A New York appellate court held that a lower court erred in denying an uncontested application to confirm an arbitration award entered after an uncontested arbitration proceeding. Specifically, according to the Court, the lower court erred in requiring the party seeking confirmation to prove the validity of the arbitration agreement because the losing party waived any right to challenge the validity of the agreement by not appearing at arbitration or in court.

In MBNA America Bank, N.A. v. Stehly, No. 2006-1512 Q C, 2008 WL 141675 (N.Y. App. Div. Jan. 11, 2008), MBNA filed an arbitration claim against Stehly for the unpaid balance on an MBNA credit card. Stehly did not participate in the arbitration, and the arbitrator entered an award in MBNA's favor.

MBNA petitioned to confirm the arbitration award with a New York trial court. Even though Stehly made no appearance, the trial court denied MBNA's petition for award confirmation on the following grounds: (1) that MBNA's supporting affidavit was inadmissible; (2) that MBNA failed to establish a valid arbitration agreement; and (3) that MBNA failed to establish proper service of both the notice of arbitration and the arbitration award.

On appeal, the Court rejected each of the grounds for denying confirmation. First, on the admissibility of MBNA's supporting affidavit, the Court held that even though New York law requires a certificate of conformity for affidavits notarized out-of-state, the lack of such certificate is not an issue unless the opposing party raises "a specific objection."

Second, regarding MBNA's alleged failure to establish a valid arbitration agreement, the Court explained that the validity of an arbitration agreement must be challenged either at arbitration or through a motion by the opposing party. Since Stehly made no appearance at arbitration or in court, he waived any right to challenge the validity of the arbitration agreement.

Third, the Court held that the lower court erred in requiring MBNA to establish proper service of the notice of arbitration. As the Court explained, it is for the arbitrator, not the court, to decide whether notice of arbitration complied with the applicable rules of arbitration – in this case, the National Arbitration Forum Code of Procedure.

Lastly, the Court held that the lower court also erred in requiring MBNA to submit an affidavit of service establishing proper service of the arbitration award. According to the Court, a certification of delivery on the face of the award was sufficient to prove that delivery of the award complied with New York law.

In reaching its decision, the Court expressly repudiated any implication from two earlier decisions that a party seeking confirmation must prove that notice of the arbitration was served in compliance with applicable rules of arbitration. See MBNA America Bank, N.A. v. Turull, 842 N.Y.S.2d 146 (2007); MBNA America Bank, N.A. v. Calciano, 15 Misc. 3d 142 (2007).

Moreover, the Court's decision in this case effectively nullifies the cumbersome confirmation requirements set forth in two recent trial court decisions. See MBNA America Bank, N.A. v. Nelson, 841 N.Y.S.2d 826 (N.Y. Civ. Ct. 2007); MBNA America Bank, N.A. v. Straub, 815 N.Y.S.2d 450 (N.Y. Civ. Ct. 2006). In both of those cases, the trial court required the party seeking confirmation to prove the validity of the arbitration agreement even though the application for confirmation was uncontested.

This case firmly establishes a rule that only a party, not the court, may challenge the validity of an arbitration agreement. This rule is necessary to uphold state and federal policy favoring arbitration as an expeditious and cost-effective alternative to court.