakfast SeminarPlease join us on January 13th for a comprehensive discussion on :
GETTING PAID- The Amended NYS Prompt Payment Act and more..
Wednesday January 13, 2010
8am, Crowne Plaza:
Goldberg & Connolly will be conducting this hour program which will review all the
effective Subcontractor “Getting Paid” Strategies & Tactics.
( registration form is on the next page).
Christopher K. Smith, an associate with the firm, assisted with the preparation of the article.
NEW YORK’S AMENDED PROMPT PAYMENT ACT
NEW LEGISLATION SHOULD ACTUALLY FACILITATE TIMELY
PAYMENT ON PRIVATE CONSTRUCTION PROJECTS
There is a new weapon against late payments from owners and general contractors on
private construction projects in New York. A recently enacted statute amends the Labor
Law and General Business Law in relation to the payments on private construction
projects. The purpose of the law was to “beef up” the existing, less than successful,
Prompt Payment Act and to make available greater enforcement procedures for
tradesman, materialmen, contractors and subcontractors.
New York previously enacted a Prompt Payment Act for construction work on private
projects in New York in July 2002, however, that law was the target of much criticism for
its lack of any meaningful enforcement mechanisms. Unlike the previous Act, the new
Prompt Payment Act actually has “teeth” and may provide a more effective set of
weapons against late payments. The following are a few of the more meaningful
provisions of the new Prompt Payment Act.
Minimum 30 Day Payment Rule
The new Act establishes the maximum time period, 30 days, in which an owner may
make payment on an interim or final invoice, which cannot be changed by the parties
even if they mutually agree otherwise in their contract. Under the previous Act,
payments were required to be made within 30 days, but parties were also free to contract
as they desired on their payment provisions, which meant that the payment terms of the
construction contract superseded the provisions of the Prompt Payment Act, thereby
diminishing any effectiveness the old Act may have had.
No L/Ds on Interim Payments
The new Act also prohibits contractors and subcontractors from withholding
“anticipated” liquidated damages from payments due a subcontractor, tradesman or
materialman. Such withholding for liquidated damages was permitted under the previous
Act in an amount established in the agreed upon schedule in the parties’ contract.
Binding Expedited Arbitration
Finally, and perhaps most importantly, the new Prompt Payment Act provides that, where
an owner and/or contractor fails to make payment on an invoice within the required time
period, the contractor and/or subcontractor may resort to expedited, binding arbitration to
resolve the late payment dispute. This is significant. By contrast, under the previous
Act, the only remedy for contractors and subcontractors was to hope to eventually collect
interest from the owner and/or suspend performance.
Now, in addition to collecting interest on late payments and in lieu of suspending
performance, a contractor/subcontractor may first provide written notice of a complaint
of late payment and attempt to resolve the matter giving rise to the complaint. If such
resolution efforts are unsuccessful, the contractor/subcontractor may refer the matter after
15 days to the American Arbitration Association for expedited arbitration. Significantly,
as indicated, the award of the arbitrator shall be final and binding on the parties.
G&C Commentary:
The new Prompt Payment Act is certainly an improvement over the ineffective previous
Act and may actually be an effective tool for subcontractors to ensure the timely payment
of their invoices. In fact, it has the potential to dramatically change the “balance of
power” along the construction payment food chain in the private sector. In particular, the
provision allowing for expedited, binding arbitration could substantially limit the time it
takes for disputes over payments to be resolved, during which time subcontractors
typically go without payment.
However, it is important to remember that, even though you may now resort to arbitration
for late and/or non-payment of invoices, you must still comply with all the notice and
recordkeeping requirements set forth in your contract in order to preserve your rights to
make claims and avoid any waiver of claims you may have against the contractor and/or
owner. In addition, before resorting to arbitration, it is important that you do your
homework and determine the alleged reason as to why you have not been paid. You also
need to establish a paper trail evidencing your receivable which can be used to prove
your case at the arbitration. You do not want to go into arbitration only to find out the
contractor/owner has a legitimate, or even pretextual, reason for not making payment,
one that may have been easily remedied or disproved prior to the arbitration.
Upcoming STA Breakfast SeminarPlease join us on January 13th for a comprehensive discussion on :
GETTING PAID- The Amended NYS Prompt Payment Act and more..
Wednesday January 13, 2010
8am, Crowne Plaza:
Goldberg & Connolly will be conducting this hour program which will review all the
effective Subcontractor “Getting Paid” Strategies & Tactics.
( registration form is on the next page).
Christopher K. Smith, an associate with the firm, assisted with the preparation of the article.
Page 1
1 of 1 DOCUMENT
Copyright 2010 ALM Media Properties, LLC
All Rights Reserved
Further duplication without permission is prohibited
New York Law Journal (Online)
April 20, 2010 Tuesday
LENGTH: 2047 words
HEADLINE: Mandatory Arbitration in Construction Payment Disputes;
Outside Counsel
BYLINE: Robert J. MacPherson and Neal M. Eiseman,[email protected], Special to the new york law journal
BODY:
Arbitration recently has been garnering its fair share of attention. Congress is currently considering controversial legislation which would outlaw mandatory arbitration provisions in consumer, employment and franchise agreements.1
Judges are more frequently coaxing litigants to submit their dispute to binding arbitration before an independent neutral
as a means of clearing out their overcrowded dockets. Since the enactment of the Federal Arbitration Act more than 85
years ago and myriad state statutes governing arbitration, one thing has always remained constant: For an arbitration to
exist, the parties must first agree to arbitrate.
2
It now appears, however, that a statutory exception exists in New York which can force owners, contractors and
subcontractors involved in payment disputes on private jobs to resolve them solely and exclusively via a binding arbitration proceeding.
With little fanfare last September, New York's Construction Contract Prompt Payment Law3 was amended to provide
that violations of the statute may be submitted to binding arbitration at the request of an "aggrieved party." Its purpose is
to expedite payment of all monies owed to those who perform contracting services on private construction projects
where the size of contract between the owner and the general contractor exceeds $150,000.
A party who claims a violation of the prompt payment requirements is required to give written notice of the violation to
the other party.4 If they cannot resolve the matter themselves the aggrieved party may, within 15 days of the other party
having received notice of the complaint, refer the matter to "expedited arbitration pursuant to the Rules of the American
Arbitration Association."5 The party receiving the notice is required to participate in the arbitration proceeding--independent of the fact that (i) the party never agreed to arbitrate and (ii) its written contract with the aggrieved
party contemplates, by silence or otherwise, that if a dispute arises, the parties will resolve their disputes in court. At the
conclusion of the arbitration, the arbitrator is to render an "opinion and award regarding the violation."6 The arbitrator's
decision is final and may only be vacated in accordance with CPLR 75.7
According to the statute, a claim that a party has "violated" the Prompt Payment Law can be submitted to an arbitrator.
But exactly what types of claims does that encompass and what type of relief may the arbitrator grant? This ambiguity
raises a number of questions about the scope of the arbitration proceeding. Consider the following:
Page 2
Mandatory Arbitration in Construction Payment Disputes; Outside Counsel New York Law Journal (Online) April 20,
2010 Tuesday
If a project owner disapproves a portion of an invoice, but pays the undisputed amount and sends a written explanation
showing the reasons and calculation of the withholding, can the contractor challenge the calculation and ask the arbitrator to rule all or part of the withholding was improper? Or is the arbitrator limited to ruling whether disapproval was
timely and whether the reasons were forth in writing, without getting into the substance of the calculation?
If an invoice is disapproved because it includes a request for payment of extra work not yet approved, does the party
seeking payment have the right to ask the arbitrator to determine that the extra work claims are valid and should be
paid?
If an invoice is not disapproved timely, can the arbitrator rule that the party disapproving the invoice has waived any
right to object and must pay the invoice without hearing evidence on whether the amounts invoiced are valid?
If the contract prohibits invoicing for extras or claims not incorporated via formal change orders, but does require any
outstanding "claims" to be submitted with the final payment request, are those claims subject to arbitration if the final
invoice including those claims is disapproved (or if not disapproved timely)?
