Petitioner Metropolitan Transportation Authority (MTA) petitions, pursuant to CPLR 7510 and 7514, for an order confirming the arbitration award (Award) issued on March 6, 2007, by a panel (Panel) of American Arbitration Association arbitrators in the arbitration entitled In the Matter of the Arbitration between HRH Construction Interiors, Inc., ("Claimant") and [*2]Metropolitan Transportation Authority, ("Respondent") and HRH Construction, LLC, ("Counterclaim Respondent"), and awarding the MTA judgment thereon.

Respondent HRH Construction, LLC (LLC) cross-moves, pursuant to CPLR 7511 (b) (1) (iii) and 7513, to vacate the Award, or in the alternative, to modify it by denying the award of attorney's fees to the MTA; vacating the Award as against LLC, on the ground that the Panel's finding, that LLC was an alter ego and successor torespondent HRH Construction Interiors, Inc. (Interiors), was beyond its power; and awarding LLC $566,418.09 in attorney's fees.

Interiors cross-moves, pursuant to CPLR 7511 (b) and (c), for an order vacating the Award for misconduct, or in the alternative, vacating the award of attorney's fees to the MTA, awarding Interiors interest and attorney's fees, vacating the deduction in its recovery on invoices, resulting from a certain audit (the Colliers Audit), and vacating the award to the MTA on its claim pertaining to Genetech Building Systems; or in the alternative, modifying the Award because it is imperfect as a matter of form.

Neither Interiors, nor LLC, challenges that portion of the Award which directed them to reimburse the MTA $94,422.43 that it paid in excess of its apportioned arbitration costs.

The arbitration arose out of a large-scale construction project at 2 Broadway in Manhattan. 2 Broadway, LLC, the owner (Owner) of the building, entered into a series of agreements with the MTA, pursuant to which the MTA would advance, against the rents that it would owe, the funds required by the Owner to renovate the infrastructure of the building so as to upgrade it to a Class A commercial building. Subsequently, on October 14, 1998, the Owner and Interiors, as construction manager, entered into a Standard Form of Agreement between Owner and Construction Manager where the Construction Manager is NOT a Constructor (Agreement). The Agreement was signed on behalf of the Owner by its authorized representative, Frederick J. Contini. On February 16, 1999, the MTA notified Interiors that the Owner was in default and that Contini would act on behalf of the MTA with regard to the completion of the designated work.

On April 16, 2002, Contini was indicted on charges of having organized and participated in a massive organized-crime conspiracy to defraud the MTA by charging it for a large number of no-show jobs. The MTA thereupon terminated Contini, and Interiors continued to work as construction manager.

In July 2004, Interiors and the MTA met to discuss a final closeout of Interiors on the work that it had performed. At that meeting, the MTA tried to present evidence that defects in Interiors's performance justified, at the least, setoffs to the contract balance outstanding to Interiors under the Agreement. The then-general counsel of Interiors refused to discuss any setoffs and left the meeting. Four days later, Interiors filed its demand for arbitration. In its statement of claim, Interiors sought the sum of $724,857.27 as due and owing under the Agreement. The MTA counterclaimed, seeking to recover approximately $15 million in alleged damages from Interiors.

As the arbitration progressed, the MTA learned that, at the beginning of 2001, LLC had supplanted Interiors with regard to the work being performed, and that, to all intents and purposes, Interiors had become a shell. The MTA, thereupon, moved the Panel to join LLC to the arbitration proceeding; LLC moved to stay arbitration against it; and the MTA cross-moved to compel arbitration. By decision and order dated March 27, 2006, I denied the stay and granted the cross motion to compel, on the ground that LLC had assumed the construction duties of Interiors under the Agreement and was receiving 80% of the payments that the MTA was making to Interiors. The Appellate Division, First Department, affirmed. HRH Constr. LLC v Metropolitan Transp. Auth., 33 AD3d 568 (1st Dept 2006).

The Agreement has a broad arbitration clause that provides that:

[c]laims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association ... .

The Rider to the Agreement provides, with regard to any award of attorney's fees, that:

[i]f any suit, action, or other proceeding ... is instituted in connection with any controversy arising out of this Agreement, the prevailing party shall be entitled to recover ... all reasonable fees ... (including ... the reasonable fees and expenses of attorneys and witnesses) incurred in connection with the prosecution or defense of such proceeding ... provided, however, that if there is no clear prevailing party, such fees ... shall be borne as determined by the court.

The Panel denied Interiors's claim and LCC's counterclaim for attorney's fees and granted the MTA's counterclaim for such fees in the amount of $3,405.414, finding that the MTA "is determined to be the `prevailing party.'" Pierce Aff., Exh. 1, at 3. Interiors and LCC severally argue that the MTA was not the clear prevailing party, because the Panel awarded Interiors a sum equal to 87% of the damages that Interiors had sought while awarding the MTA less than 20% of the damages that it sought on its counterclaim, and that, therefore, the Panel was without power to award attorney's fees to the MTA. They contend that any award of such fees to one or another party must be made by this court.

