Opinion
03 Civ. 5064 (RCC)
September 30, 2003
OPINION AND ORDER
Before the Court is Beverly Loew's ("Petitioner's") motion to confirm an NASD arbitration award. The Court previously detailed the background of this motion in its September 5, 2003 order, which enjoined and restrained Joseph I. Kolb ("Kolb") and Global Direct Securities Service Holding, Inc. ("Global Securities") from transferring or disposing of assets pending entry of judgment in this case. The Court therefore only briefly recites facts pertinent to this motion. For the reasons set forth below, Petitioner's motion to confirm the NASD arbitration award is now GRANTED.
I. Introduction
On November 15, 2001, Petitioner commenced an arbitration under the auspices of NASD Dispute Resolution, Inc. alleging that: (1) Kolb, Global Securities, and Global Direct Financial Services LLC ("Global Financial") (collectively, "Respondents") fraudulently induced her to work for Global Securities and (2) in retaliation for Petitioner's having raised SEC and NASD compliance concerns, Respondents published a false and libelous Form U-5 misreporting the circumstances surrounding Petitioner's departure from Global Securities. Petitioner alleged that the Form U-5 "effectively blackball[ed]" her in the securities industry. (Dkt. No. 1: Pet. at ¶ 7.) On July 7, 2003, a three-arbitrator panel found for Petitioner, awarding her: (1) compensatory damages in the amount of $275,000; (2) punitive damages in the amount of $1.00; and (3) reimbursement of a $600 filing fee. The panel also recommended that specific portions of the U-5 form be modified or expunged and directed that Respondents be jointly and severally responsible for paying forum fees of $18,450 to the NASD. On July 8, 2003, Petitioner moved this Court to confirm the award.
Thereafter, on August 4, 2003, Petitioner and Global Financial entered into a Stipulation under which Global Financial agreed that it would maintain its financial status quo and would not dispose of any assets other than in the ordinary course of business for fair consideration, or remove any assets from the jurisdiction pending the resolution of this case. (Dkt. No. 6: Stipulation [Slip.].)
Kolb and Global Securities did not join in this stipulation and on August 27, 2003, the Court temporarily granted an order restraining Kolb's and Global Securities's assets pending a hearing and determination of Petitioner's motion that they be restrained from transferring or disposing of assets before an entry of judgment. (Dkt. No. 8: Order to Show Cause and Temporary Restraining Notice.) On September 5, 2003, following Kolb's and Global Securities's failure to respond to the motion, the Court granted Petitioner's motion by default. As detailed in the Court's Opinion and Order, had Kolb and Global Securities responded to Petitioner's motion, the Court would nonetheless have granted Petitioner's motion on the merits. See 2003 WL 22077454, at *2 (S.D.N.Y. Sept. 8, 2003).
Respondents time to file papers, if any, opposing the motion to confirm were originally to be served on August 11, 2003. However, on August 4, 2003, Petitioner and Global Financial stipulated that its time to serve opposition papers be extended until September 10, 2003. (See Stip.) At a status conference on August 22, 2003, although Kolb's and Global Securities's time to have briefed their opposition expired two weeks earlier, the Court granted each until September 10, 2003 to serve their opposition papers. (See Aug. 22, 2003 Tr., at 3.)
On that date, Global Direct advised the Court by letter that it would not oppose the motion. To date, Global Securities has not filed any opposition papers. For his part, Kolb, proceeding pro se, served an "Answer and Cross-Petition to Vacate Award," containing bare assertions that the arbitration panel engaged in misconduct and that the award was rendered in manifest disregard of the law.
Kolb had previously been represented at the August 22, 2003 conference by Andrij V. R. Szul, but served his opposition papers pro se.
II. Confirmation of the Arbitration Award A. Global Direct and Global Securities
The Court confirms the arbitration award as against Global Direct because it expressly informed the Court that it would not oppose the petition. In not serving any opposition papers, Global Financial has defaulted. Fed.R.Civ.P. 55; see also United States District Court for the Southern District of New York, Local Civil Rule 7.1 [Local Civil Rule 7.1]; Elbex Video Kabushiki Kaisha v. Taiwan Regular Elecs. Co., 1996 WL 87278, at *4 (S.D.N.Y. Jan. 25, 1996) (holding that under Local Civil Rule 3(b), the precursor to Local Civil Rule 7.1, because "[defendants . . . did not respond at all to defendants' motion . . . defendants' failure to respond is . . . sufficient basis to grant the motion."); Singh v. New York City Dep't of Corrs., 1995 WL 733560, at *1 (S.D.N.Y. Dec. 12, 1995) (stating that because plaintiff did not respond to defendants' motion nor sought an extension, defendants' motion for summary judgment and/or judgment on the pleadings should be granted on default). The Court therefore confirms the arbitration award as against Global Financial.