Two Sets of Rules
The American Arbitration Association (AAA) has two sets of rules that would seem applicable to disputes under the
statute, the Commercial Arbitration Rules and the Construction Industry Arbitration Rules.8 While both sets of rules
contain procedures designed to shorten the time for the proceedings, only the procedures under the Commercial Rules
are referred to as "Expedited Procedures."9 The Construction Rules use the term "Fast Track Procedures."10
The one significant difference is that the Fast Track Procedures call for a preliminary telephone conference and require
the hearings be closed, meaning all hearings have been held and all evidence and arguments have been submitted to the
arbitrator with 45 days after a preliminary conference.11 Both sets of procedures apply where the claim or counterclaim
does not exceed $75,000 or where "the parties agree otherwise."12 All claimed violations of the Prompt Pay Law are
subject to expedited arbitration regardless of the amount in dispute.
Presumably, subject to the filing of a demand by the "aggrieved party," by participating in a project subject to New
York's Prompt Payment Law the parties are deemed to have adopted the AAA's expedited procedures.
Other features of the expedited procedures are limits on time extensions to respond to claims and counterclaims,13 telephone notice of hearings,14 selection of the arbitrator by the AAA if the parties cannot agree,15 exchange of exhibits two
days before hearings,16 a presumption the dispute will be submitted solely on documents if the claim is less than
$10,000,17 a hearing within 30 days of the arbitrator's appointment,18 a presumption the hearing will not exceed one
day19 and awards to be rendered within 14 days from the close of the hearings.20 It remains to be seen whether the expedited process will allow for a full and fair hearing of what could be factually and legally complex payment disputes involving multiple parties.
Other Changes
In addition to the provisions regarding arbitration of disputes, other significant changes to the Prompt Payment Law
include:
Mandating payment by an owner of interim or final invoices within 30 days of approval of the invoice;
Prohibiting contractors and subcontractors from withholding liquidated damages from progress payments; and
Making void and unenforceable contract payment provisions that differ from those in the statute or provisions which
state that arbitration as provided for in the statute is not available.2122
As originally enacted, the statute allowed the owner to set the time for payment of an invoice to the contractor. Under
the new provisions the owner must pay the contractor within 30 days of approval of an invoice, unless payment is con-
Page 3
2010 Tuesday
tingent upon lender approval in which case payment is due seven days after the lender has provided the funds to the
owner.23
If an invoice has been disapproved in whole or part by the owner the only amount which may be withheld is an amount
sufficient to pay the cots and expenses to cure the defects set forth in the written explanation for withholding payment.
The owner may also withhold an amount sufficient to cover liquidated damages if provided for in the contract.24
Withholding Payment
Contractors are required to pay subcontractors and suppliers and subcontractors are required to pay anyone downstream
of them the full or proportionate amount of the money received from the owner within seven days of receiving payment.25 Contractors and Subcontractors can withhold payments to those downstream for reasons similar to those for
which an owner can withhold payment, such as defective work. However, contractors and Subcontractors can no longer
withhold liquidated damages based on the liquidated damages set forth in the owner/contractor agreement. The statute is
silent as to whether liquidated damages can be withheld if the subcontract provides for liquidated damages.26
A contractor intending to withhold money received from the owner or must, prior to the date payment is due i.e., within
six days of their receiving payment, provide to the subcontractor and the owner a written notice setting forth the amount
withheld, the reasons for the withholding citing the specific contract clauses and provisions of the statute justifying the
withholding, the remedial action that must be taken to receive payment and any documents or waivers necessary. While
the statute does not expressly require it, a subcontractor intending to withhold money due a sub-subcontractor or supplier would be well-advised to provide a similar written notice.27
Section 756-b, entitled "Remedies," contains new provisions allowing for violations of the statute to be submitted to
arbitration at the request of an "aggrieved" party. As originally enacted the remedies included interest on late payments
of at least 12 percent per year28 and the right to suspend work due to a failure to timely approve or disapprove an invoice.29
Conclusion
Apparently, the supporters of the recent revisions to the Prompt Payment Law required mandatory arbitration of payment disputes because arbitration is viewed as a speedy, expeditious and less costly way to resolve disputes. That may
well be the case, but it does raise a serious issue. The revisions run counter to the well-settled notion that parties cannot
be compelled and must agree to use arbitration as the forum to resolve their disputes. No doubt it is just a matter of time
before a disgruntled owner, contractor or subcontractor forced into an arbitration challenges the constitutionality of the
mandatory arbitration provisions of the Prompt Pay Law. The claim will be that no one, not even the New York State
Legislature, may take away their right to a jury trial.30 A law intended to reduce litigation may very well keep lawyers
and courts busy for some time.
Robert J. MacPhersonNeal M. Eiseman
Endnotes:
1. The proposed federal Arbitration Fairness Act was re-introduced last year by Sen. Russell Feingold (D-Wi) (S. 931)
and Rep. Henry Johnson (D-Ga) (HR 1020). Both versions of the bill are presently in committee.
2. With the exception of unilateral arbitration clauses which New York courts enforce because one party has agreed to
permit the other party to decide whether they should proceed to arbitration (See e.g., Sablowsky v. The Edward S. Gordon Company Inc., 73 N.Y.2d 133, 538 N.Y.S.2d 513, 525 N.E.2d 643 (N.Y. 1989)) and "fee arbitration" statutes requiring attorneys to notify their clients of the option of proceeding to arbitration to resolve attorney's fees disputes, unless
the parties' agree to arbitrate, it is well-settled arbitration cannot occur.
3. Also known as General Business Law 756-758.
4. GBL 756b(3)(a).
Page 4
2010 Tuesday
5. GBL 756b(3)(c).
6. GBL 756b(3)(d).
7. GBL 756b(3)(e); CPLR 7501 et. seq.
8. Available at www.adr.org.
9. Commercial Arbitration Rules, Expedited Procedures, E-1 to E-10.
10. Construction Industry Arbitration Rules Fast Track Procedures F-1 to F-13.
11. F-7; F-12.
12. Commercial Rules, R-1; Construction Rules R-1.
13. E-1.
14. E-3.
15. E-4(b).
16. E-5.
17. E-6.
18. E-7.
19. E-8.
20. E-9.
21. GBL 757(3)(4). Other changes include reducing the cost of projects to which the statute applies from $250,000 to
$150,000, and changing the size of certain residential projects to which the statute will apply.
22. Some more background about the Prompt Payment statute: It applies to most private construction projects, with certain exceptions for residential projects and projects involving the World Trade Center site GBL 756(1); 756e. The
project owner is required to either approve or disapprove an invoice within 12 business days. An owner may disapprove
all or part of an invoice for reasons set out in the statute, such as unsatisfactory progress, defective work, a failure to
comply with a material provision of the contract or failure to make payments for labor or material. The reasons for disapproval must be set forth in writing and delivered to the contractor GBL 756a(2)(a)(i). Contractors and subcontractors
must also approve or disapprove invoices within 12 business days and can withhold submitting an invoice to the owner
or contractor for similar reasons GBL 756a(2)(a)(ii).
23. GBL 756a(3)(a)(i).
24. GBL 756a(3)(a)(iv).
25. GBL 756a(3)(b)(i).
26. GBL 756a(3)(b)(ii).
27. GBL 756a(3)(a)(iv).
Page 5
2010 Tuesday
28. GBL 756 b (1)(a) and (b).
29. GBL 756b(2)(a) and (b).
30. U.S. Constitution, Amendment VII; New York Constitution, Article VI 818.
LOAD-DATE: September 20, 2011
New York’
York’s “Prompt Pay”
Pay” Act:
An Underutilized Tool For
Getting Your Client Paid
•Joel
Sciascia Pavarini McGovern LLC
Eiseman Goetz Fitzpatrick LLP
•Henry L. Goldberg Goldberg & Connolly
•Michael Marra American Arbitration
Association
•Robbie MacPherson – Gibbons P.C.
•Neal
1
IT IS THE POLICY AND PURPOSE OF THIS ARTICLE TO
EXPEDITE PAYMENT OF ALL MONIES OWED TO THOSE
WHO PERFORM CONTRACTING SERVICES PURSUANT
TO CONSTRUCTION CONTRACTS
Section 756756-a - “Except as otherwise
provided in this article, the terms and
conditions of a construction contract shall
supercede the provisions of this article
and govern the conduct of the parties
thereto.”
thereto.”
THE LAW WILL NOW SUPERCEDE ANY
CONTRACT PAYMENT TERMS
2
-
APPLICATION Construction Contracts
Valued at $150,00 ($250,000) or Greater
Except:
• All public work by State
and Local governments,
public benefit
corporations or public
corporations
• Residential work of 1, 2
and 3 family dwellings,
• Residential tract
development of 100
(150) units or less
•
•
Residential project of
an aggregate size of
4500 (9,000) sq. ft. or
less
Residential project of
fewer than 75 (150)
units with public
financing for
individuals earning
80% of the HUD
Median income
3
BILLING CYCLE

By mutual agreement, or (absent that)
The calendar month within which the
work is performed
Contractor can invoice at end of Billing
Cycle
Billing Cycle could be 45, 60 or more
days
4
INVOICES - Contractor to
Owner

Owner to approve or disapprove within
12 business days of delivery of invoice
and “all contractually required
documentation”
documentation”
If the owner disapproves all or a
portion of the invoice, he must provide
a written statement describing what
has been disapproved
5
VALID REASONS FOR
DISAPPROVAL

Unsatisfactory or
disputed job
progress
Defective
construction work
or material not
remedied
Disputed work
materials
Failure to comply
with other material
provisions of the
t tii

Failure to make timely
payments for labor
(including collectively
bargained fringe benefit
funds), equipment and
material
Damage to the owner
Evidence contract can’
can’t
be completed for
outstanding contract
sum
Failure of architect to
certify payment for
reasons above
6
INVOICES - Subcontractor to
Contractor

¾
¾
Contractor to approve or disapprove in 12
business days
If the contractor disapproves all or a
portion of the invoice, he must provide a
written statement describing what has
been disapproved
How does this square with practical
timing of requisition process?
What kind of waivers should be required
with the sub’
sub’s application?
7
VALID REASONS FOR
DISAPPROVAL Failure to make timely

Unsatisfactory or
disputed job progress
Defective construction
work or material not
remedied
Disputed work
Failure to comply with
other material
provisions of the
construction contract

payments for labor
(including collectively
bargained fringe benefit
funds), equip. and
material
Damage to the
contractor, another
subcontractor or
material supplier
Evidence contract can’
can’t
be completed for
outstanding contract
sum
8
“Nothing in this subdivision shall
authorize the withholding of an
application to the owner or contractor
for the payment to a subcontractor or
material supplier when due to a delay
in job progress by the owner,
contractor or another subcontractor or
material supplier other than the
applicant’
applicant’s subcontractor or material
supplier.”
supplier.”
9
Payment Due Date Owner to Contractor

Old LawLaw-Per contractual agreement
AS AMENDED

Within 30 days (business or calendar?)
of approval, or
Within 7 days after securing funds
from a lender provided timely request
made
10
Payment Due DateDateContractor to
Subcontractor/Supplier

Within 7 Days of Receipt of Money from
upstream party
“Provided all contractually required
documentation and waivers are received”
received”
11
WHAT CAN OWNER
WITHHOLD
Only an amount sufficient to pay the
costs to cover a defect
or
An amount not to exceed the line item
in an agreed schedule of values
and
An amount sufficient to cover
liquidated damages agreed in
contract
12
WHAT CAN CONTRACTOR
WITHHOLD
The same as the Owner
EXCEPT
Provision allowing a Contractor to
withhold liquidated damages as
“agreed upon in the construction
contract”
contract” has been deleted.
Can a Contractor withhold liquidated
damages if agreed on in a
“Subcontract”
Subcontract”?
13
Withholding of
Subcontractor Payment
After Owner Approval

“If a contractor,
after submitting an
invoice to an
owner…
owner…but before
making a
payment…
payment…discovers
that all or a portion
due to the
subcontractor or
material supplier is
subject to
withholding…”
withholding…”

Prior to due date advise
subcontractor and
owner money will be
withheld
Written notice must
state:
–
–
–
–
Amount to be withheld
Specific causes
Remedial action required
Documentation and
waivers required
14
OBLIGATION TO DISCLOSE
PAYMENTS
Upon request of Subcontractor Owner must give notice to
Subcontractor within 5 days of making payment to Contractor
Contractors and Subcontractors must disclose to those
downstream date payment is due them
Failure to disclose creates an obligation to pay as if the Owner
met the dates in the Statute
With amendments mandating payment in 30 days after
approval only disclosure that may be necessary would be
payment cycle in excess of 30 days
Must Contractors and Subcontractors disclose due date for
each Billing Cycle ?
15
Remedies For Late
Payment or Non-Approval

Interest
– 1% per month or higher as per contract
Suspension of the Work
– 10 calendar day notice to cure
– Not a breach of contract
– Reimbursement for remobilization
– Extension of contract time
16
Retainage

By mutual agreement “a reasonable
amount”
amount”
Contractor may hold no more on
subcontractor than owner holds on
him
To be released 30 days after final
approval of the work (interest on late
release at 1% per month)
17
LENDER INVOLVED

Payment due date extended to 7 days
after loan proceeds are received if
Owner, Contractor or Subcontractor has
obtained a loan to pay for all or part of
“Construction Contract”
Contract”
What
does this mean when applied to contractors
and subcontractors ?
Timely request has been made to disburse loan
Lender is obligated to disburse but has not
18
WTC EXCEPTION
ACT DOES NOT APPLY TO WORK,
INCLUDING PRIVATE WORK, AT
THE WORLD TRADE CENTER
19
Void Provisions

Contracts [except material supply contracts]
subject to the laws of another state
Contracts requiring litigation, arbitration or
other dispute resolution procedure to be
conducted in another state
Contract requirement prohibiting suspension
of the contract for nonnon-payment
Contracts prohibiting expedited
arbitration for payment disputes
Contracts establishing payment
provisions that differ from the Prompt
Pay Law.
Law.
20
Right to Attempt to Resolve
Payment Dispute and Demand
Arbitration

