Source: https://casetext.com/case/acp-inv-grp-llc-v-blake
Timestamp: 2019-04-19 22:40:11+00:00

Document:
ACP INVESTMENT GROUP, LLC, and NYPPEX HOLDINGS, LLC, Plaintiffs, v. DEXTER B. BLAKE, III, Defendant.
Defendant, Dexter B. Blake, III, brings this action under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., seeking confirmation of an arbitration award against Plaintiffs ACP Investment Group, LLC, and NYPPEX Holdings, LLC (together, "ACP"). ACP opposes Blake's motion and cross-moves to vacate in part the arbitrator's decision. For the reasons that follow, Blake's motion is granted and ACP's cross-motion is denied.
A party challenging an arbitrator's decision faces a mountain range of steep burdens. The FAA permits vacatur of an arbitration award only under four narrow circumstances: "(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(a).
The Second Circuit has "'consistently accorded the narrowest of readings' to this provision of law, in order to facilitate the purpose underlying arbitration: to provide parties with efficient dispute resolution, thereby obviating the need for protracted litigation." ReliaStar Life Ins. Co. of N.Y. v. EMC Nat'l Life Co., 564 F.3d 81, 85 (2d Cir. 2009) (internal citation omitted) (quoting Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255, 262 (2d Cir. 2003)); cf. TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Sec., Inc., 953 A.2d 726, 732 (Del. Ch. 2008) ("In fact, '[a] court's review of an arbitration award is one of the narrowest standards of judicial review in all of American jurisprudence.'" (alteration in original) (quoting Way Bakery v. Truck Drivers, Local No. 164, 363 F.3d 590, 593 (6th Cir. 2004))).
In considering a challenge to an arbitration award, "'[t]he principal question for the reviewing court is whether the arbitrator's award draws its essence' from the agreement to arbitrate, 'since the arbitrator is not free merely to dispense his own brand of industrial justice.'" ReliaStar, 564 F.3d at 85 (alteration in original) (quoting 187 Concourse Assocs. v. Fishman, 399 F.3d 524, 527 (2d Cir. 2005)). Where the parties have agreed to submit an issue for arbitration, courts will "uphold a challenged award as long as the arbitrator offers 'a barely colorable justification for the outcome reached.'" Id. (quoting Banco de Seguros, 344 F.3d at 260). "In other words, 'as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,' a court's conviction that the arbitrator has 'committed serious error' in resolving the disputed issue 'does not suffice to overturn his decision.'" Id. at 86 (quoting United Paperworkers Int'l Union AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)).
ACP makes several arguments in favor of vacating the portion of the Arbitrator's award determining how many of Blake's share participations had vested. First, ACP claims that the Arbitrator exceeded her powers because the issue of vesting was not within the scope of the arbitration. Second, ACP claims that the Arbitrator's decision on the vesting issue was rendered in disregard of the terms of the Employment Agreement. Finally, ACP claims that the award should be vacated due to procedural irregularities in the arbitration process. But ACP is fighting an uphill battle on downhill skis.
ACP first argues that the vesting issue was not properly before the Arbitrator because it did not derive its essence from the 2014 Employment Agreement. However, the Second Circuit has made clear that it is only "[w]hen it is clear that the arbitrator 'must have based his award on some body of thought, or feeling, or policy, or law that is outside the contract (and not incorporated in it by reference, either . . .)'" that the determination should be set aside. In re Marine Pollution Serv., Inc., 857 F.2d 91, 94 (2d Cir. 1988) (emphasis in original) (quoting Ethyl Corp. v. United Steelworkers, 768 F.2d 180, 184-85 (7th Cir. 1985) (Posner, J.)).
