Opinion
No. 6268/06.
2008-05-22
In the Matter of The Arbitration of Certain Controversies Between Raphael GROSSMAN et ano, Petitioners, and YaakovAaron Ilowitz et ano, Respondents. In the Matter of The Arbitration of Certain Controversies Between Yaakov Aaron Ilowitz et ano, Petitioners, and Raphael Grossman et ano, Respondents.
Israel Vider, Esq., John Lonuzzi, Esq., Lonuzzi & Woodland LLP, Brooklyn, for Petitioners. Edward W. Miller, Esq., Jessica Mara Sokol, Esq., New York, for Respondents.
Israel Vider, Esq., John Lonuzzi, Esq., Lonuzzi & Woodland LLP, Brooklyn, for Petitioners. Edward W. Miller, Esq., Jessica Mara Sokol, Esq., New York, for Respondents.
BERT A. BUNYAN, J.
The genesis of the above-captioned proceedings is a dispute over certain commissions purportedly earned by Israel and Chaim Grossman (collectively, Grossman), which were allegedly improperly retained by respondents Yaakov and Israel Ilowitz (collectively, Ilowitz). On or about December 17, 2003, the parties agreed, in writing, to submit “all disputes between them” to arbitration before the Rabbinical Court of Yeshiva Beth Joseph (Beth Din) for a “final and binding determination”. The terms of said arbitration agreement provided that:
“The Beth Din shall be empowered to issue such intermediate decisions or orders as the panel finds necessary. The Beth Din shall have jurisdiction over all matters related to their disputes until the final decision is made and it shall be the decision of the panel as to whether a matter is related to the dispute or not. The Beth Din reserves the right to render a decision in the event that one of the parties fails to appear at a scheduled hearing. The panel is authorized to add to, amend, change or clarify a decision as in the panel's discretion is necessary.”
On August 4, 2005, following the Beth Din's convening and conducting a hearing, the Beth Din issued its “First Award”
which, according to the certified translation from its original Hebrew, provided that:
The Beth Din did not apply any numerical notation to its awards. Such references as shall appear henceforward in this Decision and Order are provided by the court.
1. The party of the plaintiff [Grossman] is hereby warned not to dare to talk or act in any way whatsoever to harm the party of the defendant [Ilowitz];
2. Conditioned upon compliance with Sec. 1, the defendant's party shall pay the plaintiff the amount of five hundred thousand dollars ($500,000) within five months;
Schedule of payment shall be [in accordance with the following schedule] until the entire debt will be paid off.
3. In the event a doubt will arise concerning the plaintiff's activities after the Rabbinical Court Ruling, the matter shall be brought before the Rabbinical Court for resolution. In the event it will be determined at the Rabbinical Court that the plaintiff has-G-d forbid-acted improperly, it is within the hands of the Rabbinical Judges to have him lose all his money that is mentioned in Sec. 2; everything is up to their discretion.
* * *
6. In the event a doubt will arise concerning compliance with the Rabbinical Court Ruling, the matter should be brought before us for resolution.
It is represented that no part of the $500,000 awarded to the Grossmans was ever paid.
On January 19, 2006, the Beth Din issued a “Second Award” which, altering the conditional language contained in the First Award, states, in pertinent part,
“Plaintiff Israel Grossman is enjoined from speaking or taking any action which will cause any harm to the Respondents. In the event that questions arise relating to the actions of the plaintiff [Grossman] after the decision is rendered, the Respondents may present these matters to the Beth Din. If it is determined that plaintiff [Grossman] committed actions that were improper, the arbitrators at their discretion may direct plaintiff to forfeit or return monies granted to this decision.
In the event that there will be a question regarding compliance with this decision, those matters will be presented here for a determination.
