Opinion
No. 22057/13.
09-29-2014
In the MATTER OF the Application of AISH HATORAH NEW YORK, INC., Petitioner, for An Order Pursuant to Article 75 of the CPLR Confirming an Arbitration Award, v. Jacob FETMAN a/k/a Yaakov Fetman, Respondent.
Evan R. Shusterman, Esq., Goldberg & Rimberg, attorneys for plaintiff. Daniel L. Stein, Richards Kibbe & Orbe LLP, attorney for defendant.
Evan R. Shusterman, Esq., Goldberg & Rimberg, attorneys for plaintiff.
Daniel L. Stein, Richards Kibbe & Orbe LLP, attorney for defendant.
Opinion
CAROLYN E. DEMAREST, J.
Petitioner Aish Hatorah New York, Inc. (Aish) moves for an order: (1) pursuant to CPLR 7510, confirming the award of the arbitrator; (2) pursuant to CPLR 7514, directing that judgment be entered on the award; and (3) restraining respondent from selling, transferring, or otherwise interfering with or disposing of certain properties in which he, his agents and/or assigns, has an interest.
Respondent Jacob Fetman cross moves for an order: (1) denying the petition and vacating the award; and (2) granting respondent an evidentiary hearing and leave to serve certain discovery devices on petitioner, Rabbi Yitz Greenman, Arbitrator Rabbi Dovid Cohen, and Victor Lipnitsky .
By Order dated April 30, 2014, this Court granted the motion by petitioner to quash subpoenas of several non-parties and Arbitrator Rabbi Dovid Cohen. The Court denies respondents' motion for an evidentiary hearing and for discovery, as the need for such relief is properly deferred to the Arbitrator.
Non-party Merkaz, the Center, Inc., (Merkaz), moves separately for an order: (1) pursuant to CPLR 602(a) consolidating the instant matter with a pending case captioned, Merkaz, the Center, Inc., v. Aish Hatorah (Index No. 3432/2014), or in the alternative, (2) pursuant to CPLR 1012(a), allowing Merkaz to intervene in these proceedings; (3) directing Aish to return certain funds; and (4) pursuant to CPLR 6301, restraining defendants from disposing and or transferring certain funds and properties.
FACTUAL BACKGROUND
At issue in this special proceeding is a religious arbitration, known as Beis Din, that was conducted by Rabbi Dovid Cohen between Aish, a New York non-profit corporation, and Jacob Fetman, who was Aish's chief financial officer for 17 years. Four arbitration sessions were conducted between October 13 and December 9, 2013.
Aish asserts that Aish and Fetman initially agreed to arbitrate two issues: (1) relating to whether Fetman should bear personal responsibility for improperly entering into a lease extension for a property, occupied by Aish, without authority from Aish's executive director, Rabbi Yitz Greenman, and (2) relating to Fetman's liability to Aish for making unauthorized loans from Aish (April 25, 2014 Affirmation of Greenman ¶ 16). It appears to be undisputed that it was respondent Fetman who initially contacted Rabbi Cohen to arbitrate the parties' dispute. At the first session of the arbitration, held October 13, 2013, Fetman signed an agreement to arbitrate the dispute before Rabbi Cohen (Greenman Aff. ¶ 15). According to Rabbi Greenman, Fetman, while testifying before Rabbi Cohen about loans he had made using Aish's funds, admitted to creating and controlling secret bank accounts held in Aish's name (Greenman Aff. ¶ 18), prompting the need to address an expanded “dispute”. Thus, on October 22, 2013, prior to proceeding with the second session, the parties signed a second agreement to arbitrate. Both Rabbi Greenman and Stuart Schabes, an attorney who represented Aish at the second session and the subsequent sessions before Rabbi Cohen, assert that, during the second session, Fetman admitted that he had misappropriated or stolen Aish's funds (Greenman Aff. ¶ 33; Schabes Aff. ¶¶ 9–10). This is consistent with Rabbi Cohen's Award of December 17, 2013 which is premised on Fetman's admission to having “stolen” money from plaintiff. Schabes states that, following this admission, Rabbi Cohen explained to Fetman that under Jewish law, in light of Aish having established that funds in Fetman's possession were tainted by theft, the burden shifted to Fetman to show that the remainder of the funds in his possession had not been stolen (Schabes Aff. ¶ 10).
This agreement, signed by Rabbi Cohen, Rabbi Greenman and Fetman, states, in its entirety, “Yaakov Fetman and Rabbi Yitzhak Greenman have come to me to adjudicate a dispute. They have agreed to accept my decision.”
The second agreement provided, “Yaakov Fetman and Rabbi Yitzhak Greenman, representing Aish Hatorah N.Y. Inc., have come to me to adjudicate a dispute. They have agreed to accept my decision. At present a preliminary decision is to be put into place until a thorough investigation of many bank accounts controlled by the Fetman family are researched.”
At the completion of the second session, on October 22, Rabbi Cohen issued a directive requiring Fetman and his wife to produce, inter alia, copies of tax returns, financial statements, and insurance policies, as well as requiring Fetman to create statements listing assets and real estate holdings, either held by Fetman and his wife directly or through entities controlled by them. Fetman provided some of these materials at the third session, which took place on October 30, 2013, but in the absence of “straightforward answers regarding his hidden accounts and alleged misappropriation” (Schabes Aff. ¶ 19), Rabbi Cohen issued a second, more extensive directive requiring the production of additional financial records, unrestricted access to e-mail accounts, and directing Fetman “to prove that all funds deposited into the accounts belong to him; all amounts that Mr. Fetman is unable to prove ownership of must be paid promptly by Mr. Fetman to Aish.” The directive further required Fetman to provide funds to be held in escrow pending completion of the proceedings and directed that no assets be transferred without permission of Rabbi Cohen. Fetman thereafter complied with the latter directives by providing $500,000 to Schabes' law firm to be held in escrow, and by providing Rabbi Cohen a power of attorney over Fetman's financial assets and over certain real property itemized therein which corresponded to those listed by Fetman in his statement of “Financial Position”.