B. Kolb
As a threshold matter, the Court notes by failing to submit his papers in proper form, that is by failing to submit an affidavit, documentary proof, or a memorandum of law, Kolb has effectively failed to oppose Petitioner's application. See, e.g., Dist. No. 15 v. Voges Mfg. Co., Inc., 1981 WL 2237, at *1 (S.D.N.Y. Nov. 25, 1981) (explaining that papers opposing arbitration award must include "a sworn affidavit or affidavits setting forth factual reasons why the award should not be confirmed, and a supporting memorandum of law."). Moreover, Kolb's failure to file a memorandum of law opposing Petitioner's motion is, by itself, a sufficient basis to grant Petitioner's motion to confirm the award. See Local Civil Rule 7.1 ("Except as otherwise permitted by the court, all motions and oppositions thereto shall be supported by a memorandum of law, setting forth the points and authorities relied upon in support of or in opposition to the motion, and divided, under appropriate headings, into as many parts as there are points to be determined. Willful failure to comply with the rule may be deemed sufficient cause for the denial of a motion or for the granting of a motion by default."); see also Garcia v. NYPD PCT 41, 1997 WL 563809, at *3 (S.D.N.Y. Sept. 10, 1997) ("Plaintiffs failure to file a memorandum of law or any response whatsoever, standing alone, provides me sufficient basis to grant defendants' motions to dismiss.").
Despite these deficiencies and despite Kolb's bare-bones assertions that the award was rendered in manifest disregard of the law and that the three-arbitrator panel engaged in misconduct, the Court has reviewed all papers submitted by the parties. Having done so, the Court also confirms the arbitration award as against Kolb.
The Court's power to review an arbitration award is severely limited under the Federal Arbitration Act, 9 U.S.C. § 1. Indeed, courts have consistently held that "`arbitration awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation.'" Dirussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d Cir. 1997) (citation omitted). The Second Circuit thus recently reaffirmed the principle that, "arbitration awards are subject to minimal judicial review." Hoeft v. MVL Group, Inc., 2003 WL 22048228, at *4 (2d Cir. Sept. 3, 2003). An award may be vacated only on one of the limited grounds specified in 9 U.S.C. § 10(a).
These instances are:
(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 Supreme Court has supplemented these four ground with an additional ground not prescribed in the statute: manifest disregard of the law. See Wilko v. Swan, 346 U.S. 427, 436-37 (1953), overruled on other grounds, Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 485 (1989).
Judicial review of an arbitration award for manifest disregard of the law is "severely limited." GMS Group, LLC v. Benderson, 326 F.3d 75, 81 (2d Cir. 2003). The party challenging the award — in this case Kolb — bears the "heavy burden" of proving that the arbitrator manifestly disregarded the law. Manifest disregard of the law "clearly means more than error or misunderstanding with respect to the law." Merrill Lynch, Pierce, Fenner Smith. Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986). To sustain this heavy burden, Kolb must prove: "(1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." Halligan v. Piper Jaffray, Inc., 148 F.3d 197, 202 (2d Cir. 1998) (citation omitted). Accordingly, the Second Circuit has cautioned that courts "are not at liberty to set aside an arbitrator's] . . . award because of an arguable difference regarding the meaning or applicability of laws urged upon [him]." Merrill Lynch, 808 F.2d at 934. Here, in conclusory fashion, Kolb asserts that the award ought to be vacated because "it was rendered in manifest disregard of explicit and controlling legal authority in New York" which had been provided to the arbitration panel. (See Dkt. No. 12: Answer Cross Pet. to Vacate Award H 15.) In this bare assertion, Kolb has offered no evidence to sustain his "heavy burden" of demonstrating the arbitrator's manifest disregard of the law.
Kolb also asserts that the arbitrators engaged in prejudicial misconduct and that the award was procured through evident partiality on the part of the three-arbitrator panel. (Id. ¶¶ 13-14, 26.) As long as an arbitrator's decision is reasonable, and does not render the proceeding "fundamentally unfair," "the arbitrator is acting within the liberal sphere of permissible discretion." Griffin Indus., Inc. v. Petryojam. Ltd., 58 F. Supp.2d 212, 220 (S.D.N.Y. 1999). The Second Circuit has therefore adhered firmly to the proposition "that an arbitration award should be enforced, despite a court's disagreement with it on the merits, if there is a barely colorable justification for the outcome reached." Landy Michaels Realty Corp. v. Local 32B-32J, 954 F.2d 794, 797 (2d Cir. 1992). Despite Kolb's bare assertions of prejudicial misconduct and arbitrator partiality, Kolb has offered no evidence to demonstrate that there is not a barely colorable justification for the outcome reached by the panel. Accordingly, despite Kolb's conclusory assertions made in an attempt to vacate the award, Kolb has failed to sustain his heavy burden of demonstrating manifest disregard for the law and prejudicial misconduct on behalf of the three-arbitrator panel.
III. Conclusion
For the reasons stated above, the Court confirms the arbitration award granting Petitioner: (1) compensatory damages in the amount of $275,000, plus interest from July 25, 2001 at 9% in the amount of $48,347.88; (2) punitive damages in the amount of $1.00 plus interest from July 25, 2001 at 9% in the amount of $0.18; and (3) reimbursement for filing fees in the amount of $600.00. The Clerk of the Court is directed to enter judgment accordingly and to close the case.
So Ordered: