Opinion
Index No. 522107/2023
11-24-2023
Joel Kaufman, Petitioner, v. Haim Azran and Meir Transport LLC, Respondents.
Unpublished Opinion
AARON D. MASLOW, Justice of the Supreme Court of the State of New York.
The following numbered papers were read on this petition:
NYSCEF Document Numbers 1-34.
Upon the foregoing papers, and the Court having elected to determine the within petition on submission pursuant to 22 NYCRR 202.8-f and IAS Part 2 Rules, Part I (Motions & Special Proceedings), Subpart C (Appearances), Section 6 (Personal Appearances) ("All motions presumptively are to be argued in person unless the Court informs the parties at least two days in advance that it has made a sua sponte determination that a motion will be determined on submission.), " and Part I (Motions & Special Proceedings), Subpart A (Introduction), Section 1 (Provisions Applicable to Special Proceedings) ("Unless otherwise provided specifically with respect to special proceedings, references to motions in the within Part Rules shall be deemed to include special proceedings."), and due deliberation having been had thereon, It is hereby determined as follows:
This is an Article 75 proceeding to confirm an arbitration award by a beit din. The parties proceeded to arbitration with respect to a dispute over their ownership of shares in Respondent Meir Transport LLC, a transportation company. They did not get along and it was contemplated that one would buy out the other's shares.
Besides seeking a judgment confirming the arbitration award, Petitioner seeks other, ancillary relief as discussed below.
The Court must review the petition in a special proceeding to determine whether it makes out a prima facie case for the relief requested through admissible evidence (see American Tr. Ins. Co. v Ortho City Servs. Inc., 79 Misc.3d 1204 [A], 2023 NY Slip Op 50527[U], *4-5 [Sup Ct, Kings County 2023]).
Here, Petitioner made out a prima facie case of entitlement to confirmation of the Beit Din's final ruling arbitration award of Bais Hora'ah Eitz Chaim dated May 4, 2023 (see NYSCEF Doc Nos. 1, 3-11). This has not been sufficiently rebutted by Respondents.
Respondents argue in their papers that Petitioner never signed a written agreement containing terms for share ownership of Meir Transport LLC, and that an oral agreement regarding same was never assented to by Petitioner. A written "settlement agreement" (unsigned) included terms outside those worked out by the parties. Moreover, Petitioner failed to comply with the obligations imposed upon him as per the settlement. Since there was no agreement, argues Respondent, there was nothing for the beit din to rule upon. Further, the oral agreement did not satisfy the CPLR's requirements with respect to stipulations.
Much of Respondents' argument can be distilled in the following statements of their counsel:
• "[The beit din] merely took the word of one of the parties that an agreement had been finalized and was being defaulted" (NYSCEF Doc No. 23 ¶ 28).
•"As the documents show there was never a bona fide agreement between the parties, there was no basis for the arbitral body to find that Respondents were in violation of an agreement that never came into being (id. ¶ 29).
Respondent himself averred:
•"Rather than following our agreement, Mr. Kaufman returned to the Beth Din, claiming that I was in default by failing to make payments as agreed under our verbal agreement. I had tried to communicate several times with the Beth Din, unfortunately to no effect, that the intended agreement was neither executed, consummated nor performed by Kaufman. Also that Kaufman blocked my future performance by his refusal to either transfer his shares or to otherwise to sign off on loan agreements as an owner of the business, that would allow him to finally be paid." (NYSCEF Doc No. 24 ¶ 14.)
Respondent submitted an audio file of an oral agreement reached on February 10, 2022 ("buyout agreement") (NYSCEF Doc No. 25). The beit din referred to this agreement in their final ruling (see NYSCEF Doc No. 26).
While Respondent seeks dismissal of the petition, it seeks alternatively that the Court declare that Petitioner is in default with compliance on his part with the obligations imposed on him - if the Court finds that there was a binding agreement between the parties (see NYSCEF Doc No. 23 ¶¶ 29, 31).
"A written agreement to submit any controversy thereafter arising or any existing controversy to arbitration is enforceable without regard to the justiciable character of the controversy and confers jurisdiction on the courts of the state to enforce it and to enter judgment on an award. In determining any matter arising under this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute." (CPLR 7501.)
While not explicitly stating in the notice of cross-motion that he seeks to vacate the subject final arbitration award, in effect Respondent seeks this inasmuch as he opposes confirmation of the award on the ground that "no contract between the parties was formed" (NYSCEF Doc No. 22 at 1). He also sought a court direction that Petitioner return $1.5 million in "good faith advances" made by Respondent to Petitioner in expectation of Petitioner's signing and performing on a transfer of shares agreement (id.).
The grounds for vacating an arbitration award where there was participation in the arbitration are delineated in CPLR 7511 (b) (1):
(i) corruption, fraud or misconduct in procuring the award; or
(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or
(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or
(iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.