The fourth and final session was held on December 9, 2013, at which Fetman appeared with Daniel Stein, an attorney. According to Schabes, Rabbi Cohen confronted Fetman about his failure to produce the documentation required by his first and second directives, but gave Fetman more time to provide the documents (Schabes Aff. ¶¶ 31, 33). While Greenman asserts that Stein initially agreed to provide the material at issue by December 13, 2013 (Greenman Aff. ¶ 55; Schabes Aff. ¶ 34), and thereafter requested an extension to produce the documents at a session to be held on December 15, 2013, (Greenman Aff. ¶¶ 56–57), by way of a December 13, 2013 letter addressed to Schabes, Stein requested that Schabes return the money held in escrow, and informed Schabes that Fetman had revoked the power of attorney issued to Rabbi Cohen. On December 17, 2013, believing “that Fetman was not going to produce any further documents to contradict our evidence” (Greenman ¶ 59), Greenman sent Rabbi Cohen a fax in which he outlined his view of the evidence presented at the proceedings and requested that Rabbi Cohen issue a final award in Aish's favor.
Rabbi Greenman emailed a copy of this letter to Stein, Fetman's counsel that same day.
That same day, Rabbi Cohen, issued an award, dated December 17, 2013 (Award), which reads:
“Concerning the controversy between Aish Hatorah represented by Rabbi Yitz Greenman, and Mr. Jacob Fetman, who have chosen me as arbitrator, I have come to the following conclusion.
“Since Mr. Fetman has admitted to me and others who were present at the meetings between us, and since the forensic accountant who went through some documents notified us that at least $2.4 million was stolen by Mr. Fetman, and since the books and records that were examined since Mr. Fetman's employment make it likely to the examiner that approximately $20,000,000 was stolen from Aish Hatorah over the years ...
Ellipsis and emphasis in the original.
“I hereby rule that Mr. Jacob Fetman owes $20,000,000 to Aish Hatorah. All properties and entities that can be traced that they belong or are controlled by Mr. Fetman can be confiscated by Aish Hatorah. I so rule!”
Although the Award authorized the confiscation of properties by Aish, it did not address the specific properties noted by Fetman in his list of assets that had already been presented to Rabbi Cohen. Accordingly, shortly after the issuance of the Award, Schabes “called Rabbi Cohen and asked if he could clarify his award to explicitly name those specific properties” (Schabes Aff. ¶ 41). Upon Rabbi Cohen's request, Schabes faxed Rabbi Cohen a “draft order” that was thereafter signed by Rabbi Cohen (Schabes Aff. ¶¶ 41–42). In this “clarification” of the award, dated December 19, 2013 (Clarification), Rabbi Cohen stated:
“In connection with the ongoing proceeding between Aish HaTorah New York, Inc. (“Aish”) and Mr. Jacob Fetman I am rendering the following Decision and Award as a clarification to my Decision and Award dated December 17, 2013:
“It has been determined that Jacob Fetman and Merkaz—The Center are obligated to return to Aish HaTorah N.Y. Inc. (“Aish”) assets and fungibles valued at $20,000,000.00. Among the properties taken from Aish are:
Merkaz-the Center, Inc., (Merkaz) is a religious corporation of which Fetman is (or was) a trustee, and which, based on submissions by Fetman and Merkaz (in its motion to intervene) appears to be the title owner of the 1723 Ocean Avenue and 1743 Ocean Avenue properties. Respondent listed 1743 Ocean Avenue among his “Assets” as “(our homeMerkaz)” and 1723 Ocean Avenue as “held in name only”, “owned by Merkaz the Center” in his submission of his “Financial Position” to Arbitrator Cohen. 1739 Ocean Avenue was also identified therein as “(Merkaz Building)”. 750 Washington Avenue and 677 President Street were listed as respondent's assets but parenthetically identified as Y & T Management and S & A Management, respectively.
“4305 10th Avenue, Brooklyn, N.Y. 11219
4301 10th Avenue, Brooklyn, N.Y. 11219
1723 Ocean Avenue, Brooklyn, N.Y. 11230
1739 Ocean Avenue, Brooklyn, N.Y. 11230
1743 Ocean Avenue, Brooklyn, N.Y. 11230
750 Washington Avenue, Brooklyn, N.Y. 11238
1677 President St., Brooklyn, N.Y. 11213
“Aish has an ownership interest in and is awarded title to those properties.
“Aish is awarded a judgment against Jacob Fetman in the amount of $20,000,000.00 and an interest in the aforesaid properties and Aish is entitled to take title to the aforesaid properties in its name. The monetary award shall be reduced by the value of any property to which Aish HaTorah takes title. The value of the properties taken by Aish in satisfaction of the award here under shall be determined by a licensed appraiser selected by Aish whose valuation of the properties shall be conclusive.
“Aish may take any steps it deems appropriate to satisfy the award and take title to the real properties referenced in this decision as well as any other properties belonging to Jacob Fetman and Merkaz—The Center.
