Opinion
650164/07.
Decided October 10, 2007.
Petitioner: Jeffrey A. Jannuzzo, Esq., New York, NY.
Respondents: Thelen Reid Brown Raysman Steiner, LLP, New York, NY, (John C. Ohman, Esq.).
Petitioner moves to confirm an arbitration award issued on June 5, 2007. The arbitration arose out of an alleged breach of an employment contract by petitioner's former employer. Respondent, the former employer, has cross-moved to vacate the award.
The parties' dispute turns on whether petitioner was obligated to "generate originations," i.e., bring in new business to the respondents' firm. In the proceedings before the arbitrator, petitioner claimed that he had no contractual obligation to bill a minimum number of hours, while respondents argued that petitioner had been hired based on his representations that he was billing $2 million that year for his current employer.
The petition to confirm the arbitration award alleges that petitioner Lee A. Goldberg (Goldberg) and respondents Thelen Reid Brown Raysman Steiner LLP and Brown Raysman Millstein Felder Steiner LLP (collectively Brown Raysman) entered into a contract of employment on July 12, 2005, which contract included an agreement to arbitrate all disputes or controversies.
According to the petition, respondent purported to terminate the contract of employment on September 19, 2006.
Petitioner filed a demand for arbitration with the American Arbitration Association on October 10, 2006. Respondent filed an Answer and Counterclaim dated November 20, 2006. Petitioner filed a Reply to the Counterclaim dated December 1, 2006.
Respondent's answer and reply both contained a demand for attorney's fees against claimant, in connection with Goldberg's alleged termination of his employment, and for the defense of the arbitration proceeding.
Claimant also demanded attorney's fees. Claimant's Reply expressly warned respondent that its demand for attorney's fees granted jurisdiction to the arbitrator to award attorney's fees against it.
The arbitrator's pre-hearing order dated December 20, 2006, reported the results of a telephonic case management conference between counsel for both sides and the arbitrator and a case manager.
The petition further alleges that pursuant to Rule 5 of the Rules of the American Arbitration Association, after the appointment of an arbitrator, a party may only offer a different claim or counterclaim at the discretion of the arbitrator. The pre-hearing order stated that neither party wished to amend its claims. Petition dated June 8, 2007, exhibit "B," ¶ 7.
According to the petition, respondents never requested permission to withdraw their claim for attorney's fees.
In an award dated June 5, 2007, an arbitrator stated that petitioner Goldberg claimed a breach of agreement by respondents' termination of his employment. Brown Raysman denied all charges and asserted a counterclaim for Goldberg's breach of performance obligations under the employment agreement, claiming that the termination was for good cause, and also asserted a counterclaim for fraudulent inducement.
The arbitrator found that the agreement did not expressly provide what either side contended that it did. Brown Raysman had the right to terminate Goldberg for good cause, but "good cause" was not defined in the agreement, and the parties did not offer guidance, or precedential interpretations, in support of their arguments. In dicta, the arbitrator stated:
Even though Respondent may have been genuinely and completely disappointed by Claimant's performance, the interpretation and application of the contract cannot be contingent on one party's subjective opinion.
Award of Arbitrator, dated June 5, 2007, p. 1, ¶ 4.
Although Brown Raysman had alleged that Goldberg breached the agreement "by failing to generate adequate origination and by substantially failing to bill 1800 hours," and that good cause existed for the termination, the arbitrator disagreed.
The Agreement did not have any measurable performance requirements for any minimum origination, and the evidence is clear that Respondent was capable of drafting contracts that had such provisions. (Id. ¶ 5)
Respondent had argued that the phrase "developing and supervising a patent litigation practice" in the agreement proved that Goldberg was not hired as a service partner, and was obliged to generate originations. But the arbitrator found that the identical language was found in the contract of a partner who, it was admitted, was a service partner, thus refuting the argument.
Again, in dicta, the arbitrator stated:
Although there is a distinct possibility that Respondent, in good faith, assumed Claimant would produce substantial origination, the text of the Agreement has no such requirement and I will not read one in at this time. (Id. ¶ 5)
The arbitrator found that Goldberg's duty was limited to developing the practice, and that the record was clear that he had worked diligently to do so. Regarding the claim of low billable hours, the arbitrator found that Goldberg's sole duty was to be available to work, that he met that duty, and that respondent failed to offer Goldberg the opportunity for work, despite his availability.
Thus, Goldberg was found not to have breached the agreement, either by failing to generate sufficient origination, nor by failing to bill 1800 hours. The "good cause" relied on by respondent was found not exist. On this basis, no adjustment to petitioner's first-year bonus was deemed necessary.