Section 756 – b. Remedies

Paragraph 3
– (c) If efforts to resolve such matter to the
satisfaction of all parties are unsuccessful,
the aggrieved party may refer the matter, not
less than fifteen days of the receipt of third
party verification of delivery of the complaint,
to the American Arbitration Association for an
expedited arbitration pursuant to the Rules of
the American Arbitration Association.
21
22
Authority to Proceed
scenario 1
Parties’
Parties’ contract provides for
AAA arbitration: File Demand
for arbitration.
23
Authority to Proceed
scenario 2
No Agreement to use AAA
Arbitration:
File a Demand, reference claim
arising from statute; include copy of
communication requesting payment.
24
AAA Intake Process
Case Filing Service staff reviews initial
filing to confirm initial source of
authority for AAA to proceed; assigns
case to North East Case Management
Center staff for administration.
25
Arbitrability
scenario 1
Respondent objects to proceeding based
on a lack of agreement to arbitrate: if the
claimant has cited statute as source of
authority, AAA shall proceed with
administration of the case and refer the
arbitrability question to an arbitrator as a
threshold issue (AAA Rule RR-9).
26
Arbitrability
Scenario 2
Respondent argues claimant has not
complied with statutory requirements:
AAA shall proceed with administration
and refer the issue to the arbitrator as
a threshold issue (R(R-9).
27
In neither instance is the AAA
determining the arbitrability of the
issue.
The issue before the American Arbitration
Association (“
(“AAA”
AAA”) is whether the filing
requirements contained in the AAA’
AAA’s Rules have
been met by the Claimant. After review of the
file, the AAA has made an administrative
determination that Claimant has met the filing
requirements by filing a demand for arbitration
providing for administration by the AAA under its
Rules. Accordingly, in the absence of an
agreement by the parties or a court order staying
this matter, the AAA will proceed with the
administration of the arbitration.
28
Mandatory Arbitration:
A violation of the statute
may be submitted to
binding arbitration at
the request of an
aggrieved party. . .
29
The Scope of the
Arbitration:
Who decides?
Are there any limitations?
30
Hypothetical # 1

G.C.
G.C. submits a requisition/bill. Within
12 days, Owner objects in writing to a
portion of it, claiming some of the
work is not within spec and defective.
G.C.
G.C. files a demand for arbitration.
Owner objects, claiming arbitration is
only available if the Owner fails to set
forth its objections in a timely manner.
It is the dispute arbitrable?
arbitrable?
31
Hypothetical # 2

G.C.
G.C. submits its requisition/bill. One week after the
1212-day statutory period to approve or disapprove all
or part of it, Owner rejects 50%, claiming “doubledoubledipping.”
dipping.” G.C.
G.C. then suspends performance and
demands arbitration, claiming it is an “aggrieved
party.”
party.” Can the arbitrator rule that the entire bill
must be paid because the Owner blew the 1212-day
period to object? Can the arbitrator go back,
disregard the absence of the 1212-day notice and
decide the dispute on the merits?
32
Hypothetical # 3

G.C.
G.C. submits a request for change
order and Owner disapproves it
because the work has not yet been
approved. Thereafter, G.C.
G.C. demands
arbitration seeking to have the
arbitrator determine that the extra
work claim is valid and should be paid.
Does the statute permit this?
33

Once in arbitration, may a party
recover:
attorneys’
attorneys’ fees ?
arbitrator compensation and/or costs?
34
What is the format of the
hearings?
1.
2.
3.
“On the papers”
papers”
Live testimony
Are there any limitations on the
length of the presentations?
35
Assignment of
Construction Rules
Section RR-1 of the AAA’
AAA’s Construction Industry
Arbitration Rules, amended and effective October
1, 2009 allows the AAA to assign a constructionconstructionrelated dispute to the Construction Rules when
the parties have agreed to use the AAA, even if
they have not specified the Construction Rules.
36
Assignment to Fast Track
The language of the statute does
not identify a specific set of AAA
rules or a track within AAA rules.
The mere use of the word
“expedited”
expedited” without reference to
the Commercial Rules does not
require the application of the
Commercial Expedited Procedures.
37
Fast Track
It is the intent of the AAA to apply the Fast Track
of the Construction Rules to cases with claims
relating to prompt payment issues, even if the
claim size exceeds $75,000.
Should the parties not comply with the terms of
the Fast Track or should the parties’
parties’ dispute
include other claims, the AAA or the arbitrator
may assign the case to one of the other tracks of
the rules.
Parties may also agree to opt into the Regular or
LCC track should they agree that the case cannot
be resolved within the parameters of the Fast
Track. This issue shall be discussed during the
preliminary management hearing.
38
Fast Track Highlights

Single Arbitrator
Preliminary Management Hearing within
10 business days of confirmation of
appointment of arbitrator
Time Standards (F(F-12)
No discovery
14 days from close of hearing for Award
In most cases, flat rate for all arbitrator
compensation
39
Optional procedures for the
Resolution of disputes through
document Submission

Parties may agree to use DD-Section of
rules.
No inin-person hearing.
Good for single issue, document focused
cases.
40
The Arbitrator’s Award:
How final is final?
41
AAA Panel of Construction
Arbitrators

Must have minimum 10 years
experience in their field; most have 15
or more.
Attorneys must have minimum of 50%
of practice in construction law and
most have closer to 75%75%- 100%.
Required ADR training.
All NY arbitrators for cases arising
under this statute.
42
AAA Case Management

Dedicated Case Manager.
Each case individually managed; no
docket.
Construction focused staff team.
NECMC cases managers trained ADR
service providers.
National Case Management
Department support.
43
Practice Pointers

Specify and include in contract or
subcontract sample documentation
required with payment applications
(e.g. lien waivers, insurance certificates,
tests and inspection reports, etc.)

Educate Owner Representatives, Project
Managers and Superintendents to
document nonnon-performance
44
Many believe the law has had
little impact since first enacted
in 2003. Will that remain the
case ?
45
“DIRTY DOZEN” REASONS WHY PROMPT PAY ACT MAY NOT BE
SO PROMPT
12. Ambiguity or weakness as to what governs particular
provisions:

Parties Contract (“Mutual Agreement”) vs. the Act.
(Note 2009 Amendments)
11. Limitations on application of Act (i.e., type of project)
eliminates parties that need its potential benefits the
most.

–
–
10. The contractor cannot simply walk off the job if not
paid; the contractor can only “suspend” performance
upon ten (10) days written notice of intent to suspend
work with “opportunity to cure”. (§756-b(2)(a)(i))
“Feels” counterintuitive.
The contractor also runs the risk, if it does walk off, that it will be in
breach if it is ultimately determined that the dispute did not involve
approved (or undisputed) pay requisitions.
“DIRTY DOZEN” REASONS WHY PROMPT PAY ACT MAY NOT BE SO
PROMPT
9. “Mandatory” arbitration can simply be written out by
contract.

(See Southgate Owners Corp. v. KNS Building Restoration, Slip
Opinion, Supreme Court, County of New York, Index No.
651927/2013).
Currently under appeal to App. Div., 1st Dept.
8. Only two reported arbitrations concerning the Act in 4
years (2009 – 2013).