“Aish is also entitled to take the $500,000.00 currently in the escrow account of Ober Kaler as well as all funds under Jacob Fetman and/or Merkaz's name invested at the Platinum Fund of approximately $1,500,000.00 as well as in the Bayberry Fund of no less than $250,000.00.”
Fetman, in the answer verified by him, his own affidavit submitted in support of his cross-motion to vacate the award, and the affirmation of his attorney, attempts to present a different picture of the arbitration proceedings. Fetman initially asserts that, in early October 2013, while he was preparing for his daughter's wedding to be held on November 18, 2013, Rabbi Greenman threatened to have him arrested and tell his daughter's fiancé and family that he was a thief unless he submitted to arbitration regarding the lease extension issue (Answer ¶¶ 36–38). Fetman asserts that he only agreed to proceed with the arbitration and only signed the writings consenting to the arbitration as a result of this duress by Rabbi Greenman (Answer ¶¶ 5, 36–38). Fetman further asserts that he never agreed to extend the scope of the arbitration to cover issues relating to his allegedly taking improper loans from Aish or misappropriating Aish's assets (Answer ¶ 39). Fetman does not, however, deny signing both of the agreements to arbtirate.Fetman concedes that he attended three meetings with Rabbi Cohen. At the first meeting held on or about October 13, 2013, Fetman asserts that Rabbi Cohen directed to him to provide his financial records, and at the second, held on or about October 30, 2013, Fetman asserts that the status of the document production was discussed (Answer ¶ 6). Fetman characterizes the first and second sessions as “preliminary” or “case management hearings” (Answer ¶ 44). With respect to the third meeting, held on December 9, 2013, Fetman attended the session with his counsel, Daniel Stein, and they both assert that they attended the session with the goal of reaching a settlement, but deny any substantive arbitration proceedings occurred (Answer ¶ ¶ 6 and 49; Stein Aff. ¶¶ 5–8).
Fetman denies that he ever made a verbal or written statement that could be construed as an admission that he stole funds from Aish (Answer ¶¶ 49 and 52). Fetman also asserts that he was never notified that the forensic accountant had found that he had stolen at least $2.4 million, that he never had a chance to cross-examine the forensic accountant, and that he never had an opportunity to be heard regarding the forensic accountant's findings or present his defenses to the effect that certain of the transactions had been made with Rabbi Greenman's knowledge and approval and/or were otherwise consistent with Aish's standard operating procedures for its employees (Answer ¶¶ 43, 53). Fetman's contentions regarding his inability to contest the findings of the forensic accountant are disputed by petitioner's affidavits which describe meetings between Fetman and Lipnitsky, both in the presence of Rabbi Cohen and separately, in which the records were reviewed and the discrepancies at issue were specifically addressed (Greenman Aff. at ¶¶ 31–32). Fetman moves to vacate the Award based on his assertions relating to the scope of his initial agreement to arbitrate and the conduct of the arbitration sessions, as well as additional assertions that Rabbi Cohen had improper ex parte communications with Rabbi Greenman (Answer ¶ 41), that Rabbi Greenman had an undisclosed financial relationship with Rabbi Cohen (Fetman Aff. ¶¶ 7–8), that the Award exceeded the Arbitrator's authority in that it required payment, or forfeiture of property, from entities that were not parties to the arbitration proceedings and that the amount of the award was wholly irrational (Fetman Aff. ¶¶ 9–15).
Although Fetman has raised an additional ground for vacating the award (the fact that the final meeting occurred on a Sunday in purported violation of Judiciary Law § 5 ) in a letter from counsel dated June 25, 2014, the Court has not considered the letter as it was sent to the Court after submission of the petition to confirm the award and the cross-motion to vacate on April 30, 2014. In any event, as Sunday is not the Sabbath of the parties to this proceeding, the argument has no merit.
