Belesis et al v. Kerr

Filing 25

OPINION & ORDER re: (47 in 1:14-cv-09168-KBF) FIRST MOTION to Vacate Arbitration . filed by Joseph Castellano, Anastasios Belesis, (74 in 1:14-cv-09168-KBF) MOTION for Sanctions . filed by Eubulus J. Kerr, III, (44 in 1:14- cv-09168-KBF) FIRST MOTION to Vacate Arbitration . filed by George Belesis, (82 in 1:14-cv-09168-KBF) MOTION for Sanctions Opposition. filed by Joseph Castellano, Anastasios Belesis. For the foregoing reasons, Kerr's pet ition to confirm the arbitration award is GRANTED, respondents' petitions to vacate the arbitration award are DENIED, and Kerr's motion for sanctions against A. Belesis and G. Belesis is DENIED. This action is stayed against Castellano, an d accordingly this Opinion & Order is not effective as against him until the stay is lifted. The Clerk of Court is directed to close the motions at 14-cv-9168 ECF Nos. 44, 47, 74, 82. (As further set forth in this Order) (Signed by Judge Katherine B. Forrest on 7/16/2015) (lmb) Modified on 7/16/2015 (lmb).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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DR. EUBULUS J. KERR, III,
:
:
Plaintiff,
:
:
-v:
:
JOHN THOMAS FINANCIAL et al.,
:
:
Respondents.
:
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:
ANASTASIOS BELESIS and JOSEPH
:
CASTELLANO,
:
:
Petitioners,
:
:
-v:
:
EUBULUS J. KERR III,
:
:
Respondent.
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KATHERINE B. FORREST, District Judge:

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: July 16, 2015

14-cv-9168 (KBF)

14-cv-8306 (KBF)
OPINION & ORDER

Now before the Court are dueling petitions to confirm and vacate an award
issued in an arbitration before the Financial Industry Regulatory Authority
(“FINRA”) initiated by petitioner Dr. Eubulus J. Kerr III against respondents John
Thomas Financial (“JTF”), Anastasios Belesis (“A. Belesis”), George Belesis (“G.
Belesis”), and Joseph Castellano. In the arbitration, Kerr accused respondents of
churning his securities brokerage account. Kerr won the arbitration, and the
arbitration panel awarded him nearly $1 million in damages. For the reasons set
forth below, Kerr’s petition to confirm the arbitration award is GRANTED and
respondents’ petitions are DENIED.

Kerr has also moved for sanctions against A. Belesis and G. Belesis, arguing
that their motions to vacate are frivolous and designed to delay payments owed to
Dr. Kerr. As the circumstances in this case are not so extraordinary as to justify
the imposition of sanctions, Kerr’s motion for sanctions is DENIED.
I.

BACKGROUND1
In April 2011, Dr. Kerr opened a securities brokerage account with JTF,2 a

registered broker/dealer regulated by FINRA. (ECF No. 12 (“Kerr Pet.”) ¶ 3; ECF
No. 44 (“G. Belesis Pet.”) ¶ 5; ECF No. 60 at 4.) At the time, A. Belesis was JTF’s
Chief Executive Officer; Castellano was JTF’s Chief Compliance Officer; and G.
Belesis, who is A. Belesis’ younger brother was JTF’s President. (G. Belesis Pet. ¶¶
6-9.) JTF assigned brokers Brian Roth and Peter Viglione and branch managers
Marc Greenberg and Michele Misiti to Dr. Kerr’s account. (G. Belesis Pet. ¶¶ 16, 21
n.2, 41(e)-(f).)
On or about January 3, 2013, Dr. Kerr initiated an arbitration before FINRA
pursuant to the compulsory securities industry arbitration rules.3 (Kerr Pet. ¶ 9.)
In essence, Kerr alleged that JTF’s brokers churned his account by executing a high
volume of purchases and sales in order to generate excessive commissions and fees.
1 Unless otherwise stated, all citations to entries on ECF in this Opinion & Order refer to the docket
in case no. 14-cv-9168. Any references to the docket in case no. 14-cv-8306 will be explicitly noted.
2

JTF went out of business in July 2013. (G. Belesis Pet. ¶ 4.)

The full caption for the arbitration, which was assigned FINRA Arbitration No. 13-00041, was: Dr.
Eubulus J. Kerr, III vs. John Thomas Financial, Brian Robert Roth, Peter Daniel Viglione,
Anastasios P. Belesis, George Belesis, Joseph Louis Castellano, Michele Ann Misiti, Marc Greenberg,
Gary Robert Putwin, Michael Robert Egan, Thomas George Pinou. (Kerr Pet. ¶ 9.) Before the
arbitration hearing, Dr. Kerr withdrew his claims against Michael Robert Egan, George Pinout, and
Gary Robert Putwin. (Kerr Pet. ¶ 10.) During the hearing, on or about June 19, 2014, Dr. Kerr
settled and withdrew his claims against Brian Roth, Peter Viglione, and Marc Greenberg. (Kerr Pet.
¶ 10.)
3

2

(See Kerr Pet. ex. A.) The arbitration hearing took place from June 16-18, 2014 in
New Orleans, Louisiana. (Kerr Pet. ¶ 12.) Respondents were called as witnesses at
the hearing. (ECF No. 61 at 10.) Castellano and G. Belesis appeared at the
hearing, were represented by counsel, and provided testimony on their own behalf.
(ECF No. 61 at 11.) However, G. Belesis was not in attendance at the start of the
evidentiary hearings. (ECF No. 44 ¶ 39.) A. Belesis chose not to appear, even
though he was named as a party and at the time was a registered investment
adviser and therefore required to appear. (ECF No. 61 at 10-11.) At the beginning
of the hearing, when neither A. Belesis nor G. Belesis was in attendance, one of the
arbitrators commented that their absence was “disrespectful, at the least.” (See
ECF Nos. 43 at 4; 44 ¶¶ 33, 38, 40; 70 ¶ 13.) When the arbitration panel later
inquired into A. Belesis’ absence, G. Belesis stated that it was because an aunt was
visiting him, and A. Belesis did not want to travel. (ECF No. 61 at 11.)
On August 5, 2014, FINRA issued a written award (the “Award”) setting
forth the Arbitration Panel’s decision. The Award states:
Respondents JTF, A. Belesis and G. Belesis are liable,
jointly and severally, for churning and failure to supervise
and shall pay to [Dr. Kerr] compensatory damages in the
amount of $600,000.00 plus interest accruing at the
Louisiana statutory rate from April 1, 2012, until the date
of payment of the Award.
Respondent Castellano is liable for churning and failure
to supervise and shall pay to [Dr. Kerr] compensatory
damages in the amount of $5,000.00 plus interest
accruing at the Louisiana statutory rate from April 1,
2012, until the date of payment of the award.

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Respondents JTF, A. Belesis and G. Belesis are liable,
jointly and severally, and shall pay to Claimant punitive
damages in the amount of $300,000.00 pursuant to
Alabama Code 1975 § 6-11-20.
Respondents JTF, A. Belesis and G. Belesis are liable,
jointly and severally, and shall pay to [Dr. Kerr] costs in
the amount of $14,732.96.
Respondents JTF, A. Belesis and G. Belesis are liable,
jointly and severally, and shall pay to [Dr. Kerr] the sum
of $375.00 representing reimbursement of the
nonrefundable portion of the claim filing fee previously
paid by Claimant to FINRA Dispute Resolution.
The awards against Respondents [above] shall be over
and above any sums received by [Dr. Kerr] through
settlements with other Respondents.
Respondents JTF, Roth, Viglione, A. Belesis, G. Belesis,
Castellano and Misiti’s request for expungement is denied
without prejudice because it was not pursued at the
evidentiary hearing.
[Dr. Kerr]’s claims against Respondent Misiti are denied,
with prejudice.
Any and all relief not specifically addressed herein,
including [Dr. Kerr’s] request for attorneys’ fees, is
denied.
(Kerr Pet. ¶ 13 & ex. A at 4-5.) To date, respondents have not remitted any
payment to Dr. Kerr in accordance with the Award. (Kerr Pet. ¶ 15.)
G. Belesis filed a petition for voluntary bankruptcy on September 12, 2014.
(Kerr Pet. ¶¶ 6, 14.) On October 16, 2014, A. Belesis and Castellano filed a petition
to vacate the arbitration award. (14-cv-8306 ECF No. 1.) On October 20, 2014, Dr.
Kerr commenced an action in the Supreme Court of the State of New York, New
York County, seeking to confirm the arbitration award against A. Belesis,
4