So why should I be the guinea pig??
7. Strict dictates (e.g., 12 day “tripwire” for approval of
invoices) on owner and GC are equally applicable to
subcontractors which have less ability to administer.

(Legislature attempted to be “fair,” but parties are not equal in
resources.)
PROMPT

6. Important loophole for failure of lender to distribute
funds. (§756-d)
“The date of payment required by the owner, the contractor and/or
subcontractor pursuant to Section 756-A of the Article, shall be
extended to the seventh day after the owner, contractor and
subcontractor, as the case may be, receives loan proceeds necessary
to make such payment...”
(But see, Westfair)
Or
“This job is going South!”

5. Grounds for withholding of funds undermines the Act.

4.
Grounds for disapproval of invoices undermines the Act.
PROMPT

3. The “prompt” in The Prompt Payment Act may be illusionary.
- Freedom to Contract “Promptness” Out;
- Numerous grounds to reject invoices;
- Numerous grounds to withhold funds and correct;
- Etc.
The parties can, for example, frustrate prompt payment through “mutual
agreement” regarding Payment Cycle provisions. Section 756-a (1) provides:
“Billing cycle. The parties to a construction contract may, by mutual
agreement, establish a billing cycle for the submission of invoices requesting
payment for work performed pursuant to a construction contract.”
(Thus, effectively delays payment, even though the law requires “payment
no later than 30 days after invoice approval”.) 2009 Amendment (§756-a 3
(ii))
PROMPT

2. The Act applies only to “approved” pay
requisitions. (§756 a (2)(i))
The owner can withhold approval for any of the following:
(3) Disputed work materials;
(4) Failure to comply with other material provisions of the
construction contract;
(5) Failure of the contractor to make timely payments for labor;
(6) Failure of owner’s architect to certify payment “for any reason”
provided only that reason is cited in owner’s written statement of
disapproval.
PROMPT

1.
The Act applies only to private contacts which are
fundamentally based upon personal relationships.
May be reason for historically dismal utilization.
“DIRTY DOZEN” REASONS WHY PROMPT PAY ACT
MAY NOT BE SO PROMPT
12.
Ambiguity or weakness as to what governs particular provisions:
Parties Contract (“Mutual Agreement”) vs. the Act.
(Note 2009 Amendments)
-
11.
Limitations on application of Act (i.e., type of project) eliminates parties
that need its potential benefits the most.
10.
The contractor cannot simply walk off the job if not paid; the
contractor can only “suspend” performance upon ten (10) days
written notice of intent to suspend work with “opportunity to cure”.
(§756-b(2)(a)(i))
“Feels” counterintuitive.
The contractor also runs the risk, if it does walk off, that it will be in breach if it
is ultimately determined that the dispute did not involve approved (or
undisputed) pay requisitions.
9.
“Mandatory” arbitration can simply be written out by contract.
(See Southgate Owners Corp. v. KNS Building Restoration, Slip Opinion,
Supreme Court, County of New York, Index No. 651927/2013).
Currently under appeal to App. Div., 1st Dept.
8.
Only two reported arbitrations concerning the Act in 11 years (2002 – 2013).
So why should I be the guinea pig??
7.
Strict dictates (e.g., 12 day “tripwire” for approval of invoices) on owner
and GC are equally applicable to subcontractors which have less ability
to administer.
(Legislature attempted to be “fair,” but parties are not equal in resources.)
6. Important loophole for failure of lender to distribute funds. (§756-d)
“The date of payment required by the owner, the contractor and/or subcontractor
pursuant to Section 756-A of the Article, shall be extended to the seventh day after
the owner, contractor and subcontractor, as the case may be, receives loan
proceeds necessary to make such payment...”
(But see, Westfair)
Or
“This job is going South!”
5. Grounds for withholding of funds undermines the Act.
4. Grounds for disapproval of invoices undermines the Act.
3. The “prompt” in The Prompt Payment Act may be illusionary.
-
Freedom to Contract “Promptness” Out;
Numerous grounds to reject invoices;
Numerous grounds to withhold funds and correct;
Etc.
The parties can, for example, frustrate prompt payment through “mutual
agreement” regarding Payment Cycle provisions. Section 756-a (1) provides:
“Billing cycle. The parties to a construction contract may, by mutual
agreement, establish a billing cycle for the submission of invoices requesting
payment for work performed pursuant to a construction contract.”
(Thus, effectively delays payment, even though the law requires “payment no
later than 30 days after invoice approval”.) 2009 Amendment (§756-a 3 (ii))
2. The Act applies only to “approved” pay requisitions. (§756-a (2)(i))
The owner can withhold approval for any of the following:
1.
(1)
Unsatisfactory or disputed job progress;
(2)
Defective construction work or material not remedied;
(3)
Disputed work materials;
(4)
Failure to comply with other material provisions of the construction
contract;
(5)
Failure of the contractor to make timely payments for labor;
(6)
Failure of owner’s architect to certify payment “for any reason” provided
only that reason is cited in owner’s written statement of disapproval.
The Act applies only to private contacts which are fundamentally based
upon personal relationships.
May be reason for historically dismal utilization.
© Goldberg & Connolly Sept. 2013
Faculty Biographies
Goetz Fitzpatrick – Dedicated to Excellence
http://www.goetzfitz.com/FirmDetail.aspx?FirmID=22
Download vCard File
Email:
[email protected]
For 30 years, commercial litigator Neal Eiseman has provided legal services to a wide
variety of corporate clients in the construction and real estate industries. Representing
real estate developers, lenders, owners, construction managers, contractors,
manufacturers and design professionals, he advises clients in both the transactional and
litigation aspects of commercial and real estate law.
Neal's commitment to his practice extends beyond the courtroom. He serves on the
Construction Arbitration Master Panel, the Panel of Arbitrators and the Panel of
Mediators of the American Arbitration Association, and has served on that
organization’s Regional Construction Attorney Advisory Counsel. He has also served
as an arbitrator for New York City's Civil Court, and founded the Bergen County Bar
Association’s Construction Law Committee.
As an Adjunct Professor at New York University, he teaches masters courses in
construction and real estate law and negotiation and dispute resolution. He is a regular
guest speaker at events held by the American Bar Association, the American
Arbitration Association and various construction trade associations. Last March, Neal
spoke at the American Bar Association’s Annual Litigation Conference in Chicago
about “Dealing with Attorneys Who Don’t Play Well in the Sandbox: Identifying
Tactics Intended to Derail Your Arbitration and How Best to Thwart Them.” Next
month Neal will be teaching an intensive mediator training program entitled “Essential
Mediation Skills for the New Mediator” in New York on behalf of the American
Arbitration Association.
He has written extensively about construction and commercial issues for various legal
publications. His latest opinion piece titled "Who Will Step Up to Protect
Policyholders?" appeared in the April 19, 2012 edition of the New York Law Journal.
This spring Neal co-authored an article entitled "A Tale of Two Lawyers: How
Arbitrators and Advocates Can Avoid the Dangerous Convergence of Arbitration and
Litigation" for the Cardozo Law School's Journal of Conflict Resolution.
Earlier this year, Neal obtained a unanimous reversal of an adverse decision of a New
York federal trial court when the Second Circuit Court of Appeals held that a
“Residential Exclusion” rider in a comprehensive general liability insurance policy does
not permit a contractor’s insurance company to disclaim coverage because the project
in question involves the construction of a residential condominium project.
A member of the American and New York State Bar Associations, the New York
County Lawyers' Association and ABA Sections in Construction and Litigation, Neal is
currently Co-Chair of the ABA's Committee on Arbitration. He is also a member of
the New York University Schack Institute of Real Estate/Construction Management
Advisory Board and is a Fellow in the College of Commercial Arbitrators.
1 of 2
CONSTRUCTION
LITIGATION,
ARBITRATION AND
MEDIATION
CONSTRUCTION
CONTRACTS AND
TRANSACTIONS
COMMERCIAL
LITIGATION
EDUCATION
St. John's University School of
Law, J.D.
The George Washington
University, B.A., Journalism and
Political Science
ADMISSIONS
New York
9/3/2013 2:39 PM
Goetz Fitzpatrick – Dedicated to Excellence
http://www.goetzfitz.com/FirmDetail.aspx?FirmID=22
Neal is rated AV Preeminent by Martindale-Hubbell and has been recognized as a
"Super Lawyer®" in the field of construction law every year since 2007. In 2011, 2012
and 2013, he was named a "Best Lawyer in America®" in the specialty of construction.
Neal was named one of Bergen County, New Jersey's "Top Lawyers" in (201)
Magazine. Chambers USA referred to Neal as "very intelligent" and "a breath of fresh
air," praising him for his ability to "bring to the table a pragmatic approach."
U.S. District Court, Southern
District of New York
U.S. District Court, Eastern
District of New York
U.S. Court of Appeals for the
Second Circuit
U.S. Supreme Court
New Jersey
U.S. District Court for New Jersey
Neal M. Eiseman
online at
visit
superlawyers.com
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Goldberg & Connolly | Henry L. Goldberg
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About The Firm
Practice Areas
http://www.goldbergconnolly.com/pages/attorneys/henry-goldberg.html
Attorneys
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Resources
Contact Us
ATTORNEYS Henry L. Goldberg
Attorneys
Henry L. Goldberg
Janet M. Connolly
( Retired )
Henry L. Goldberg, Esq., Managing Partner of the law firm of
Goldberg & Connolly, Rockville Centre, New York, is a prominent
authority in construction law and government contracting.
Mitchell B. Reiter
Consistent with this experience, Mr. Goldberg enjoys a working
relationship with the leadership of most contracting agencies in the
area. He is a member of the MOLES, a fraternal engineering
organization of the heavy construction industry, and the most
prestigious organization of its kind in the world.
William James Tinsley, Jr.
Erik A. Ortmann
Eugene Drexler
Darrell Harp
Mr. Goldberg is Counsel to the Construction Management
Association of America (CMAA) for the Metro New York / New Jersey
Chapter. He is also Counsel to the Subcontractors Trade Association
(STA) and past-president the New York City Chapter of the
Construction Financial Management Association and is a founding
Board Member and Counsel to the Long Island Chapter. He has also
served as Chairman of the New York Building Congress Public
Procurement Committee.
Norman A. Steiger
Brian P. Craig
Theresa Brennan Murphy
Michael J. Rosenthal
Christopher K. Smith
Clinton S. Hein
Jeffrey I. Scott
[email protected]
Download vCard
Paralegal
Bernice Augustus
Director of Administration
Julie Wyetzner
Mr. Goldberg is also active in most other construction industry
associations including the Associated General Contractors of
America and New York State, the General Contractors Association of
New York, the Construction Industry Council of Westchester and
Hudson Valley, the Long Island Contractors Association, the
Construction Management Association of America, the National
Contract Management Association, and the American Bar
Association's Public Contract Law, Fidelity and Surety Law,
Construction Litigation and Construction Industry Forum
Committees. He also serves on the "National Advisory Committee"
of The Journal of Construction Accounting and Taxation published by
Warren Gorham & Lamont and was recently appointed as Expert
Advisor to the American Arbitration Association.