LEGAL ANALYSIS
New York favors arbitration as a means of resolving disputes and courts interfere as little as possible with agreements to arbitrate (Matter of Smith Barney Shearson v. Sacharow, 91 N.Y.2d 39, 49 [1997] ; Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co., 37 N.Y.2d 91, 95 [1975] ). While a court will not compel a party to arbitrate and surrender the right to resort to the courts absent evidence that affirmatively establishes that the parties expressly agreed to arbitrate their disputes (Matter of Waldron [Goddess], 61 N.Y.2d 181, 183–184 [1984] ; Matter of Miller, 40 AD3d 861, 862 [2d Dept 2007] ), a party waives his or her right to challenge the validity of an agreement to arbitrate by participating in the arbitration (Matter of Commerce & Indus. Ins. Co. v. Nester, 90 N.Y.2d 255, 262–264 [1997] ; Matter of Meisels v. Uhr, 79 N.Y.2d 526, 538 [1992] ; Matter of National Cash Register Co. [Wilson], 8 N.Y.2d 377, 383 [1960] ; Matter of Smullyan [SIBJET S.A.], 201 A.D.2d 335, 336 [1st Dept 1994] ; CPLR 7511[b][2][ii] ). A party who has participated in an arbitration may only obtain vacature of an award where the party's rights were prejudiced by corruption, fraud or misconduct in procuring the award, a procedural failure that was not waived, the bias or partiality of an arbitrator, or that the arbitrator exceeded his or her power or failed to make a final and definite award (Matter of Silverman [Benmor Coats], 61 N.Y.2d 299, 307 [1984] ; CPLR 7511[b][1] ). “It is well-settled that an arbitrator exceed[s] his [or her] power' under the meaning of the statute where his [or her] award violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator's power' “ (Matter of Kowaleski [New York State Dept. of Correctional Servs.], 16 NY3d 85, 90 [2010] citing Matter of New York City Tr. Auth. v. Transport Workers' Union of Am., Local 100, AFL–CIO, 6 NY3d 332, 336 [2005] ). The party seeking to vacate the award bears a heavy burden of demonstrating that any of these CPLR 7511(b)(1) grounds require vacature of the award (North Syracuse Cent. School Dist. v. North Syracuse Educ. Assn., 45 N.Y.2d 195, 200 [1978] ).In seeking vacature of the award, Fetman initially contends that the arbitration award is invalid because the agreements to arbitrate lack essential terms relating to the nature and scope of the dispute to be arbitrated, rendering them unenforceable under CPLR Article 75. It is admitted that Fetman provided an initial description of the subject of arbitration to Rabbi Cohen which recited the dispute over a lease extension but did not include either the unauthorized loans or the diversion of funds into secret accounts, which was only revealed during the initial arbitration meeting. It was apparently because of these revelations that the second agreement to arbitrate was executed, expanding the scope of the arbitration. Where the arbitration agreement does not limit the scope of arbitration, the arbitrator's authority is not limited, nor does ambiguity in the agreements regarding the subject of the “disputes” to be arbitrated create an impediment to enforcement of the unequivocal intent to arbitrate (Board of Educ. of Lakeland Central School Dist. of Shrub Oak v. Barni, 49 N.Y.2d 311, 315 [1980] ). It is settled law that the agreement need not be specific as to the subject of the arbitration to be enforceable (Matter of Meisels v. Uhr, 79 N.Y.2d at 538 [rejecting argument that the agreement must identify with specificity the issue to be submitted to arbitration] ). Moreover, Fetman has waived any claim regarding the validity of the arbitration agreements by participating in the arbitration (see Matter of Commerce & Indus. Ins. Co. v. Nester, 90 N.Y.2d at 262–264 ; Matter of Meisels v. Uhr, 79 N.Y.2d at 538 ; Matter of National Cash Register Co. [Wilson], 8 N.Y.2d at 383 ; CPLR 7511[b][2][ii] ) . While Fetman asserts that the arbitration sessions were not substantive in nature, but rather, were limited to “case management,” discovery and settlement issues, such limited participation is still sufficient to establish a waiver (see Matter of Wiederspiel [Carstans], 36 AD3d 971, 973 [3d Dept 2007] ; Greenwald v. Greenwald, 304 A.D.2d 790, 791 [2d Dept 2003] ). Fetman's argument that the agreements were improperly obtained through duress is likewise waived by his participation in the proceedings.
Schon v. Rakower, 2013 WL 6334833 [U] [Sup Ct, Kings County 2013], in which a stay of arbitration was granted, is readily distinguishable in that it involved a party seeking a stay of arbitration where the court found that the party seeking the stay had not participated in arbitration.
To the extent that Fetman's duress arguments require consideration, Fetman has failed to meet his heavy burden of demonstrating that duress compelled his participation. As described above, Fetman alleged that, in early October 2013, Rabbi Greenman threatened to have Fetman arrested and threatened to expose him as a thief if he declined to arbitrate the lease dispute issue (Answer ¶ 36), a claim that Rabbi Greenman vigorously denies. The threat to expose Fetman as a thief, which concomitantly implies the threat of siruv , does not constitute duress (see Berg v. Berg, 85 AD3d 950, 952 [2d Dept 2011] ; Matter of Greenberg v. Greenberg, 238 A.D.2d 420, 421 [2d Dept 1997] ; Lieberman v. Lieberman, 149 Misc.2d 983, 987 [Sup Ct, Kings County 1991] ; Matter of Mikal [Scharf], 105 Misc.2d 548, 552–553 [Sup Ct, Kings County 1980], affd 85 A.D.2d 604 [1981] ). While a threat of criminal prosecution, if unfounded, is the kind of improper threat that may establish duress (see Adams v. Irving Natl. Bank of NY, 116 N.Y. 606, 612–614 [1889] ; Call v. Ellenville Natl. Bank, 5 AD3d 521, 525–526 [2d Dept 2004] ; Liffiton v. Santiago, 134 A.D.2d 924, 924 [4th Dept 1987] ; Gottex Industries, Inc. v. Menczel, 1995 WL 412419 * 2 [U] [SDNY 1995] ), as with other forms of duress, an agreement procured by way of a threat of criminal prosecution must be promptly disaffirmed or it will be deemed to have been ratified unless the unwarranted duress continues (see Matter of Guttenplan, 222 A.D.2d 255, 257 [1st Dept 1995] ).
In Berg, the Court explained that “a siruv entails a type of ostracism from the religious community, and ... is prescribed as an enforcement mechanism by the religious law to which the [respondent] freely adheres” but it “cannot be deemed duress” (85 AD3d at 952 quoting Greenberg, 238 A.D.2d at 421 ).
