ACP Investment Group, LLC et al v. Blake
OPINION AND ORDER: re: 12 MOTION to Confirm Arbitration Award filed by Dexter B. Blake, III, 20 MOTION to Vacate Arbitration (Cross-Motion to Vacate Portion of Arbitration Award) filed by ACP Investment Group, LLC, Nyppex Holdings, LLC. For the foregoing reasons, Blakes motion to confirm the arbitration award is GRANTED, ACPs cross-motion to vacate in part the arbitration award is DENIED, and the arbitration award is hereby CONFIRMED. The Clerk of Court is directed to close the motions at Docket Number 12 and Docket Number 20 and to close this case. SO ORDERED. (Signed by Judge J. Paul Oetken on 10/13/2016) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ACP INVESTMENT GROUP, LLC, and
NYPPEX HOLDINGS, LLC,
DEXTER B. BLAKE, III,
OPINION AND ORDER
J. PAUL OETKEN, District Judge:
Defendant, Dexter B. Blake, III, brings this action under the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1 et seq., seeking confirmation of an arbitration award against Plaintiffs
ACP Investment Group, LLC, and NYPPEX Holdings, LLC (together, “ACP”). ACP opposes
Blake’s motion and cross-moves to vacate in part the arbitrator’s decision. For the reasons that
follow, Blake’s motion is granted and ACP’s cross-motion is denied.
This action arises from an arbitration initiated by Blake against ACP in September of
2015, after he resigned as ACP’s Chief Operating Officer. (Dkt. No. 23 ¶ 3.) The arbitration
was conducted pursuant to the 2014 Employment Agreement entered into by ACP and Blake.
(Dkt. No. 16 at 1.) The proceeding concerned the interpretation of that Agreement in the wake
of Blake’s resignation. (Id.) The 2014 Employment Agreement provided, in a section titled
“Dispute Resolution”: “Any and all disputes, controversies or claims arising out of or relating to
this Agreement, or the breach, termination or invalidity thereof, shall be finally and exclusively
settled by arbitration conducted by the American Arbitration Association.” (Dkt. No. 15, Ex. D
In an arbitration award issued on May 19, 2016, the Arbitrator, Retired Magistrate Judge
Carol E. Heckman, addressed a variety of issues relating to the employment relationship between
Blake and ACP. Addressing a provision of the 2014 Employment Agreement that required
forfeiture of only unvested share participations upon Blake’s resignation (Dkt. No. 15, Ex. D at
4), the Arbitrator determined that of Blake’s approximately three million share participations
accrued over his tenure with ACP, just over two million were vested (Dkt. No. 15, Ex. E at 12).
The Arbitrator, however, refused to value these vested shares or order their disposition, as she
found that part of the dispute “not within the purview of the Arbitration clause in the 2014
Agreement.” (Dkt. No. 15, Ex. E at 13.)
After the Arbitrator issued the Award, ACP sought clarification in a letter, asking the
Arbitrator whether the portions of the Award addressing the vesting status of Blake’s shares were
“non-binding dicta,” and stating that “the parties’ dispute over whether Blake’s [shares] vested
. . . [was] outside the jurisdiction of the American Arbitration Association.” (Dkt. No. 15, Ex. F
at 2.) The Arbitrator denied ACP’s request, noting that the 2014 Employment Contract provided
for forfeiture only of unvested shares, that she had concluded that certain of these shares were
vested and certain were not, and that the valuation and disposition of the shares she found to
have vested exceeded the scope of her authority. (Dkt. No. 15, Ex. H.)
ACP initiated the instant action in this Court on November 30, 2015, seeking a temporary
restraining order, which this Court denied. (Dkt. No. 1.) Blake now moves to confirm the
arbitration award in full. (Dkt. No. 16.) ACP cross-moves for partial vacatur, challenging only
the portion of the Award determining which of Blake’s shares had vested. (Dkt. No. 21 at 2.)
A party challenging an arbitrator’s decision faces a mountain range of steep burdens.
The FAA permits vacatur of an arbitration award only under four narrow circumstances: “(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 Second Circuit has “‘consistently accorded the narrowest of readings’ to this
provision of law, in order to facilitate the purpose underlying arbitration: to provide parties with
efficient dispute resolution, thereby obviating the need for protracted litigation.” ReliaStar Life
Ins. Co. of N.Y. v. EMC Nat’l Life Co., 564 F.3d 81, 85 (2d Cir. 2009) (internal citation omitted)
(quoting Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255, 262 (2d Cir.
2003)); cf. TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Sec., Inc., 953 A.2d 726, 732 (Del.
Ch. 2008) (“In fact, ‘[a] court’s review of an arbitration award is one of the narrowest standards
of judicial review in all of American jurisprudence.’” (alteration in original) (quoting Way
Bakery v. Truck Drivers, Local No. 164, 363 F.3d 590, 593 (6th Cir. 2004))).
In considering a challenge to an arbitration award, “‘[t]he principal question for the
reviewing court is whether the arbitrator’s award draws its essence’ from the agreement to
arbitrate, ‘since the arbitrator is not free merely to dispense his own brand of industrial justice.’”