Castellano, and JTF. (ECF No. 1 ¶ 1.) A. Belesis, Castellano, and JTF removed Dr.
Kerr’s state court action to federal court on November 18, 2014. (ECF No. 1.)
At the time, A. Belesis, Castellano, and JTF were represented by Dan A.
Druz, who evidently failed to prosecute their case. On November 18, 2014 the Court
gave A. Belesis and Castellano notice of its intention to dismiss their petition to
vacate pursuant to Rule 41(b) of the Federal Rules of Civil Procedure. (14-cv-8306
ECF No. 5.) Since Druz took no action following that order, the Court dismissed A.
Belesis and Castellano’s petition to vacate on December 1, 2014. (14-cv-8306 ECF
No. 6.) They attempted to appeal. (See 14-cv-8306 ECF No. 9.)
On January 8, 2015, Judge Martin Glenn lifted the automatic stay in G.
Belesis’s bankruptcy, and Dr. Kerr filed an amended petition to confirm, which
named G. Belesis as an additional respondent. (Kerr Pet. ¶¶ 6, 14.) Dr. Kerr’s
amended petition seeks an order directing Castellano to pay Dr. Kerr $5,000 in
compensatory damages, and directing A. Belesis, G. Belesis, and JTF to pay Dr.
Kerr $600,000 in compensatory damages and $300,000 in punitive damages, plus
interest, costs, and fees. (Kerr Pet. at 5-6.)
On January 14, 2015, the Court held a joint telephonic conference to clarify
the relationship between and current status of the two actions. (ECF Nos. 14-15.)
At the conference, Druz agreed to withdraw the appeal and to withdraw as counsel
for A. Belesis and Castellano. (ECF No. 15.) G. Belesis represented himself pro se

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until February 12, 2015.4 (See ECF No. 33.) A. Belesis and Castellano represented
themselves pro se until March 9, 2015. (See ECF Nos. 37-38.)
As a result of the discussion at that conference, on January 15, 2015, the
Court consolidated the two actions. (ECF No. 15.) On March 10, 2015, A. Belesis
and Castellano filed a motion to vacate the arbitration award (ECF No. 47), and G.
Belesis did the same (ECF No. 44). Dr. Kerr filed briefs in opposition to
respondents’ motions on April 7, 2015. (ECF Nos. 60-61.) The motions became fully
briefed on April 21, 2015. (ECF Nos. 63, 65, 68.)
On May 1, 2015, this Court stayed these actions as against Castellano due to
his filing for bankruptcy in the United States District Court for the Eastern District
of New York. (ECF No. 24.) On May 26, 2015, Dr. Kerr filed a motion for sanctions
against A. Belesis and G. Belesis.5 (ECF No. 74.) Those respondents filed briefs in
opposition on June 9-10, 2015. (ECF Nos. 80, 82-83.) The motions became fully
briefed on June 16, 2015. (ECF Nos. 84-85.)
II.

LEGAL STANDARDS
A.

Judicial Review of Arbitration Award
1.

Policy favoring arbitration.

Courts generally aim not to interfere with arbitration proceedings, as doing
so tends to “frustrate the intent of the parties, and thwart the usefulness of
arbitration, making it ‘the commencement, not the end, of litigation.’” Duferco Int’l
G. Belesis’ counsel, Robert Marc Bursky, has not yet filed a notice of appearance, though he has
stated that he intends to do so. (See ECF No. 33.)
4

5 Although Dr. Kerr’s notice of motion states that he is seeking sanctions against A. Belesis, G.
Belesis, and Castellano, his opening brief states that he is not seeking sanctions against Castellano
in light of his ongoing bankruptcy proceedings. (See ECF No. 77 at 6.)