Here, Fetman's conclusory assertion that Rabbi Greenman “continued to threaten” Fetman (Answer ¶ 37) fails to establish that the alleged continued threats occurring after early October were related to the threat of criminal prosecution, as opposed to the original threat to expose Fetman as a thief to his daughter's fiancé and her family. In the absence of non-conclusory allegations that a threat of criminal prosecution continued, Fetman has failed to demonstrate that he acted promptly to disaffirm his participation in the Beis Din arbitration, and, as such, he effectively ratified Rabbi Cohen's authority to arbitrate the dispute by continuing to participate in the proceedings without raising the issue of duress (see Berg v. Berg, 20 Misc.3d 1142[A], 2008 N.Y. Slip Op 51823 * 4–5[U] [Sup Ct, Kings County 2008], affd as modified 85 AD3d 950 [2d Dept 2011] ; see also Montgomery Dev. Carolina Corp. v. Forino USA, LLC, 2013 WL 2451273 [U] [Conn Super 2013] ). This is particularly true with respect to the December 9, 2013 meeting, which took place after the wedding of Fetman's daughter and after Fetman had obtained counsel. Finally, it is noted that “[a] threat to do that which one has the legal right to do [here, prosecute for theft or embezzlement of funds] does not constitute duress” (Matter of Garvin, 210 A.D.2d 332, 333 [2d Dept 1994] ). Respondent's argument of duress is therefore unavailing.
Fetman also argues that he only agreed to arbitrate the issue of the lease extension, and never agreed to arbitrate issues relating to his alleged misappropriation of Aish's funds. To the extent that this issue was not waived by his participation in the arbitration without first seeking a stay (see Matter of Silverman [Benmor Coats], 61 N.Y.2d at 309 ), the argument is without merit. For a court to rule that the arbitrator exceeded the scope of his or her powers in issuing an award, the court must find that the subject of the award was beyond the arbitrator's reach based on a specific enumeration of the issues in the agreement to arbitrate (id. at 308–310 ). Here, the arbitration agreements are broad and contain no language limiting the scope of Rabbi Cohen's authority to rule on any issue (id. at 308 ; Matter of Wieder v.. Schwartz, 35 AD3d 752, 753 [2d Dept 2006] ; Matter of Ticotin v. Simon Prop. Group, 289 A.D.2d 143, 144 [1st Dept 2001] ). Indeed, while the second agreement, dated October 22, 2013, does not contain language expressly indicating that the scope of the arbitration would include Fetman's alleged misappropriations from Aish, the provision in the agreement reciting that a preliminary decision would be “put into place until a thorough investigation of many bank accounts controlled by the Fetman family are researched”, clearly indicates that Fetman was agreeing to an arbitration relating to the misappropriation from Aish, especially when considered in the context of the financial records production required by Rabbi Cohen's October 22, 2013 directive. The Fetmans' own bank accounts would certainly only be relevant to the misappropriation issue and would have no relevance to the lease dispute. Further, Fetman's own actions in complying with at least some of the discovery, in agreeing to pay for the forensic accountant, in providing the $500,000 to be held in escrow and in signing the power of attorney giving Rabbi Cohen authority to bar the transfer of certain real property belie any assertion that he never agreed to arbitrate the misappropriation issue.
Although Fetman's counsel does not identify this issue as a legal ground for vacating the award in his memorandum of law, the issue is raised in the answer and in Fetman's own affidavit.
The court notes that, even if Fetman was found responsible for payment of Aish's rent for the entire term of the lease extension, his maximum liability would be $331,200 ($6,900 per month-the monthly rent under the lease extension as asserted in Fetman's Shaila [exhibit A to Fetman's affidavit]-for four years).
Fetman's assertion that Rabbi Cohen engaged in improper ex parte communications is the type of claim that may support a finding of prejudice to the rights of the parties (see Matter of Goldfinger v.. Lisker, 68 N.Y.2d 225, 231–232 [1986] ; Matter of Star Boxing Inc. v. Daimlerchrysler Motors Corp., 40 AD3d 1106, 1108 [2d Dept 2007] ). However, Fetman's assertion that Rabbi Cohen “issued” his directives and communications through Rabbi Greenberg would not constitute improper conduct to the extent such communications were administrative or procedural in nature (see Britt v. Napoli, 91 AD3d 1102, 1102 [3d Dept 2012] ; Costalas v. Amalfitano, 23 AD3d 303, 304 [1st Dept 2005] ). Rabbi Greenman and Schabes' communications requesting the issuance of the Award were not ex parte as respondent's counsel was made aware of such requests. The fact that counsel was away and did not immediately receive the transmission by e-mail does not render the e-mails improper. With respect to ex parte conversations held with both sides separately, Rabbi Greenman represents that Rabbi Cohen, after obtaining consent from both parties, spoke separately to both Fetman and himself and that Fetman was afforded extensive opportunity to discuss Lipnitsky's findings, and review the records relied upon, prior to the meetings and in the presence of the Arbitrator. This assertion has not been denied. It is noted that the arbitration herein was conducted pursuant to Jewish law, to which both parties subscribe, and is often a more informal process than a secular arbitration. Fetman's claims, “on information and belief”, that Cohen spoke to the landlord pertaining to the lease dispute is not supported by any evidentiary proof and must thus be rejected (see Matter of Moran v.. New York City Tr. Auth., 45 AD3d 484, 485 [1st Dept 2007] ).
Since Rabbi Greenman emailed Stein a copy of his fax to Rabbi Cohen, it would not appear that the fax would be deemed an ex-parte communication (see Boschetti v. O'Blenis, 2013 WL 2458774 *1–2 [U] [WD Wash 2013]; Irizarry v. M.L. Moskowitz & Co., Inc., 2012 WL 386434 *5 [U] [Conn Super 2012] ).
