Anglim v. The Vertical Group
OPINION AND ORDER: For the reasons set forth above, the Petition is GRANTED IN PART and DENIED IN PART, and the Award is CONFIRMED in full. The Clerk of Court is directed to terminate all pending motions and close this case. (Signed by Judge Katherine Polk Failla on 2/10/2017) (cla)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
THE VERTICAL GROUP,
DOC #: _________________
February 10, 2017
DATE FILED: ______________
16 Civ. 3269 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
Petitioner James Anglim, a former penny-stock trader for Respondent
The Vertical Group (“Vertical”), seeks to confirm, vacate, and modify an
arbitration award (the “Award”). In the underlying arbitration (the
“Arbitration”), Petitioner alleged that Respondent unlawfully withheld a portion
of his wages in a reserve fund (the “Reserve”), then failed to return that money
when Petitioner left Respondent’s employ. Petitioner sought recovery under
Sections 191 and 193 of the New York Labor Law (the “NYLL”), N.Y. Lab. Law
§§ 191 and 193, as well as equitable theories of quantum meruit, unjust
enrichment, and restitution.
The Award, issued by a three-member Financial Industry Regulatory
Authority (“FINRA”) panel (the “Panel”) in February 2016, has two parts.
Section 1 granted Petitioner $50,000 in compensatory damages. The parties do
not quibble over that figure, and Petitioner seeks to confirm this part of the
Award under Section 9 of the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 9.
Petitioner insists, however, that Section 2 of the Award — which denied him all
other relief — is erroneous, because he was entitled to attorney’s fees under
Section 198 of the NYLL, N.Y. Lab. Law § 198. In consequence, Petitioner
urges the Court to (i) vacate Section 2 of the Award under Section 10 of the
FAA, 9 U.S.C. § 10, then (ii) modify it under Section 11 of the FAA, 9 U.S.C.
§ 11, in order to award Petitioner attorney’s fees. Respondent retorts that
Petitioner’s request for vacatur is untimely and, in any event, meritless.
Respondent has the better arguments. Petitioner’s application to vacate
the Award is untimely under Section 12 of the FAA, 9 U.S.C. § 12. And it falls
short of the high bar Petitioner must meet in order to demonstrate that vacatur
is warranted. Thus, for the reasons set forth below, Petitioner’s petition (the
“Petition”) is granted in part and denied in part, and the Award is confirmed in
Petitioner’s argument for vacating Section 2 of the Award rests on the
following syllogism: Section 198 of the NYLL mandates that an employee who
This Opinion draws on facts from the Petition (“Pet.” (Dkt. #1-2)); the memorandum
Petitioner submitted in support of his Petition (“Pet’r Mem.” (Dkt. #1-3)); the Declaration
of Sandra P. Lahens in support of the Petition (“Lahens Decl.” (Dkt. #1-5)); the
Affirmation of Sandra P. Lahens supporting Petitioner’s motion for summary judgment
(“Lahens Aff.” (Dkt. #15)) and the exhibits attached thereto (“Lahens Aff., Ex. [ ]”);
Petitioner’s Statement of Material Facts submitted pursuant to Local Civil Rule 56.1
(“Pet’r 56.1” (Dkt. #17)); the Affirmation of John Murphy in support of Respondent’s
motion for summary judgment (“Murphy Aff.” (Dkt. #20)) and the exhibits attached
thereto (“Murphy Aff., Ex. [ ]”); and Respondent’s response to Petitioner’s Local Civil
Rule 56.1 Statement of Material Facts (“Resp’t 56.1” (Dkt. #24)). On July 29, 2016,
Respondent mailed to the Court a letter enclosing a CD with transcripts from three days
of the Arbitration. The Court will cite those transcripts as: “1/14/16 Tr.”; “1/15/16
Tr.”; and “1/21/16 Tr.” Finally, for ease of reference, the Court refers to Petitioner’s
opening brief as “Pet’r Br.,” to Respondent’s opposition brief as “Resp’t Opp.,” and to
Petitioner’s reply as “Pet’r Reply.”
prevails on an NYLL claim “shall [be] allow[ed] … to recover … [his] reasonable
attorney’s fees.” N.Y. Lab. Law § 198(1-a). In Section 1 of the Award, Petitioner
insists, the Panel concluded that Respondent violated the NYLL, and
accordingly awarded Petitioner damages, viz., $50,000 from the Reserve. Thus,
Petitioner argues, the Panel was required to award Petitioner attorney’s fees,
and by refusing to do so the Panel “manifestly disregarded” Section 198 of the
This introduction makes plain that a key aspect of this case is
understanding Petitioner’s employment with Respondent in light of the NYLL’s
statutory framework. To this end, the Court will begin by reviewing the terms
and nature of Petitioner’s work and compensation with an eye towards
Petitioner’s Reserve. Then, the Court will consider the arguments the parties
pressed during the Arbitration. And consistent with its obligation to treat the
Petition “as akin to a motion for summary judgment,” Salzman v. KCD Fin.,
Inc., No. 11 Civ. 5865 (DLC), 2011 WL 6778499, at *2-3 (S.D.N.Y. Dec. 21,
2011) (internal quotation mark omitted) (quoting City of N.Y. v. Mickalis Pawn
Shop, LLC, 645 F.3d 114, 136 (2d Cir. 2011)), the Court will note where the
parties dispute material facts.
