Sharbat v. Muskat et al
Filing
23
ORDER granting 14 Motion to Dismiss for Lack of Jurisdiction; denying 18 Motion to Enforce Subpoena. For the reasons set forth in the attached memorandum and order, respondents' 14 Motion to Dismiss is GRANTED to the extent that the con firmation petition is DISMISSED, without prejudice to petitioner's ability to file a confirmation petition upon entry of a final arbitral award in the underlying arbitration pursuant to the Arbitration Agreement. Petitioner's motion to enforce the arbitration subpoena is DENIED. The Clerk of Court is respectfully directed to enter judgment dismissing this action and to close the case. Ordered by Judge Kiyo A. Matsumoto on 9/27/2018. (Flores, Diego)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
SOLOMON SHARBAT,
MEMORANDUM & ORDER
Petitioner,
-against-
17-CV-4776(KAM)(CLP)
CHAIM MUSKAT; STAR FINANCIAL LLC;
and SEPHARDIC TORAH AND RETURN
CENTER, INC.,
Respondents.
----------------------------------X
MATSUMOTO, United States District Judge:
Petitioner Solomon Sharbat (“petitioner”) commenced
the instant action by filing a petition (the “Confirmation
Petition”) dated July 20, 2017 in the New York Supreme Court,
Queens County, seeking confirmation of an arbitration award.
(See Confirmation Petition, ECF No. 1-1.)
On August 15, 2017,
respondents Chaim Muskat, Star Financial LLC, and Sephardic
Torah and Return Center, Inc. (collectively, “respondents”)
removed the action to this court, invoking both diversity and
federal question jurisdiction.
(Notice of Removal, ECF No. 1,
¶¶ 3-5.)
Presently before the court are cross-motions by the
parties.
Respondents’ motion (the “Dismissal Motion,” ECF No.
14) seeks dismissal of the Confirmation Petition under Federal
Rule of Civil Procedure (“Rule”) 12 for lack of federal subject
matter jurisdiction, failure to state a claim upon which relief
1
can be granted, and failure to join necessary parties.
In
support of the Dismissal Motion, respondents have submitted a
memorandum of law (“Resp. Mem.,” ECF No. 14-1), declarations of
Baruch S. Gottesman, Esq. (ECF No. 14-2), and respondent Chaim
Muskat (“Muskat Decl.,” ECF No. 14-15), exhibits to the
declarations, and a reply memorandum.
(ECF No. 17.)
Petitioner
opposes the Dismissal Motion and has submitted a memorandum of
law (“Pet. Opp.,” ECF No. 16), as well as a declaration of
Eliahu Sarfaty, Esq.
(“Sarfaty Opp. Decl.,” ECF No. 16-1) and
exhibits thereto.
Petitioner’s motion (the “Subpoena Motion,” ECF No.
18) seeks enforcement of a subpoena under section 7 of the
Federal Arbitration Act (the “FAA”).
In support of the Subpoena
Motion, petitioner has submitted a memorandum of law (“Pet.
Mem.,” ECF No. 18-1), another declaration by Mr. Sarfaty
(“Sarfaty Subpoena Decl.,” ECF No. 18-2) and exhibits thereto,
and a reply memorandum.
(ECF No. 21.)
Respondents oppose the
Subpoena Motion and have submitted an opposition memorandum (ECF
No. 19), and another declaration by Mr. Gottesman (ECF No. 20)
and exhibis thereto.
For the reasons set forth below, the court concludes
that the Confirmation Petition seeks to enforce a non-final
award and consequently must be dismissed without prejudice, and
2
that the Subpoena Motion seeks relief that is not available to
petitioner as a matter of law and accordingly must be denied.
BACKGROUND
I.
Parties
The Confirmation Petition asserts that petitioner is a
resident of Israel, respondent Chaim Muskat is a resident of
Queens, New York, respondent Star Financial LLC is a New York
limited liability company “based in Queens,” and respondent
Sephardic Torah and Return Center, Inc. is a New York not-forprofit corporation also “based in Queens.”
Petition ¶¶ 1-4.)
(Confirmation
Respondents’ Notice of Removal does not
dispute any of the foregoing assertions (see Notice of Removal
¶¶ 14-17), but adds that, “[u]pon information and belief,
[petitioner] . . . is a citizen solely of the State of Israel.”
(Id. ¶ 17; see also id. ¶¶ 20-40 (discussing various public
records from other litigation matters and purported statements
by petitioner in support of respondents’ contention that
petitioner is solely a citizen of Israel).)
The Confirmation Petition further asserts that
petitioner and respondents “had business dealings together,” and
that “[a]fter a dispute arose, the [p]etitioner and
[r]espondents agreed to submit their claims to binding
arbitration.”
(Confirmation Petition ¶¶ 5-6.)
3
Respondents’
notice of removal acknowledges the foregoing assertions and does
not dispute them.
II.
(See Notice of Removal ¶ 11.)
The Arbitration Agreement
Petitioner, together with certain entities with which
he is affiliated and “any other entity that [he] has an
ownership or control interest in,” and respondents, together
with “any other entity that [respondent Chaim] Muskat has an
ownership or control interest in” are parties to an arbitration
agreement (the “Arbitration Agreement”) dated June 22, 2015.