Mr. Goldberg serves as Editor-in-Chief of the 2011 Edition of Federal
Contract Management: A Manual for the Contract Professional,
which is now available for purchase exclusively on LexisNexis.com.
He has long held Martindale-Hubbell's highest AV Preeminent™ rating and has continually been recognized
by Thomson Reuters' Super Lawyers® as a top construction attorney in the New York Metro area.
Mr. Goldberg is a graduate of Cornell University and Fordham Law School. He received his Bachelor of
Science in Industrial and Labor Relations in 1971 and his J.D. in 1974.
"The practice of law is the "ultimate service profession." The mission is completed only when the problem
is successfully avoided, mitigated or resolved. Merely going through the motions-whether in delicate
negotiations or complex litigation-does not lead to extraordinary results. I have always sought to lead and
motivate our legal team to "go the extra mile" in pursuit of our clients' goals. It is important to "play hard"
as well. For me, it's downhill skiing, competitive sailing or a round of golf. Last year I had the unique
pleasure of assisting our pet Weimaraner to whelp six healthy pups."
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Goldberg & Connolly - 66 North Village Avenue, Rockville Centre, NY 11570 - Tel: 516.764.2800 - Fax: 516.764.2827
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© 2013 Gibbons P.C., All Rights Reserved.
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http://www.gibbonslaw.com/biographies/attorney_biography.php?attorne...
Robert J. MacPherson
Robert J. MacPherson is a Fellow of the American College of Construction Lawyers
and former Chair of the ABA Forum on the Construction Industry. He has been
practicing construction law since 1981, focusing his practice on drafting and
negotiating contracts relating to construction projects and the resolution, through
negotiation, mediation, arbitration and litigation, of construction disputes. He is
admitted to practice in the State and Federal Courts in New Jersey and New York.
Mr. MacPherson regularly acts as construction contract and disputes counsel for
contractors, subcontractors suppliers and owners involved in building and heavy civil
construction for public and private work. He has been lead counsel in disputes
involving contract termination (both prosecuting on behalf of owners and defending
on behalf of contractors), liens, surety bonds, extra work claims, defective work
claims, scheduling and delays.
He teaches Construction Law at Rutgers Law School, Newark, NJ.
Mr. MacPherson also acts as a mediator and arbitrator and has been involved in
developing and conducting mediation education and training programs in New
Jersey. He taught Alternative Dispute Resolution at Rutgers Law School from 1996
until 2004.
Representative Matters
Defended cooperative housing corporation in action by municipality seeking over $20
Million for the repair of the concrete encased columns and slab supporting the coop’s
building over a major urban highway. Issues include legality of emergency contract
let without public bidding, access rights to public roadway to maintain coop’s
structures, impossibility of performance, beach of implied contractual duties and
liability of municipality for corrosive effect of road deicing materials on coop’s
concrete structures.
Robert J. MacPherson
Director
Business & Commercial
Litigation
Practice Areas
Alternative Dispute
Resolution
Business & Commercial
Litigation
Construction
Sandy Relief Task Force
Contact Information
One Gateway Center
Newark, NJ 07102-5310
Direct: 973-596-4811
Fax:
973-639-6473
RMacPherson
@gibbonslaw.com
Download V-Card
Negotiated a $120 Million contract for the design and construction of what will be the
headquarters campus of a major pharmaceutical company.
Advised a public agency on construction contract issues involving a public-private
partnership on P3 project.
Negotiated EPC, Fuel Supply and Operation and Maintenance agreements for a 50
MW bio mass fueled combined heat and power plant with a value in excess of €120
Million.
Assisted German wind turbine manufacturer in redrafting its supply contracts for use
in the United States.
Negotiation of EPC contracts for several solar projects in New Jersey.
Represented a foundation in the negotiation of a $500 million construction
management agreement.
Negotiated a $180 Million construction management agreement for a major retail
development on a “Brownfield” site in Brooklyn, New York. Advised the construction
manager on issues that arose during construction.
9/3/2013 2:49 PM
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Provided advice to design builder on issues related to P3 projects.
Assisted wind turbine manufacturer and supplier in the preparation of master
contracts between manufacturer and private power developers. Also provided advice
in connection with disputes including design and construction defects and
performance warranties for projects throughout the US.
Acted as construction contract and claims counsel for owner/developer of several
hydroelectric projects in upstate New York. Prepared and negotiated contracts with
designers, contractors and major equipment suppliers. Provided advice on claims
and disputes that arose during construction and litigated extra work, delay and
warranty claims.
Represented design-builder of a power plant in a dispute with the supplier of two 315
MW CFB Steam Generators. Primary issue was the use of 3D modeling in the design
process. Other issues included design deliverable liquidated damages and concurrent
delays.
Arbitrator in a dispute between the Owner and Design Builder of a gas fired peaking
plant. The design build contract value was in excess of $40 million and a separate
turbine supply contract between the owner and turbine manufacturer was
approximately $60 million. Issues included coordination between the design builder
and the turbine supplier, delays, construction defects, manufacturing defects and
performance guarantees.
Arbitrator in a dispute involving a design-build contractor’s $30 Million claim against
an insurer under a policy providing coverage for certain payment obligations of the
project owner and a performance bond surety arising out of a landfill closure project.
Arbitrator in a dispute involving the sale of a construction company where the future
revenue from a public construction project was the source of the funding for the
purchase price.
Arbitrator in a dispute arising out of contracts for roof systems on two office
buildings. Issues include statue of limitations, choice of law, limitations of liability
provisions and warranty claims, including a claim the warranty failed of its essential
purpose.
Arbitrator in a dispute between contractor and subcontractor on several public
housing authority projects. Issues included the subcontractor’s claim that it was the
general’s joint venture partner, a project suspension by the owner and the
application of the Eichleay formula for a home office overhead claim arising out of
the suspension, and extra work claims.
Mediator in over 100 construction contract, construction defect, insurance and surety
disputes involving from two to over forty parties with claims ranging from thousands
to millions of dollars.
Education
Seton Hall University School of Law (J.D., 1980)
Monmouth University (B.A., 1976)
Brookdale Community College (A.A., 1972)
Professional Admissions
State of New Jersey 1980
State of New York 1983
9/3/2013 2:49 PM
3 of 5
United States District Court for the District of New Jersey 1980
United States District Court for the Eastern District of New York 1983
United States District Court for the Southern District of New York 1983
United States Supreme Court 1987
Professional Activities
Fellow, American College of Construction Lawyers
Member, American Bar Association
Forum on the Construction Industry
Budget Chair, 2009-2010
Chair, 2008-2009
Chair-Elect, 2007-2008
Chair, Alternative CLE Committee, 2006-2007
Governing Committee, 2003-2006
Chair of Division 1, 2000-2002
Member, New Jersey Bar Association
Dispute Resolution Section
Chair 1994-1995
Construction and Public Contract Law Section
Original Member, Garibaldi ADR Inn of Court
Member, Committee on Complementary Dispute Resolution of the New Jersey
Supreme Court, Court Term 1994-1996
Mediator, Superior Court of the State of New Jersey 1994 to 2007
Mediator, United States District Court for the Southern District of New York
Member, Associated General Contractors of New York State
Member, Associated General Contractors of America
Former member, New York City Procurement Policy Board Advisory Council
Member of the Construction Cost Reduction Team appointed by Mayor Michael
Blumberg to study and report on New York City's capital construction program. The
report was delivered in July 2008.
Construction Industry Arbitration and Mediation Panel, American Arbitration
Association
Publications
"New York State’s Design Build Statute May Pave the Way for Public Private
Partnerships," Business Litigation Alert, May 1, 2013 (Lisa Lombardo, Robert J.
MacPherson)
"Got Those Supplier Ascertaining Allocation Blues?," RPE Law Alert, March 19, 2013
(Philip W. Lamparello, Robert J. MacPherson)
"So Far Away from Home, It’s No Longer an American Tune: Fee Shifting in
Construction Disputes," JAMS Global Construction Solutions, Fall, 2012
"Contract Provisions - Who Reads Them Anyway," ABA Forum on the Construction
Industry, April 2012 (Robert J. MacPherson, Melissa Beutler, Patrick A. Genzler)
9/3/2013 2:49 PM
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"Shaking the Arbitration Blues," New Jersey Law Journal, March 28, 2011
"Mandatory Arbitration in Construction Payment Disputes," New York Law Journal,
April 20, 2010 (Robert J. MacPherson, Neal M. Eiseman)
"Carefully Drafted Indemnification Clauses Provide Significant Protections to
Construction Contract Parties," New Jersey Law Journal, March 22, 2010 (Damian V.
Santomauro, Robert J. MacPherson)
"The Devil Is In The Details When It Comes To Construction Contracts," Construction