Similarly without merit is Fetman's assertion that Rabbi Cohen had a conflict of interest in light of a “material” financial relationship with Aish and Rabbi Greenman. The financial relationship alleged in Fetman's answer and affidavit relate to Aish's rental of a catering hall located at Rabbi Cohen's synagogue on six occasions in the period from September 2005 to October 2009 with a rental ranging from $500 to $850 per event. In addition, Fetman has provided a copy of a flyer showing that Rabbi Greenman conducted a seminar, sponsored by another organization operated by Rabbi Greenman, that was held at Rabbi Cohen's synagogue at some point in 2011. Since Aish has shown that, as Chief Financial Officer, Fetman signed at least two of the checks for the events, clearly Fetman knew about some of the contacts and, therefore, in agreeing to the arbitration before Cohen, waived any objection he might have had. In any event, these occasional contacts between Aish and/or Rabbi Greenman and Rabbi Cohen's synagogue do not necessarily show direct contact between Aish and Rabbi Cohen or even that Cohen had any knowledge of the rental agreements. More importantly, the contacts with Cohen's synagogue were sufficiently occasional and remote that they do not warrant a finding that there was an appearance of bias on Rabbi Cohen's part (see Kaygreen Realty Co., LLC v. IG Second Generation Partner, L.P., 116 AD3d 667, 668 [2d Dept 2014] ; Fleury v. Amedore Homes, Inc., 107 AD3d 1088, 1089 [3d Dept 2013] ; Elias Eleni Rest. Corp. v. 8430 New Utrecht Corp., 282 A.D.2d 705, 705 [2d Dept 2001] ).
With respect to Fetman's assertions that he never admitted to taking Aish's money, that he was not present when the forensic accountant presented his proof, that he did not have an opportunity to cross-examine the forensic accountant and he did not have an opportunity to present his own proof, these issues were waived by Fetman's continued participation in the arbitration proceedings without specifically raising the issues before the Arbitrator (see Railworks Corp. v. Villafane Elec. Corp., 6 Misc.3d 301, 307 [Sup Ct, New York County 2004] ; see also Matter of American Ins. Co. [Messinger–Aetna Cas. & Sur. Co.], 43 N.Y.2d 184, 191 [1977] ; Matter of Loike v. Kletenik, 36 Misc.3d 1222[A], 2012 N.Y. Slip Op 51430 * 4[U] [Sup Ct, Nassau County 2012] ). Rabbi Greenman, in his affidavit, disputes Fetman's assertions regarding what occurred, creating a factual issue as to what occurred during the course of the arbitration. In light of this conflict as to what occurred during the proceedings, and in the absence of a record of the proceedings, Fetman has failed to meet his burden of demonstrating misconduct by clear and convincing evidence (see Matter of New York State Correctional Officers & Police Benevolent Assn. [New York State Dept. of Correctional Servs.], 304 A.D.2d 954, 955 [3d Dept 2003] ; Matter of Broderick v. Suffolk County Bar Assn., 157 A.D.2d 780, 780 [2d Dept 1990] ). “Having opted not to have the hearing transcribed, [Fetman] cannot now have a trial to reconstruct what took place at the hearing” (Matter of New York State Correctional Officers & Police Benevolent Assn. [New York State Dept. of Correctional Servs.], 304 A.D.2d at 955 ). Even were there evidence to find that Fetman denied taking the funds from petitioner as part of his proof before the Arbitrator, such evidence would be ineffective to set aside the Award, as even a manifest disregard of facts is not a ground for vacature of an arbitration award (see Wien & Malkin LLP v. Helmsley–Spear, Inc., 6 NY3d 471, 483 [2006], cert dismissed 548 U.S. 940 [2006] ; Matter of Joan Hansen & Co., Inc., v. Everlast World's Boxing Headquarters Corp., 103 AD3d 456, 458 [1st Dept 2013], lv denied 21 NY3d 856 [2013] ); Matter of Liberty Mutual Ins. Co. v. Sedgewick, 43 AD3d 1062, 1063 [2d Dept 2007] (“The Supreme Court had no authority to decline to confirm [the] award on the ground that there was conflicting evidence ... a reviewing court may not second-guess the fact-findings of the arbitrator”).Turning to Rabbi Cohen's damage award in the amount of $20,000,000, Fetman asserts that the Award in this amount is wholly irrational. In order to vacate an award on the basis of irrationality, a party must show that there was no proof whatsoever to justify the award (see Matter of Eastman Assoc., Inc. [Juan Ortoo Holdings, Ltd.], 90 AD3d 1284, 1285 [3d Dept 2011] ; Matter of Patel v. Ahmad, 82 AD3d 1104, 1104 [2d Dept 2011] ). A challenge on the basis of irrationality must be denied and the award must be upheld as long as the arbitrator provides “even a barely colorable justification for the outcome reached” (Matter of Professional, Clerical, Tech., Empls. Assn. [Board of Educ. for Buffalo City Sch. Dist.], 103 AD3d 1120, 1122 [4th Dept 2013], lv denied 21 NY3d 863 [2013] ; see also Wien & Malkin LLP, 6 NY3d at 479 ). Specifically, with respect to an arbitrator's damage award, the Court of Appeals has stated that:
Respondent only asserted, in conclusory fashion, that he was prevented from presenting evidence that “certain transactions in question had Rabbi Greenman's full knowledge and approval, and that [Fetman]'s alleged improper conduct was in fact consistent with Petitioner's standard operating procedures and was identical to the conduct of Petitioner's other employees, including among others, Rabbi Greenman” (Answer ¶ 43).