6

Steel Treading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir. 2003)
(quoting Burchell v. Marsh, 58 U.S. (17 How.) 344, 349 (1854)). Judicial review of
arbitration awards is available only in limited circumstances, as “[u]ndue judicial
intervention would inevitably judicialize the arbitration process, thus defeating the
objective of providing an alternative to judicial dispute resolution.” Tempo Shain
Corp. v. Bertek, Inc., 120 F.3d 16, 19 (2d Cir. 1997).
2.

Confirmation of arbitration award.

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., the role of a
district court in reviewing an arbitration award is ‘narrowly limited’ and
‘arbitration panel determinations are generally accorded great deference under the
[FAA].’” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Tr., 729
F.3d 99, 103 (2d Cir. 2013) (quoting Tempo Shain, 120 F.3d at 19). “This deference
promotes the ‘twin goals of arbitration, namely settling disputes efficiently and
avoiding long and expensive litigation.’” Id. (quoting Telenor Mobile Commc’ns AS
v. Storm LLC, 584 F.3d 396, 405 (2d Cir. 2009)); see also T Co Metals, LLC v.
Dempsey Pipe & Supply, Inc., 592 F.3d 329, 342 (2d Cir. 2010) (a court’s “power
under § 10(a)(4) is strictly limited ‘in order to facilitate the purpose underlying
arbitration: to provide parties with efficient dispute resolution, thereby obviating
the need for protracted litigation’” (quoting ReliaStar Life Ins. Co. of N.Y. v. EMC
Nat’l Life Co., 564 F.3d 81, 85 (2d Cir. 2009))). “Consequently, the burden of proof
necessary to avoid confirmation of an arbitration award is very high, and a district
court will enforce the award as long as ‘there is a barely colorable justification for
the outcome reached.’” Kolel, 729 F.3d at 103-04 (quoting Rich v. Spartis, 516 F.3d
7

75, 81 (2d Cir. 2008)). The confirmation of an arbitration award under FAA § 9 is
thus generally “a summary proceeding that merely makes what is already a final
arbitration award a judgment of the court.” D.H. Blair & Co. v. Gottdienier, 462
F.3d 95, 110 (2d Cir. 2006) (internal quotation marks and citation omitted).
3.

Vacatur of arbitration award.
a)

FAA § 10(a).

“[A] party seeking to vacate an arbitration award bears the burden of proof,
‘and the showing required to avoid confirmation is very high.’” A & G Coal Corp. v.
Integrity Coal Sales, Inc., 565 F. App’x 41, 42 (2d Cir. 2014) (summary order)
(quoting D.H. Blair, 462 F.3d at 110); see also Beljakovic v. Melohn Props., Inc., 542
F. App’x 72, 73 (2d Cir. 2013) (summary order) (“The showing required to avoid
summary confirmation of an arbitration award is high.” (quoting Willemijn
Houdstermaatschappij, BV v. Standard Microsys. Corp., 103 F.3d 9, 12 (2d Cir.
1997))). Vacatur is warranted only in four circumstances set forth in FAA § 10(a):
(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.
8

9 U.S.C. § 10(a)(1)-(4).
As to § 10(a)(2), “evident partiality” exists only if “a reasonable person would
have to conclude that an arbitrator was partial to one party to the arbitration.”
Scandinavian Reins. Co. v. St. Paul Fire & Marine Ins. Co., 668 F.3d 60, 64 (2d Cir.
2012) (quoting Applied Indus. Materials Corp. v. Ovalar Makine Tacaret Ve Sanayi,
A.S., 492 F.3d 132, 137 (2d Cir. 2007)). Although a party seeking vacatur must
prove evident partiality by showing something more than the mere appearance of
bias, proof of actual bias is not required, and partiality can be inferred from
objective facts inconsistent with impartiality. Kolel, 729 F.3d at 104. A showing of
evident partiality must be “direct and not speculative,” and evidence of corruption
“must be abundantly clear in order to vacate an award under § 10(a)(2).” Id. As to
§ 10(a)(3), an arbitration panel’s decision “to hear only one witness does not make
the arbitration fundamentally unfair,” because the panel is “not required to hear
more—or any—testimony to reach its determination.” Kolel, 729 F.3d at 107.
b)

Manifest disregard of the law.