Respondent's failure to prosecute its counterclaim was found to constitute an implicit withdrawal of that claim. The arbitrator held that the record was clear that the counterclaim should not have been filed at all, and thus found for Goldberg on the counterclaim.
With respect to the cross claims for attorney's fees, the arbitrator found that such awards are neither expressly permitted, nor expressly prohibited by the rules of the American Arbitration Association, and that Respondent voluntarily submitted the issue of an attorney's fee award when it made a demand for same. Although Respondent attempted to withdraw its demand for attorney's fees on its counterclaim, it did not withdraw its contemporaneous demand for attorney's fees in connection with its defense. In the alternative, the arguments raised by Goldberg in favor of an award of attorney's fees, based on court rules, was found to be another basis for making such an award.
Goldberg was awarded $453,468.62, inclusive of attorney's fees, costs and interest through the date of the award.
Judicial review of arbitration awards is severely limited, and an award will be upheld so long as there is even a "barely colorable justification for the outcome.'" Wien v Malkin LLP v Helmsley-Spear, Inc. , 6 NY3d 471 , 479 (2006). The arbitrators are free to shape a remedy with unrestrained flexibility in order to achieve a just result. Board of Ed. of Norwood-Norfolk Cent. School Dist. v Hess, 49 NY2d 145 (1979).
CPLR 7511 (b) specifies the grounds for vacating an award. They include: corruption, fraud or misconduct; partiality or exceeding authority of the arbitrator; and failure to follow statutory procedures.
CPLR 7511(c) provides the exclusive grounds for modifying an arbitrator's award, as follows:
1. there was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award; or
2. the arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or
3. the award is imperfect in a matter of form, not affecting the merits of the controversy.
CPLR 7510 provides that an award must be confirmed unless it is vacated or modified on one of the grounds listed in CPLR 7511.
It is well settled that, absent an express provision in the arbitration clause, "an arbitrator is not bound by principles of substantive law or by rules of evidence." Matter of Silverman [Benmor Coats], 61 NY2d 299, 308 (1984).
An arbitrator may apply his or her "own sense of law and equity to the facts as [the arbitrator] finds them to be and making an award reflecting the spirit rather than the letter of the agreement." Id. at 308.
[An] award will not be vacated, even though the court concludes that [the arbitrator's] interpretation of the agreement misconstrues or disregards its plain meaning or misapplies substantive rules of law, unless it is violative of a strong public policy, or is totally irrational, or exceeds a specifically enumerated limitation on [the arbitrator's] power.
Id. at 308.
Respondent has failed to show that the arbitrator's award was violative of public policy, was totally irrational, or exceeded a specifically enumerated limitation of power. See Henneberry v ING Capital Advisors, LLC , 37 AD3d 353 (1st Dept 2007). The arbitrator here made a carefully reasoned award, which considered and rejected the respondents' arguments.The arbitrator rendered an award that considered the plain meaning of the operative words in the parties' agreement. The arbitrator's discussion of "adequate origination," "developing and supervising a patent litigation practice," "service partner," and "good cause" established a rational basis for the arbitrator's award. So too, the arbitrator's attention to the evidence that Goldberg was ready and willing to work, that he actively sought out billable work, and that there were a significant number of hours being billed that Goldberg might have been able to perform if the opportunity had been offered, support a finding that the arbitrator's findings on the main claim were not irrational.
The arbitrator gave consideration to the amount of the award, as well, considering respondent's request for an adjustment to the first-year bonus, and rejecting that request on his finding that respondents could have provided Goldberg with billable work, but failed to do so.
With respect to the finding in favor of petitioner on respondents' counterclaims, the arbitrator referenced the testimony of two witnesses at the arbitration proceeding before concluding that respondent should have known that there was no merit to the counterclaim for fraud, and never should have proceeded with it.
The arbitrator found that respondent had voluntarily submitted the issue of an attorney's fee award to arbitration when it demanded same, and did not withdraw its demand for fees in connection with its defense. That, and the court rules cited by petitioner, provided the arbitrator with a rationale basis for awarding attorney's fees that was neither violative of public policy, or in excess of a specifically enumerated limitation of the arbitrator's powers.
Accordingly, it is
ORDERED that the petition is granted and the award rendered in favor of petitioner and against respondent is confirmed; and it is further
ORDERED and ADJUDGED that petitioner Lee A. Goldberg, have judgment and recover against respondents Thielen Reid Brown Raysman Steiner LLP, and Brown Raysman Millstein Felder Steiner LLP, in the amount of $453,468.62, plus interest at the rate of ____% per annum from the date of June 5, 2007, as computed by the Clerk, together with $7,165.38, representing respondents' share of amounts previously advanced to the American Arbitration Association by the petitioner, together with costs and disbursements.