Aksman v. Greenwich Quantitative Research LP

• Decision Date: 28 September 2021
• Docket Number: 20 Civ. 8045 (PAE)
• Citation: 563 F.Supp.3d 139
• Parties: Michael AKSMAN, Petitioner, v. GREENWICH QUANTITATIVE RESEARCH LP, Respondent. Greenwich Quantitative Research LP, Cross-Petitioner, v. Michael Aksman, Cross-Respondent.
• Court: U.S. District Court — Southern District of New York

563 F.Supp.3d 139

Michael AKSMAN, Petitioner,

v.GREENWICH QUANTITATIVE RESEARCH LP, Respondent.

Greenwich Quantitative Research LP, Cross-Petitioner,

v.Michael Aksman, Cross-Respondent.

20 Civ. 8045 (PAE)

United States District Court, S.D. New York.

Signed September 28, 2021

Adam Paskoff, Paskoff & Tamber, LL, New York, NY, for Petitioner.

Serine Rami Consolino, Aegis Law Group, Washington, DC, for Respondent.

PAUL A. ENGELMAYER, District Judge:

This decision resolves competing motions arising out of a more than $4 million arbitral award (the "Award"). The Award was entered in favor of an asset management firm, Greenwich Quantative Research LP ("Greenwich"), against Michael Aksman ("Aksman"), whom it hired as a senior portfolio manager but whom it later accused of fraud. Aksman, who did not participate in the arbitration, has petitioned to vacate the Award. He argues that he was not served with notice of the arbitration, and that the parties’ agreement containing a mandatory arbitration clause was void and ineffective at the time of arbitration. Greenwich opposes that petition and has cross-petitioned to confirm the Award. For the following reasons, the Court denies Aksman's petition to vacate the Award and grants Greenwich's cross-petition to confirm it.

I. Background

A. Factual Background¹

1. Events Preceding the Arbitration

Greenwich is a Delaware-based asset management firm that specializes in trading global equities. Award at 1. In 2017, Greenwich hired Aksman through a recruiter to be the senior portfolio manager for a new fund, which Greenwich planned to launch in late 2019. Id. ; see also id. at 4. Aksman's credentials, as presented to Greenwich, included a master's degree in Computational Mathematics from the Massachusetts Institute of Technology and a Ph.D. in Theoretical Physics from the Soviet Academy of Sciences. Id. at 4–5. His resume also detailed years of experience in trading equities. Id. at 5. Aksman also represented to Gene Reilly ("Reilly"), Greenwich's chief investment officer, that he was then managing a $10 million personal equity account housed at Wedbush Securities ("Wedbush") on behalf of Stefano Brocco ("Brocco"), a partner at A.R.T. Advisors. Id. In support of this representation, Aksman gave Reilly purported Wedbush Equity Summary Reports, which reflected highly successful trading in Brocco's account. Id. Aksman also provided Greenwich with purported tax returns consistent with the compensation he claimed to be earning while managing Brocco's account. Id. Aksman represented to Reilly that he was unable to provide audited financials from the Brocco account because his investment advisory agreement with Brocco prohibited such disclosure. Id. This seemed plausible to Reilly. Id.

Greenwich and Aksman entered into two agreements governing Aksman's employment: an Employment Agreement and a Restrictive Covenants Agreement ("RCA"). The operative versions of each were dated March 7, 2019. Id. ; see also RCA.

The Employment Agreement set out the terms of Aksman's compensation and benefits. Important here, it specified that Aksman's employment would commence only after Greenwich "rais[ed] sufficient investor capital to support a minimum of $250,000,000 Gross Market Value (‘GMV’) in trading positions (‘the Capital Raise’) as of June 30, 2019 (the ‘Closing Date’)." Employment Agreement at 1. That date was later extended by agreement to August 31, 2019. See Reilly Decl., Ex. E.

The RCA imposed certain confidentiality and non-compete provisions, and in addition, provided for binding arbitration "[i]n consideration of Employee's employment or engagement with [Greenwich]." See RCA § 8(b)(1). Like the Employment Agreement, the RCA's continued validity was "conditioned upon the Employee's commencing employment with [Greenwich]." Id. § 8(i). The RCA specified that if Aksman did not commence employment, the RCA would be "void ab initio." Id.