In addition to these four grounds for vacatur, the Second Circuit has provided
a “‘judicial gloss’” on § 10(a) to provide that “an arbitration award may be set aside
if it was rendered in ‘manifest disregard of the law.’” A & G Coal, 565 F. App’x at 42
(quoting Schwartz v. Merrill Lynch & Co., 665 F.3d 444, 451 (2d Cir. 2011)). “[A]n
arbitration award should not be confirmed where it can be shown that the
arbitration panel acted in ‘manifest disregard of the law’ to such an extent that ‘(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,
9

explicit, and clearly applicable.’” Hardy v. Walsh Manning Sec., L.L.C., 341 F.3d
126, 129 (2d Cir. 2003) (quoting DiRussa v. Dean Witter Reynolds Inc., 121 F.3d
818, 821 (2d Cir. 1997)). A court’s review of an arbitral decision for manifest
disregard of the law is “severely limited, highly deferential, and confined to those
exceedingly rare instances of egregious impropriety.” Vaughn v. Leeds, Morelli &
Brown, P.C., 315 F. App’x 327, 330 (2d Cir. 2009) (summary order) (quoting StoltNielsen SA v. AnimalFeeds Int’l Corp., 548 F.3d 85, 91, 95 (2d Cir. 2008)).
c)

Public policy.

A court may refuse to enforce an arbitration award on the grounds that it
“violate[s] some explicit public policy that is well defined and dominant and is to be
ascertained by reference to the laws and legal precedents and not from general
considerations of supposed public interests.” DiRussa, 121 F.3d at 824-25 (quoting
United Paperworkers Int’l v. Misco, Inc., 484 U.S. 29, 43 (1987)); see also Schwartz,
665 F.3d at 452 (the deferential standard of review applied to arbitration awards “is
not applied ‘[i]f the contract as interpreted by [the arbitrator] violates some explicit
public policy’; in that circumstance the courts ‘are obligated to refrain from
enforcing it’” (alterations in original) (quoting W.R. Grace & Co. v. Local Union 759,
Int’l Union of the United Rubber, Cork, Linoleum & Plastic Workers of Am., 461
U.S. 757, 766 (1983))).
B.

Sanctions

“For sanctions issued pursuant to a motion by opposing counsel, courts have
long held that an attorney could be sanctioned for conduct that was objectively
unreasonable.” Muhammad v. Walmart Stores E., L.P., 732 F.3d 104, 108 (2d Cir.
10

2013). A district court may impose Rule 11 sanctions against a litigant who submits
papers “to harass, cause unnecessary delay, or needlessly increase the cost of
litigation.” Ginther v. Provident Life & Cas. Ins. Co., 350 F. App’x 494, 496 (2d Cir.
2009) (summary order) (quoting Fed. R. Civ. P. 11(b)(1)). A district court may also
impose Rule 11 sanctions “when claims are not supported by existing law, lack
evidentiary support, or are otherwise frivolous.” Ipcon Collections LLC v. Costco
Wholesale Corp., 698 F.3d 58, 63 (2d Cir. 2012) (citing Fed. R. Civ. P. 11(b)-(c);
Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 391 (2d Cir. 2003)).
III.

DISCUSSION
A.

Arbitration Award

Respondents’ motions to vacate and their opposition to Dr. Kerr’s motion to
confirm represent precisely the kind of second bite at the apple that the exacting
and narrow standard of review for arbitration awards is designed to prevent. An
arbitration award must be confirmed if there exists a colorable ground for doing so.
Here, the evidence and record of the arbitration hearing amply support the
confirmation of the arbitration award.
1.

FAA § 10(a).