The Court finds that none of these apply here. The Court notes that the parties executed an "Agreement to Submit to Arbitration" on May 3, 2021 (see NYSCEF Doc No. 4), and that the final arbitration ruling on May 4, 2023 embodied the beit din's understanding of the February 10, 2022 buyout agreement.
Since the parties devolved jurisdiction on the beit din to "resolve this controversy, " described as "Proper compensation and owner distribution for Meir Transport" (NYSCEF Doc No. 4), this Court finds that the May 4, 2023 final arbitration ruling must be sustained. "An arbitrator's award generally will not be set aside based on an error of law or fact or misapplication of the substantive law. Falzone v. New York Central Mutual Fire Ins. Co., supra, 15 N.Y.3d at 534, 914 N.Y.S.2d at 69, 939 N.E.2d at 1199; New York City Transit Auth. v. Transport Workers' Union of America, Local 100, AFL-CIO, supra, 6 N.Y.3d at 336, 812 N.Y.S.2d at 415, 845 N.E.2d at 1245. Nor will courts set aside an award where the arbitrator's interpretation of the parties' contract misconstrues or disregards its plain meaning. Silverman v. Benmor Coats, Inc., supra, 61 N.Y.2d at 308, 473 N.Y.S.2d at 779, 461 N.E.2d at 1266." (Vincent C. Alexander, Prac Commentaries, McKinney's Cons Laws of NY, CPLR C7511:5.)
In terms of whether the parties had entered into a mutually agreed upon contract - whether in writing or orally - before the beit din's final ruling, this cannot be disputed in this Article 75 proceeding. There clearly was a dispute between the parties concerning their co-ownership of Respondent Meir Transport LLC, which they mutually submitted to the beit din for adjudication. Any errors in how the beit din construed any agreement, whether orally or in writing, including the February 10, 2022 buyout agreement, and even whether there was a legally binding agreement, are legally irrelevant. By agreeing to arbitration and without any specifically enumerated limitation in the arbitration agreement, a party cannot claim after a settlement that the arbitration panel lacked authority (see State of New York v Philip Morris Inc., 42 A.D.3d 353 [1st Dept 2007]). A broad arbitration clause should be given the full effect of its wording (see Weinrott v Carp, 32 N.Y.2d 190 [1973]). Once there is an agreement to arbitrate, it is for the arbitrators to determine all issues of fact and law (see Exercycle Corp. v Maratta, 9 N.Y.2d 329 [1961]).
The said arbitration award is confirmed. As per the said arbitration award, this Court finds that
(a) Petitioner Joel Kaufman and Respondent Haim Azran remain equal partners in Respondent Meir Transport LLC. Respondent Azran is required to give Petitioner Kaufman full and unhindered access to all bank accounts, accounting, contracts, files, etc. Petitioner Kaufman shall be granted access to all service providers.
(b) All decisions shall me made jointly. Both Petitioner Kaufman and Respondent Azran are required to act in the best interest of the company. No partner may compete directly or indirectly with the company and its interests.
(c) Respondent Azran is entitled to a wage in the amount of one thousand dollars from February 10, 2022 until July 25, 2022, for his work for the company. He shall receive no wages from July 25, 2022 until he fully complies with the ruling of the aforesaid beit din.
(d) Respondent Azran shall pay an additional amount of $250,000.00 to Petitioner Kaufman for the default penalty as per their agreement.
(e) The parties shall reach out to the aforesaid beit din regarding all disputes, questions, and interpretations of the ruling, and any such matter will further be adjudicated by the aforesaid beit din upon a supplemental application.(See NYSCEF Doc No. 7.)
Petitioner failed to establish on a prima facie basis that a temporary receiver should be appointed. "Courts proceed with 'extreme caution' in determining whether to appoint a temporary receiver because of the drastic incursion it imposes on the defendant's interests prior to determination of the underlying action on the merits. Hahn v. Garay, 1976, 54 A.D.2d 629, 387 N.Y.S.2d 430 (1st Dep't). The appointment must be 'necessary' to protect the property from waste, dissipation or disappearance. In re Armienti, 2003, 309 A.D.2d 659, 661, 767 N.Y.S.2d 2, 4 (1st Dep't); Nelson v. Nelson, 99 A.D.2d 917, 918, 473 N.Y.S.2d 40, 41 (3d Dep't). Thus, courts require clear and convincing evidence of the danger of irreparable loss or damage. See, e.g., McBrien v. Murphy, 1989, 156 A.D.2d 140, 548 N.Y.S.2d 186 (1st Dep't). They are particularly hesitant to appoint a receiver with respect to a profitable, ongoing business. See, e.g., Martin v. Donghia Associates, Inc., 1980, 73 A.D.2d 898, 424 N.Y.S.2d 222 (1st Dep't)." (Vincent C. Alexander, Prac Commentaries, McKinney's Cons Laws of NY, CPLR 6401.)