On or about February 24, 2006, Grossman, pursuant to CPLR 7510, commenced the first of the above-captioned proceedings ( Grossman v.. Ilowitz, Index No. 6268/06), and ultimately obtained, on default, an order, dated May 10, 2006 and entered May 24, 2006, and Judgment confirming the Second Award. Said judgment, in the total amount of $538,445.00, was entered on June 7, 2006.On or about September 29, 2006, the Beth Din issued a “Third Award”. Noting that: the parties granted authority and jurisdiction to the Beth Din to adjudicate “all matters between the parties;” that the parties “have presented in part ... and ... on August 4, 2004, the Beth Din rendered a decision in part on some of the matters presented to them; and that “[w]hereas, plaintiffs sought confirmation of the Beth Din award before the Supreme Court of the State of New York, Kings County ... and obtained such confirmation, and ... on August 22, 2006, plaintiffs filed a further motion in the above court regarding these matters,” the Beth Din directed the parties to appear before it to adjudicate all pending claims and counterclaims between them, and enjoined plaintiffs from proceeding with any enforcement of said decision of August 4, 2004 and/or until a final decision and determination of all matters in dispute between the parties is ordered by the Beth Din.
However, on or about January 23, 2007, the Grossmans commenced an action in Supreme Court, Kings County, entitled Grossman v. New York Life, Index No. 2801/07 (the New York Life action), seeking damages for commissions withheld and wrongful termination as agents for New York Life, and reinstatement of plaintiffs' employment status. In their summons and complaint, plaintiffs refer to the “partial judgment' ... for a portion of the misappropriated commissions ... ordered by this court against Defendant's recruiter and his brother.” Thereafter, by a “Fourth Award” dated May 29, 2007, the Beth Din, noting that: (1) on October 31, 2006, it sent notices scheduling a session for November 8, 2006, at which the Grossmans did not appear; (2) the Grossmans refused to schedule a session thereafter; (3) plaintiffs indicated by letter dated February 22, 2007, their refusal to consent to any further jurisdiction of the Beth Din; and (4) plaintiffs, in violation of the Beth Din's directive to refrain from speaking or taking any action that would cause any harm to the respondents, commenced the action against New York Life wherein they detailed claims previously adjudicated and determined by the Beth Din, ordered the award of $500,000 forfeited, and vacated respondents' obligation to pay same.
The Parties' Litigation
6268/06—the 2006 motions
On or about August 22, 2006, Raphael and Israel Grossman, as “plaintiffs”, moved pursuant to unspecified provisions of the CPLR for an order compelling defendants to comply with an Information Subpoena and Restraining Notice requesting that “defendants” provide “plaintiffs” with financial data and information regarding available assets to pay “the outstanding debt owed to said plaintiffs, in the sum of $538,445.00.”
Thereafter, and following the issuance of the Beth Din's Second Award, Yaakov and Yisroel Ilowitz, as respondents in the matter bearing Index No. 6268/06, moved by order to show cause dated October 12, 2006:(1) to compel the Grossmans to proceed to arbitration and submit all enforcement proceedings thereto; (2) pursuant to CPLR 5015(a)(1) and (a)(4), CPLR 7511 and CPLR 3211(a)(8), to vacate the aforementioned order, as well as the subsequent judgment entered June 7, 2006; and (3) pursuant to CPLR 6301 and 7503, to enjoin petitioner from taking actions to enforce any judgment or order. In support of said application, respondents, emphasizing that they sought vacatur of the confirmation of the award, not of the award itself, argued that the very terms of the September 29, 2006 award precluded any finding that the Beth Din had issued a final award, that the instant action to confirm the non-final arbitration award was therefore improperly commenced by Grossman, that they had never been served with the petition whereby petitioners had commenced the instant proceeding, and that the court should direct that any enforcement proceedings of any award or judgment arising therefrom, should be held before the arbitrators only, as per the agreement between the parties. In the alternative, respondents sought vacatur of the judgment and order pursuant to CPLR 5015(a) based on an excusable default and meritorious defense and/or material misrepresentations made by petitioners, as well as confirmation of the award of September 29, 2006. Finally, respondents sought a temporary restraining order prohibiting enforcement of the judgment.