None of the circumstances justifying vacatur under FAA § 10(a) are present
here. As to § 10(a)(1), there is no evidence here that the arbitration panel was
corrupt or engaged in fraud. Indeed, respondents do not argue that appear to argue
that § 10(a)(1) justifies vacatur here.
Respondents’ various arguments that vacatur is warranted under § 10(a)(2)
due to evident partiality or corruption in the arbitrators are meritless. Respondents
11

have not offered any “direct and not speculative” evidence of partiality or
corruption, let alone evidence that it is “abundantly clear” that vacatur under §
10(a)(2) is warranted. Kolel, 729 F.3d at 104. Indeed, respondents’ proffered
evidence of the arbitration panel’s bias is better understood as the arbitration
panel’s logical reaction to the weakness of respondents’ case. For instance,
respondents argue that vacatur under § 10(a)(2) is warranted because the
arbitration panel allowed, over respondents’ objections, hearsay in Dr. Kerr’s
amended statement of claim. However, contrary to respondents’ assertions, they
did not object on the record at the hearing to any section of the amended statement
of claim on hearsay grounds.
A stray comment at the start of the evidentiary hearing that the absence of
the Belesis brothers was “disrespectful, at the least” does not change this
determination. This comment does not reasonably suggest or imply that the
arbitration panel had prejudged any of the merits of the case against the Belesis
brothers, nor are there any other objective facts confirming the contentions of bias
such that the evidence of corruption is “abundantly clear.” Kolel, 729 F.3d at 104.
Respondents also argue that vacatur is warranted in light of the arbitration
panel’s decision to proceed with the hearing without receiving testimony from Roth
and Viglione. However, respondents had the opportunity to call Roth and Viglione
at the arbitration hearing, and explicitly chose not to (see Declaration of Brian J.
Neville, ECF Nos. 64 & 66 (“Neville Decl.”) ex. B), and they similarly never
requested that the arbitration panel execute an order of appearance for them—

12

effectively waiving this argument. In any event, the arbitration panel considered a
range of other evidence, which provided a more than colorable basis for the award of
damages against respondents. This evidence included examinations by
respondents’ counsel of G. Belesis, Castellano, Greenberg, and a suitability expert,
and respondents’ counsel rested without offering any further evidence or testimony
(see Neville Decl. ex. C), which undermines respondents’ argument that the
arbitrators were out to get them and would simply not allow them to make their
case. In sum, vacatur under § 10(a)(2) is not warranted here.
As to § 10(a)(3), respondents have not demonstrated that the arbitrators
refused to postpone the hearing or engaged in any other misbehavior that made the
arbitration fundamentally unfair. And finally, there is no basis here for vacatur
under § 10(a)(4), as the arbitration panel clearly executed a mutual, final, and
definite award, and respondents’ arguments that the arbitration panel exceeded its
powers lack merit.
2.

Manifest disregard of the law.

Respondents’ arguments that the arbitration award should be set aside
because the arbitration panel manifestly disregarded the law similarly lack merit.
Respondents argue that the arbitration panel misapplied the law regarding the
scienter requirement for a 10b-5 churning violation, control person liability,
respondeat superior, failure to supervise, and punitive damages. Respondents also
strenuously argue that they could not have been found liable for churning as a
matter of law because they themselves did not trade Dr. Kerr’s account, and G.

13

Belesis argues that he cannot be liable for churning under a failure to supervise
theory because he had no supervisory responsibilities.
However, respondents have not alleged or established that the arbitrator
knew of the relevant legal standards, appreciated that they controlled the outcome
of disputed issues, and nonetheless willfully flouted those standards and refused to
apply them correctly. Simply put, manifest disregard is not the same as erroneous
application—and respondents have only alleged the latter. In sum, vacatur of the
arbitration award due to manifest disregard of the law is not appropriate in this
case.
3.

Public policy.

