Summary
stating that "the Second Circuit ... has rejected respondent's argument that federal courts lack the power to order discovery before the initiation of a contempt proceeding to verify compliance with the court's order"
Summary of this case from Chevron Corp. v. DonzigerOpinion
02 Civ. 3511 (HB).
July 21, 2003.
OPINION ORDER
Petitioners, Ermenegildo Zegna Corporation and Lanificio Ermenegildo Zegna E Figli, S.p.A. (collectively "petitioners") move to compel respondent Lanificio Mario Zegna, S.p.A. to provide proof of compliance with an arbitration award ("the Award") that had been confirmed by this Court. For the reasons set forth below, petitioners' motion is GRANTED.
I. BACKGROUND
The Court assumes familiarity with the facts as set forth in Ermenegildo Zegna Corp. v. Lanificio Mario Zegna, S.p.A., 2002 WL 31427341 (S.D.N.Y. Oct 29, 2002) and will not repeat them herein. The Award, which this Court confirmed on October 28, 2002, requires respondent to: (a) cease and desist from all use of labels and hang tags that violate a 1987 Agreement and Stipulation, into which the parties entered, and (b) to notify respondent's customers and prospective customers, in writing and in clear terms, of the labeling requirements under the 1987 Agreement. Soon after the Court confirmed the Award, petitioners sought to have respondent provide proof that it was complying with the Award. Specifically, petitioners seek to have:
(a) a sample of the label conforming to the Award utilized by [respondent] from and after the date of the Award and
(b) the text and list of addressees of the letter or other communication to customers advising them that
(i) the labels in use prior to the date of the Award may not be used,
(ii) the use of a hang tag containing the words Zegna is illegal and
(iii) conforming labels may only be used in the manner detailed in the 1987 Agreement.
Pet. Exh. 4. Petitioners contend that they recently discovered a fabric label that remains in the stream of commerce in the United States and that violates the Award. Respondent represents that it has carried out all the requirements of the Award and no proof of compliance is required.
II. DISCUSSION
The Award in the instant case was confirmed under the Convention on Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 ("the Convention). Ermenegildo Zegna, 2002 WL 31427341, at *1; see 9 U.S.C. § 201 et seq. Although 9 U.S.C. § 201 provides that the Convention shall be enforced in accordance with chapter 2 of Title 9, that chapter provides little guidance on the procedure to enforce a confirmed arbitration award. The residual clause of chapter 2 provides that chapter 1 shall apply to "actions and proceedings" brought under chapter 2 to the extent the provisions of chapter 1 do not conflict. 9 U.S.C. § 208. Little in chapter 1, other than 9 U.S.C. § 13, however, provides any additional procedure for enforcing confirmed awards. Specialty Healthcare Mgmt. v. St. Mary Parish Hosp., 220 F.3d 650, 653 (5th Cir. 2000). Section 13 provides that "the judgment so entered shall have the same force and effect, in all respects, as, and be subject to all provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered." 9 U.S.C. § 13.
Petitioners bring their motion to ensure compliance with the Award, which respondent does not dispute "is now a judgment of this Court." 9 U.S.C. § 13. Respondent contends that requiring proof of compliance would modify or alter the confirmed Award, and that this Court lacks the power to issue such an order. Although not in the context of an arbitration award, the Second Circuit in an analogous situation has rejected respondent's argument that federal courts lack the power to order discovery before the initiation of a contempt proceeding to verify compliance with the court's order. New York v. Shore Realty Corp., 763 F.2d 49, 53 (2d Cir. 1985). Furthermore, petitioners and respondent expressly agreed in the 1987 Agreement and Stipulation, Resp. Exh. A, that the prevailing party after obtaining and entering a judgement may "obtain enforcement of the judgment." Id. ¶ 14. Having agreed that the federal court's intervention may be sought to enforce a judgment confirming an arbitration award, respondent can hardly avow that it never consented to giving this Court supervisory authority to compel proof of compliance with the award. See Kallen v. District 1199, Nat `l Union of Hosp. and Health Care Employees, 574 F.2d 723, 726 (2d Cir. 1978); see also Cheminova A/S v. Griffin L.L.C., 182 F. Supp.2d 68, 73-74 (D.C. 2002) (noting that consent to a binding arbitration agreement waives any argument that the court has jurisdiction to enforce the award). Even if I were to accept respondent's argument that compelling it to provide proof of compliance would constitute a correction or modification to the award, 9 U.S.C. § 11 provides federal courts with authority to correct or modify an award "[w]here the award is imperfect in matter of form not affecting the merits of the controversy," so as to effectuate the intent behind the arbitration award and promote justice. 9 U.S.C. § 11; Island Creek Coal Sales Co. v. City of Gainesville, Florida, 764 F.2d 437, 440 (6th Cir. 1985), cert. denied, 474 U.S. 948 (1985). To reject petitioner's demand for proof of compliance, which respondent refuses to provide and which respondent does not dispute is entirely in its possession and control, would effectively amount "to preclud[ing] the district court from taking action necessary to ensure specific performance . . ., [that] had been directed by arbitration, [and] confirmed by the district court." Id. at 442; cf. id (dissent by Judge Merritt arguing that supervision of the court's judgment is more properly the province, in the first instance, of the arbitrators). The proof of compliance does not affect the merits of the dispute, would advance the arbitrators' intent to stop future violations of the 1987 Agreement and Stipulation, and furthermore, promotes justice in ensuring that respondent complies with this Court's judgment.
III. CONCLUSION
For the reasons discussed above, petitioners' motion for proof of compliance is GRANTED. Respondent is directed to provide to petitioners within 20 days from the date hereof:
(a) a sample of the label utilized by respondent from and after the date of the Award and
(b) the text and list of addressees of the letter or other communication to customers advising them that
(i) the labels in use prior to the date of the Award may not be used,
(ii) the use of a hang tag containing the word Zegna is illegal and
(iii) conforming labels may only be used in the manner detailed in the 1987 Agreement.
The parties should bear in mind, however, that should they move before this Court to dispute whether respondent is in conformance with the Award, when the resolution of such dispute will require an interpretation of respondent's duties and obligations arising from the 1987 Stipulation and Agreement, this Court is obligated to remand such dispute to arbitration, which is the grievance mechanism that the parties agreed to and the Court so ordered in 1987. See Resp. Exh. A (1987 Agreement and Stipulation) ¶ 12a ("Should there be any dispute arising between the parties with respect to the interpretation of this Agreement and Stipulation or with respect to the rights, duties and obligations undertaken by the parties herein, or arising herefrom, . . . such dispute . . . shall be submitted to the American Arbitration Association in New York.").