Court Opinion

ID: 9954314
Source: CourtListenerOpinion
Date Created: 2024-03-25 21:11:11.601633+00
Date Added: 2024-06-11T08:12:01.472171
License: Public Domain

DKV, LLC. v CFG Merchant Solutions, LLC.
               2024 NY Slip Op 30918(U)
                     March 19, 2024
           Supreme Court, New York County
        Docket Number: Index No. 656361/2022
                  Judge: Arlene P. Bluth
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                            INDEX NO. 656361/2022
  NYSCEF DOC. NO. 22                                                                                               RECEIVED NYSCEF: 03/19/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. ARLENE P. BLUTH                                                PART                                 14
                                                                                      Justice
            ---------------------------------------------------------------------------------X       INDEX NO.              656361/2022
                DKV, LLC.
                                                                                                     MOTION DATE            07/15/20221
                                                         Petitioner,
                                                                                                     MOTION SEQ. NO.            001
                                                 -v-
                CFG MERCHANT SOLUTIONS, LLC.,                                                           DECISION + ORDER ON
                                                                                                              MOTION
                                                         Respondent.
            ---------------------------------------------------------------------------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 1- 8, 9, 11, 12, 13,
            14, 15, 16, 17, 18
            were read on this motion to/for                                                      Article 75 confirm award                 .

                      The petition to confirm an arbitration award is granted.

            Background

                      Petitioner observes that in November 2018, it entered into a joint venture agreement in

            which it was to perform underwriting services for respondent. The agreement contained an

            arbitration provision. Petitioner claims that it invoiced respondent for the work it performed and

            respondent did not pay the full amount due. Petitioner commenced an arbitration seeking over

            $100,000 in damages.

                      The arbitrator concluded “that Respondent breached Paragraphs 1.5 and 7 of the Joint

            Venture Agreement by not paying Petitioner according to his PNL invoice sent prior to his

            Termination. At the time of the Termination, Respondent owed Petitioner $108,149.21 and

            1
              Although this proceeding was only transferred to the undersigned in the last few days, the Court observes that it
            has been pending before different judges for far too long. The Court apologizes, on behalf of the court system, for
            the long delay in the resolution of this proceeding.
                656361/2022 DKV, LLC. vs. CFG MERCHANT SOLUTIONS, LLC.                                                      Page 1 of 5
                Motion No. 001

                                                                           1 of 5
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                                                                                                   INDEX NO. 656361/2022
  NYSCEF DOC. NO. 22                                                                       RECEIVED NYSCEF: 03/19/2024

            nothing that happened after that could be attributed to Petitioner's actions or its breach of any

            provision of the Joint Venture Agreement. Therefore the $108,149.21 remains due and owing”

            (NYSCEF Doc. No. 3 at 14). The arbitrator dismissed respondent’s counterclaims and also

            awarded $83,000 for legal fees, $29,361 for expenses, and $4,000 in interest.

                   Respondent cross-moves to vacate the arbitration award on the ground that the arbitrator

            failed to apply the plain terms of the parties’ joint venture agreement. It emphasizes that the

            parties did not include a deadline under which respondent had to pay petitioner’s invoices. It

            explains that in the parties’ field (merchant cash advances), the amounts owed to petitioner often

            fluctuated.

                   Respondent argues that section 7 of the agreement specifically does not contain a

            timetable for payments. It explains that as a merchant’s receivable came in, petitioner would be

            credited with half of the commission amount but only get payments when its profits over losses

            amount (“PNL”) was positive. Respondent argues that in April 2020 (when petitioner demanded

            that its invoice be paid), all parties knew that petitioner’s PNL would soon turn negative due to

            the ongoing pandemic. It claims that by the end of April 2020, petitioner’s PNL balance was in

            the negative by over $1 million.

                   Respondent insists that the arbitrator was not permitted to read in a “course of dealings”

            into the parties’ joint venture agreement. It concludes that she exceeded her powers as an

            arbitrator by imposing obligations on respondent not found in the agreement.

                   In reply, petitioner points out that respondent’s position was expressly rejected by the

            arbitrator. It insists that respondent already unsuccessfully attempted to argue that the lack of a

            specific term about payment was a bargained-for-term and that petitioner agreed to provide

             656361/2022 DKV, LLC. vs. CFG MERCHANT SOLUTIONS, LLC.                                Page 2 of 5
             Motion No. 001

                                                           2 of 5
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                                                                                                   INDEX NO. 656361/2022
  NYSCEF DOC. NO. 22                                                                       RECEIVED NYSCEF: 03/19/2024

            services with no expectation of payment. Petitioner emphasizes that this analysis is absurd and

            that is why the arbitrator rejected it.

            Discussion

                    CPLR 7511 provides just four grounds for vacating an arbitration award, including that

            the arbitrator exceeded his power, which “occurs only where the arbitrator's award violates a

            strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the

            arbitrator's power. Mere errors of fact or law are insufficient to vacate an arbitral award. Courts

            are obligated to give deference to the decision of the arbitrator, even if the arbitrator misapplied

            the substantive law in the area of the contract” (NRT New York LLC v Spell, 166 AD3d 438, 438-

            39, 88 NYS3d 34 [1st Dept 2018]).