In opposition to Ilowitz' order to show cause, Grossman, by way of an attorney's affirmation that appears to channel Grossman's own allegations verbatim, contended, inter alia, that: the Beth Din's award of 9/29/06 was a nullity; that the award of 8/4/05 was final, and its finality was unaffected by the forfeiture language; and there was no basis for granting an injunction.
In its Award of January 19, 2006, the Beth Din deferred certain unspecified claims presented by plaintiff Rafael Grossman to a later date.
Subsequently, in opposition to Grossman's motion, Ilowitz sought denial of same, claiming that his request directly violated the terms of the Beth Din's order of September 29, 2006, which enjoined the Grossmans from proceeding with any enforcement of the decision of August 4, 2004 until the Beth Din rendered a final decision and determination of all matters in dispute. In reply and further support of their motion to compel arbitration, vacate judgment and dismiss the petition, respondents reiterated their contention that petitioner failed to confirm the award of August 2005, which contained the conditional language, but rather sought to confirm the Second Award of January, 2006, which, while providing for a forfeiture, omitted said conditional language. They further reiterated their contention that under controlling authority, the Second Award was not confirmable.
The court reserved decision on the foregoing pair of motions. Prior to its rendering of an order, Ilowitz, by order to show cause dated June 1, 2007, moved (1) pursuant to CPLR 3211(a)(5), to dismiss the petition on the ground that the entire proceeding is bound by arbitration and award; or in the alternative, (2) pursuant to CPLR 3211(a)(5), to dismiss the petition on the ground that the entire proceeding is barred by res judicata and collateral estoppel, and upon dismissal of the petition, (3) pursuant to CPLR 5015(a)(5), to vacate the “Order Directing Judgment” and the Judgment; (4) pursuant to CPLR 3126, to strike the petition by reason of petitioner's willful failure to respond to discovery demands, or, in the alternative, pursuant to CPLR 3126, to preclude petitioner from introducing into evidence any information and documents, or giving testimony regarding same. A stay was imposed pending the hearing on the matter.
By Supplemental Affirmation dated September 4, 2007, Ilowitz notes that no opposition had been served by petitioner, that the motion was returnable before the court on September 5, 2007, and that petitioner had in fact stated in writing that he is not opposing the motion.
Referring to papers filed by Grossman in the companion matter ( Ilowitz v. Grossman, Index No. 19552/07), where Grossman contended that the present motion was unopposed because of a purported stay that was imposed by the court, Ilowitz, characterizing Grossman's reading of the order to show cause as “warped”, seeks an order granting the present motion as unopposed.
Counsel for Ilowitz avers that it received a call from Grossman's attorney upon being served with the Motion to Dismiss and requested an adjournment in order to prepare opposition papers; that upon her further request, a stipulation was prepared and a briefing schedule was arranged; that said schedule was subsequently enlarged, but Grossman still failed to serve opposition papers. In addition, in a letter to the court dated August 14, 2007, counsel for Ilowitz states that it received a letter from counsel for Grossman “erroneously” stating that the dismissal motion was not on the calendar.
The court's verbal directive to counsel
At a conference held on October 24, 2007, the court instructed Ilowitz to serve Grossman, on or before November 27, 2007, with a memorandum of law addressing the question of whether the court had the authority to issue its order of May 10, 2006 which, as interpreted by Grossman, confirmed the money judgment, but not the non-monetary provision enjoining Grossman from engaging in harmful conduct in the future, with reference to the Beth Din's Award of January 19, 2006. Contrary to Ilowitz' assertion, and citing what is contended to be controlling authority, Grossman, in affirmations dated December 21, 2007 and February 27, 2008, argues that the court, with the power to grant any motion in part and deny same in part, correctly confirmed a definite—and therefore a valid and enforceable-provision of the Award.