Respondents argue that the Court should set aside the arbitration panel’s
award because it violates public policy. To the extent respondents’ public policy
argument is based on the arbitration panel’s alleged bias and alleged failure to
obtain certain evidence from certain witnesses, this argument lacks merit both for
the reasons stated above and because in making these arguments respondents point
to no “well defined and dominant” public policy justifying vacatur. DiRussa, 121
F.3d at 824-25. Indeed, here respondents’ arguments are based only on “general
considerations of supposed public interests,” Schwartz, 665 F.3d at 452, which the
Second Circuit has said do not justify vacating an arbitration award.
Respondents also argue that the Court should set aside the arbitration
panel’s award of punitive damages because it violates public policy. However, this
argument misses the mark because the arbitration panel’s award of punitive
damages was proper under the relevant law. Respondents were on notice of the
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punitive damages issue as such damages were requested by Dr. Kerr in his
pleading. The customer agreement between Dr. Kerr and JTF did not prohibit an
award of punitive damages, and it also specifies that Alabama law governs the
agreement. (See ECF No. 49 ex. C at 7 ¶ 18.) Alabama Code § 6-11-20 states that
punitive damages may be awarded “in a tort action where it is proven by clear and
convincing evidence that the defendant consciously or deliberately engaged in
oppression, fraud, wantonness, or malice with regard to the plaintiff.” Ala. Code. §
6-11-20. Dr. Kerr’s amended statement of claim asserted counts for common law
fraud, negligence, gross negligence, and negligent supervision (ECF No. 40 ex. B ¶¶
40-48), all of which are torts under Alabama law. E.g., Pub. Bldg. Auth. of City of
Huntsville v. St. Paul Fire & Marine Ins. Co., 80 So.3d 171, 175 (Ala. 2010)
(negligence is a tort claim); Trammer v. Bernstein, 596 So.2d 572, 576 (Ala. 1991)
(“A fraud action is a tort action.”); Lane v. Cent. Bank of Ala., N.A., 425 So.2d 1098,
1100 (Ala. 1983) (negligent supervision is a tort). And in awarding Dr. Kerr
punitive damages, the arbitration panel explicitly cited § 6-11-20. (Kerr Pet. ¶ 13.)
The arbitration panel therefore properly awarded Dr. Kerr punitive damages, and
public policy thus does not counsel toward vacating the arbitration award.
B.

Sanctions

Dr. Kerr argues that this Court should grant sanctions against A. Belesis and
G. Belesis because their moving papers contain false statements of facts and
frivolous arguments, and are designed to delay payment of their obligations to Dr.
Kerr. Dr. Kerr requests that the Court award him attorneys’ fees and expenses

15

incurred in opposing the Belesis brothers’ petitions to vacate the arbitration award
and in prosecuting the motion for sanctions.
Although nobody would accuse the Belesis brothers of having brought strong
motions to vacate, the circumstances here are not so sufficiently extraordinary as to
justify an award of sanctions against them, especially considering that both A.
Belesis and G. Belesis represented themselves pro se for a time, and A. Belesis
changed counsel after the attorney he had initially hired to litigate this matter
failed to prosecute the case. Further, respondents’ motions to vacate did not require
much duplication of effort on the part of counsel for Dr. Kerr, as respondents’
arguments in favor of their motions to vacate were essentially the same as their
arguments opposing Dr. Kerr’s motion to confirm, and much of the briefing
consisted of copy-and-paste jobs. The Court therefore declines to award sanctions
against A. Belesis and G. Belesis at this time, though the Court will not preclude
petitioner from renewing their motion should respondents act so as to frustrate or
delay the payment of their obligations to Dr. Kerr. Petitioner’s motion for sanctions
is DENIED.
IV.

CONCLUSION
For the foregoing reasons, Kerr’s petition to confirm the arbitration award is

GRANTED, respondents’ petitions to vacate the arbitration award are DENIED,
and Kerr’s motion for sanctions against A. Belesis and G. Belesis is DENIED. This
action is stayed against Castellano, and accordingly this Opinion & Order is not
effective as against him until the stay is lifted.

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The Clerk of Court is directed to close the motions at 14-cv-9168 ECF Nos.
44, 47, 74, 82.
SO ORDERED.
Dated:

New York, New York
July 16, 2015

KATHERINE B. FORREST
United States District Judge

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