Opinion
23-CV-0513 (JGLC) (OTW)
01-25-2024
STONEX MARKETS LLC f/k/a INTL FCSTONE MARKETS, LLC, Petitioner, v. COOPERATIVA DE CAFICULTORES DEL SUROESTE DE ANTIOQUIA, Respondent.
REPORT AND RECOMMENDATION TO THE HONORABLE JESSICA G. L. CLARKE
ONA T. WANG, United States Magistrate Judge:
I. INTRODUCTION
Judge Clarke referred this matter to me for a Report and Recommendation (ECF 23) on Petitioner StoneX Markets LLC's (“Petitioner”) motion for (1) entry of a default judgment confirming an American Arbitration Association (“AAA”) arbitration award (the “Final Award”) entered in Petitioner's favor against Cooperativa de Caficultores del Suroeste de Antioquia (“Respondent”), and (2) attorneys' fees and costs incurred to confirm the Final Award. (See ECF Nos. 21 and 22). For the reasons set forth below, I respectfully recommend that Petitioner's motion for entry of a default judgment be GRANTED and a default judgment affirming the Final Award against Respondent be entered. I further recommend that Petitioner's motion for additional attorneys' fees occurred in connection with this case be DENIED.
II. BACKGROUND
a. Factual Background
Petitioner is a limited liability company formed under Iowa's laws, with its principal place of business in New York. (ECF 1 at 3). Petitioner specializes in trading financial products in derivative markets. Id. Respondent is a coffee cooperative domiciled in Medellin, Colombia and is organized under Colombia's laws. Id. Petitioner and Respondent entered into a Swaps and Over-the Counter Derivatives Account Agreement (“the Agreement”) on December 20, 2018. (ECF 1-2, Exhibit B). On July 31, 2021, Respondent's trading account incurred losses resulting in a negative Net Liquidating Value of $1,788,890.62. (ECF 22 at 2; ECF 1-1, Exhibit A - Final Award, at ¶ 54). The AAA arbitration arose from a contractual dispute after Respondent failed to pay money owed to Petitioner pursuant to the Agreement. Id.
The Agreement contained a mandatory arbitration provision under the International Arbitration Rules of the AAA - International Centre for Dispute Resolution (“ICDR”) (ECF 1-3 Exhibit B, § 8.7), and designated New York as the forum where arbitration would be held. (ECF 1 at 2). On December 23, 2021, Petitioner filed a demand for arbitration, seeking $1,788,890.62 in damages, plus attorneys' fees, pre-judgment and post-judgment interest, and costs and arbitration fees. (ECF Nos. 1 at 6; 22 at 2). Despite notice of the proceeding, Respondent did not “appear, respond, or otherwise participate in the Arbitration.” (ECF 1 at 6). On November 15, 2022, a three-arbitrator panel “[h]aving considered the totality of evidence, legal and factual arguments” ruled in Petitioner's favor, and issued a monetary award as follows:
See ECF 1-1, Exhibit A - Final Award, at 14 (“Respondent was provided with appropriate notice of the Preliminary Hearing, both by email and by Federal Express, but Respondent did not participate in the Preliminary Hearing.”).
a. $1,788,890.62 in damages (due within 30 days of the award);
b. $123,703.21 in pre-award interest;
c. Post-judgment interest on the total amounts awarded above at the New York statutory rate of 9% amounting to $441.09 per day starting from November 16, 2022 until payment is made;
d. $57,312.50 towards Petitioner's attorneys' fees; and e. $54,915.00 in ICDR administrative fees and expenses.(ECF 1-1, Exhibit A - Final Award, at ¶ 143).
Following the panel's decision, Respondent neither filed nor served a motion to vacate, modify, or correct the Final Award, and never paid the amounts owed. (ECF 22 at 3).
b. Procedural Background
On January 20, 2023, Petitioner filed a petition for confirmation of the Final Award pursuant to 9 U.S.C. § 9. (ECF 1). A summons was issued to Respondent on March 16, 2023 (ECF 6), and an alternative certificate of service was served and accepted by Respondent on May 30, 2023. (ECF 14). After Respondent failed to answer, Petitioner filed a proposed Clerk's Certificate of Default (ECF 15), which was entered on June 30, 2023 (ECF 17). On July 7, 2023, Judge Preska, then presiding over this case, issued an Order granting Petitioner's motion to proceed with its proposed motion for a default judgment (ECF 19). Petitioner filed its motion on August 4, 2023 (ECF Nos. 21 and 22), and Judge Clarke referred the action to me on August 9, 2023, for a Report and Recommendation. (ECF 23). To date, Respondent has not opposed the petition or otherwise appeared in this proceeding.