Petitioner’s Employment with Respondent
Petitioner worked “as an institutional equities trader and salesman” for
Respondent, which is based in New York City, between 2005 and 2013. (Pet’r
Mem. 5; Pet’r Rule 56.1 ¶¶ 1-2). Throughout this period, Petitioner was
compensated on a commissions-only basis. (Pet’r 56.1 ¶ 3). He was
compensated well: During Petitioner’s final year of employment, 2013,
Respondent paid him $1,458,211. (Murphy Aff., Ex. Y).
Petitioner never had a written employment agreement with Respondent.
(See, e.g., 1/14/16 Tr. 40). Indeed, the absence of written documentation
would seem to be a hallmark of the parties’ relationship. The parties did not
reach a written agreement when, for example, Petitioner decided to work
remotely from Las Vegas, Nevada. (1/15/16 Tr. 77). Nor did they write up
agreements when Petitioner’s commissions percentage increased from 35
percent to 45 percent, or from 45 percent to 50 percent. (Id. at 76, 93). And
most critically for the purposes of the instant motion, there exists no written
agreement explaining clearly how Respondent structured Petitioner’s Reserve.
(See id. at 55-56; Pet. 2-3).
Respondent opened Petitioner’s Reserve in 2007, following an inquiry
from the Securities and Exchange Commission and the Department of Justice
into accounts for which Petitioner was the registered representative. (1/14/16
Tr. 165-68; 1/15/16 Tr. 32). Petitioner agreed to “share in the legal fees” for
this investigation. (1/15/16 Tr. 33). But the purposes for which Respondent
could use the funds in the Reserve, and the source from which Respondent
deducted those funds, are matters the parties debate hotly.
Petitioner’s take on the Reserve is as follows: Starting in 2007,
Respondent withheld money “from Petitioner’s wages” in order to build up the
Reserve, which was intended to be used “to cover [Petitioner’s] trading losses.”
(Pet. 2; Pet’r 56.1 ¶ 6). Put another way: Respondent deducted money from
Petitioner’s commissions and kept it in the Reserve. (Pet. 2). The size of the
Reserve increased substantially throughout Petitioner’s employment with
Respondent — from $5,000 in 2007 to $150,000 by the time Petitioner left the
firm. (Murphy Aff., Ex. F, L). There are no written agreements memorializing
these increases to Petitioner’s Reserve. (1/15/16 Tr. 75-76). However, in May
2010, Respondent’s then-Chief Executive Officer (“CEO”) Robert Schaffer sent a
letter to Petitioner confirming that Respondent had retained “cash reserves
against [Petitioner’s] trading account,” and that Respondent had withheld this
money “from [Petitioner’s] net payout.” (Murphy Aff., Ex. N).
Respondent offers a different interpretation of the Reserve. The money in
the Reserve, Respondent maintains, was not withheld from Petitioner’s wages.
(Resp’t 56.1 ¶ 6). Rather, Respondent posits that this money was withheld
from the total revenue Petitioner generated for Respondent, from which
Respondent deducted “the costs and expenses associated with [Petitioner’s]
trading activities.” (Resp’t Opp. 2-3). Respondent thus argues that Petitioner’s
commissions — i.e., his wages — were calculated after Respondent made these
deductions, including the Reserve deductions. (Resp’t 56.1 ¶ 3).
Although Petitioner had no employment contract with Respondent, he
did receive monthly profit-and-loss statements that reference the Reserve.
Petitioner’s January 2013 statement, for example, indicates that in that month
Petitioner’s “Net Pay” was $248,000. (Murphy Aff., Ex. L). Respondent arrived
at that figure by first calculating Petitioner’s “Net Payout,” which was the sum
of Petitioner’s gross profit and loss, multiplied by the percentage of
commissions he drew from that profit and loss, less certain expenses and sales
credits. (Id.). From Petitioner’s Net Payout — which for January 2013 was
$260,573 — Respondent deducted additional expenses, such as Petitioner’s
monthly dental- and medical-insurance premiums. (Id.). Included in this
latter category of “below-the-line” deductions is the Reserve: In January 2013,
Respondent made no deductions to bolster Petitioner’s Reserve, which at that
point held $150,000. (Id.). When Petitioner left Respondent in October 2013,
the Reserve’s balance stood at $150,000. (Pet’r 56.1 ¶¶ 10-11).
On December 12, 2013, Petitioner filed with FINRA a Statement of Claim.
(Murphy Aff., Ex. A). Petitioner alleged that Respondent had “unilaterally
deducted from his earned wages and/or commissions to fund” the Reserve. (Id.
at 1). Petitioner contended that those deductions, and Respondent’s failure to
return the funds in the Reserve to Petitioner, violated Sections 191 and 193 of
the NYLL. (Id. at 4-7). And Petitioner argued that under Section 198 of the
NYLL, he was entitled to recover his attorney’s fees. (Id. at 7). In addition to
pursuing relief under the NYLL, Petitioner brought claims for “unjust
enrichment and/or restitution” and quantum meruit. (Id. at 8-9). 2
In its Answer to Petitioner’s Statement of Claim, Respondent raised several
counterclaims. (Pet’r 56.1 ¶ 15). Respondent withdrew or settled all of these
counterclaims before the Arbitration concluded (id.; Murphy Aff., Ex. C), and
accordingly the Court will not address them further.