The arbitration clause in the 2014 Employment Agreement is broadly worded. It provides for jurisdiction over "[a]ny and all disputes . . . arising out of or relating to this Agreement." (Dkt. No. 15, Ex. D at 5.) The Agreement also addresses vesting in several places. It provides that upon resignation Blake shall "forfeit any and all rights in, and entitlement to . . . unvested rights, grants and awards . . . in connection with long term incentives including share participations . . . (in general, as described in the agreements provided to Employee)." (Id. at 4-5.) It also confirms that "[v]esting provisions shall be described either in the award agreement, the Company's long term performance incentive plan or its amended and restated operating agreements." (Id. at 3.) These provisions bring the vesting issue within the scope of the Agreement's arbitration clause.
Based on these considerations, the most natural conclusion is that the vesting question was squarely within the scope of the Arbitrator's authority. But at the very least, it is certainly not clear that the Arbitrator must have derived the award from something neither within nor incorporated into the Employment Agreement (the standard required to disrupt the Arbitrator's decision on this issue). See In re Marine Pollution Serv., Inc., 857 F.2d at 94.
But this brand of second-guessing runs directly counter to "the 'great deference' which must be paid to arbitral panels by federal courts." Wallace, 378 F.3d at 193 (quoting Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003)). "To the extent that a federal court may look upon the evidentiary record of an arbitration proceeding at all, it may do so only for the purpose of discerning whether a colorable basis exists for the panel's award so as to assure that the award cannot be said to be the result of the panel's manifest disregard of the law." Id. "[W]hatever the weight of the evidence considered as a whole, '[i]f a ground for the arbitrator's decision can be inferred from the facts of the case, the award should be confirmed.'" Id. (second alteration in original) (quoting Fahnestock & Co., Inc. v. Waltman, 935 F.2d 512, 516 (2d Cir.1991) (internal quotation marks and citation omitted)).
Here, the Arbitrator justified her conclusion regarding the vesting status of Blake's shares based on her interpretation of an "Equity Participation Statement." In her Award, she wrote: "Blake's equity participation as of October 11, 2005 identifies his allocated share participations as being 3,061,680. Of those allocated, those available to sell are listed as 2,092,896. I agree with Claimant's view that the only reasonable construction of the 2005 Statement is that shares available to sell are vested." (Dkt. No. 15, Ex. E at 12.) She arrived at this decision after considering arguments on this issue at the arbitration hearing and weighing the 2014 Employment Agreement and numerous other documents relevant to its interpretation. She subsequently confirmed her conclusion on this question following additional, targeted briefing. The record in this case thus provides more than a colorable basis for the Arbitrator's decision, and ACP has failed to show any "egregious . . . misapplication of legal principles" sufficient to suggest manifest disregard of the governing law. Wallace, 378 F.3d at 190.
While the FAA permits vacatur where an arbitration award was obtained through fraud or undue means, 9 U.S.C. § 10(a)(1), or where the arbitrator's procedural misconduct prejudices a party, id. § 10(a)(3), the burden here is yet another steep slope for ACP to climb. To justify vacatur on the grounds of fraud or undue means, it must be "abundantly clear" that the award was procured through improper means. Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 105 (2d Cir. 2013) (quoting Karppinen v. Karl Kiefer Mach. Co., 187 F.2d 32, 34 (2d Cir. 1951)). As regards procedural irregularities, arbitrators "need not follow all the niceties observed by the federal courts." Id. (quoting Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 20 (2d Cir. 1997)). Rather, "misconduct occurs under this provision only where there is a denial of 'fundamental fairness.'" Id. (quoting Tempo Shain, 120 F.3d at 20).
Under these circumstances, the Court cannot conclude that the Arbitrator's actions were improper or that they denied ACP fundamental fairness. The Court must therefore refrain from retrospectively micromanaging the Arbitrator's capable handling of the issues properly before her.
For the foregoing reasons, Blake's motion to confirm the arbitration award is GRANTED, ACP's cross-motion to vacate in part the arbitration award is DENIED, and the arbitration award is hereby CONFIRMED.
The Clerk of Court is directed to close the motions at Docket Number 12 and Docket Number 20 and to close this case.

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