ReliaStar, 564 F.3d at 85 (alteration in original) (quoting 187 Concourse Assocs. v. Fishman,
399 F.3d 524, 527 (2d Cir. 2005)). Where the parties have agreed to submit an issue for
arbitration, courts will “uphold a challenged award as long as the arbitrator offers ‘a barely
colorable justification for the outcome reached.’” Id. (quoting Banco de Seguros, 344 F.3d at
260). “In other words, ‘as long as the arbitrator is even arguably construing or applying the
contract and acting within the scope of his authority,’ a court’s conviction that the arbitrator has
‘committed serious error’ in resolving the disputed issue ‘does not suffice to overturn his
decision.’” Id. at 86 (quoting United Paperworkers Int’l Union AFL-CIO v. Misco, Inc., 484
U.S. 29, 38 (1987)).
ACP makes several arguments in favor of vacating the portion of the Arbitrator’s award
determining how many of Blake’s share participations had vested. First, ACP claims that the
Arbitrator exceeded her powers because the issue of vesting was not within the scope of the
arbitration. Second, ACP claims that the Arbitrator’s decision on the vesting issue was rendered
in disregard of the terms of the Employment Agreement. Finally, ACP claims that the award
should be vacated due to procedural irregularities in the arbitration process. But ACP is fighting
an uphill battle on downhill skis.
ACP first argues that the vesting issue was not properly before the Arbitrator because it
did not derive its essence from the 2014 Employment Agreement. However, the Second Circuit
has made clear that it is only “[w]hen it is clear that the arbitrator ‘must have based his award on
some body of thought, or feeling, or policy, or law that is outside the contract (and not
incorporated in it by reference, either . . .)’” that the determination should be set aside. In re
Marine Pollution Serv., Inc., 857 F.2d 91, 94 (2d Cir. 1988) (emphasis in original) (quoting Ethyl
Corp. v. United Steelworkers, 768 F.2d 180, 184-85 (7th Cir. 1985) (Posner, J.)).
The arbitration clause in the 2014 Employment Agreement is broadly worded. It
provides for jurisdiction over “[a]ny and all disputes . . . arising out of or relating to this
Agreement.” (Dkt. No. 15, Ex. D at 5.) The Agreement also addresses vesting in several places.
It provides that upon resignation Blake shall “forfeit any and all rights in, and entitlement to . . .
unvested rights, grants and awards . . . in connection with long term incentives including share
participations . . . (in general, as described in the agreements provided to Employee).” (Id. at 45.) It also confirms that “[v]esting provisions shall be described either in the award agreement,
the Company’s long term performance incentive plan or its amended and restated operating
agreements.” (Id. at 3.) These provisions bring the vesting issue within the scope of the
Agreement’s arbitration clause.
ACP argues that the fact that the 2014 Employment Agreement mentions extrinsic
agreements about vesting puts the vesting issue wholly outside the scope of this Agreement.
(Dkt. No. 21 at 16-17.) But the opposite is true. These references make clear that the vesting
issue arose from (or at least relates to) the 2014 Employment Agreement so as to bring the
vesting issue within the Agreement’s capacious arbitration clause. Their mention, in fact, has the
effect of incorporating these extrinsic documents into the Employment Agreement by reference.
There is also evidence that the parties submitted the vesting issue to the Arbitrator—including
testimony at the arbitration hearing by ACP’s Treasurer Robert Zimmel on the vesting status of
Blake’s shares, and the admission of documentary evidence regarding the vesting status of the
shares as well as the terms and conditions of Blake’s various incentive plans. (Dkt. No. 14, Ex.
C at 744-46.)
Based on these considerations, the most natural conclusion is that the vesting question
was squarely within the scope of the Arbitrator’s authority. But at the very least, it is certainly
not clear that the Arbitrator must have derived the award from something neither within nor
incorporated into the Employment Agreement (the standard required to disrupt the Arbitrator’s
decision on this issue). See In re Marine Pollution Serv., Inc., 857 F.2d at 94. 1
ACP next argues that even if the Arbitrator had jurisdiction over the vesting issue, she
imperfectly executed her powers by rendering a decision in manifest disregard of the
Employment Agreement. ACP faults the Arbitrator for relying on unreliable evidence, such as a
draft 1999 Employment Agreement and a 2005 Equity Participation Statement, and essentially
asks this Court to reconsider the Arbitrator’s decisions to rely on these documents and to reassess
the conclusions she drew from all of the evidence presented to her. (Dkt. No. 21 at 16-17.)