On the eve of the Arbitration, Petitioner appeared to be focusing more
intently on his NYLL claims than his claims for equitable relief. His January 6,
2016 Amended Pre-Hearing Brief did not raise unjust enrichment, restitution,
or quantum meruit claims. (Lahens Aff., Ex. O). But Petitioner also clarified
that that brief was “not meant to be an exhaustive recitation of the … legal
precepts which may be applicable to the issues in [his] case.” (Id. at 1).
The Arbitration began the week of January 11, 2016. (Resp’t 56.1 ¶ 16).
During his opening statement and closing argument, Petitioner gave to the
Panel printed copies of the NYLL provisions that he believed Respondent had
violated, as well as copies of NYLL Section 198. (Id. at ¶ 17).
One cornerstone of Respondent’s case was that the Reserve did not
consist of deductions taken from Petitioner’s wages. To this end, on
January 15, 2016, Respondent moved for a partial directed verdict dismissing
Petitioner’s NYLL claims. (1/15/16 Tr. 126-28; Resp’t Opp. 16 n.6).
Respondent argued that Petitioner’s claim for compensatory damages boiled
down to his belief that Respondent had breached an agreement between the
parties. (1/15/16 Tr. 127-28). But that argument, Respondent contended,
was substantively distinct from a claim that Respondent had violated the NYLL.
(Id.). One of the three members of the Panel couched Respondent’s oral motion
as an argument “that the labor law [did] not apply.” (Id. at 128). The Panel
denied Respondent’s motion, but agreed to “take it into consideration at the
end” of the Arbitration. (Id. at 129).
One data point about the Reserve merits attention here. On April 26,
2010, Respondent received from FINRA a letter seeking, among other things,
information about Respondent’s supervisory procedures. (Murphy Aff., Ex. P).
Among the categories of information FINRA sought was “[a] list of the
individual[s] who supervise[d] [Respondent] and a list of [Respondent’s] clients.”
(Id.). That investigation concluded in December 2013, when Respondent
executed a “Letter of Acceptance, Waiver and Consent” in which it agreed to
pay FINRA a $400,000 fine. (Id. at Ex. V).
During the Arbitration, Schaffer and Thomas Martin (who at that point
was Respondent’s CEO) testified that when Petitioner left the firm, they had
both expected that Petitioner “would contribute $100,000” of the money in his
Reserve to pay this fine. (1/14/16 Tr. 30-31, 48-49, 197). Here again, there is
no written agreement memorializing Respondent’s understanding that
Petitioner would make this contribution. (Id. at 197-98). Rather, Martin
testified that Petitioner and Respondent had reached an oral agreement
pursuant to which Petitioner would pay a proportional share “of what the
ultimate fine was.” (Id. at 198). Petitioner, in contrast, does not believe that he
agreed to contribute towards the fine. (1/15/16 Tr. 38-39).
The parties’ closing arguments to the FINRA Panel on January 21, 2016,
tracked many of the arguments they have raised before this Court. Petitioner
insisted that he had stated a claim for relief under the NYLL. (1/21/16 Tr. 6971). And Section 198 of the NYLL, Petitioner claimed, required the Panel to
award Petitioner both attorney’s fees and liquidated damages. (Id. at 126). All
told, Petitioner requested $545,014, a figure that included compensatory
damages, interest, liquidated damages, and $146,292 in attorney’s fees and
costs. (Lahens Aff., Ex. P). Respondent countered that its deductions to build
the Reserve did not violate the NYLL, and that the statute was thus flatly
inapplicable. (1/21/16 Tr. 26-35).
The Panel issued the Award on either February 2 or February 3,
2016 — a discrepancy the parties dispute, and which the Court will explore
more fully infra. (Compare Pet’r 56.1 ¶ 16 (February 3), with Resp’t 56.1 ¶ 16
(February 2)). A section of the Award entitled “Case Summary” provides that
Petitioner had sought recovery under the NYLL and theories of “unjust
enrichment and/or restitution, and quantum meruit.” (Murphy Aff., Ex. C). As
for damages, Section 1 of the Award ordered Respondent to pay Petitioner
“compensatory damages in the amount of $50,000.00 plus interest at the rate
of 9% per annum from December 12, 2013 until January 15, 2016.” (Id.).
Section 1 does not disclose the grounds on which the Panel awarded this relief.
Indeed, at no point in the Award did the Panel explain the legal basis for its
$50,000 damages calculation. Section 2 of the Award added: “Any and all
relief not specifically addressed herein is denied.” (Id.).
Petitioner filed his Petition to confirm, vacate, and modify the Award on
May 2, 2016. (Dkt. #1). On May 3, Petitioner served the Petition on the
attorney who had represented Respondent during the Arbitration — who by
that date was no longer Respondent’s counsel. (Dkt. #6; see Murphy Aff.,
On May 11, 2016, this Court issued an Order directing Petitioner to
“move for confirmation, vacation, or modification of the [Award] in the form of a
motion for summary judgment.” (Dkt. #7). Petitioner filed his motion for
summary judgment and supporting papers on May 23, 2016. (Dkt. #9). 3
Respondent filed its opposition papers on July 15, 2016 (Dkt. #20-24), and
briefing concluded when Petitioner submitted his reply on July 28, 2016
Two principles guide the Court’s analysis in this Opinion. The first is
“that district courts should … treat a petitioner’s application to confirm or
vacate an arbitral award as ‘akin to a motion for summary judgment.’”