Ilowitz' motion to confirm Award of May 29, 2007
By order to show cause dated June 1, 2007, Ilowitz, as petitioners in the above-captioned proceeding bearing Index No. 19552/07, move, pursuant to CPLR 7510, for an order confirming the Beth Din's Award dated May 29, 2007. In that same order to show cause, they further move for an order dismissing Grossman's petition which names them as respondents under Index No. 6268/06. Grossman, in response, cross-moves pursuant to CPLR 7505, for an order denying confirmation and setting aside as improper and/or as against public policy, the decision of the Beth Din dated May 29, 2007.
In the initial order to show cause and subsequent papers, Ilowitz, duplicating many of the arguments raised in the companion matter as set forth above, contends that the Beth Din's Award of January 2006, rendered in Grossman's favor, which was confirmed by the entry of the judgment on default, was confirmed in its entirety, thus providing the Beth Din with the authority to divest Grossman of the proceeds thereof should his conduct, in the eyes of the Beth Din, warrant a forfeiture.
DISCUSSION
In view of the similarity of the issues raised in the motions filed by Ilowitz in 2006, and subsequently in 2007, under Grossman v. Ilowitz (6268/06), the court finds the earlier undecided motion to be moot, and will consider it as part of the later set of papers.
In New York, an agreement to proceed before a beth din is treated as an agreement to arbitrate ( see Spilman v. Spilman, 273 A.D.2d 316 [2000];Erber v. Goldstein, 195 Misc.2d 792 [App Term 2003] ). Under CPLR 7511(b)(1), an arbitration award may be vacated only if the rights of a party were prejudiced by: (i) corruption, fraud, or misconduct in procuring the award; or (ii) partiality of an arbitrator; or (iii) the arbitrator exceeded his or her power or failed to make a final and definite award; or (iv) the arbitration did not follow the proper procedure (CPLR 7511[b]; see Matra Bldg, Corp. v. Kucker, 2 AD3d 732, 733 [2003];see also Murray v. Cornette, 2008 N.Y. Slip Op 50786[U] [2008] ). The burden of proof that an award has been imperfectly rendered or is the result of fraud, or is subject to vacatur on any other ground enumerated within CPLR 7511(b), rests upon the petitioner ( see Rose v. J.J. Lowrey & Co., 181 A.D.2d 418 [1992] )
The parties' agreement to arbitrate was valid
The arbitration proceeding at issue in the case at bar was commenced by an agreement between the parties to vest the Beth Din with extraordinary and sweeping powers. Citing, in their agreement, a designated dispute surrounding certain commissions, they expressly referred “all disputes and matters in controversy whatsoever between them [in any way connected or arising out of the above mentioned controversy] to [the panel]” for a final and binding determination under a fully-explicated set of rules and procedures “customary at a Din Torah.” In addition to agreeing to permit the Beth Din to render a decision in the event that one of the parties failed to appear at a scheduled hearing, the parties conferred to the Beth Din (1) the power to issue such intermediate decisions or orders as the panel were to find necessary, as well as to add to, amend, change or clarify a decision, and (2) jurisdiction over all matters related to their dispute (such relationship to be determined by the Beth Din) until the making of a final decision.
Grossman's challenge to the decision-making powers of the Beth Din under this agreement focuses, in part, on the purported violation of public policy. Such contention is devoid of merit. Courts will not invoke the public policy limitation on an arbitrator's power unless that policy involves strong and substantial public issues (Matter of Silverberg, 75 A.D.2d 817 [1980] ), “almost invariably involving an important constitutional or statutory duty or responsibility” (Matter of Port Jefferson Sta. Teachers Assn. v. Brookhaven–Comsewogue Union Free School Dist., 45 N.Y.2d 898, 899 [1978] ). No such concern has been identified here, nor is there any challenge raised as to the validity of the agreement ( see Manos v. Interbank of New York, 202 A.D.2d 403 [1994] ). Accordingly, as a threshold matter, the court determines that the parties freely and voluntarily agreed to be bound by the final determination of the Beth Din ( see Dinnerstein v. Shapiro, 147 Misc. 37 [App Term 1933] ).
