Daum Global Holdings Corp. v. Ybrant Digital Limited et al

Filing 55

MEMORANDUM AND ORDER: For the foregoing reasons, the Petitioner's petition is GRANTED in part and DENIED in part. Petitioner's request for discovery is denied. However, Respondents are ordered to either (1) pay Petitioner enough money to sa tisfy the Judgment plus applicable interest, minus the current value of the Escrowed Shares; or (2) deliver to a designated sheriff or Marshal for sale stock certificates in their possession or control of sufficient value to satisfy the Judgment plus applicable interest, minus the current value of the Escrowed Shares. Stock certificates subject to this Order include, but are not limited to, stock in the companies outlined in pages 5 to 6 of Petitioner's Brief in which Ybrant Digital has a 100% ownership interest, as well as Ybrant Media's stock in Lycos. This resolves Dkt. No. 43. The Clerk of the Court is directed to close the case. SO ORDERED. (Signed by Judge Alison J. Nathan on 10/6/2015) (ajs)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DAUM GLOBAL HOLDINGS CORP.,
Petitioner,
13-CV-3135 (AJN)

-vYBRANT DIGITAL LIMITED et al.,
Respondents.

MEMORANDUM
AND ORDER

ALISON J. NATHAN, District Judge:
On February 26, 2014, April 18, 2014, and May 6, 2015, the Court confirmed three
separate arbitration awards totaling approximately $35 million in the above-captioned case. See
Dkt. Nos. 18, 19, 28, 29, 40 and 41. Daum Global Holdings Corporation ("Petitioner") now
seeks a Turnover Order pursuant to Federal Rule of Civil Procedure 69(a) and New York Civil
Practice Law and Rules ("CPLR") § 5225(a) compelling Ybrant Digital Limited and other
Ybrant companies ("Respondents") to tum over their stock certificates in a variety of whollyowned subsidiaries to satisfy the awards. Petitioner also seeks discovery in connection with its
attempts to execute on the judgment. See Dkt. No. 43. For the reasons articulated below,
Petitioner's motion is granted in part and denied in part.

I.

BACKGROUND
On September 24, 2014, an International Chamber of Commerce arbitration tribunal

based in Singapore issued a final award of $33,547,883 plus interest against Respondents in
favor of Petitioner. See Pet. Br. Ex. A2 (the "Final Award"). Subsequently, Petitioner sought to
confirm that award and two other related awards in this Court pursuant to the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 ("New
York Convention" or "Convention"), implemented and codified at 9 U.S.C. § 207. On February

26, 2014, April 18, 2014, and May 6, 2015, the Court confirmed three awards totaling
approximately $35 million. See Dkt. Nos. 18, 19, 28, 29, 40, and 41. The awards required
Respondents to pay Petitioner the amount of the judgment within 15 days of notification of the
award or within 20 days of written demand by Petitioner. Final Award if 213. If Respondents
failed to make timely payment, the award provided that Petitioner would be entitled to receive
certain shares held in escrow (the "Escrowed Shares"). Id. To date, Respondents have not made
payment, so Petitioner has acquired possession of the Escrowed Shares. Pet. Br. at 5. Because
the value of the Escrowed Shares is considerably less than the full value of the judgment,
Petitioner filed the instant motion to execute upon the remaining portion of the confirmed
awards. Id.

II.

DISCUSSION
The New York Convention, binding on federal courts pursuant to 9 U.S.C. § 207,

provides that arbitration awards shall be enforced "in accordance with the rules of procedure of
the territory where the award is relied upon." New York Convention art. III. A federal court has
"inherent power to enforce its judgments," Peacock v. Thomas, 516 U.S. 349, 356 (1996),
including arbitration awards that have been confirmed pursuant to 9 U.S.C. § 207. See

Universitas Educ., LLCv. Nova Grp., Inc., Nos. 11-CV-1590 (LTS) and 11-CV-8726 (LTS),
2015 WL 57097, at *1 (S.D.N.Y. Jan. 5, 2015); JSC Foreign Econ. Ass'n Technostroyexport v.

Int'l Dev. & Trade Servs., Inc., 295 F. Supp. 2d 366, 386-87 (S.D.N.Y. 2003). Under Federal
Rule of Civil Procedure 69(a), a federal court enforcing a money judgment will apply the
"procedure on execution ... of the state where the court is located." Fed. R. Civ. P. 69(a). In
New York, enforcement of money judgments is governed by CPLR § 5225. That section
provides:

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Upon motion of the judgment creditor ... where it is shown that the judgment
debtor is in possession or custody of money or other personal property in which
he has an interest, the court shall order that the judgment debtor pay the money, or
so much of it as is sufficient to satisfy the judgment, to the judgment creditor and,
if the amount to be so paid is insufficient to satisfy the judgment, to deliver any
other personal property, or so much of it as is of sufficient value to satisfy the
judgment, to a designated sheriff.
CPRL § 5225(a). A debtor can be ordered under CPLR § 5225(a) to turn over any personal
property in its possession, including assets located outside the state. See Gryphon Dom. VL LLC

v. APP. Int'!. Fin. Co., B. V., 836 N.Y.S.2d 4, 14 (App. Div. 2007).
The instant action involves a dispute as to the proper interpretation of the Final Award.
Respondents argue that by taking possession of the Escrowed Shares, Petitioner forfeited its
rights to the considerable difference in value between the Escrowed Shares and the Final Award.
Petitioner, on the other hand, argues that the two forms of relief are cumulative and that it is
entitled to both the Escrowed Shares and the value of the Final Award.
Respondents further claim that because this dispute involves interpretation of an
arbitration award, it must be decided in arbitration. Resp. Br. ilil 22-23. To the contrary, 9
U.S.C. § 207, Federal Rule of Civil Procedure 69(a), and the inherent power of federal courts to
enforce their judgments give federal courts the authority to enforce arbitration awards. See

Universitas Educ., LLC v. Nova Group, Inc., Nos. 11-CV-1590-LTS, 11-CV-8726-LTS, 2015
WL 57097, at *1 (S.D.N.Y. Jan. 5, 2015). In doing so, a district court is entitled, and indeed
obligated, to interpret the award. See Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108,
110-11 (2d Cir. 1993) (affirming the district court's interpretation of an arbitration award). Only
when an award is internally contradictory or so ambiguous that neither party can "advance[] a
clear and compelling interpretation of the award" must a proceeding to enforce an arbitration
award be remanded back to arbitration. Kallen v. Dist. 1199, Nat'! Union ofHosp. & Health

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Care Emp., RWDSU, AFL-CIO, 574 F.2d 723, 726 (2d Cir. 1978) (quoting Bell Aerospace Co.
Div. of Textron, Inc. v. Local 516, 500 F.2d 921 (2d Cir. 1974)). That is not the case here.
As to the substance, Respondents oppose, arguing that Petitioner "elected to retake [the
Escrowed Shares] in lieu of collecting the monetary award set forth in the final arbitration
Award." Resp. Br. ii 4. In support of that position, Respondents point to language in the Final
Award that the Escrowed Shares "are available to [Petitioner] under the Escrow Agreement if
[Petitioner] is not paid the Eamout Payment Amount by ... [Respondents]." Resp. Br. ii 15
(quoting Final Award ii 176). Petitioner counters that the Escrowed Shares are a cumulative
remedy intended as security for payment of the Final Award. Pet. R. Br. ii 7. Petitioner also
estimates the value of the Escrowed Shares to be approximately $6.4 million, far less than the
$35 million total value of the judgments in their favor. See id. ii 9 (noting that the Escrowed
Shares represent 44% of a company worth approximately $14.5 million).
In interpreting an arbitration award, a court should look to the plain language of the
award. See Chios Charm Shipping Co. v. Rionda, No. 93-CV-6313 (SS), 1994 WL 132141, at
*3 (S.D.N.Y. Apr. 12, 1994) (citing Folkways, 989 F.2d at 110). Respondents' proposed
interpretation of the Final Award is not supported by the text. The Final Award "[ o]rders and
declares that in the event of [Respondents] not making payment to [Petitioner] ... [Petitioner] is
entitled to have the Escrowed Shares distributed to it." Final Award ii 213. Nowhere does the
award indicate that taking possession of the Escrowed Shares is in lieu of full payment or
satisfies the entirety of the judgment. In fact, the Final Award specifically describes Petitioner's
entitlement to release of the Escrowed Shares as cumulative. Final Award ii 176.
("[Petitioner's] entitlement to the release of the Escrowed Shares is ... cumulative in the sense

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that remedies are available to it under the Escrow Agreement if [Petitioner] is not paid the
Eamout Payment Amount.").
Furthermore, the Final Award specifically provides that the purpose of the Escrowed
Shares is to "ensure satisfaction by Buyer of obligations" to pay the arbitration award. Final
Award~

173. Treating the Final Award's provisions as non-cumulative defies that language by

creating a perverse incentive for Respondents, who assert that they can refuse payment of the
$35 million judgment and limit Petitioner's recovery to the far lesser value of the Escrowed
Shares. Under Respondents' interpretation, placing the shares in escrow does not incentivize
payment of the final judgment; to the contrary, it encourages Respondents to refuse payment of
the full judgment. Adopting an interpretation of the Final Award giving Respondents the ability
to so easily and dramatically limit Petitioner's recovery is contrary to the language describing the
purpose of the Escrowed Shares.
The award is also clear, however, that Petitioner is not entitled to both the Escrowed
Shares and full payment of the judgment. As noted above, the Final Award provides that the
purpose of the Escrowed Shares is to "ensure satisfaction by Buyer of obligations" to pay the
arbitration award, not to penalize Respondents for failure to make timely payment. 1 Final Award
~

173. As the arbitrators note in their Award, "[i]f ... [Respondents] were to pay the Eamout

Payment Amount ... [Petitioner] would have no entitlement to the Escrowed Shares.").

Id.~

176. This language demonstrates that while taking possession of the Escrowed Shares upon
Respondents' default is a cumulative remedy in that it can be done in conjunction with executing
on the remaining value of the award, Petitioner may not recover the Escrowed Shares in addition
to the full $35 million judgment (plus applicable interest). This interpretation is further bolstered

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Instead, the penalty for late payment is Respondents' obligation to pay interest. Final Award iii! 179-190.

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by the clear requirements of New York law, the law applied by the arbitration panel, see Final
Award~

7, under which "liquidated and actual damages are mutually exclusive remedies." U.S.

Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 71 (2d Cir. 2004) (citingXL.O.
Concrete Corp. v. John T. Brady & Co., 482 N.Y.S.2d 476, 479 (App. Div. 1984)).
Thus, upon Respondents' default, Petitioner is entitled to the value of the Final Award,
minus the value of the Escrowed Shares currently in its possession. At the current time,
Respondents have failed to make required payments under the Final Award. Under paragraphs
173, 176, and 213 of the Final Award, Petitioner may retain possession of the Escrowed Shares
and execute on the remaining value of the judgment. The Court therefore grants Petitioner's
request for a Turnover Order.
Petitioner further requests that the Court "grant other and further relief, including an
order authorizing discovery." Pet. Br. at 12. At the current time, the Court finds this request to
be premature and denies it. However, if Respondents continue to refuse payment, Petitioner may
seek appropriate relief from the Court.

III.

CONCLUSION
For the foregoing reasons, the Petitioner's petition is GRANTED in part and DENIED in

part. Petitioner's request for discovery is denied. However, Respondents are ordered to either (1)
pay Petitioner enough money to satisfy the Judgment plus applicable interest, minus the current
value of the Escrowed Shares; or (2) deliver to a designated sheriff or Marshal for sale stock
certificates in their possession or control of sufficient value to satisfy the Judgment plus
applicable interest, minus the current value of the Escrowed Shares.

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Stock certificates subject to this Order include, but are not limited to, stock in the
companies outlined in pages 5 to 6 of Petitioner's Brief in which Ybrant Digital has a 100%
ownership interest, as well as Ybrant Media's stock in Lycos.
This resolves Dkt. No. 43. The Clerk of the Court is directed to close the case.
SO ORDERED.

Dated:

October~'

2015
New York, New York

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