Group Newsletter, January 29, 2010
"The Third Circuit Court of Appeals Decides Contracts Mean What They Say and the
No Harm No Foul Rule Still Applies," Construction Group Newsletter, July 2009
"Discovery Desk Book for Construction Disputes," ABA Publishing, 2005
"50 State Public Construction Law Source Book," CCH Incorporated, 2002
"Sticks and Bricks, A Practical Guide to Construction Technology," ABA Publishing,
2001
"New York Construction Law Manual," West Publishing, 1998
"Partnering in Design and Construction - Alternative Dispute Resolution as a
Partnering Tool," McGraw Hill, 1996
Quotes/Interviews
Interviewed in "Off the Clock," New Orleans CityBusiness, May 11, 2009
Speaking Engagements
Speaker, Associated General Contractors of New York State , "P3: Potential, Profit or
Pitfall - What You Need to Know, " Saratoga Springs, NY. December 5, 2012
Mr. MacPherson has spoken before a variety of organizations, including the New
Jersey Judicial College; American Bar Association; American Arbitration Association;
New Jersey Institute of Continuing Legal Education; New Jersey Bar Association;
Associated General Contractors of America; General Building Contractors of New
York; Pratt University, New York, New York; Pace University, New York, New York;
and Rutgers University, Newark, New Jersey.
Honors/Awards*
Listed in Super Lawyers, Construction Litigation, 2011-2013
Listed in Chambers USA Guide to America's Leading Law Firms, Construction - 2006,
2007, 2008; Litigation: General Commercial - 2013
Recipient, 2008 Chambers “Award of Excellence for Construction”
Listed in Best Lawyers in America, Construction Law and Litigation - Construction
James B. Boskey ADR Practitioner of the Year, 2001
News
New Jersey Super Lawyers and Rising Stars Ranks 69 Gibbons Attorneys as Leaders
in Their Fields
*No aspect of this communication has been approved by the Supreme Court of New
Jersey. Further information about methodologies for rating or selecting attorneys is
available on our website’s Award Methodology page.
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The copyright laws of the United States and international treaties protect Gibbons P.C. documents available from
this Web site.
9/3/2013 2:49 PM
Michael A. Marra
American Arbitration Association
Vice President, Construction Division
As Vice President Construction Division, Mr. Marra’s responsibilities include managing the association’s
largest commercial business. National responsibility includes managing and developing business with
national construction associations with focus on selling dispute resolution services to the industry
through placement in standard form contracts. As a division executive, he works directly with the senior
vice president to develop marketing strategies and goals. His responsibilities also include developing and
marketing national and regional education programs for both outside and in-house counsel/business
professionals in an effort to educate the industry on AAA services and uncover leads for further
development. On a regional basis, he prospects for and meets with potential clients to develop
relationships and consults on dispute resolution strategy in an effort to increase revenue.
Prior to his appointment as District Vice President, Mr. Marra spent twelve years in the insurance
industry in both operations and sales. Mr. Marra is a graduate of Temple University with a B.A. in
Marketing.
Jo e l M . S c i a s c i a , E s q . I G e n e ra l C o u n s e l
EDUCATION
• JD/Law/Fordham Law School
• BS/Architecture/Arizona State University
• MS/Construction - RE Development
Core/Arizona State University
BAR ASSOCIATIONS
• New York State Bar/April 1998
• US Supreme Court Bar/May 2005
• NY County Lawyers Association/
Construction Law Committee - Chair
AWARDS
• The Archibald R. Murray Public Service Award
• Student Leadership Award - Habitat for
Humanity/Fordham University School of Law
MEMBERSHIPS
NEW YORK LAW SCHOOL
FLAGSHIP BUILDING
• Board/Greater NY Construction User Council
• Board/Arizona State University Alumni
Association/Greater New York Chapter
• Member/Association of Corporate Counsel
INTRODUCTION
As General Counsel for Pavarini McGovern, Mr.
Sciascia advises the CEO, Chairman and Vice
Presidents on various matters, which include new
business opportunities, deal structuring and
contractual risks, as well as working with Project
Executives and Project Managers to resolve trade
contractor negotiations and disputes. Mr. Sciascia
reviews, negotiates and drafts construction
management agreements with owners and
subcontract agreements with trade contractors.
Additionally, Mr. Sciascia is an adjunct professor at
Polytechnic Institute of New York University, where he
teaches graduate coursework in Construction Law and
Contracts & Specifications.
Mr. Sciascia is also the current Chair of the construction
committee of the New York County Lawyers
Association. He frequently lectures and moderates
panel discussions on topical issues effecting the
construction industry.
DEVELOPMENT EXPERIENCE
Savoy Senior Housing Corporation, New York, NY
General Counsel & VP of Real Estate Development
Developed proforma models to analyze various real
estate transactions including development budgets,
construction costs, operational income and expenses,
investor IRR, lease-up, draws, and refinancing.
Designed, coordinated and carried out due diligence
work plans to ascertain physical, legal and market
risks. Responsible for preparing business plans and
market analysis for presentation to equity and debt
capital sources. Acted as owner's representative and
managed architects, engineers, and subcontractors on
a variety of old and new projects.
Took over $15 million in construction to complete
construction of two assisted living facilities (150,000SF) after construction manager failed to timely
complete and was terminated. Terminated deficient
trades. Bid and negotiated completion contracts.
Directed all work including Owner's separate trades.
Coordinated as-built drawings, expeditors and Dept.
standards
IN CONSTRUCTION
HIGHER
S c i a s c i a I Pa g e 2
of Building inspections. Obtained Certificates of Occupancy. Worked with
architects and engineers to design and specify a ground up 70,000-SF assisted
living facility, then worked with architects and engineers to redesign the site
as an apartment building. Oversaw outside counsel on over $17 million in
civil litigation. Handled various legal matters, drafted and negotiated leases,
obtained Dept. of Health licenses, as well as assisted in all aspects of
development, zoning, financing, leasing, due diligence, and market analysis.
REAL ESTATE EXPERIENCE
Ernst & Young Kenneth Leventhal, New York, NY
Senior Consultant/Attorney
Advised clients on various real estate issues. Structured and modeled real
estate transactions and Real Estate Investment Trust (REIT) initial public
offerings using Excel software. Developed tax liability and OP unit
allocation models for REIT roll-ups. Performed REIT acquisition and
lending due diligence including lease and mortgage review; asset, income
and distribution testing; and organizational requirement analysis. Developed
REIT due diligence work plans, document requests and property service
questionnaires. Researched and wrote briefs on various real estate tax issues.
Goldberg Weprin & Ustin, New York, NY
Acquired extensive limited liability company law experience; drafting
operating agreements, partnership conversions, and conveyancing.
Drafted commercial mortgages, notes, and assignments. Performed due
diligence for commercial acquisitions. Represented commercial lenders
and residential and commercial purchasers at closings. Handled
foreclosure and construction litigation, DHCR, and tax remission issues.
Max E. Greenberg Trager Toplitz & Herbst, New York, NY
Closed condominium and cooperative loans for institutional lenders.
Researched and wrote briefs on construction issues. Corrected deficient
loan packages and prepared closing binders.
PAVARINI MCGOVERN EXPERIENCE
Academia Projects
NY Law School Flagship Building, 185 West Broadway, New York, NY
Columbia University, Campbell Sports Center, New York, NY
Mixed-Use Projects
Setai Fifth Avenue Hotel & Residences, 400 Fifth Ave., New York, NY
CassaNY, 60-77 West 45th Street, New York, NY
Shangri-La NY, 610 Lexington Avenue, New York, NY
The Smyth Hotel, 85 West Broadway, New York, NY
Residential Projects
40 East 66th Street, New York, NY
45 Park Avenue, New York, NY
47 East 91st Street, New York, NY
57 Reade Street, New York, NY
70 Bedford Street, New York, NY
110+Broadway, New York, NY
124 Hudson Street, New York, NY
2forty, 240 Park Avenue South, New York, NY
The Anthem, 220 East 34th Street, New York, NY
Arcadia, 408 East 79th Street, New York, NY
Artisan Lofts, 143 Reade Street, New York, NY
Barbizon/63, 140 East 63rd Street, New York, NY
The Hubert, 3-9 Hubert Street, New York, NY
K. Hov, Port Imperial North, West New York, NJ
Mercer 40 Residences, 40 Mercer Street, New York, NY
The Pier Apartments, Jersey City, NJ
The Urban Glass House, 330 Spring Street, New York, NY
Hospitality Projects
The East River Hotel, 410 East 92nd Street, New York, NY
The Standard, 848Washington Street, New York, NY
Commercial/Office Projects
330 Hudson Street, New York, NY
360 Madison Avenue, New York, NY
505 Fifth Avenue, New York, NY
598 Madison Avenue, New York, NY
Bank of America, 9 West 57th Street, New York, NY
Harlem Park, 1800 Park Avenue, New York, NY
Legal Aid Society, New York, NY
Waterfront Corporate Center Phase II & Phase III, Hoboken, NJ
Retail Projects
1 East 57th Street, New York, NY
The Belnord, 225 West 86th Street, New York, NY
Healthcare Projects
Kings County Hospital Center, DASNY, Brooklyn, NY
NY Proton Center, New York, NY
Gov’t/Civic Projects
Queens Family Court & City Agency Facility DASNY, Jamaica, NY
Cultural Projeccs
The Battery SeaGlass Carousel, New York, NY
French Embassy in US, New Y ork, NY
standards
IN CONSTRUCTION
HIGHER

The New York PromPT PaY acT - New York County Lawyers

Transcription

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