But this brand of second-guessing runs directly counter to “the ‘great deference’ which
must be paid to arbitral panels by federal courts.” Wallace, 378 F.3d at 193 (quoting Duferco
Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003)). “To the
extent that a federal court may look upon the evidentiary record of an arbitration proceeding at
all, it may do so only for the purpose of discerning whether a colorable basis exists for the
panel’s award so as to assure that the award cannot be said to be the result of the panel’s
manifest disregard of the law.” Id. “[W]hatever the weight of the evidence considered as a
whole, ‘[i]f a ground for the arbitrator’s decision can be inferred from the facts of the case, the
ACP makes much of the Arbitrator’s conclusion that the valuation and disposition
of the vested shares was outside the scope of her authority, whereas she deemed the vesting
status of the shares within her authority. (Dkt. No. 15, Ex. E at 12-13.) But even were the Court
to conclude that the Arbitrator’s conclusions about the reach of her authority are inconsistent,
such a finding would still not provide grounds for vacatur. See Wallace v. Buttar, 378 F.3d 182,
190 (2d Cir. 2004) (“Internal inconsistencies in the [arbitrator’s] opinion are not grounds to
vacate the award notwithstanding the [movant's] plausible argument that the arbitrator’s decision
was misguided or our own concerns regarding the arbitrator’s conclusion.” (alterations in
original) (quoting St. Mary Home, Inc. v. Service Emps. Int’l Union, Dist. 1199, 116 F.3d 41, 4445 (2d Cir. 1997))).
award should be confirmed.’” Id. (second alteration in original) (quoting Fahnestock & Co., Inc.
v. Waltman, 935 F.2d 512, 516 (2d Cir.1991) (internal quotation marks and citation omitted)).
Here, the Arbitrator justified her conclusion regarding the vesting status of Blake’s shares
based on her interpretation of an “Equity Participation Statement.” In her Award, she wrote:
“Blake’s equity participation as of October 11, 2005 identifies his allocated share participations
as being 3,061,680. Of those allocated, those available to sell are listed as 2,092,896. I agree
with Claimant’s view that the only reasonable construction of the 2005 Statement is that shares
available to sell are vested.” (Dkt. No. 15, Ex. E at 12.) She arrived at this decision after
considering arguments on this issue at the arbitration hearing and weighing the 2014
Employment Agreement and numerous other documents relevant to its interpretation. She
subsequently confirmed her conclusion on this question following additional, targeted briefing.
The record in this case thus provides more than a colorable basis for the Arbitrator’s decision,
and ACP has failed to show any “egregious . . . misapplication of legal principles” sufficient to
suggest manifest disregard of the governing law. Wallace, 378 F.3d at 190.
Finally, ACP seeks vacatur on the ground that procedural irregularity in the arbitration
process denied ACP fundamental fairness and due process. In particular, ACP cites the
Arbitrator’s refusal to grant postponements or permit amendment of the exhibit list, as well as
her lack of clarity on the intended scope of her decision, to suggest that the Award “was procured
by fraud or other undue means.” (Dkt. No. 21 at 24.)
While the FAA permits vacatur where an arbitration award was obtained through fraud or
undue means, 9 U.S.C. § 10(a)(1), or where the arbitrator’s procedural misconduct prejudices a
party, id. § 10(a)(3), the burden here is yet another steep slope for ACP to climb. To justify
vacatur on the grounds of fraud or undue means, it must be “abundantly clear” that the award
was procured through improper means. Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL
Irrevocable Trust, 729 F.3d 99, 105 (2d Cir. 2013) (quoting Karppinen v. Karl Kiefer Mach. Co.,
187 F.2d 32, 34 (2d Cir. 1951)). As regards procedural irregularities, arbitrators “need not
follow all the niceties observed by the federal courts.” Id. (quoting Tempo Shain Corp. v. Bertek,
Inc., 120 F.3d 16, 20 (2d Cir. 1997)). Rather, “misconduct occurs under this provision only
where there is a denial of ‘fundamental fairness.’” Id. (quoting Tempo Shain, 120 F.3d at 20).
ACP has failed to make it abundantly clear that the arbitration award was procured
through improper means or through a process that denied it fundamental fairness. The bulk of
ACP’s claim on this issue results from its eleventh-hour substitution of counsel in the weeks
before the arbitration hearing and the Arbitrator’s subsequent refusal to allow new counsel
additional time to prepare or the opportunity to introduce additional exhibits or amended
counterclaims. (Dkt. No. 23 at 5-9.) ACP’s suggestion that it was given insufficient notice that
the issue of vesting would be raised in the arbitration is belied by the evidence in the record,
including Blake’s express mention in the arbitration complaint of whether he must “forfeit stock
awarded to him under a stock incentive plan because he resigned” and his request for “an
updated statement of his equity participation” (Dkt. No. 23, Ex. A ¶ 2, 62), and the Arbitrator’s
comment at the hearing that the issue of how many shares Blake had was “part of the claim
indirectly” (Dkt. No. 23 at 12). In any event, ACP had the opportunity to specifically challenge
this portion of the Arbitrator’s ruling with additional letter briefing. (Dkt. No. 15, Ex. F.)
Under these circumstances, the Court cannot conclude that the Arbitrator’s actions were
improper or that they denied ACP fundamental fairness. The Court must therefore refrain from
retrospectively micromanaging the Arbitrator’s capable handling of the issues properly before
For the foregoing reasons, Blake’s motion to confirm the arbitration award is
GRANTED, ACP’s cross-motion to vacate in part the arbitration award is DENIED, and the
arbitration award is hereby CONFIRMED.
The Clerk of Court is directed to close the motions at Docket Number 12 and Docket
Number 20 and to close this case.
Dated: October 13, 2016
New York, New York
J. PAUL OETKEN
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?