Respondents' arguments fail for the following two reasons. The word "court" in paragraph 6.5 of the Rider simply denotes the body before which the "suit, action, or other proceeding ... is instituted," here, the Panel. Neither Interiors nor LCC has provided any cogent argument for interpreting the word "court" to refer to a court of law, as distinguished from the body, if other than a court, before which a proceeding has been instituted. The distinction that section 6.5 of the Rider draws is not between a court and another body, but between a proceeding in which one party has clearly prevailed, in which case that party is to recover all of its fees, and a proceeding in which no party has clearly prevailed, in which case the body before which the proceeding was conducted must determine whether to allocate fees among the parties or not to award fees to any party.

Moreover, it was not in the least irrational for the Panel to have determined that the MTA was, in fact, the clear prevailing party. A prevailing party is one that has "prevailed with regard to the central relief sought." Nestor v McDowell, 81 NY2d 410, 416 (1993); see also 25 East 83 Corp. v 83rd St. Assoc., 213 AD2d 269 (1st Dept 1995). Here, Interiors commenced the arbitration proceeding in an attempt to recover its contract balance, without any of the setoffs that the MTA had tried to raise at the abortive closeout meeting that took place four days before Interiors filed its demand for arbitration. Interiors failed to obtain that central relief. Indeed, the Award determined that the MTA was entitled to setoffs of $3,775,125, that is, more than five times the contract balances that Interiors had sought to recover. In this context, the fact that, while the MTA was awarded at least some damages on 15 of its 23 counterclaims, it received only a small percentage of the overall amounts that it had sought in its counterclaims, is not decisive. Similarly, with regard to LLC, the central issue was whether LLC would be liable for such damages, if any, as the Panel would award against Interiors. On that central issue the MTA prevailed and LLC lost.

Respondents also argue that, even if the MTA was the clear prevailing party, the amount of attorney's fees that the Panel awarded was unreasonable. I disagree. In addition to having to prepare for, and to conduct 26 days of hearings over the course of more than 13 months and to perform all the legal work that generally attends a long and drawn out arbitration, the MTA's attorneys were suddenly faced with the information, which Interiors had until then concealed, that the real party in interest at the arbitration was not Interiors but LLC. At that point, counsel engaged in large-scale discovery proceedings, which would not have been necessary had LLC not secretly subverted the no-assignment clauses of the Agreement and the Rider by entering into an agreement with the corporate parent of Interiors, pursuant to which LLC would take over from [*4]Interiors the performance of the Agreement. In any event, respondents have not even tried to show, with any particularity, that the award of fees was so excessive as to be irrational.

Alter Ego Liability

LLC argues that, while I held, and the Appellate Division affirmed, that LLC was required to join the arbitration, the Panel lacked authority to determine that LLC was the alter ego, or the successor, of Interiors, and that it was, therefore, liable for the damages awarded against Interiors. The basis of that argument is LLC's contention that the issue of alter ego liability does not arise out of the Agreement. However, "[a]ny limitation upon the remedial power of the arbitrator must be clearly contained, either explicitly or incorporated by reference, in the arbitration clause itself." Matter of Board of Edu. of Dover Union Free School Dist. v Dover-Wingdale Teachers' Assn., 61 NY2d 913, 915 (1984); see also Rochester City School Dist. v Rochester Teachers Assn., 41 NY2d 578 (1977).

The arbitration provision in the Agreement is extremely broad, and it neither explicitly nor implicitly exempts the issue of alter ego liability from arbitration. The task for a reviewing court is to determine "whether there is a reasonable relationship between the subject matter of the dispute and the general subject matter of [the relevant contract]". Matter of City of Johnstown (Johnstown Police Benevolent Assn.), 99 NY2d 273, 279 (2002) (citation omitted). It would be hard to imagine a dispute that is more related to the subject matter of the Agreement than one concerning the identity of the party or parties who will be liable for any breach thereof. Once LLC became a party to the arbitration, it was within the power of the Panel to consider the question of LLC's alter-ego liability and to determine that LLC was so liable. See Matter of Pile Found. Constr. Co. (Howell Co.), 159 AD2d 352 (1st Dept 1990); Matter of Sbarro Holding, Inc. (Shiaw Tien Yuan), 91 AD2d 613 (2d Dept 1982); Glasser v Price, 35 AD2d 98 (2d Dept 1970). The Panel's determination that LLC is liable was neither barred from the Panel's consideration by the Agreement, nor completely irrational. Therefore, it must stand. Rochester City School Dist. v Rochester Teachers Assn., 41 NY2d 578, supra.

