Opinion
15275 Index No. 652658/20 Case No. 2021–03415
02-10-2022
In the Matter of 544 BLOOMREST, LLC, Petitioner–Respondent, v. Alexi HARDING et al., Respondents–Appellants.
Levine & Blit, PLLC, New York (Russell S. Moriarty of counsel), for appellants. Peyrot & Asscoiates, PC, New York (David C. Van Leeuwen of counsel), for respondent.
Levine & Blit, PLLC, New York (Russell S. Moriarty of counsel), for appellants.
Peyrot & Asscoiates, PC, New York (David C. Van Leeuwen of counsel), for respondent.
Gische, J.P., Kern, Moulton, Kennedy, Rodriguez, JJ.
Order, Supreme Court, New York County (Eileen A. Rakower, J.), entered on or about February 23, 2021, which granted petitioner's motion to confirm an arbitration award dated May 27, 2020 and denied respondents’ cross motion to vacate the award, unanimously modified, on the law, to vacate that part of the award awarding petitioner punitive damages, sanctions and attorneys’ fees, and otherwise affirmed, without costs.
As to the arbitrator's award on petitioner's claim for conversion by fraud and dismissing respondents’ counterclaims for breach of contract, respondents raise only purported errors of law and fact by the arbitrator, which are not subject to judicial review (see Wien & Malkin LLP v. Helmsley–Spear, Inc., 6 N.Y.3d 471, 479–480, 813 N.Y.S.2d 691, 846 N.E.2d 1201 [2006], cert dismissed 548 U.S. 940, 127 S.Ct. 34, 165 L.Ed.2d 1012 [2006] ); Matter of SCM Corp. [Fisher Park Lane Co.], 40 N.Y.2d 788, 793, 390 N.Y.S.2d 398, 358 N.E.2d 1024 [1976] ). Contrary to respondents’ contention, the individual respondent, a corporate officer or director, is not immune from personal liability, since there is evidence that he personally participated in the fraud or had actual knowledge of it ( Marine Midland Bank v. Russo Produce Co., 50 N.Y.2d 31, 44, 427 N.Y.S.2d 961, 405 N.E.2d 205 [1980] ).
The arbitrator, however, exceeded her power by awarding petitioner punitive damages, sanctions and attorneys’ fees none of which were demanded ( CPLR 7511[b][1][iii] ; Denson v. Donald J. Trump for President, Inc., 180 A.D.3d 446, 116 N.Y.S.3d 267 [1st Dept. 2020]). Petitioner filed a demand for arbitration form stating that its dispute with respondents concerned "[c]onversion by a variety of fraudulent means" in the sum of $362,456.77, the dollar amount of its claim. Although the American Arbitration Association (AAA) preprinted form petitioner used allows a claimant to seek other relief, including attorneys’ fees, interest, arbitration costs and punitive/exemplary damages, the only boxes that petitioner checked off were for interest and arbitration costs. It did not check the punitive damages box or attorneys’ fees box, nor indicate anywhere on its demand that it was seeking such relief. Petitioner never amended its demand for arbitration. Nor did it include a prayer for such relief in its subsequently filed post-arbitration memorandum. By granting unrequested relief, the arbitrator exceeded the expressly enumerated limits on her authority by deciding matters that were not before her ( Denson at 451, 116 N.Y.S.3d 267 ).
Although AAA commercial rule 47(d) empowers an arbitrator to award attorneys’ fees, this is only "if all parties have requested such an award or it is authorized by law or their arbitration agreement." Here, neither party requested such an award and it is not authorized by law. The Engagement Letter that petitioner relies on does not incorporate AAA rule 47(d) into that agreement ( Matter of Steyn v. CRTV, LLC, 175 A.D.3d 1, 6, 103 N.Y.S.3d 415 [1st Dept. 2019] ). In any event even if the arbitrator has the authority to make an award, it must be demanded in the particular arbitration for the matter to be considered. An "arbitrator's authority extends to only those issues that are actually presented by the parties" ( Matter of Joan Hansen & Co., Inc. v. Everlast World's Boxing Headquarters Corp., 13 N.Y.3d 168, 173, 889 N.Y.S.2d 886, 918 N.E.2d 482 [2009] ). Consequently, in the absence of a demand for such fees ( Denson, 180 A.D.3d at 451, 116 N.Y.S.3d 267 ; Steyn, 175 A.D.3d at 7–8, 103 N.Y.S.3d 415 ) or the parties’ agreement that the prevailing party is entitled to legal fees (see Matter of Stewart Tabori & Chang [Stewart], 282 A.D.2d 385, 723 N.Y.S.2d 492 [1st Dept. 2001], lv denied 96 N.Y.2d 718, 730 N.Y.S.2d 791, 756 N.E.2d 79 [2001] ; Myron Assoc. v. Obstfeld, 224 A.D.2d 504, 638 N.Y.S.2d 154 [2d Dept. 1996], lv denied 88 N.Y.2d 807, 647 N.Y.S.2d 165, 670 N.E.2d 449 [1996] ), they may not be awarded. Similarly, even though an arbitrator is authorized to award punitive damages pursuant to AAA rule 47(a), they still must be demanded (see Matter of Flintlock Constr. Svcs, LLC v. Weiss, 122 A.D.3d 51, 991 N.Y.S.2d 408 [1st Dept. 2014], appeal dismissed 24 N.Y.3d 1209, 4 N.Y.S.3d 590, 28 N.E.3d 25 [2015] ). Petitioner's request that the arbitrator award such "other relief that the AAA deems just and proper" does not satisfy the requirements of a demand.
In contrast, the arbitrator's award granting petitioner the costs of arbitration was properly confirmed by Supreme Court. Not only did petitioner request them in its demand for arbitration, AAA rule 47(c) provides that "the arbitrator shall assess the fees, expenses, and compensation," including administrative fees, expenses, and the arbitrator's own compensation, "among the parties in such amounts as the arbitrator determines is appropriate" (see also CPLR 7513 ).
We have considered respondents’ remaining arguments and find them unavailing.