From 2017 and until his fraud was discovered in 2019, Aksman repeatedly touted to Greenwich and potential investors the success of the Brocco account that he was purportedly managing. See Award at 6. For example, at a July 2019 meeting, Aksman shared details about the Brocco account with representatives from Morgan Stanley Alternative Investment Partners. Id. Apart from Aksman's representations to investors, Greenwich used the Brocco account's purportedly successful performance to promote the fund to some 70 prospective investors. Id. Aksman also provided purported updates about the Brocco account to Greenwich, including by emailing monthly trading updates. Id. at 5.

Aksman's claims about the Brocco account unraveled during summer 2019, after Greenwich hired James Alpha ("Alpha"), an investment advisor, to assist in marketing the fund. Alpha sought to create an account that would track Aksman's trading in the Brocco account, so that Greenwich could generate an audited record of Aksman's performance. Id. at 6–7. Alpha sought to use Wedbush, the same prime broker Aksman claimed to use for the Brocco account. But, on September 10, 2019, when Reilly and Alpha's representatives called Wedbush and asked to establish an account with the same parameters as the Brocco account, Sean Trager ("Trager"), a Wedbush Vice President, informed them that no such account existed in Wedbush's systems. Id. at 7.

Aksman gave various explanations for the missing account. Each attempt to cover his tracks contradicted the previous one. Aksman first claimed that Trager was mistaken. Id. Then Aksman claimed that Trager was barred from discussing the account due to privacy considerations. Id. On September 23, 2019, Greenwich obtained an email exchange between Trager and Aksman, in which Trager wrote, "[y]ou know full well there is no active account [at Wedbush] and that more specifically there is no cash on deposit or positions." Id. On October 3, 2019, during a conference call with Reilly and others, Aksman stated that the account had been closed more than one year earlier. Id. Later, in an October 12, 2019 email, Aksman said that the account had been closed at the end of 2018. Id. In fact, as eventually emerged, neither Aksman nor his company had maintained any equity account at Wedbush during the preceding five years. Id. at 8.

Greenwich's fund ultimately did not raise the requisite $250 million that would have triggered Aksman's employment with the fund, pursuant to the Employment Agreement.²

2. The Arbitration

On November 8, 2019, Greenwich submitted to Judicial Arbitration & Mediation Services ("JAMS") a demand for arbitration ("Demand") seeking approximately $10 million in damages from Aksman. Id. at 2. The Demand alleged that Aksman had committed a "two-year-long fraud against Greenwich, in which Aksman repeatedly deceived Greenwich about his resume and track record, and falsified return summaries for an equity investment account he claims to have managed—but which, as it appears, does not actually exist." Consolino Decl., Ex. E, at 1. Greenwich asserted that the RCA, signed by both Greenwich and Aksman, "contain[ed] the parties’ explicit agreement to arbitrate." Id. at 2.

Specifically, the Demand quoted from RCA § 8(b):

(i) In consideration of Employee's employment or engagement with the Company, his promise to arbitrate all employment or service related disputes and Employee's receipt of the compensation and other benefits paid to Employee by the Company, at present and in the future, EMPLOYEE AGREES THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, STOCKHOLDER OR BENEFIT PLAN OF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, OR RESULTING FROM EMPLOYEE'S EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF EMPLOYEE'S EMPLOYMENT WITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION. Employee agrees to arbitrate such disputes, and thereby agrees to waive any right to a trial by jury, including any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the New York State Labor Law, claims of harassment, discrimination or wrongful termination and any statutory claims. Employee further understands that this agreement to arbitrate also applies to any disputes that the Company may have with Employee.

(ii) Employee agrees that any arbitration will be administered by Judicial Arbitration & Mediation Services ("JAMS"), or its successor, pursuant to its Comprehensive Arbitration Rules and Procedures and JAMS appellate procedures (such rules and procedures, the "Procedure") before a sole arbitrator who shall be a lawyer, Employee agrees that the arbitration will be conducted in New York, New York. Employee agrees that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Employee also agrees that the arbitrator shall have the power to award any remedies, including attorneys’ fees and costs, available under applicable law and that any decision or judgment of the arbitrator will be enforceable in any court of competent jurisdiction. Employee agrees that the decision of the arbitrator shall be in writing and shall be binding upon Employee and the Company.

See RCA § 8(b)(i), (ii). The Demand asserted one claim—fraud—and sought $1.2 million in compensatory damages; $2.9 million in lost profit damages; $5 million in punitive damages; attorneys’ fees and costs; and pre-judgment interest.

In light of Aksman's claim here that he was never served with notice of the Demand, the Court sets out the occasions on which, according to Greenwich, see Greenwich Opp. at 6–8; Award at 2–3, 9,...