"Moreover, '[t]he appointment of a temporary receiver is an extreme remedy resulting in the taking and withholding of possession of property from a party without an adjudication on the merits' (Vardaris Tech, Inc. v Paleros Inc., 49 A.D.3d 631, 632 [internal quotation marks omitted]; see Schachner v Sikowitz, 94 A.D.2d 709). Accordingly, a temporary receiver should only be appointed where there is a clear evidentiary showing of the necessity for the conservation of the property at issue and the need to protect a party's interests in that property (see Vardaris Tech, Inc. v Paleros Inc., 49 A.D.3d at 632; Singh v Brunswick Hosp. Ctr., 2 A.D.3d 433, 434-435; Matter of Armienti & Brooks, 309 A.D.2d 659, 661; Lee v 183 Port Richmond Ave. Realty, 303 A.D.2d 379, 380; Modern Collection Assoc. v Capital Group, 140 A.D.2d 594; Schachner v Sikowitz, 94 A.D.2d at 709). Here, the record did not clearly establish the necessity to conserve the partnership's assets, or the need to protect any of the partners' interests in that property (see Mandel v Grunfeld, 111 A.D.2d 668)." (Quick v Quick, 69 A.D.3d 828, 829 [2d Dept 2010].)
In the instant proceeding, Petitioner failed to demonstrate on a prima facie basis that there was a need to conserve the property of Respondent Meir Transport LLC or a need to protect Petitioner Kaufman's interest. There was no showing that "there is danger that property would be removed from the state, or lost, materially injured or destroyed" (CPLR 6401 [a]). Further, there was no showing through clear and convincing evidence (see Board of Mgrs. of Nob Hill Condominium Section II v Board of Mgrs. of Nob Hill Condominium Section I, 100 A.D.3d 673 [2d Dept 2012]). The provision for an accounting as per the Partnership Law is denied, inasmuch as Respondent is a limited liability company.
To obtain an accounting, it must be shown that there was some wrongdoing with respect to the fiduciary relationship concerning property in which the plaintiff has an interest and a demand for an accounting was refused (see LMEG Wireless, LLC v Farro, 190 A.D.3d 716 [2d Dept 2021]). Petitioner has not shown this on a prima facie basis.
Additionally, since the beit din's award required the parties to "reach out" to it "regarding all disputes or questions, interpretations etc. arising from this ruling and the matter, " which will be "adjudicated by the B"D" (NYSCEF Doc No. 7 [emphasis added]), the appointment of a temporary receiver and an accounting must be sought from the beit din in the form of a supplemental application to it (see Matter of Board of Educ. of Dover Union Free School Dist v Dover-Wingdale Teachers' Assn., 95 A.D.2d 497 [2d Dept 1983]).
Petitioner failed to submit timesheets regarding the legal work performed. In the absence of such a submission, an attorney's fee of $2,000.00 is deemed appropriate.
Accordingly, it is hereby ORDERED that the Clerk SHALL ENTER JUDGMENT as follows:
(1) The final ruling arbitration award of the beit din of Bais Hora'ah Eitz Chaim dated May 4, 2023 in connection with the dispute between Joel Kaufman and Haim Azran regarding Meir Transport LLC is CONFIRMED.
(2) It is DECLARED that:
(a) Petitioner Joel Kaufman and Respondent Haim Azran remain equal partners in Respondent Meir Transport LLC. Respondent Azran is required to give Petitioner Kaufman full and unhindered access to all bank accounts, accounting, contracts, files, etc. Petitioner Kaufman shall be granted access to all service providers.
(b) All decisions shall me made jointly. Both Petitioner Kaufman and Respondent Azran are required to act in the best interest of the company. No partner may compete directly or indirectly with the company and its interests.
(c) Respondent Azran is entitled to a wage in the amount of one thousand dollars from February 10, 2022 until July 25, 2022, for his work for the company. He shall receive no wages from July 25, 2022 until he fully complies with the ruling of the aforesaid beit din.
(d) Respondent Azran shall pay an additional amount of $250,000.00 to Petitioner Kaufman for the default penalty as per their agreement.
(e) The parties shall reach out to the aforesaid beit din regarding all disputes, questions, and interpretations of the ruling, and any such matter will further be adjudicated by the aforesaid beit din upon a supplemental application.
(3) An appointment by the Court of a temporary receiver is DENIED.
(4) The ordering by the Court of an accounting is DENIED.
(5) Petitioner is AWARDED $2,000.00 as attorney's fees.
(6) Petitioner is AWARDED costs, disbursements, and interest as taxed and fixed by the Clerk upon presentment of proper proof of same.