Ilowitz' motion to vacate the Order and Judgment and Dismiss the Petition
CPLR 5015(a) provides that “[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct, upon the ground of: (5) reversal, modification or vacatur of a prior judgment or order upon which it is based. A party seeking to vacate an order entered upon default is required to demonstrate both a reasonable excuse for the default and the existence of a potentially meritorious cause of action or defense (see CPLR 5015[a][1]; Cooney v. Cambridge Mgt. & Realty Corp., 35 AD3d 522 [2006];Tyberg v. Neustein, 21 AD3d 896 [2005];Carnazza v. Shoprite of Staten Is., 12 AD3d 393 [2004] ). In 6268/06, Ilowitz, alleging both non-service and substantive infirmities in support of the motion to vacate the Order and Judgment, has raised sufficient grounds to make out a prima facie showing of a meritorious defense ( see Bergen v. 791 Park Avenue, 162 A.D.2d 330 [1990] ). Said motion was unopposed on the record, and the court rejects any excuse, based upon a strained and self-serving interpretation of this court's ruling, proffered by Grossman for failing to interpose opposition. Accordingly, the court vacates the Order and Judgment that was entered July 7, 2006, whereby the Award of January 19, 2006 was confirmed ( see Surat Realty v. Brissett, 15 Misc.3d 144[A] [App Term 2007]; NPC Co., Inc. v. South Bronx Human Development, 2001 N.Y. Slip Op 40492[U] [App Term 2001] ).
Even if the court were to accept Grossman's contentions and deny Ilowitz' motion to vacate the Judgment, there is no question, despite Grossman's strained argument with respect to the meaning of the court's order, that the Beth Din's Second Award of January, 2006 was not a final award. In the first place, as made clear by the Beth Din in the text of its subsequent award of May 29, 2007, plaintiff had been enjoined by previous orders from proceeding with any enforcement of the [previous Awards] until a final decision and determination of all matters in dispute was ordered by the Beth Din” (emphasis provided). Secondly, the Beth Din clearly retained jurisdiction pursuant to the powers with which it was vested under the parties' binding agreement when it (a) enjoined Israel Grossman from engaging in certain conduct, (b) advised the parties that any question relative thereto was to be presented to the Beth Din, and (c) advised the parties that the monetary award was subject to forfeiture. “An award is deficient in this regard and subject to vacatur ... if it leaves the parties unable to determine their rights and obligations, if it does not resolve the controversy submitted or if it creates a new controversy” (Meisels v. Uhr, 79 N.Y.2d 526, 536 [1992], citing Hiscock v. Harris, 74 N.Y. 108, 113 [1878];Matter of Guetta [Raxon Fabrics Corp.], 123 A.D.2d 40, 44 [1987] ). Although the Beth Din's award in Meisels was found by the Court have sufficiently set forth the parties' rights and obligations (Meisels, 79 N.Y.2d at 536 [“(t)he Beth Din's reservation of jurisdiction concerned only potential disputes that might arise, not because of any indefiniteness in the award, but because of the nature of the assets in issue or because of the parties' intransigence”] ), the same result cannot ensue here, where the language of the disputed award clearly communicated that the very substance of the Award was subject to review and forfeiture ( see Board of Educ. of Dover Union Free School Dist. v. Dover–Wingdale Teachers' Ass'n, 95 A.D.2d 497, 498 [1983] [ “An arbitrator may, absent any express limitation, retain jurisdiction to resolve a dispute”]; see also Adelstein v. Thomas J. Manzo, Inc., 61 A.D.2d 933 [1978] [where, by terms of the award, the arbitrator retained jurisdiction over question of back pay due to petitioner, award was not a final determination, and petition for confirmation should have been dismissed] ).
Finally, even if the Order and Judgment were permitted to stand, Grossman's distorted contention that the court only confirmed the monetary aspect, but not the totality, of the Beth Din's award, is rejected, since same would amount to a sua sponte modification of the award on this court's own motion ( see Schlesinger v. Schlesinger, 21 AD3d 942 [2005] ). In making said finding, the court notes that Grossman sought confirmation of the entire award.