Mickalis Pawn Shop, LLC, 645 F.3d at 136 (quoting D.H. Blair & Co. v.
Gottdiener, 462 F.3d 95, 109 (2d Cir. 2006)). The second is that this Court
owes “strong deference … [to] arbitral awards and the arbitral process, and has
limited its review of arbitration awards in obeisance to that process.” N.Y. City
Dist. Council of Carpenters v. WJL Equities Corp., No. 15 Civ. 4560 (KPF), 2015
It appears that Respondent’s May 23, 2016 submission did not comply with this Court’s
procedures for electronic filing. (See Dkt. #9). Respondent also encountered docketing
problems when he attempted to remediate this error by re-filing his summary-judgment
papers on May 26, 2016. (Dkt. #11, 12). Respondent’s June 2, 2016 submissions,
however, appear to have been filed without incident, and in this Opinion the Court has
cited the documents that Respondent filed on that date.
WL 7571835, at *2 (S.D.N.Y. Nov. 24, 2015) (internal quotation mark omitted)
(quoting Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133, 138
(2d Cir. 2007)). The Court considers each principle in turn.
Motions for Summary Judgment
A “court shall grant summary judgment if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). To discharge this burden,
a summary-judgment movant “bears the initial responsibility of …
demonstrat[ing] the absence of a genuine issue of material fact.” Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986). “A ‘material’ fact is one capable of
influencing the case’s outcome under governing substantive law, and a
‘genuine’ dispute is one as to which the evidence would permit a reasonable
juror to find for the party opposing the motion.” Figueroa v. Mazza, 825 F.3d
89, 98 (2d Cir. 2016) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986)). If a movant makes this showing, the non-movant “must ‘set forth
specific facts demonstrating that there is a genuine issue for trial,’ and cannot
‘merely rest on the allegations or denials’ contained in the pleadings.” Trustees
for the Mason Tenders Dist. Council Welfare Fund, Pension Fund, Annuity Fund,
and Training Program Fund and Bonanza v. YES Restoration, No. 14 Civ. 8536
(KPF), 2015 WL 3822764, at *3 (S.D.N.Y. June 19, 2015) (quoting Wright v.
Goord, 554 F.3d 255, 266 (2d Cir. 2009)).
“A court reviewing a motion for summary judgment must ‘construe the
facts in the light most favorable to the non-moving party and must resolve all
ambiguities and draw all reasonable inferences against the movant.’” Beyer v.
Cty. of Nassau, 524 F.3d 160, 163 (2d Cir. 2008) (quoting Dallas Aerospace,
Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003)).
Judicial Review of Arbitration Awards
“When reviewing an arbitration award, ‘courts must grant an arbitration
panel’s decision great deference.’” Trina Solar US, Inc. v. JRC-Servs. LLC, No.
16 Civ. 2869 (VEC), 2017 WL 187476, at *4 (S.D.N.Y. Jan. 17, 2017) (quoting
Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004)). That deference
circumscribes narrowly this Court’s ability to disturb an arbitration award.
“Confirmation of an arbitration award is generally ‘a summary
proceeding that merely makes what is already a final arbitration award a
judgment of the court, and the court must grant the award unless the award is
vacated, modified, or corrected.’” YES Restoration, 2015 WL 3822764, at *3
(quoting D.H. Blair, 462 F.3d at 110). “Courts in this [C]ircuit will … vacate an
arbitration award only upon finding a violation of one of the four statutory
bases” that Section 10 of the FAA lists “or, more rarely, if [the court] find[s] a
panel has acted in manifest disregard of the law.” Hagan v. Katz Commc’ns,
Inc., No. 12 Civ. 5987 (RA), 2016 WL 4147194, at *3 (S.D.N.Y. Aug. 3, 2016)
(internal quotation marks omitted) (quoting Porzig, 497 F.3d at 139).
The construct of “manifest disregard of the law” is “judicial gloss on the
specific grounds for vacatur” that the FAA enumerates. Schwartz v. Merrill
Lynch & Co., 665 F.3d 444, 451 (2d Cir. 2011) (quoting T.Co Metals, LLC v.
Dempsey Pipe & Supply, Inc., 592 F.3d 329, 340 (2d Cir. 2010)); accord Doscher
v. Sea Port Grp. Sec., LLC, 832 F.3d 372, 375 n.3 (2d Cir. 2016). “To vacate an
award on the basis of a manifest disregard of the law, the court must find
‘something beyond and different from mere error in the law or failure on the
part of the arbitrators to understand or apply the law.’” Jock v. Sterling
Jewelers Inc., 646 F.3d 113, 121 n.1 (2d Cir. 2011) (quoting Westerbeke Corp.
v. Daihatsu Motor Co., 304 F.3d 200, 208 (2d Cir. 2002)).
