In D'Agostino v. Forty-Three East Equities Corp. , Peter D'Agostino commenced a Housing Part (HP) proceeding to compel his landlord to repair the building's roof and to address water damage to his apartment (caused by alleged roof and window defects). The landlord moved to stay or dismiss the HP proceeding, based on an arbitration clause that was contained in a prior settlement agreement reached by the parties.
The New York County Civil Court denied the landlord's motion to compel arbitration, since enforcement of an arbitration clause in this context would violate public policy. On appeal, the Appellate Term, First Department, concurred.
While arbitration undoubtedly has its virtues, courts continue to play the role of "gatekeeper," and must decide whether the contested issues are appropriately arbitratable. In this instance, the AT1 concluded that HP disputes are "beyond the reach of an arbitrator's discretion."
An HP proceeding is not your typical landlord-tenant case. It's a process which involves both the Housing Part of the Civil Court and the New York City Department of Housing Preservation and Development (HPD). The Housing Part recommends and employs any appropriate legal remedy to enforce housing laws and codes, while HPD investigates building conditions, issues violations, and levies fines and penalties. By compelling the maintenance and preservation of our City's housing stock, both the impacted tenants and the public-at-large benefit.
The AT1 was of the opinion that if enforcing housing standards were left to an arbitrator -- who is not bound by substantive law -- "critical decisions carrying potentially adverse consequences" would result. While the parties would secure a decision in the matter, the Housing Part of the Civil Court and HPD would lack input and thus be prevented from safeguarding the public interest.
Ultimately, the appellate court found that these kind of cases belonged in a judicial forum.
In an interesting twist, Justice William P. McCooe dissented. McCooe was of the opinion that the public policy favoring arbitration should have been applied and that the majority's stated rationale for preventing the dispute from proceeding in a manner which the parties had contractually selected lacked precedential support.
Looks like the Appellate Division, First Department, will be arbitrating this one in the near future.
For a copy of the Appellate Term's decision, please use this link: D'Agostino v. Forty-Three East Equities Corp.