                    The Court grants the petition and affirms the arbitration award. The parties’ agreement

            certainly is silent with respect to a deadline for payment (see NYSCEF Doc. No. 5, ¶ 7).

            However, the Court is unable to embrace respondents’ arguments that the agreement’s silence

            with respect to payments means that the arbitrator exceeded her powers. In this Court’s view,

            the absence of any specific requirements relating to a payment schedule forced the arbitrator to

            rationally consider the parties’ course of dealing.

                    This is not a situation in which the arbitrator ignored the express language of an

            agreement (c.f. Matter of Good Samaritan Hosp. v 1199 Nat. Health & Human Services

            Employees Union, 69 AD3d 721, 893 NYS2d 192 [2d Dept 2010] [finding that the arbitrator

            exceeded her powers by ignoring an express contract provision]). Instead, the arbitrator was

            tasked with making a ruling about how payments were to be processed. She observed that

            “While the Agreement makes no specific provision for the time of payments, the example

            contained in paragraph 1.13 establishes a calendar month for determining the PNL and sums due

             656361/2022 DKV, LLC. vs. CFG MERCHANT SOLUTIONS, LLC.                                Page 3 of 5
             Motion No. 001

                                                           3 of 5
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                                                                                                    INDEX NO. 656361/2022
  NYSCEF DOC. NO. 22                                                                         RECEIVED NYSCEF: 03/19/2024

            the Contractor” (NYSCEF Doc. No. 3 at 10-11). The arbitrator added that “Based on the above

            provisions, Petitioner submitted invoices to Patrick Connelly, who was Respondent's Account

            manager at the end of every month, Connelly would review the submission and make payments

            shortly after the end of each month. This was the course of dealing that had been established by

            Respondent with its Contractors and was consistent with the provisions of the Joint Venture

            Agreement” (id. at 11).

                    As the arbitrator rationally observed, parties conduct can be considered in the absence of

            an express contractual provision on an issue. “[T]he parties' course of performance under the

            contract is considered to be the most persuasive evidence of the agreed intention of the parties”

            (Fed. Ins. Co. v Americas Ins. Co., 258 AD2d 39, 44, 691 NYS2d 508 [1st Dept 1999] [internal

            quotations and citations omitted]).

                    Here, there was nothing written in the agreement about when respondent was supposed to

            pay petitioner. Petitioner convincingly points out that respondent’s argument yields an untenable

            position—that respondent did not have to pay petitioner at all. Under respondent’s argument, any

            time the petitioner sought payment, respondent could say “it isn’t due yet”. It certainly was not

            irrational for the arbitrator to reject that position. And the arbitrator also rationally addressed

            respondent’s claim that petitioner was, essentially, “gaming the system” by demanding payment

            when petitioner knew full well that the pandemic would drastically reduce the amount it was

            entitled to be paid.

                    “Although Respondent asserts that Petitioner knew that Respondent was not able to or

            going to pay PNL in April 2020, the Arbitrator credits Mr. Lynch's testimony to the effect that he

            was not in the loop and did not receive the proposal put forth by Joe Hugenot to defer receipt of

            monies due from accounts receivable for three months or more and was unaware that other

             656361/2022 DKV, LLC. vs. CFG MERCHANT SOLUTIONS, LLC.                                  Page 4 of 5
             Motion No. 001

                                                           4 of 5
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                                                                                                     INDEX NO. 656361/2022
  NYSCEF DOC. NO. 22                                                                           RECEIVED NYSCEF: 03/19/2024

            underwriters had agreed to defer PNL payments. By not conferring with Petitioner after

            receiving a letter from his lawyer threatening arbitration and simply terminating him, Petitioner

            was given no opportunity to either agree to or not agree to the deferral” (NYSCEF Doc. No. 3 at

            12-13).

                      Simply put, the Court finds that the arbitrator’s decision was rational and there is no basis

            to vacate it.

                      Accordingly, it is hereby

                      ADJUDGED that the petition is granted, the subject arbitration award is confirmed and

            the Clerk is directed to enter judgment in favor of petitioner and against respondent in the

            amount of $224,801.00 plus interest at the statutory rate of nine percent from the date of the

            award (April 22, 2022) along with costs and disbursements upon presentation of proper papers

            therefor.

                      3/19/2024                                                           $SIG$
                        DATE                                                      ARLENE P. BLUTH, J.S.C.
             CHECK ONE:                 X   CASE DISPOSED                  NON-FINAL DISPOSITION

                                                                                                    □
                                        X   GRANTED             DENIED     GRANTED IN PART              OTHER

             APPLICATION:                   SETTLE ORDER                   SUBMIT ORDER

                                                                                                    □
             CHECK IF APPROPRIATE:          INCLUDES TRANSFER/REASSIGN     FIDUCIARY APPOINTMENT        REFERENCE

             656361/2022 DKV, LLC. vs. CFG MERCHANT SOLUTIONS, LLC.                                  Page 5 of 5
             Motion No. 001

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