Thus, a party seeking to vacate an award based on manifest disregard of
the law must make two showings: (i) that “the governing law alleged to have
been ignored by the arbitrators was well defined, explicit, and clearly
applicable,” and (ii) that “the arbitrator knew about ‘the existence of a clearly
governing legal principle but decided to ignore it or pay no attention to it.’”
Jock, 646 F.3d at 122 n.1 (internal quotation mark omitted) (quoting
Westerbeke, 304 F.3d at 209). “A mere demonstration that an arbitration
panel made ‘the wrong call on the law’ does not show manifest disregard,” and
an arbitration “award should be enforced ... if there is a barely colorable
justification for the outcome reached.” Telenor Mobile Commc’ns AS v. Storm
LLC, 584 F.3d 396, 407 (2d Cir. 2009) (internal quotation mark omitted)
(quoting Buttar, 378 F.3d at 190) (emphasis in Buttar).
To review, Petitioner seeks to confirm, vacate, and modify the Award.
These requests are all related. This Court’s default position is to confirm the
Award. YES Restoration, 2015 WL 3822764, at *3. It will deviate from that
position only if there is a reason to vacate, modify, or correct the Award. Id.
Neither Petitioner nor Respondent takes issue with Section 1 of the
Award, which granted Petitioner $50,000 in compensatory damages. But
Petitioner argues that the Panel manifestly disregarded Section 198 of the NYLL
when it denied his request for attorney’s fees. For that reason, Petitioner urges
the Court to vacate and modify Section 2 of the Award.
This, the Court will not do. Respondent is correct in its contentions that
Petitioner’s request for vacatur is untimely and flawed on the merits. 4
Petitioner did not serve his Petition within three months of the date the Panel
delivered the Award to the parties, as 9 U.S.C. § 12 commands. And even if
Petitioner had timely served the Petition, it would fail on its merits, because
Petitioner has not demonstrated that the Panel manifestly disregarded the law.
Accordingly, the Court denies Petitioner’s request for vacatur, and confirms the
Award in full.
Respondent also presses a third argument: that “‘manifest disregard of the law’ … no
longer remains a valid ground to modify an arbitration award.” (Resp’t Opp. 23). It is
true that Hall Street Associates, L.L.C. v. Mattel, Inc. held that Sections 10 and 11 of the
FAA “respectively provide the FAA’s exclusive grounds for” vacating and modifying an
arbitration award. 552 U.S. 576, 584, 590 (2008). And the Second Circuit has
recognized that Hall Street “placed the proper scope of the manifest disregard doctrine
into some doubt.” Schwartz, 665 F.3d at 451 (quoting T.Co, 592 F.3d at 339). But the
Supreme Court’s 2010 decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp.
explicitly declined to answer the question “whether ‘manifest disregard’ survives … Hall
Street … as an independent ground for review or as a judicial gloss on the enumerated
grounds for vacatur set forth at 9 U.S.C. § 10.” 559 U.S. 662, 672 n.3 (2010).
Following this cue, the Second Circuit has affirmed the continuing vitality of the
manifest disregard doctrine in recent opinions. See, e.g., Doscher v. Sea Port Grp. Sec.,
LLC, 832 F.3d 372, 375 n.3 (2d Cir. 2016). Accordingly, and consistent with binding
Second Circuit authority, the Court proceeds on the assumption that manifest
disregard remains a valid ground for vacating an arbitral award.
Petitioner’s Request for Vacatur Is Denied
Petitioner Did Not Serve His Petition Within Three
Months of the Date on Which the Panel Delivered the
Under Section 12 of the FAA, “[n]otice of a motion to vacate, modify, or
correct an award must be served upon the adverse party or his attorney within
three months after the award is filed or delivered.” 9 U.S.C. § 12. 5
Respondent argues that Petitioner failed to abide by this timeline: He served
the Petition on May 3, 2016 — three months and one day after February 2,
2016, the date the Panel issued the Award. (Resp’t Opp. 19-21). Petitioner
tries to resist this conclusion in several ways, chief among them by claiming
that the Panel issued the Award on February 3, not February 2. (Pet’r
Reply 10). The record confirms, however, that any factual dispute between the
parties is more apparent than real, and that the Petition is indeed untimely.
Before delving into the facts, a few notes about Section 12’s temporal
requirement are warranted. The statute’s three-month time limit for service is
absolute: “No exception to [the] three month limitations period is mentioned in
Section 12 goes on: “If the adverse party is a resident of the district within which the
award was made, such service shall be made upon the adverse party or his attorney as
prescribed by law for service of notice of motion in an action in the same court.” 9
U.S.C. § 12. In addition to arguing that Petitioner failed to serve the Petition within
Section 12’s three-month window, Respondent contends that Petitioner failed to serve
the Petition on Respondent or its attorney. (Resp’t Opp. 20-21). Petitioner, Respondent
notes, served the Petition on Respondent’s counsel from the Arbitration, who
(apparently unknown to Petitioner) stopped representing Respondent months before the
instant case commenced. This argument — unsupported by any legal authority in
Respondent’s brief — strikes the Court as too clever by half. More importantly, it is
irrelevant. Even if Petitioner had served the Petition “upon [Respondent] or [its]
attorney” in accordance with Section 12, that service would have been untimely.
Accordingly, the Court will assume without deciding that Petitioner served the Petition
on an individual entitled to accept service under Section 12.