Accordingly, the court (1) grants that branch of Ilowitz' motion to the extent of vacating, pursuant to CPLR 5015(a)(5), the Order Directing Judgment entered on May 24, 2006, and the Judgment dated and entered on June 7, 2006, and (2) denies Grossman's motion to compel compliance.
The Award of May 29, 2007 was a Final Award
As correctly noted by Ilowitz, the parties empowered the Beth Din, by the terms of their Arbitration Agreement, to render multiple awards. The Award of May 29, 2007, whereby the arbitrators disposed of all considerations and objects, thus became the Final Award ( see Polednak v. Country–Wide Ins. Co., 153 A.D.2d 930 [1989] ).
By virtue thereof, as well as by virtue of the substantive law in New York, any contention that the Final Award that was issued by the Beth Din is invalidated by (a) lack of jurisdiction, (b) a violation of public policy, or (c) a procedural flaw,
is devoid of merit. Indeed, it is well settled that “this State favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties” ( Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co., 37 N.Y.2d 91, 95 [1975];accord 166 Mamaroneck Ave. v. 151 East Post Rd., 78 N.Y.2d 88, 93 [1991] [arbitration is a favored method of dispute resolution in New York] ). Hence, “[j]udicial review of an arbitrator's award is extremely limited' ( Pearlman v. Pearlman, 169 A.D.2d 825, 826 [1991] ), and a reviewing court may not second-guess the fact-findings of the arbitrator” ( Matter of Liberty Mut. Ins. Co. v. Sedgewick, 43 AD3d 1062, 1063 [2007] ). When parties agrees to submit a dispute to arbitration, they thereby agree to abide by the rules of chosen arbitration forum ( see Allstate Ins. Co. v. Ben–Ari, 228 A.D.2d 458 [1996];Berman v. Shatnes Laboratory, 43 A.D.2d 736 [1973] ). In addition, “unless the agreement provides to the contrary, an arbitrator is not bound by principles of substantive law or by rules of evidence but “may do justice as he sees it, applying his own sense of law and equity to the facts as he finds them to be” ‘ ( Brown & Williamson Tobacco v. Chesley, 7 AD3d 368, 372 [2004], quoting Azrielant v. Azrielant, 301 A.D.2d 269, 275 [2002], quoting Matter of Silverman [Benmor Coats], 61 N.Y.2d 299, 308 [1984];accord Mikel v. Scharf, 105 Misc.2d 548, [1980],affd85 A.D.2d 604 [1981] [errors of fact or law by arbitrators does not suffice to vacate an arbitral award] ).
Grossman's challenge to the Third Award on the ground that the signatures of two, rather than three, arbitrators thereon render the award invalid, is devoid of merit, since, under CPLR 7506(c), “The hearing shall be conducted by all arbitrators, but a majority may determine any question and render an award” ( see Schall v. Congregation Tifireth Israel, 236 N.Y.S.2d 851[1962];Meer Corp. v. Farmella Trading Corp., 14 Misc.2d 242, 244 [1958] ). Moreover, the Final Award was signed by the full panel of the three arbitrators.
Finally, the Beth Din was vested with full authority and discretion to grant equitable relief, including the conditions and confidentiality provision contained in the Award of August 4, 2005, which served as a fulcrum for the events leading to the forfeiture. “In general, except where prohibited by the plain and express terms of the submission, an arbitrator is empowered to grant any relief reasonably fitting and necessary to a final determination of the matter submitted to him, including legal and equitable relief” (Board of Educ. of Dover–Wingdale, 95 A.D.2d at 502).
In accordance with the foregoing, (1) the court grants Ilowitz' motion made under Index No. 19552/07 for an order, pursuant to CPLR 7510, confirming the Final Award of May 29, 2007, and directs entry of judgment thereon, and (2) denies Grossman's cross-motion to vacate the arbitration decision.
The foregoing constitutes the decision and order of the court.