“Merely because an arbitrator's award is not arrived at by precise mathematical computations does not make it punitive. Indeed, much of the laudatory value of arbitration lies in the arbitrator's power to construct a remedy best suited to the situation without regard to the restrictions on traditional relief in a court of law ... Merely because the computation of damages may be so speculative as to be unsupportable if awarded by a court does not make the award infirm, for, as we have firmly stated, arbitrators are not bound by rules of substantive law or, indeed, rules of evidence” (Board of Educ. of Cent. School Dist. No.1 of Towns of Niagara, Wheatfield, Lewiston & Cambria v. Niagara–Wheatfield Teachers Assn., 46 N.Y.2d 553, 557 [1979] [internal citations omitted] ).Regarding the specific award at issue in Board of Educ. of Cent. School Dist. No.1 of Towns of Niagara, Wheatfield, Lewiston & Cambria v. Niagara–Wheatfield Teachers Assn., the Court of Appeals noted that, “[a]s in many cases, the award was an attempt to arrive at a just solution, despite the association's inability to prove the damages precisely” (id. at 558 ). It is clear that the Arbitrator here made inferences based upon evidence before him, including the findings of the forensic accountant and the records upon which he relied, that respondent had diverted funds from petitioner throughout the period of his employment, though the evidence was incomplete due to respondent's failure to produce documents as directed. This determination was not irrational and was appropriate in the circumstances. Rabbi Cohen stated that he reached the $20,000,000 figure in damages, “since the forensic accountant who went through some documents notified us that at least $2.4 million was stolen by Mr. Fetman, and since the books and records that were examined since Mr. Fetman's employment make it likely to the examiner that approximately $20,000,000 was stolen from Aish Hatorah over the years.” Rabbi Greenman explains the Award as follows:
“The final Award amount of $20,000,000 was based on the limited information we had in our possession which was presented at the Arbitration, which showed at least $2.4 million being stolen or diverted from Aish accounts, over the last six years, between 2007 and 2013, together with approximately $2.5 million in unauthorized and unverified credit card expenditures over the same period. The Arbitrator drew negative inferences against Respondent for his failure to produce documents as directed by the Rabbi's interim psak rulings, together with his failure, under Jewish Law, to account for the legal means with which he claims to have amassed his unexplained net worth, as presented to the Arbitrator, and extrapolated that amount over Fetman's full 17 years of employment at Aish. He was also directed to pay the professional fees for the forensic accountant” (Greenman Aff. ¶ 60).
Accepting Rabbi Cohen's finding that there were books and records that specifically showed that Fetman misappropriated at least $2.4 million and that “the examiner” concluded Fetman had “likely” stolen approximately $20,000,000 “over the years”, although based upon “extrapolation” from the evidence presented that more was taken during the entire course of Fetman's 17–yearemployment, and on negative inferences premised on Fetman's failure to produce documents and upon his unexplained “net worth,” the Arbitrator did not exceed his authority and the Award is not irrational or arbitrary. Given an arbitrator's power to construct a just remedy in the face of an inability to prove damages precisely, Rabbi Cohen reasonably imposed additional damages based on the negative inferences and the extrapolation (see Matter of Eastman Assoc., Inc [Juan Ortoo Holdings, Ltd.], 90 AD3d at 1285–1286 ). Although not expressly articulated in the Award, Arbitrator Cohen apparently found that Fetman had acquired interests in the real properties he listed in his Financial Position statement through his direct or indirect diversion of petitioner's funds and that such properties therefore properly belonged to Aish. The value of such properties was apparently incorporated into the Award of $20,000,000 in damages, which in his Clarification, the Arbitrator directed would be reduced by their assessed value upon transfer of title to Aish. There was thus nothing irrational in the Award. It is further apparent from the Clarification, that Arbitrator Cohen had determined that Merkaz–The Center was controlled by Fetman and that property owned in the name of Merkaz–The Center was subject to confiscation in satisfaction of the $20,000,000 Award against Fetman. Such Award is clearly compensatory, as the Arbitrator determined, and not, as respondent argues, improper punitive damages (see Board of Educ. of Cent. School Dist. No.1 of Towns of Niagara, Wheatfield, Lewiston & Cambria v. Niagara–Wheatfield Teachers Assn., 46 N.Y.2d at 557–558 ).
However, the Clarification Award of December 19, 2013, rendered at the request of petitioner's counsel ex parte, and not in compliance with CPLR § 7509, was improperly entered against property owned by a non-party to the arbitration in violation of their due process rights (Matter of Braver v. Silberman, 90 AD3d 654, 656 [2d Dept 2011] ). Although the Arbitrator apparently relied upon Fetman's own representations of his interest, and the records may well have substantiated the conclusion that Fetman was actually the beneficial owner of property acquired at Aish's expense, Merkaz–The Center, and any other owners of record of the properties purportedly transferred to petitioner through the Arbitrator's Clarification, are necessary parties to the arbitration.