(See Arbitration Agreement, Sarfaty Opp. Decl., Ex. A, ECF No.
16-2, ECF pp. 1-2.) 1
Pursuant to the Arbitration Agreement, the
parties “agree[d] to submit to binding arbitration all the
controversies (claims and counterclaims) between the[m] . . .
including, without limitation . . . [c]laims on OCPI shares and
related matters.”
(Id. ¶ 1.)
The Arbitration Agreement does
not explain what the “OCPI shares” are, but according to the
Notice of Removal, they are shares in an entity named Oral
Cancer Prevention International.
(Notice of Removal ¶ 8.)
The Arbitration Agreement is also annexed as Exhibit A to the
Confirmation Petition (ECF No. 1-1, ECF pp. 6-7), and as Exhibit A to
petitioner’s August 23, 2017 letter responding to respondent’s request for a
pre-motion conference. (ECF No. 11-1.) Respondent Chaim Muskat asserts that
the Arbitration Agreement that petitioner has presented to the court omits a
full page and is “not a full and complete copy of the arbitration agreement
between the parties” (Muskat Decl. ¶ 13), but respondents have not put the
“full” arbitration agreement into the record.
1
4
The Arbitration Agreement provides for “the
controversy [to be] heard and determined by a panel of any three
arbitrators . . . of Maysharim Rabbinical Court,” and that the
arbitrators “may make their award based upon Din Torah,
compromise, settlement, or any other way they wish to reach an
agreement.”
(Arbitration Agreement ¶ 2.)
Additionally, the
parties agreed to “faithfully abide by and perform any interim
or final award or decision rendered by the Arbitrators,” and to
“submit themselves to the personal jurisdiction of the courts of
the State of New Jersey and/or New York for any action or
proceeding to confirm or enforce a decree of the Arbitrators.”
(Id ¶ 5.)
The parties then proceeded to arbitration, and
although the record before this court contains few details
regarding those proceedings, it appears that the arbitral
tribunal held more than one hearing.
(See Sarfaty Opp. Decl. ¶
4 (referring to “oral hearings in this matter”); Sarfaty
Subpoena Decl. ¶ 4 (“I personally attended many hearings as part
of the arbitration underlying this action.”).)
III. The Interim Decision
On May 3, 2017, the arbitration panel of three
Rabbinical Court arbitrators (the “Bais Din”) issued a “Psak Din
Zmani/Interim Decision” (the “Interim Decision”) in the parties’
5
dispute.
(See Interim Decision, Sarfaty Opp. Decl., Ex. B, ECF
No. 16-2, ECF pp. 3-6.) 2
Although the precise location from
which the Bais Din issued the Interim Decision is not clear,
both the Arbitration Agreement and the Interim Decision indicate
that the Maysharim Rabbinical Court’s office and one of its
courtrooms are in Lakewood, New Jersey, and that it has another
courtroom Brooklyn, New York.
Interim Decision.)
(See Arbitration Agreement;
Consequently, the Interim Decision was
issued within the United States.
The Interim Decision lists all parties to the
Arbitration Agreement as parties to the arbitration proceedings.
Specifically, the “Plaintiffs” are petitioner individually and
on behalf of various specified entities affiliated with him, and
“any other entity” in which petitioner had an “ownership or
control interest.”
(See Interim Decision.)
The “Defendants”
are identified as respondent Muskat individually and on behalf
of the remaining respondents and “any other entity” in which he
had an “ownership or control interest.
(Id.)
The Interim Decision is divided into four “subjects”:
the “Sharbat Claim” (Subject “A”), the “OCPI Claim” (Subject
2
The Interim Decision is also annexed as Exhibit B to the Confirmation
Petition (ECF No. 1-1, ECF pp. 8-10), although the copy annexed to the
Confirmation Petition omits the Interim Decision’s signature page.
Additionally, the Interim Decision is annexed as Exhibit B to petitioner’s
August 23, 2017 letter responding to respondent’s request for a pre-motion
conference. (ECF No. 11-2.)
6
“B”), “Defendant Loans to Plaintiff” (Subject “C”), and
“Miscellaneous” (Subject “D”).
(See id.)
The Interim Decision
contains little information regarding the nature of, or issues
presented with respect to, any of these “claims” or “subjects,”
and instead focuses on the Bais Din’s decision on each.
(See
id.)
Regarding the Sharbat Claim, the Bais Din concluded
that respondent Chaim Muskat “is presently obligated to pay
Plaintiff the sum total of $277,469.00 US Dollars” (Arbitration
Award, Subject A(1)), which amount is net of “credits awarded”
as a result of certain loans from petitioner and/or his
affiliated entities to defendant and/or his affiliated entities.
(See id. and id., Subject C.)
The Bais Din further
“authorize[d] Plaintiff to petition in civil court for a
forensic investigation” within parameters specified in the
Interim Decision and “[t]o subpoena Defendant to furnish access
to Defendants’ accounting records,” in each case regarding
revenues associated with “deals” made between “Defendants and
Jonathan Spetner specifically relating to Life Insurance
policies.”
(Id., Subjects A(2) and A(3).)
The Bais Din also
authorized the issuance of a subpoena for “records to ascertain
revenues received from policies of Erno Bodek,” but did not
7
specify to whom this subpoena should or could be directed.
(Id., Subject A(3).)
Additionally, the Bais Din expressly “retain[ed]
jurisdiction to review the information obtained through
discovery and . . . determine if any additional monies are owed”
(id., Subject A(4)), as well as jurisdiction “to determine if
Plaintiff will be entitled to be compensated for any expenses
incurred in performing this discovery.”
(Id., Subject A(5).)
Notably, the Bais Din did not specify the plaintiff (or
plaintiffs) entitled to the $277,469.00 sum or any potential
additional award.
(Id., Subjects A(1), A(4).)
Nor did the Bais
Din specify the plaintiff (or plaintiffs) entitled to petition
for the aforementioned forensic investigation or issue the
aforementioned subpoenas.
(See id., Subjects A(2)-A(3).)
Regarding the “OCPI Claim,” the Bais Din wrote that it
“d[id] not find it viable . . . to adjudicate the OCPI matters,”
but did not explain its reasons.
(Id., Subject B.)
As to the
issue of “Defendant Loans to Plaintiff,” the Bais Din concluded
that an unspecified plaintiff was “obligated to pay back loans
received from” an unspecified defendant, as well as to
“reimburse expenses that resulted from” an unspecified
plaintiff.
(Id., Subject C.)
The Bais Din “calculated the
amount owed and . . . issued a credit” in resolving the “Sharbat
8
Claim” “to reflect this amount.”
(Id.)
Finally, the Bais Din
denied “[a]ll other claims already presented but not addressed
in the [Interim Decision],” stated that a ruling on certain
unspecified counterclaims would “be delivered at a later date,”
expressly “retain[ed] jurisdiction over all matters between the
Parties,” and granted the unspecified defendant ordered to pay
money on account of the “Sharbat Claim” the “right to put the .
. . money in escrow by the Bais Din . . . within 30 days of
receiving th[e] [Interim Decision].”
(Interim Decision,
Subjects D(1)-D(3).)
IV.
Procedural History
As discussed above, petitioner commenced the instant
action by filing the Confirmation Petition in the New York
Supreme Court, Queens County on July 20, 2017 (see Confirmation
Petition), and respondents removed the action to federal court
on August 15, 2017.
(See Notice of Removal.)
At a pre-motion
conference on September 11, 2017, the court granted the parties
leave to file the instant cross-motions and set a briefing
schedule, pursuant to which the Dismissal Motion was submitted
to the court on October 16, 2017, and the Subpoena Motion was
submitted to the court on October 18, 2017.
9
JURISDICTION
Respondents, who removed the case to federal court,
assert that this court has jurisdiction over this action based
on diversity of citizenship, and because the action presents a
federal question.
(Notice of Removal ¶¶ 1-2.)
As set forth
below, the court cannot determine whether complete diversity
exists, but concludes that the Confirmation Petition presents a
federal question.
I.
Diversity Jurisdiction
Respondents assert that the court has jurisdiction
based on diversity of citizenship under 28 U.S.C. § 1332(a)(2),
which, as relevant here, provides for federal jurisdiction where
the amount in controversy exceeds $75,000, and the action is
between “citizens of a State and citizens or subjects of a
foreign state.”
Respondents note that the amount in controversy
exceeds $75,000 and that petitioner is domiciled in Israel, and
contend petitioner is a citizen of Israel and not the United
States.
(Notice of Removal ¶¶ 1, 17.)
Additionally, and as
discussed above, there is no dispute that respondent Chaim
Muskat is a citizen of New York State; respondent Star Financial
LLC is a New York limited liability company “based in Queens,”
New York; and respondent Sephardic Torah and Return Center, Inc.
is a New York not-for-profit corporation also “based in Queens.”
10
(Confirmation Petition ¶¶ 2-4; Notice of Removal ¶¶ 14-16.)
No
party, however, has provided any information regarding Star
Financial LLC’s members or their citizenship.
Respondents’ contention that petitioner is a citizen
solely of Israel and not the United States is based on
statements and omissions made by, or attributed to, petitioner
in other litigation matters.
To briefly summarize, respondents
assert that in various papers filed in several courts between
2008 and 2015, petitioner represented that he was a dual citizen
of the United States and Israel.
37.)
(See Notice of Removal ¶¶ 20-
Respondents further assert that in 2014, petitioner began
filing court papers that omitted any reference to United States
citizenship (id. ¶ 35), and in at least one instance, outright
asserted that he had no connection to New York or the United
States, and only Israeli law should apply to him.
(Id. ¶ 38.)
Petitioner, for his part, denies that there is any
basis for diversity jurisdiction in the instant action and
asserts that respondents’ notice of removal “contains material
misrepresentations and distortions of fact regarding
[petitioner], his citizenship, and his positions and filings in
other litigations,” but does not explain further.
Pre-Motion Conference Letter, ECF No. 11, at 1.)
11
(Petitioner’s
As the parties seeking to invoke the court’s diversity
jurisdiction, it is respondents’ burden to “demonstrate[e] that
the grounds for diversity exist and that diversity is complete.”
Herrick Co. v. SCS Commc’ns, Inc., 251 F.3d 315, 322–23 (2d Cir.
2001) (citation omitted).
Consequently, respondents must
establish petitioner’s citizenship, particularly because “United
States citizens domiciled abroad are neither citizens of any
state of the United States nor citizens or subjects of a foreign
state, so that [28 U.S.C.] § 1332(a) does not provide that the
courts have jurisdiction over a suit to which such persons are
parties.” Id. at 322 (internal quotation marks and citation
omitted).
Additionally, because limited liability companies
“take[] the citizenship of each of [their] members,” Bayerische
Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692
F.3d 42, 49 (2d Cir. 2012) (citation omitted), respondents must
establish the citizenship of each member of respondent Star
Financial, LLC in order to establish that the presence of Star
Financial LLC as a respondent does not destroy diversity.
Although respondents have raised questions regarding
petitioner’s citizenship, however, they have not submitted any
evidence affirmatively indicating that he does not hold United
States citizenship.
Further, respondents have submitted no
information or evidence regarding the identity or citizenship of
12
the members of respondent Star Financial, LLC.
Consequently,
based on the current record, the court cannot conclude that
complete diversity exists, and therefore cannot conclude it has
diversity subject matter jurisdiction over the instant action
under 28 U.S.C. § 1332(a)(2).
Because the court concludes that
the instant action presents a federal question, however, the
court need not determine whether jurisdictional discovery is
appropriate.
II.
Federal Question Jurisdiction
Respondents also assert that the instant action
presents a federal question pursuant to the United Nations
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the “New York Convention”), 21 U.S.T. 2517, and
the New York Convention’s implementing statute, chapter two of
the FAA.
9 U.S.C. §§ 201-08; see also Scherk v. Alberto-Culver
Co., 417 U.S. 506, 520 n.15 (1974) (noting that Congress enacted
chapter two of the FAA to implement the New York Convention).
Accordingly, respondents assert that the court has jurisdiction
over the instant action pursuant to 28 U.S.C. § 1331.
Petitioner “does not contest” that the court has jurisdiction
over the instant action under the New York Convention
(Petitioner’s Pre-Motion Conference Letter, ECF No. 11, at 1),
13
and himself affirmatively invokes the court’s jurisdiction
through the Subpoena Motion.
Section 203 of the FAA provides that “[a]n action or
proceeding falling under the [New York] Convention shall be
deemed to arise under the laws and treaties of the United
States,” and “[t]he district courts of the United States . . .
shall have original jurisdiction over such an action or
proceeding, regardless of the amount in controversy.”
§ 203.
9 U.S.C.
“[A]ctions or proceedings that fall under the New York
Convention include arbitration agreements or arbitral awards
arising out of a legal relationship . . . which is considered as
commercial between any parties, unless both parties are citizens
of the United States and that relationship involves neither
property located abroad, nor envisages performance or
enforcement abroad, nor has some other reasonable relation with
one or more foreign states.”
CBF Industria de Gusa S/A v. AMCI
Holdings, Inc., 850 F.3d 58, 71 (2d Cir. 2017) (internal
quotation marks and citation omitted), cert. denied, 138 S. Ct.
557 (2017); accord 9 U.S.C. § 202; see also Yusuf Ahmed Alghanim
& Sons v. Toys “R” Us, Inc., 126 F.3d 15, 19 (2d Cir. 1997)
(citing approvingly Seventh Circuit’s conclusion in Jain v. de
Méré, 51 F.3d 686, 689 (7th Cir. 1995) that “any commercial
arbitral agreement, unless it is between two United States
14
citizens, involves property located in the United States, and
has no reasonable relationship with one or more foreign states,
falls under the [New York] Convention”).
As discussed above, the instant action involves both
an interim arbitration agreement (i.e., the Arbitration
Agreement), and an arbitral award (i.e., the Interim Decision),
in each case arising out of a legal relationship between
petitioner and respondents.
Further, both the Arbitration
Agreement and Interim Decision makes clear that they relate to
“OCPI shares” (Arbitration Agreement; Interim Decision, Subject
B), which respondents explain are shares an entity named Oral
Cancer Prevention International.
(Notice of Removal ¶ 8.)
The
Interim Decision also refers to “deals made,” life insurance
policies, and loans from an unspecified defendant (i.e., an
affiliate of respondents’) to an unspecified plaintiff (i.e., an
affiliate of petitioner’s).
C.)
(Interim Decision, Subjects A3 and
These references to shares in an entity, “deals,” life
insurance policies, and loans arising in the course of dealing
between petitioner and his affiliates and respondents and their
affiliates establish that the parties’ relationship can be
“considered as commercial.”
CBF Industria de Gusa, 850 F.3d at
71.
15
Additionally, although petitioner’s citizenship is not
clear, there is no dispute that he is domiciled in Israel, and
both the Arbitration Agreement and the Interim Decision make
clear that the parties to the arbitration agreed to adjudicate
all controversies between the parties.
(See Arbitration
Agreement ¶ 1 (“W[e], the undersigned (Parties), hereby agree to
submit to binding arbitration all the controversies . . .
between the undersigned Parties.” (emphasis added)); Interim
Decision (“[T]he above Parties authorized this Bais Din . . . to
adjudicate . . . without limitation, all the controversies that
exist between the parties.”)).)
Consequently, the Arbitration Agreement and Interim
Decision “envisage[] performance,” and possibly property and
“enforcement abroad,” and have a “reasonable relationship” to a
foreign state, specifically Israel.
CBF Industria de Gusa, 850
F.3d at 71 (quoting 9 U.S.C. § 202).
Accordingly, the court
concludes that the instant action presents a federal question
under sections 202 and 203 of the FAA, 9 U.S.C. §§ 202-03, and
that the court has jurisdiction pursuant to 28 U.S.C. § 1331.
DISCUSSION
I.
Respondent’s Dismissal Motion
Respondents move to dismiss the Confirmation Petition
on the grounds that this court “has no subject matter
16
jurisdiction to confirm th[e] non-final and indefinite” Interim
Decision, that petitioner “failed to join necessary and
indispens[a]ble parties,” and that petitioner “has not
sufficiently alleged that the . . . Interim Decision was
delivered” or “the existence of the parties’ arbitration
agreement, and because there are genuine issues of material
fact.”
(Resp. Mem. at 1.)
For the reasons set forth below, the
court concludes that the Interim Decision is not a final award,
and therefore the court lacks authority to confirm it.
A.
Applicable Law
As discussed above, petitioner commenced this action
seeking confirmation of the Interim Decision.
Because the
Maysharim Rabbinical Court, from which the Bais Din issued the
Interim Decision, is situated within the United States, the
Interim Decision constitutes an arbitral award “made” in the
United States, and is a “nondomestic” arbitral award for
purposes of the New York Convention.
See CBF Industria de Gusa,
850 F.3d at 73 (“[A] nondomestic arbitral award is an award that
is ‘made’ in the United States because the parties agreed to
arbitrate before an arbitrator in the United States, but which
nonetheless falls under the New York Convention and Chapter 2 of
the FAA.” (citation omitted)).
“Under the New York Convention,
the country in which the award is made is said to have primary
17
jurisdiction over the arbitration award.”
Id. at 71 (internal
quotation marks, citations, and emphasis omitted).
Accordingly,
this court “sits in primary jurisdiction” over the Interim
Decision in this action.
Id. at 73 (citation omitted).
Further, because the Interim Decision falls under the
New York Convention and the court sits in primary jurisdiction,
the New York Convention and the FAA, and not New York State law,
govern confirmation.
See 9 U.S.C. §§ 202 (defining scope of New
York Convention), 207 (providing that the district court “shall
confirm” an award “falling under the [New York] Convention . . .
unless it finds one of the grounds for refusal or deferral of
recognition or enforcement of the award specified in the [New
York] Convention”); see also CBF Industria de Gusa, 850 F.3d at
73 (“Under its primary jurisdiction in a confirmation
proceeding, the district court is . . . ‘free to set aside or
modify an award in accordance with its domestic arbitral law and
its full panoply of express and implied grounds for relief.’”
(quoting Yusuf Ahmed Alghanim & Sons, 126 F.3d at 23)); Yusuf
Ahmed Alghanim & Sons, 126 F.3d at 21(indicating that the FAA
constitutes “domestic arbitral law” pursuant to which a district
court sitting in primary jurisdiction may set aside or vacate
arbitral award).
18
As the Second Circuit observed in a case involving
confirmation of a nondomestic New York Convention award over
which the district court sat in primary jurisdiction, “[t]he
confirmation of an arbitration award is a summary proceeding
that merely makes what is already a final arbitration award a
judgment of the court[,] [t]he review of arbitration awards is
very limited[,] . . . [and] [a]ccordingly, the showing required
to avoid summary confirmance is high.”
Yusuf Ahmed Alghanim &
Sons, 126 F.3d at 23 (internal quotation marks and citations
omitted).
Under the New York Convention, however, “district
courts lack authority to confirm arbitral awards that are not
final awards.”
Ecopetrol S.A. v. Offshore Expl. & Prod. LLC, 46
F. Supp. 3d 327, 336 (S.D.N.Y. 2014) (citing Metallgesellschaft
A.G. v. M/V Capitan Constante, 790 F.2d 280, 283 (2d Cir. 1986);
Michaels v. Mariforum Shipping, S.A., 624 F.2d 411, 414 (2d Cir.
1980); and Daum Global Holdings Corp. v. Ybrant Digital Ltd.,
No. 13-CV-3135(AJN), 2014 WL 896716, at *2 (S.D.N.Y. Feb. 20,
2014)).
“[A]n award is final if it resolves the rights and
obligations of the parties definitively enough to preclude the
need for further adjudication with respect to the issue
submitted to arbitration.” Id. (citing Rocket Jewelry Box, Inc.
v. Noble Gift Packaging, 157 F.3d 174, 176 (2d Cir. 1998)).
19
Thus, “[a]n award that finally and conclusively disposes of a
‘separate independent claim’ may be confirmed even if it does
not dispose of all the claims that were submitted to
arbitration.”
Kerr-McGee Ref. Corp. v. M/T Triumph, 924 F.2d
467, 471 (2d Cir. 1991) (citation omitted); see also Zeiler v.
Deitsch, 500 F.3d 157, 169 (2d Cir. 2007) (finding arbitration
awards final and confirmable where they “require[d] specific
action and d[id] not serve as a preparation or a basis for
further decisions by the arbitrators”).
B.
Application
The Second Circuit’s decision in Kerr-McGee Refining
Corporation v. M/T Triumph, 924 F.2d 467 (2d Cir. 1991), is
instructive on the confirmation or enforcement of a final
arbitral award.
There, and in relevant part, an “arbitration
panel issued a Partial Final Award in favor of Kerr-McGee for
the value of cargo short delivered, together with interest,” but
“deferred decision on a number of other issues, including KerrMcGee’s RICO claim, its alternative claim for punitive damages,
and its claim for attorneys’ fees and costs.”
Id. at 469.
The
Second Circuit concluded that “the Partial Final Award did not
finally dispose of a separate independent claim” because “the
arbitration panel expressly left open whether, as a result of
[the complained-of conduct], Kerr-McGee was also entitled to
20
punitive or RICO damages, costs and attorneys’ fees.”
471.
Id. at
Thus, the interim award in Kerr-McGee Refining “merely
decided the issue of liability and partial damages . . . and did
not finally dispose of an independent claim because it left open
the question of damages.”
Id. (citing Michaels, 624 F.2d at
414).
Petitioner nevertheless contends that the court should
confirm the Interim Decision because, by agreeing to the
Arbitration Agreement, which empowers the arbitral tribunals to
“issue such intermediate decisions or orders as they deem
necessary,” respondents “waived their rights to any finality
requirement.”
(Pet. Opp. at 3 (quoting Arbitration Agreement).)
This argument is without merit.
Petitioner does not cite, and
the court cannot locate, any authority for the proposition that
language in an arbitration agreement empowering an arbitral
tribunal to issue intermediate decisions and requiring that
parties comply with those decisions renders all intermediate
decisions “final” and confirmable.
Further, although certain authority suggests that
where parties agree to an arbitral tribunal’s partial final
determination as to certain issues, the resulting partial final
award is “final” for purposes of confirmation, these cases have
involved express bifurcation of issues (for instance, an express
21
agreement to make liability and damages separate and independent
claims).
See Employers’ Surplus Lines Ins. Co. v. Glob.
Reinsurance Corp.-U.S. Branch, No. 07-CV-2521(HB), 2008 WL
337317, at *5 (S.D.N.Y. Feb. 6, 2008) (citing Goldman v.
Architectural Iron Co., No. 01-CV-8875(DLC), 2001 WL 1705117, at
*3-4 (S.D.N.Y. Jan. 15, 2001) and Doreen v. Bldg. Material Local
Union 282, 250 F.Supp.2d 107, 112-13 (E.D.N.Y. 2003)); see also
Trade & Transp., Inc. v. Nat. Petroleum Charterers Inc., 931
F.2d 191, 195 (2d Cir. 1991) (“[I]f the parties agree that the
panel is to make a final decision as to part of the dispute, the
arbitrators have the authority and responsibility to do so.”).
Here, by contrast, the parties merely consented to the
“issu[ance] [of] such intermediate decisions or orders as [the
arbitral tribunal may] deem necessary.”
¶ 2.)
(Arbitration Agreement
This language leaves undefined the nature and scope of
any potential “intermediate” decisions, and is silent as to
whether the parties intended for any “intermediate” decision to
be final as to any issue or issues.
Thus, the parties “did not
ask . . . [for] an immediate determination of [any discrete
issue or issues] or otherwise to bifurcate the proceedings, nor
did the [arbitral tribunal] give them any prior indication that
[it] would defer the issue of [additional] damages to a later
date.”
Employers’ Surplus Lines, 2008 WL 337317, at *5.
22
Accordingly, the court cannot conclude that the Interim Decision
constitutes a final award by virtue of any agreement to submit
to a partial final determination.
In the Interim Decision, with respect to the “Sharbat
Claims,” the Bais Din expressly left open the possibility that
“additional monies,” as well as certain expenses, might be
awarded to the plaintiffs in the arbitration following
discovery.
(See Interim Decision, Subject A(4) (“Bais Din
retains its jurisdiction to review the information obtained
through discovery and . . . determine if any additional monies
are owed.”); Subject A(5) (“Bais Din retains the jurisdiction to
determine if Plaintiff will be entitled to be compensated for
any expenses incurred in performing this discovery.”).)
In
addition, the Interim Decision decided that, with regard to the
“Sharbat Claims,” defendant Muskat was “presently obligated” to
pay the amount of $277,469.00 to an unspecified plaintiff.
(Id., Subject A(1).)
Further, the Interim Decision decided with
regard to “Defendant Loans to Plaintiff,” that plaintiff was
obligated to pay back an unspecified amount of loans from
defendant, calculated the amount owed by plaintiff to defendant,
and issued a credit on the amount owed by defendant Muskat to
plaintiff.
(See Interim Decision, Subject C (“The Bais Din has
23
calculated the amount owed and has issued a credit in [Subject]
A1 to reflect this amount.”).)
The foregoing aspects of the Interim Decision make
clear that, with respect to the “Sharbat Claims” and the
“Defendant Loans to Plaintiff,” the Interim Decision “serve[s]
as a preparation or a basis for further decisions by the
arbitrators,”
Zeiler, 500 F.3d at 169, as it “merely decided
the issue of liability and partial damages.”
Refining, 924 F.2d at 471.
Kerr-McGee
The Interim Decision “expressly left
open” the possibility of a further award, id., specifically, an
award of damages and/or discovery expenses.
Accordingly, the
court concludes that the Interim Decision, like the partial
final award at issue in Kerr-McGee Refining, does not constitute
a “final award.”
As to the remaining “subjects” addressed in the
Interim Decision, the Bais Din expressly found that it was “not
. . . viable” to adjudicate the “OCPI Claim.”
Decision, Subject B.)
(Interim
Consequently, this branch of the Interim
Decision is not an award, much less a final award, as it does
not in any way resolve any issue submitted to arbitration.
Regarding “Miscellaneous” subjects, the Bais Din wrote
in the Interim Decision that “[a]ll other claims already
presented but not addressed in the above are hereby denied.
24
A
ruling on the counterclaims will be delivered at a later date.”
(Interim Decision, Subject D(1).)
At minimum, the Interim
Decision is not final as to “the counterclaims” because it
expressly states that a “ruling . . . will be delivered at a
later date.”
This same logic applies to “[a]ll other claims” if
the Bais Din used the terms “[a]ll other claims” and “the
counterclaims” interchangeably.
Finally, if “[a]ll other claims” refers to claims
other than “the counterclaims,” the Interim Decision is not
confirmable as to the “other claims” on the present record.
As
stated above, the FAA’s confirmation provisions apply to the
instant action because the court sits in primary jurisdiction
over the Interim Decision.
Under the FAA, the court must
confirm an arbitration award if “there is ‘even a barely
colorable justification for the outcome reached.’”
Willemijn
Houdstermaatschappij, BV v. Standard Microsystems Corp., 103
F.3d 9, 13 (2d Cir. 1997) (quoting Matter of Andros Compania
Maritima, S.A. (Marc Rich & Co., A.G.), 579 F.2d 691, 704 (2d
Cir. 1978)).
Absent some indication as to what the “other
claims” denied in the Interim Decision are, however, the court
is without a basis to determine whether any justification
whatsoever exists for confirmation of the Interim Decision.
25
Accordingly, the court concludes that the Interim
Decision is not a final award or, solely with respect to the
“other claims” referenced in Subject D, not confirmable on the
present record, and consequently, the Confirmation Petition must
be dismissed. 3
This dismissal is without prejudice to
petitioner’s ability to seek confirmation of a final award
resting on the Interim Decision if and when such an award is
issued.
Further, in light of this conclusion, the court need
not address respondents’ remaining arguments in the Dismissal
Motion.
II.
Petitioner’s Subpoena Motion
Petitioner seeks to enforce an arbitration subpoena
under section 7 of the FAA.
(Pet. Mem. at 2.)
As relevant
here, the subpoena that petitioner seeks to enforce is signed by
petitioner’s counsel and purports to require that respondent
Chaim Muskat “produce [certain] documents for inspection and
copying” at the office of petitioner’s counsel.
(Subpoena,
Sarfaty Subpoena Decl., Ex. C, ECF No. 18-3, ECF pp. 8-13, at 1,
5.)
The court declines to afford petitioner the opportunity to supplement
the record regarding the “other claims” referred to in the Interim Decision
because nothing in the Confirmation Petition or in petitioner’s briefing
indicates that petitioner has any particular interest in having the Interim
Decision’s disposition of “other claims” confirmed. Instead, petitioner’s
focus has been on the portion addressing the “Sharbat Claims.” (See
Confirmation Petition ¶¶ 9-10 (describing overall import of Interim Decision
but not referring to “other claims”); Pet. Opp. at 1-6 (containing no
reference to “other claims”).)
3
26
A.
Applicable Law
Chapter one of the FAA “applies to actions and
proceedings brought under . . . chapter [two] to the extent that
chapter [one] is not in conflict with . . . chapter [two] or the
[New York] Convention.”
9 U.S.C. § 208.
Section 7 of the FAA
therefore applies to this proceeding, as it is codified in
chapter one and does not conflict with the New York Convention
or chapter two of the FAA.
Section 7 provides, in relevant
part, that
[t]he arbitrators selected either as prescribed
in this title or otherwise, or a majority of
them, may summon in writing any person to attend
before them or any of them as a witness and in a
proper case to bring with him or them any book,
record, document, or paper which may be deemed
material as evidence in the case. . . . Said
summons shall issue in the name of the arbitrator
or arbitrators, or a majority of them, and shall
be signed by the arbitrators, or a majority of
them, and shall be directed to the said person
and shall be served in the same manner as
subpoenas to appear and testify before the court.
9 U.S.C. § 7.
As the Second Circuit has observed, section 7 of the
Federal Arbitration Act “explicitly confers authority only upon
arbitrators; by necessary implication, the parties to an
arbitration may not employ this provision to subpoena documents
or witnesses.”
Nat’l Broadcasting Co., Inc. v. Bear Stearns &
Co., Inc., 165 F.3d 184, 187 (2d Cir. 1999) (emphasis in quoted
27
material) (citations omitted).
The Second Circuit has also
concluded that “[t]he language of section 7 is straightforward
and unambiguous. Documents are only discoverable in arbitration
when brought before arbitrators by a testifying witness.”
Life
Receivables Tr. v. Syndicate 102 at Lloyd’s of London, 549 F.3d
210, 216 (2d Cir. 2008).
B.
Application
Here, it is abundantly clear that a party to
arbitration, not the arbitral panel itself, seeks to invoke
section 7 of the FAA.
Further, petitioner seeks to invoke
section 7 to compel the production of documents for inspection
at his counsel’s office, not to have them brought before the
arbitral tribunal by a witness.
Petitioner nevertheless asserts that the subpoena was
issued “in the name of the Arbitration Panel” (Pet. Mem. at 3;
see also Sarfaty Subpoena Decl. ¶ 7).
Even if petitioner could
employ section 7 “in the name of” the arbitral tribunal, the
Second Circuit has made abundantly clear that under section 7,
“[d]ocuments are only discoverable in arbitration when brought
before arbitrators by a testifying witness.”
Trust, 549 F.3d at 216.
Life Receivables
Thus, the petitioner’s Subpoena Motion
must be denied because petitioner seeks to compel the delivery
of documents to his counsel, instead of having a testifying
28
witness to bring the documents before the arbitral tribunal.
(Subpoena at 1.)
The parties’ Arbitration Agreement provides,
in relevant part, “that the Arbitrators shall be empowered to
issue subpoenas for witnesses and the production of documents.”
(Arbitration Agreement at ¶ 2.)
Plaintiff cites no authority indicating that a party
to arbitration may invoke section 7 “in the name of” an arbitral
tribunal.
Other than section 7 of the FAA itself, the only
authorities to which petitioner cites are Sexton v. Cavalier, 11
F. Supp. 3d 439 (S.D.N.Y. 2014) and Complaint of Koala Shipping
& Trading Inc., 587 F. Supp. 140 (S.D.N.Y. 1984) (Pet. Mem. at
2), but these cases are inapposite.
More specifically, in Sexton, an arbitral tribunal
itself issued a document subpoena.
See Sexton, 11 F. Supp. 3d
at 440 (noting that “at Plaintiff’s request, the Arbitral
Tribunal . . . issued a non-party subpoena” seeking to obtain
certain documents in connection with an arbitration).
Thus,
Sexton in no way supports plaintiff’s suggestion that a party to
arbitration may employ section 7 of the FAA “in the name of” an
arbitral tribunal.
Complaint of Koala involved a more complex posture,
but nevertheless, like Sexton, fails to support petitioner’s
position.
There, a party to parallel arbitration and a federal
29
court proceeding relating to the parties’ relative liability and
limitation of liability, respectively, “sought to have a
subpoena duces tecum issued and a discovery order executed by
the panel of arbitrators.”
587 F. Supp. at 141-42.
The
arbitral tribunal convened and “stated that it was ‘unsure’ of
its power and suggested to [the party] that it present the same
application to [the district court].”
Id. at 142.
The party
complied with the panel’s suggestion.
The district court, in relevant part, concluded that
section 7 of the FAA “authorizes arbitrators to subpoena
individuals and documents and . . . the material sought [wa]s
relevant to the issues before the arbitrators,” and in any
event, the discovery was within the scope of the parallel action
before the district court.
587 F. Supp. at 142-43.
The
district court also noted that it saw “no purpose” in sending
the subpoena application “back to the panel,” but that “[i]n the
future, the panel should exercise its power” pursuant to section
7 of the FAA.
Id.
Thus, Complaint of Koala is marked by two
critical aspects not present here: first, the party seeking
discovery properly applied to the arbitral tribunal for the
issuance of a subpoena and execution of a discovery order, and
second, an independently sufficient basis existed for the
district court to order the discovery sought.
30
The Arbitration Agreement is clear: the arbitrators
(not the parties) are empowered to issue subpoenas for witness
testimony and documents.
(Arbitration Agreement ¶ 2.)
Absent
any authority indicating that a party to arbitration may employ
section 7 of the FAA “in the name of” an arbitral tribunal, the
court applies the plain language of section 7, which is
“straightforward and unambiguous,” Life Receivables Trust, 549
F.3d at 216, and “explicitly confers authority only upon
arbitrators” themselves, and not parties to an arbitration, to
“employ [section 7] to subpoena documents or witnesses.”
Nat’l
Broadcasting Co., 165 F.3d at 187 (emphasis omitted).
Accordingly, through the Subpoena Motion, petitioner seeks
relief from this court that is unavailable to him under the FAA,
and the Subpoena Motion is denied.
CONCLUSION
For the foregoing reasons, the respondents’ Motion to
Dismiss is GRANTED to the extent that the Confirmation Petition
is DISMISSED, without prejudice to petitioner’s ability to file
a confirmation petition upon entry of a final arbitral award in
the underlying arbitration pursuant to the Arbitration
Agreement.
Petitioner’s Subpoena Motion is DENIED.
31
The Clerk
of Court is respectfully directed to enter judgment dismissing
this action and to close the case.
SO ORDERED.
Dated:
September 27, 2018
Brooklyn, New York
/DRAFT/
Kiyo A. Matsumoto
United States District Judge
32
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