III. JURISDICTION
The arbitration in this case involved parties from the United States and Colombia and is therefore subject to two international conventions on arbitral award enforcement. First, both countries are signatories to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). See 21 U.S.T. 2517. The New York Convention governs arbitral award enforcement of disputes that are “commercial and . . . not entirely between citizens of the United States.” PDV Sweeny, Inc. v. ConocoPhillips Co., No. 14-CV-5183 (AJN), 2015 WL 5144023, at *4 (S.D.N.Y. Sept. 1, 2015) (quoting Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 391 (2d Cir. 2011)); see also 9 U.S.C. § 202. Moreover, the Inter-American Convention on International Commercial Arbitration (the “Panama Convention”) applies because the parties' dispute arose “from a commercial relationship between citizens of signatory nations” to that Convention. Sanluis Developments, L.L.C. v. CCP Sanluis, L.L.C., 498 F.Supp.2d 699, 702 (S.D.N.Y. Aug. 2, 2007).
Under 9 U.S.C. § 305(1), “[w]hen the requirements of both the Inter-American Convention and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards . . . are met, determination as to which convention applies shall be made . . . [i]f a majority of the parties to the arbitration agreement are” signatories of the Panama Convention. The parties to this case hail from Colombia and the United States, both of which are signatories to the convention. The Panama Convention therefore governs.
The Federal Arbitration Act (“FAA”) implements the New York and Panama Conventions domestically and provides that “[a]n action or proceeding falling under [either] Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United States . . . shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy.” 9 U.S.C. § 203; see also id. at § 302. Orders to confirm arbitration awards fall under the Panama Convention. Id. at § 302. Because Petitioner filed a motion to confirm the Final Award, the Panama Convention, as implemented by the FAA, provides a jurisdictional basis for this dispute under 28 U.S.C. § 1331.
IV. DISCUSSION
a. The Final Award
Under the FAA, the losing party in an arbitration proceeding has three months to move to vacate or modify an arbitral award following the proceeding. See 9 U.S.C. § 12. “When the three month limitations period has run without [vacatur] of the arbitration award, the successful party has a right to assume the award is valid and untainted, and to obtain its confirmation in a summary proceeding.” Wang v. Skype Communications S.A.R.L, 21-CV-8082 (LGS), 2022 WL 883773, at *2 (S.D.N.Y. Jan. 3, 2022) (quoting Florasynth, Inc. v. Pickholz, 750 F.2d 171, 177 (2d Cir. 1984)). Additionally, a petition to confirm an arbitration award “may be made to the United States court in and for the district within which such award was made” and must be sought “within one year after the award is made[.]” Coastal Equities, Inc. v. Stephens, 21-CV-2470 (AMD) (RML), 2022 WL 16951710, at *2 (E.D.N.Y. Oct. 17, 2022) (quoting 9 U.S.C. § 9).
Arbitration awards are subject to limited review to avoid undermining arbitration's twin goals of settling disputes efficiently and avoiding long and expensive litigation. Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993). When a motion to confirm an arbitration award is unopposed, “vacatur proceedings are ‘generally inappropriate'” for default judgments; rather a “summary judgment framework” should be used to resolve an unopposed motion. Cessna Finance Corp. v. Gulf Jet LLC, No. 14-CV-2149 (ALC), 2015 WL 337556, at *3 (S.D.N.Y. Jan. 26, 2015) (citing D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 109-10 (2d Cir. 2006)). Therefore, a respondent's failure to reply to a motion to confirm an arbitration award is treated as an unopposed motion for summary judgment, Coastal Equities, 2022 WL 16951710, at *2 (citing D.H. Blair & Co., 462 F.3d at 110), meaning that a court “may not grant the motion without first examining the moving party's submission to determine if it has met its burden of demonstrating that no material issue of fact remains for trial.” Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004). Moreover, “[i]f the evidence submitted in support of the summary judgment does not meet the movant's burden of production, then summary judgment must be denied even if no opposing evidentiary matter is presented.” Id. (emphasis in original) (internal quotation marks omitted). Further, the party opposing the arbitration award's confirmation has a “heavy burden of showing a ground for refusing to confirm the arbitration award.” Citigroup Inc. v. Sayeg, 21-CV-10413 (JPC), 2023 WL 4198758, at *5 (S.D.N.Y. June 26, 2023) (internal quotation marks omitted).
Here, Petitioner's motion to confirm the Final Award is an action to confirm an unopposed arbitration award and is therefore treated as an unopposed motion for summary judgment. Coastal Equities, 2022 WL 16951710, at *2. “[E]ven if a motion to confirm is unopposed, a court must still ensure that judgment is proper as a matter of law under the disputed facts.” Sayeg, 2023 WL 4198758, at *5. Petitioner asserts that the Final Award was entered in its favor by a AAA panel and served on Respondent on November 15, 2022. (ECF 221 at ¶ 3). Therefore, the three-month limitations period to move, vacate, or modify the Award expired on February 15, 2023, without Respondent acting. Wang, 2022 WL 883773, at *2; see also ECF 22 at 3. Petitioner's motion to confirm the Final Award was filed less than a year after the Final Award was made, on April 25, 2023. Coastal Equities, 2022 WL 16951710, at *2; ECF 22 at 3.