Accordingly, petitioner's motion to confirm is granted to the extent that the Award of December 17, 2013, which, by its terms, applies only to Fetman, is confirmed as to the entire Award. Respondent's motion to vacate is granted only to the extent of vacating the Clarification of the Award, dated December 19, 2013. The vacature of the Clarification of December 19, 2013, is not intended to inhibit the Arbitrator's authority with respect to Aish's argument that the property of Merkaz and the other non-party title owners may be reached because, despite their separate corporate existence, they are mere alter egos of Fetman (see TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 [1998] ; Glasser v. Price, 35 A.D.2d 98, 100–102 [2d Dept 1970] ); see also Mobius Mgt. Syts., Inc. v. Technologic Software Concepts, Inc., 2002 WL 31106409 * 2–3 [SDNY 2002] ; Habitations Limited, Inc. v. BKL Realty Sales Corp., 169 A.D.2d 657, 658 [1st Dept 1991] ; Matter of Klein v. Persaud, 27 Misc.3d 1205[A], 2010 N.Y. Slip Op 50564 * 4–5[U] [Sup Ct, Kings County 2010] ). Aish's request for a preliminary injunction restraining the transfer of the properties identified in Rabbi Cohen's Clarification is granted as the confirmation of the Award establishes petitioner's probability of success and the balancing of the equities in its favor.
The motion by Order to Show Cause by Merkaz–The Center is granted to the extent that it may intervene and participate in the further arbitration regarding the properties subject to “confiscation” by Aish as provided in the confirmed Award of December 17, 2013, as that Award contemplated that Fetman's ownership or control was to be “traced” prior to confiscation and Merkaz–The Center has articulated an interest in such property (CPLR § 1012(a)(2, 3) ; cf. Association of Contracting Plumbers, Inc. v. Local Union 2, 841 F.2d 461, 466–467 [2d Cir.1988] ). The motion to intervene is deemed to be binding consent to participate in such arbitration. The motion to intervene in the instant proceeding is therefore granted. The matter is remitted to Arbitrator Rabbi Cohen to address the issues raised in the Clarification regarding Fetman's assets to be applied to the satisfaction of the confirmed Award. In light of the complaints raised by respondent in the instant motions, Fetman and Merkaz shall select an additional arbitrator to join Rabbi Cohen and Rabbi Cohen shall select a third arbitrator to join the arbitration tribunal composed of three persons qualified to act in a Beis Din (see CPLR § 7511(d) ).
Consolidation with the plenary action commenced by Merkaz, (captioned Merkaz the Center Inc., v. Aish Hatorah New York, Inc., et al, index no. 3432/14) is not appropriate, however, given the summary nature and present posture of this special proceeding pursuant to CPLR 7510 and 7511 (see Matter of Anastasi & Assoc. v. Masaryk Towers Corp., 52 AD3d 241, 241 [1st Dept 2008] ; see also Thelco Elec. Contrs. v. Duffy, 43 A.D.2d 567, 567 [2d Dept 1973] ). Merkaz's request for an order directing that Aish return money and property to Merkaz is denied because, aside from the ultimate issue of who is entitled to the money at issue, Merkaz has failed to demonstrate that any money or property has been turned over to Aish as of this time. Notably, Merkaz's own papers show that Fetman, by way of a December 23, 2013 letter signed by his counsel, revoked his authority to transfer funds held in certain of Merkaz's accounts. In addition, although Merkaz also represents that the $500,000 that Fetman turned over to Ober Kaler, the firm that acted as Aish's counsel before Rabbi Cohen, to be held in escrow pending Rabbi Cohen's determination, came from accounts belonging to Merkaz, Merkaz has presented no evidence suggesting that Ober Kaler has released any of the $500,000 held in escrow to Aish. Moreover, Ober Kaler is not a party to these proceedings, does not appear to have been served with Merkaz's order to show cause, and does not represent Aish in the current proceedings before the court (see Kaplan v. Kaplan, 94 A.D.2d 788, 788 [2d Dept 1983] ; State Univ. of N.Y. v. Denton, 35 A.D.2d 176, 178–179 [4th Dept 1970).
The court makes no determination relating to the appropriateness of such relief in the context of the plenary action under Index No. 3432/14 or the Arbitrators' authority to provide relief in the context of the continued hearing.
With respect to Fetman's motion requesting discovery, to the extent that the request for discovery was not already denied in this Court's April 3, 2014 order, the Court finds that Fetman has failed to demonstrate that the requested discovery is material and necessary in the context of this expedited special proceeding (see City of Glen Cove Indus. Dev. Agency v. Doxey, 79 AD3d 1038, 1038–1039 [2d Dept 2010] ; Zulu v. Egan, 1 AD3d 649, 649 [3d Dept 2003] ) and, as noted, the request is properly the province of the arbitration tribunal. In any case, such discovery is both inappropriate and unnecessary in light of the confirmation of the Award.
CONCLUSION
Aish's petition to confirm the arbitration Award is granted only to the extent of confirming the Award dated December 17, 2013, and is denied as to the Clarification dated December 19, 2013. Aish's motion for a preliminary injunction restraining the transfer of assets is granted.
Fetman's motion to vacate the arbitration Award is granted only to the extent that the Clarification of Award dated December 19, 2013 is vacated and, upon application to the Arbitrator made consistent with the procedure set forth in CPLR § 7509 within 30 days of the date hereof, pursuant to CPLR § 7511(d), the matter is remitted for further hearing and determination before a three-arbitrator tribunal or Beis Din composed of Rabbi Dovid Cohen and another to be selected by him and a third member selected by respondent Fetman and intervener Merkaz. Fetman's motion is otherwise denied.
Merkaz's motion is granted to the extent that Merkaz is granted leave to intervene in this summary proceeding, and to participate in further proceedings before the Beis Din, and is otherwise denied. Merkaz is directed to file with the court and serve on the other parties to this proceeding an appropriate pleading in the event that there are any further applications in this proceeding.
This constitutes the decision and order of the court. ENTER,