[9 U.S.C. § 12]. Thus, under its terms, a party may not raise a motion to
vacate, modify, or correct an arbitration award after the three month period
has run[.]” DeGrate v. Broad. Music, Inc., No. 12 Civ. 1700 (RJS) (JLC), 2013
WL 639146, at *3 (S.D.N.Y. Feb. 20, 2013) (quoting Florasynth, Inc. v. Pickholz,
750 F.2d 171, 175 (2d Cir. 1984)); accord Barclays Capital Inc. v. Hache, No. 16
Civ. 315 (LGS), 2016 WL 3884706, at *2 (S.D.N.Y. July 12, 2016) (“[T]he threemonth deadline contained in 9 U.S.C. § 12 is not subject to extension.”).
Section 12’s clock starts ticking the same day that an arbitration “award
is delivered [or filed], not the day after.” Triomphe Partners, Inc. v. Realogy
Corp., No. 10 Civ. 8248 (PKC), 2011 WL 3586161, at *2 (S.D.N.Y. Aug. 15,
2011), on reconsideration in part, No. 10 Civ. 8248 (PKC), 2012 WL 266890
(S.D.N.Y. Jan. 30, 2012). That is because Federal Rule of Civil Procedure
6(a)(1)(A) — which provides that “in computing any time period specified in” the
Rules, courts should “exclude the day of the event that triggers the
period” — “does not apply to [Section 12’s] limitation period.” Id.; see Fed. R.
Civ. P. 81(a)(6)(B) (Federal Rules of Civil Procedure govern arbitration
proceedings under the FAA, except where FAA “provide[s] other procedures”).
And because an “action to enforce an arbitration award is a creature of
statute,” “there is no common law exception to [Section 12’s] three month
limitations period.” Pickholz, 750 F.2d at 175. All this should make plain that
Section 12’s three-month “limitation period is strictly construed.” Triomphe
Partners, 2011 WL 3586161, at *2 (holding that petition to vacate “served three
months and one day after delivery of the award … [was] untimely”); Waveform
Telemedia, Inc. v. Panorama Weather N. Am., No. 06 Civ. 5270 (CM) (MDF),
2007 WL 678731, at *5 (S.D.N.Y. Mar. 2, 2007) (reaching same result where
cross-petition to vacate award was served three months and three days after
cross-petitioner received award).
Petitioner served the Petition — which sought confirmation, vacatur, and
modification of the Award — on May 3, 2016. (Dkt. #6). If the Panel delivered
the Award to the parties on February 3, 2016, as Petitioner insists it did, that
service was timely. But if the Panel instead delivered the Award on February 2,
2016, as Respondent maintains, then that service was untimely by one day.
The record overwhelmingly supports Respondent’s position. Respondent
argues that “[n]otice of the [A]ward and the [A]ward itself [were] first sent by email message by FINRA to the parties on February 2, 2016.” (Resp’t 56.1
¶ 16). This version of the Award “was signed by two of the three arbitrators” on
the Panel, which Respondent contends “was sufficient to make the [A]ward
binding on the parties.” (Id.). Respondent adds that FINRA sent another email to the parties on February 3, 2016 — but that e-mail “simply added an
additional page containing the signature o[f] the third arbitrator who ha[d]
previously signed the [A]ward.” (Id.).
The Award itself accords with Respondent’s timeline. Respondent has
submitted as a single exhibit (i) a letter enclosing the Award; (ii) a second letter
informing Respondent of its obligation to make payment on the Award “within
30 days of” receiving it; and (iii) a copy of the Award attaching two signature
pages, each bearing the signature of one of the three Panel members. (Murphy
Aff., Ex. C). Respondent’s counsel from the Arbitration avers that he received
all three of these documents in FINRA’s February 2, 2016 e-mail. (Id. at ¶ 5).
The first enclosure letter is dated February 2, 2016. (Id. at Ex. C). The second
letter concerning payment of the Award is dated February 2, 2016. (Id.). And
both signature pages attached to the Award indicate that the Award’s “Date of
Service” was February 2, 2016. (Id.).
In contrast, Petitioner has offered conflicting accounts of the Award’s
timing with no substantiation for his current position. In a declaration
attached to the Petition (which, somewhat tellingly, is dated May 2, 2016), one
of Petitioner’s attorneys, Sandra Lahens, averred that the Award “was served
on Petitioner and [Respondent], by FINRA, on February 2, 2016.” (Lahens
Decl. ¶ 3). In later submissions, Petitioner appears to retreat from this
position, and he now maintains that he did not receive the Award until
February 3, 2016. (Pet’r 56.1 ¶ 16; Pet’r Br. 2, 10; Pet’r Reply 10). Even here,
however, Petitioner is very careful in what he claims. In his Rule 56.1
Statement submitted in connection with this motion, Petitioner states that “[o]n
February 3, 2016, a three member FINRA Panel issued an Award.” (Pet’r 56.1
¶ 16 (emphasis added)). This statement, however, cites to a new affirmation
from Petitioner’s counsel in which she makes no mention of the Award’s date.
(Id.; see Lahens Aff. ¶ 3).
Petitioner’s reference to “a three member FINRA Panel” seems to align
with an argument he raises in his reply brief: that under the FAA, New York
Civil Practice Law and Rules (“C.P.L.R.”) § 7507, and FINRA Rule 12904(e), 6 the
Award was not “delivered” until all three members of the Panel signed it. (Pet’r
Reply 1, 10). Petitioner appears to argue that the Award was not “filed or
delivered” within the meaning of Section 12 until February 3, when FINRA
delivered to the parties a version of the Award that bore all three Panel
members’ signatures. And in so doing, Petitioner ignores Respondent’s claim
that FINRA first e-mailed the parties on February 2.
Petitioner’s decision to address only obliquely the issue of the date on
which he received the Award does not distract the Court from the dearth of
evidence substantiating his claim that the Panel delivered the Award on
February 3, 2016. Apart from conclusory statements in Petitioner’s pleadings,
the only suggestion that the Panel e-mailed some variant of the Award on
February 3 and not February 2 is a clarifying statement in Respondent’s Local
Rule 56.1 Statement. (Resp’t 56.1 ¶ 16). Put simply, the date on which the
Panel issued the Award may be a “material” fact, but there is here no “genuine”
dispute concerning that fact. See Figueroa, 825 F.3d at 98. The Court
concludes that a copy of the Award bearing two arbitrators’ signatures was
The Court assumes that Petitioner’s citation to FINRA Rule 12904, which governs
“customer disputes,” is erroneous, and that he meant to cite to FINRA Rule 13904,
which applies in “industry disputes.” Compare FINRA, RULE 12904,
[“FINRA Rule 12904”], with FINRA, RULE 13904,
0 [“FINRA Rule 13904”].
“filed or delivered” on February 2, 2016. That means that Petitioner’s service of
the Award on May 3, 2016, was untimely by one day.
Petitioner’s legal argument that the Award was not “delivered” until all
three arbitrators signed fails on the merits. FINRA Rule 13904(a) states that
“[a]ll awards shall be in writing and signed by a majority of the arbitrators or as
required by applicable law.” FINRA Rule 13904(a) (emphasis added). Petitioner
claims, without elaboration, that the FAA (he does not identify a specific
subsection) and C.P.L.R. § 7507 require that an arbitration award be signed by
every member of the panel that rendered it. But C.P.L.R. § 7507 provides only
that an arbitration “award shall be … signed and affirmed by the arbitrator
making it.” N.Y. C.P.L.R. § 7507. That statute says nothing about signature
requirements where a multi-member panel has issued an arbitration award,
and the Court has found no case law justifying Petitioner’s unsupported claim
that it does. Similarly, the FAA does not by its terms impose the “all
signatures” requirement Petitioner ascribes to it.
Ultimately, the Court finds that Petitioner did not serve the Petition
within 9 U.S.C. § 12’s limitation period. For this reason, the Court denies the
Petition insofar as it requests vacatur and modification of the Award.
Petitioner’s Request for Vacatur Is Meritless
Even if Petitioner had timely served the Petition, this Court would not
vacate Section 2 of the Award. Petitioner argues that the Panel manifestly
disregarded NYLL Section 198 by denying his request for attorney’s fees. (Pet’r
Br. 11-14). But after reviewing the Award and the record of the Arbitration, the
Court cannot conclude that the Panel erred, and certainly not to an egregious
degree, in refusing to award Petitioner attorney’s fees.
Petitioner has woven a tenuous set of inferences into an argument for
vacatur. The Award does not disclose the legal basis for the Panel’s decision, in
Section 1, to award Petitioner $50,000 in compensatory damages. Petitioner,
however, insists that the Panel “found for Petitioner on his claim for unpaid
wages under” the NYLL. (Pet’r Br. 14). Implicit in that assumption is an
antecedent conclusion: the Panel determined that Respondent built up
Petitioner’s Reserve by making unlawful deductions from Petitioner’s wages.
Otherwise, Petitioner would not be entitled to damages under Sections 191 and
193 of the NYLL, which respectively impose requirements for the timing of wage
payments and deductions therefrom. N.Y. Lab. Law §§ 191, 193.
Embroidered on these arguments is Petitioner’s belief that the Panel
rejected his quantum meruit, restitution, and unjust enrichment causes of
action. And to reach this conclusion, Petitioner posits, the Panel must have
determined that Petitioner and Respondent had a binding agreement regarding
the Reserve, because in New York “[t]he existence of an express agreement,
whether oral or written, governing a particular subject matter precludes
recovery in quasi-contract for events arising out of the same subject matter.”
A. Montilli Plumbing & Heating Corp. v. Valentino, 935 N.Y.S.2d 647, 649 (App.
Div. 2d Dep’t 2011) (citation omitted).
These arguments unravel under scrutiny. To demonstrate that the Panel
manifestly disregarded the law, Petitioner must establish (i) that “the governing
law alleged to have been ignored by the arbitrators was well defined, explicit,
and clearly applicable,” and (ii) that “the arbitrator[s] knew about ‘the existence
of a clearly governing legal principle but decided to ignore it or pay no attention
to it.’” Jock, 646 F.3d at 122 n.1 (internal quotation mark omitted) (quoting
Westerbeke, 304 F.3d at 209). Based on the arguments advanced in his brief,
Petitioner must make two showings to satisfy this first requirement: (i) the
Panel found that Respondent had violated the NYLL and (ii) the Panel also
rejected flatly Petitioner’s equitable claims.
Petitioner has made neither showing. Nothing in the parties’ written or
oral submissions to the Panel established that the NYLL was “clearly
applicable” to the parties’ dispute. Indeed, the NYLL’s applicability — more
directly, whether the Reserve consisted of deductions from Respondent’s
wages — was a central point of contention during the Arbitration. And in light
of this ambiguity, the Court cannot conclude that Section 198’s mandatoryattorney’s-fees requirement “clearly applied” in the Arbitration.
On the other side of the coin, there is good reason to suspect that the
Panel granted Petitioner equitable relief. As noted, Petitioner left Respondent
when his Reserve balance was $150,000. Within weeks of Petitioner’s
departure, Respondent paid a $400,000 fine to FINRA in order to settle an
ongoing regulatory investigation. And during the Arbitration, Respondent’s
former and current CEO both testified (and Petitioner disputed) that Petitioner
had orally agreed to contribute $100,000 of his Reserve to help pay that fine.
That would have left $50,000 in the Reserve, which is the precise amount of
damages the Panel awarded Petitioner.
Petitioner is correct that a party cannot recover in quasi-contract if he
has a binding agreement with the counterpart from whom he seeks recovery.
See, e.g., Sugerman v. MCY Music World, Inc., 158 F. Supp. 2d 316, 326
(S.D.N.Y. 2001) (applying New York law). 7 But the parties’ testimony during
the Arbitration suggested that they had not reached an agreement concerning
Petitioner’s purported obligation to contribute Reserve funds to pay the FINRA
fine. It is axiomatic that “[t]o create a binding contract, there must be a
meeting of the minds as to the material terms of the agreement.” Metro.
Enterprises N.Y. v. Khan Enter. Const., Inc., 1 N.Y.S.3d 328, 329 (App. Div. 2d
Dep’t 2015). Here, it is unclear whether Respondent and Petitioner ever orally
agreed that Petitioner would contribute any portion of the Reserve to satisfy the
All three of the equitable theories Petitioner pursued in the
Arbitration — unjust enrichment, restitution, and quantum meruit — have
analytically similar elements. See Mid-Hudson Catskill Rural Migrant Ministry,
Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005) (“Applying New York
In support of its argument that the Panel granted Petitioner equitable, not statutory,
relief, Respondent cites two cases from this District that applied New York substantive
law. (Resp’t Opp. 17). Petitioner, making the opposite argument in his reply brief, also
cites two federal district-court opinions applying New York law. (Pet’r Reply 5).
Because there is no arbitration agreement in the record, the Court cannot say whether
the parties agreed that New York substantive law would apply in the Arbitration. But
given that the parties appear to have proceeded on that assumption, the Court will do
law, we may analyze quantum meruit and unjust enrichment together as a
single quasi contract claim.”); Alan B. Greenfield, M.D., P.C. v. Long Beach
Imaging Holdings, 981 N.Y.S.2d 135, 137 (App. Div. 2d Dep’t 2014) (quoting
Paramount Film Distrib. Corp. v. State, 30 N.Y.2d 415, 421 (1972)) (restitution
and unjust enrichment share same elements). To recover unjust enrichment,
for example, Petitioner would have had to show “that [i] [Respondent] was
enriched, [ii] at [Petitioner’s] expense, and [iii] that it is against equity and good
conscience to permit [Respondent] to retain what is sought to be recovered.”
Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511, 516 (2012) (citation omitted). It
would have been consistent with the parties’ course of dealings for the Panel to
determine that Petitioner had satisfied those three elements. And it is thus
entirely possible that the Panel awarded Petitioner $50,000 — i.e., the balance
of the Reserve, minus Petitioner’s proportional share of the FINRA fine — under
an equitable theory of recovery.
At bottom, the Court is confident that “there is a barely colorable
justification for” Section 1 and Section 2 of the Award. Telenor Mobile, 584 F.3d
at 407 (internal quotation mark omitted) (quoting Buttar, 378 F.3d at 190)
(emphasis in Buttar). Petitioner’s speculations do not establish that the Panel
awarded him damages under the NYLL. And for that reason, his claim that the
Panel manifestly disregarded Section 198 of the NYLL falls flat. In sum, even
assuming that Petitioner had timely served his Petition, his request for vacatur
The Court Confirms the Award in Its Entirety
The Court’s refusal to vacate or modify Section 2 of the Award makes the
final part of this Opinion straightforward. Section 9 of the FAA commands that
“a court ‘must’ confirm an arbitration award ‘unless’ it is vacated, modified, or
corrected ‘as prescribed’ in §§ 10 and 11.” Hall St. Assocs., L.L.C. v. Mattel,
Inc., 552 U.S. 576, 582 (2008) (quoting 9 U.S.C. § 9). The parties identify no
error in Section 1 of the Award, and the Court has concluded that Section 2
should stand. Accordingly, the Court confirms the Award in full.
For the reasons set forth above, the Petition is GRANTED IN PART and
DENIED IN PART, and the Award is CONFIRMED in full. The Clerk of Court is
directed to terminate all pending motions and close this case.
February 10, 2017
New York, New York
KATHERINE POLK FAILLA
United States District Judge
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