Pre-Award Interest

Paragraph 13.5.2 of the Agreement provides that the MTA will pay Interiors interest at the legal rate on all invoices that have not been paid within 30 days of the date of the invoice. The Panel declined to award Interiors prejudgment interest on those invoices which the Panel decided that the MTA owed. That decision was not irrational, and it hardly amounted to a rewriting of the Agreement, as Interiors contends. While the Panel held for Interiors on certain invoices, the amount owed to Interiors by the MTA was dwarfed, as discussed above, by the amount that the Panel determined Interiors owed to the MTA. In effect, the Panel held that the Interiors had received more than $3 million from the MTA, to which it was not entitled. Inasmuch as the MTA received no interest on that overpayment, it was hardly irrational for the Panel to deny interest to Interiors on the much smaller sum that Interiors was awarded against the MTA. See Chaindom Enters., Inc. (Furgang & Adwar, L.L.P.), 10 AD3d 495 (1st Dept 2004) (not irrational to deny contractually provided for collection costs and interest where claimant had submitted substantial double billing of disbursements).

The Colliers Audit

The Panel awarded the MTA $92,233 as a result of financial abuse by Interiors discovered by an audit that had been performed prior to the arbitration by the MTA's construction monitor, Colliers ABR (Colliers). These abuses included charging the MTA $17,089.20 for two first-class Concorde tickets to Italy and thousands of dollars identified only as "entertainment" and gift certificates to Macy's. Interiors argues that these matters were resolved, several years prior to the arbitration, by a close-out agreement between Interiors and the Owner, and that the amount there agreed upon was then credited to the MTA on an Interiors requisition. Colliers had questioned more than $300,000 in charges by Interiors. The refund to the MTA was in the sum of $46,549. The close-out agreement, to which the MTA was not a party, merely provided, in connection with the Colliers audit, that Interiors and the Owner "agree to reach a prompt resolution of the items address [in the audit]." Pierce Aff., Exh. 6, at 2. Indeed, at the [*5]arbitration, Interiors witness Slaney testified that, as of the day of the signing of the close-out agreement, the matters discussed in the Colliers audit were to be the subject of further discussion and agreement. Consequently, it was not irrational for the Panel to conclude that the matters raised by the Colliers audit had not been definitively resolved, and to award the MTA the further sum of $92,233.

Genetech

Genetech performed curtain wall and storefront work on the project under contracts with the Owner. One of those contracts incorporated by reference a provision requiring that, if the Owner opted for an Owners Controlled Insurance Program (OCIP), then Genetech would provide the Owner with a credit in an amount to be determined at the start of the project. In the arbitration, the MTA claimed that Interiors should be liable to the MTA for having failed to take an OCIP credit from Genetech. The Panel awarded the MTA $276,950 on that claim.

Interiors points out that in a letter to Colliers, Genetech offered the MTA a refund of $45,629, the calculation of which included the amount that the Panel subsequently awarded the MTA for insurance costs. Interiors also notes that the MTA is holding $344,000 in retainage against the Genetech contracts, and it contends that the MTA neither paid the OCIP amount nor suffered any damage from Interiors' failure to collect that amount from Genetech. None of this shows that the Panel's award of OCIP costs to the MTA was irrational.

In the first place, the MTA was not obligated to accept Genetech's offer to Colliers to refund the MTA $45,629. Secondly, it does not follow from the fact that the MTA is holding retainage against the Genetech contracts that the Panel's award of OCIP costs constitutes a double recovery or a windfall. Thirdly, Interiors' claim that the MTA did not pay the amount covered by the OCIP award is entirely unsupported by the record.

Accordingly, it is hereby

ORDERED that Petitioner Metropolitan Transportation Authority's motion to confirm the March 6, 2007 award of the American Arbitration Association panel in the arbitration entitled In the Matter of the Arbitration between HRH Construction Interiors, Inc., "Claimant") and Metropolitan Transportation Authority, ("Respondent") and HRH Construction, LLC, ("Counterclaim Respondent") is granted; and it is further

ORDERED that the cross motions of respondents HRH Construction Interiors, Inc. and HRH Construction, LLC are denied; and it is further

ORDERED and ADJUDGED that petitioner Metropolitan Transportation Authority have judgment and recover against respondents HRH Construction Interiors, Inc. and HRH Construction, LLC, jointly and severally, in the amount of $6,551,903.43 ($6,457,481 + $94,422.43), together with costs and disbursements as taxed by the Clerk, for the total amount of $_____, and that the petitioner have execution therefor.

This constitutes the decision and judgment of the court.

Dated:_______

ENTER:

____________________

J.S.C.