Under the Panama Convention, incorporated at 9 U.S.C. § 207, a respondent challenging an arbitration award is limited to certain enumerated reasons for not confirming or recognizing the award. Those reasons “for refusal or deferral of recognition or enforcement” an award are: (a) the parties to the agreement were subject to some incapacity under the applicable law or the agreement is not valid under the law to which the parties have submitted it; (b) the party against which the arbitral decision has been made was not duly notified of the appointment of the arbitrator or of the arbitration procedure to be followed, or was unable, for any reason, to present his defense; (c) the decision concerns a dispute not envisaged in the agreement between the parties to submit to arbitration; (d) the constitution of the arbitral tribunal or the arbitration procedure has not been carried out in accordance with the terms of the agreement signed by the parties; or (e) the decision is not yet binding on the parties or has been annulled or suspended by a competent authority of the State in which, or according to the law of which, the decision has been made. Sayeg, 2023 WL 4198758, at *4 (citing Panama Convention art. V).
Respondent has not opposed this motion nor articulated any reason why the award should not be confirmed. “It is well established that courts must grant an arbitration panel's decision great deference.” Duferco Intern. Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003). Under Blair, “[t]he arbitrator's rationale for an award need not be explained, and the award should be confirmed ‘if a ground for the arbitrator's decision can be inferred from the facts of the case,'” and “[o]nly ‘a barely colorable justification for the outcome reached by the arbitrators is necessary to confirm the award.'” 462 F.3d at 110.
After reviewing Petitioner's motion papers and accompanying exhibits, the Court determines that there is no material issue of fact for trial and confirmation of the Final Award is proper. No specific grounds for refusing to recognize the Final Award under the Panama Convention are triggered in this case. First, no evidence indicates Respondent was subject to any incapacity or that the parties' agreement is invalid. Second, Respondent was notified of the arbitration, the selection of the arbitrator, and the applicability of the ICDR rules, and failed to appear. (ECF 1 at 2, 6 ¶ 20). Third, there is no reason to believe that the arbitration concerned a dispute not envisioned in the parties' agreement to submit to arbitration. Fourth, nothing indicates that the Arbitrator was selected, or the arbitration conducted, in a manner contrary to the law of the United States, as both acts were performed in accordance with ICDR rules. Furthermore, Respondent did not object to the Arbitral Tribunal's appointment. (ECF 1-1, Exhibit A - Final Award, at 7 ¶ 26-28). Fifth, there is no indication that the decision has been annulled or suspended. Finally, the Court sees no grounds for determining that the recognition of the Final Award would be contrary to public policy. Similarly, while Respondent has not moved to vacate the Final Award, there is nothing in the record to suggest that any of the grounds for vacatur in section 10(a) of the FAA apply in this case.
Accordingly, the Court recommends that Petitioner's motion for entry of a default judgment be GRANTED and a default judgment affirming the Final Award against Respondent be entered.
b. Attorneys' Fees
Petitioner also moves for fees in making this motion for entry of a default judgment confirming the Final Award, seeking, essentially “fees on fees,” as the Final Award awarded Petitioner $57,312.50 in attorneys' fees. (ECF 1 at 8-9). The Court recommends denying Petitioner's motion for “fees on fees.” See, e.g., Commissions Imp. Exp. S.A. v. Republic of the Congo, 19 - M- 195 (KPF), 2021 WL 4991716, at *7 (S.D.N.Y. Oct. 27, 2021) (“While the Court has awarded [fees on fees] in the past, it will not do so here.”) (internal citations omitted); see also ECF 1-1, Exhibit A - Final Award, at ¶ 143(g) (“All other claims not expressly provided in this Final Award are denied).
V. CONCLUSION
For the reasons discussed above, I respectfully recommend that the motion to confirm the Final Award be GRANTED in its entirety and a default judgment against Respondent be entered. I further recommend that Petitioner's motion for attorneys' fees be DENIED.
VI. OBJECTIONS
In accordance with 28 U.S.C. §636(b)(1) and Fed.R.Civ.P. 72(b), the parties shall have fourteen (14) days (including weekends and holidays) from receipt of this Report to file written objections. See also FED. R. CIV. P. 6 (allowing three (3) additional days for service by mail). A party may respond to any objections within fourteen (14) days after being served. Such objections, and any responses to objections, shall be addressed to the Honorable Jessica G. L. Clarke, United States District Judge. Any requests for an extension of time for filing objections must be directed to Judge Clarke.
FAILURE TO FILE OBJECTIONS WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140, 155 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 58 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).