In re the Arbitration between Astoria Medical Group & Health Insurance Plan

Per Curiam. The respondent, Health Insurance Plan of Greater New York (hereinafter referred to as HIP), and its various physician-composed medical groups, being unable to agree on certain fee arrangements proceeded, in accordance with the terms of their contract, to institute a tripartite arbitration. As its arbitrator HIP nominated a physician who was a member of its board of directors as well as a consultant paid by it. The medical groups objected to such appointment and moved at Special Term to have such appointee disqualified. Special Term granted the motion and directed the designation of a new arbitrator. We conclude that such order was properly made and should be affirmed. The threshold inquiry to be answered is whether the relief here sought may properly be granted in advance of an award. The absence of statutory authority is not an absolute bar to preaward judicial intervention for the purpose of disqualifying an arbitrator. Such intervention has been sanctioned in Western Union Tel. Co. v. Selly (295 N. Y. 395) and in Matter of Pisciotta (Newspaper Enterprises) (5 A D 2d 1014). While the Western Union case was one where a court-appointed arbitrator was disqualified, yet in the Pisciotta case the arbitrators disqualified were those appointed by the parties. While the facts of these cases are not identical with those here involved they bespeak the inherent power of the court to intervene despite the absence [290] of statutory authority therefor. In any event, apart from these cases, it is inconceivable that a court of equity must sit idly by and permit an arbitration proceeding to continue where, by reason of the surrounding circumstances, any award made in favor of one party is preordained to be vacated. The courts are not that impotent. The ultimate question to be answered is whether the facts and circumstances here present are such as to require the exercise of such power. We conclude that they are. Despite the more “ liberal ” standards applicable to a tripartite arbitration an arbitrator is still required to “ possess the judicial qualifications of fairness to both parties so that he may render a faithful, honest and disinterested opinion ” (Matter of American Eagle Fire Ins. Co. v. New Jersey Ins. Co., 240 N. Y. 398, 405 [emphasis supplied]). Thus it has been held that parties may not designate themselves to serve as arbitrators and that, such designation being made, the courts may preliminarily intervene to disqualify such designees. (Matter of Pisciotta [Newspaper Enterprises], supra.) Disregarding the legal subtleties of the corporate entity but looking rather to the practical side of the corporate existence it is the board of directors that is really the corporation insofar as policy decisions and operations are concerned. [See Matter of Cross & Brown Co. [Nelson], 4 A D 2d 501.) As a practical matter, decisions of the corporation are those made by its board. Thus, in this case the initial refusal of HIP to accede to the, fee requests of the medical groups was a determination made by the HIP board of directors, of which the named arbitrator is a member. He is, therefore, essentially a “ party” to the dispute because he is now asked to sit as an arbitrator to determine the propriety or fairness of a decision in the making of which he participated. HIP, through its designation of its director, has in effect designated itself as one of the arbitrators. We conclude that such director may not sit as an arbitrator and, in the contemplation of the law, he cannot render the requisite “ disinterested ” opinion and that any eventual award in favor of HIP would have to be vacated. Thus, a situation is presented requiring' that the court now intervene and disqualify. Accordingly, the order granting petitioners’ motion to disqualify the person designated by HIP to serve as an arbitrator should be affirmed, with costs.