Americredit Fin. Services v. Oxford Mgmt. Servs.

• Decision Date: 18 September 2008
• Docket Number: No. 07-CV-3948 (JFB)(MLO).,07-CV-3948 (JFB)(MLO).
• Citation: 627 F.Supp.2d 85
• Parties: AMERICREDIT FINANCIAL SERVICES, INC., Plaintiff, v. OXFORD MANAGEMENT SERVICES, Defendant.
• Court: U.S. District Court — Eastern District of New York

627 F.Supp.2d 85

AMERICREDIT FINANCIAL SERVICES, INC., Plaintiff, v. OXFORD MANAGEMENT SERVICES, Defendant.

No. 07-CV-3948 (JFB)(MLO).

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

September 18, 2008.

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Jonathan D. Deily, Esq. and Richard Cromwell Maider, Esq. of Deily, Mooney & Glastetter, LLP, Albany, NY, for the plaintiff.

John G. Poli, III, Esq., of John Poli P.C., Northport, NY, for the defendants.

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge:

Plaintiff AmeriCredit Financial Services, Inc. (hereinafter, "AmeriCredit" or "plaintiff") commenced this action seeking to confirm an Arbitration Award pursuant to Section 9 of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Defendant Oxford Management Services (hereinafter, "OMS" or "defendant") cross-moves to vacate the Arbitration Award. Specifically, OMS alleges that the arbitrator (1) exceeded his powers in dismissing defendant's counterclaim, and (2) manifestly disregarded the law by ignoring evidence and drawing an adverse inference against the defendant. The Court disagrees and, for the reasons set forth below, the Court grants Ameri-Credit's motion to confirm the arbitration award and denies OMS's cross-motion to vacate the arbitration award.

I. BACKGROUND

A. Facts

The facts are taken from the record submitted by the parties and are undisputed unless otherwise noted.

1. The Recovery Services Agreement

On November 1, 2004, AmeriCredit and OMS entered into a Recovery Services Agreement ("RSA") under which Ameri-Credit retained OMS to perform collection activities on certain of AmeriCredit's delinquent accounts. (Petition ¶ 6; Pl.'s Exh. A ("RSA").) Section 14 of the RSA requires, among other things, that the parties resolve any dispute that could not be resolved by negotiation through final and binding arbitration in accordance with the American Arbitration Association (hereinafter, "AAA"). (RSA, at 9.) Specifically, Section 14 provides as follows:

Any dispute arising out of or related to this Agreement, which cannot be resolved by negotiation, must be settled by final and binding arbitration in accordance with the American Arbitration Association ("AAA") Rules and Procedures. The cost of arbitration, including fees and expenses of the arbitrator, will be shared equally by the parties unless the arbitration award provides otherwise. Each party will bear the costs of preparing and presenting its case. The parties agree that this provision and the arbitrator's authority to grant relief is subject to the United States Arbitration Act, 9 U.S.C. 1-16 ET SEQ. ("USAA"), THE PROVISIONS OF THIS agreement, and the ABA-AAA Code of Ethics for Arbitrators in Commercial Disputes. The parties agree that the arbitrator has no power or authority to make awards or issue orders of any kind except as expressly permitted by the Agreement, and in no event may the arbitrator have the authority to make any award that provides for punitive or exemplary damages. The Arbitrator's decision must follow the plain meaning of the relevant documents, and will be final and binding. The award may be confirmed and enforced in any court of competent jurisdiction. All post-award proceedings will be governed by the USAA. This provision should not be construed so as to prohibit either party from seeking preliminary or permanent injunctive relief in any court of competent jurisdiction.

(RSA, at 9.)

2. The Dispute

The following dispute formed the basis for the arbitration:

By correspondence dated August 4, 2006, AmeriCredit terminated the RSA, which would become effective August 8, 2006. (Stipulation of Uncontested Facts ¶ 25; Maider Aff., Pl.'s Exh. B.) OMS received notice of the August 4, 2006 termination on August 7, 2006. (Id. ¶ 26.) The notice directed OMS to cease all collection activities as of August 8 and make arrangements to return all accounts to AmeriCredit. (Id. ¶¶ 27-28.) The parties subsequently agreed that, notwithstanding the termination date, OMS would continue to service certain accounts (the "Retained Accounts") where OMS had either existing debtor promises to pay or debtor post-dated checks on the account.¹ (Id. ¶¶ 29-31.)

On October 26, 2006, AmeriCredit discovered that OMS continued to collect on recalled accounts. (Id. ¶ 37.) By letter dated October 26, 2006 (the "October 26 Letter"), AmeriCredit instructed OMS to cease collection efforts on the Retained Accounts and demanded that OMS remit all payments to AmeriCredit. (Id. ¶ 38.) The October 26 Letter also stated that AmeriCredit would not pay any commissions to Oxford on funds received on the Retained Accounts after October 26, 2006. (Id. ¶ 39.)

AmeriCredit and OMS were unable to consensually resolve a dispute regarding money due and owed under the Recovery Services Agreement for the period of time between August 8, 2006 and October 26, 2006.

3. The Arbitration

On December 14, 2006, AmeriCredit filed a Demand for Arbitration (the "Demand") against OMS with the AAA, seeking the recovery of monies due and owing under the RSA. (See Petition to Confirm ¶ 9; Pl.'s Exh. B.) AmeriCredit alleged that OMS breached the RSA by, among other things, (a) failing to remit money due and owing to AmeriCredit as required by the RSA; (b) settling collection accounts for less than 50% of the customer debt without written approval from AmeriCredit as required by Section 4 of the RSA; (c) improperly collecting on customer accounts after termination of the RSA; and (d) subjecting AmeriCredit to customer liability for unlawful collection practices under state and federal law. (Id.) OMS filed a counterclaim alleging that certain of the sum due to AmeriCredit should be "set-off" by money owed to OMS.²

The parties chose the Honorable Richard D. Simons (hereinafter, "the arbitrator") out of a roster of proposed arbitrators submitted by the AAA. (Petition to Confirm ¶ 11; Pl.'s Exh. C.) Following the appointment of the arbitrator, AmeriCredit requested and was granted permission by the arbitrator for the parties to take deposition testimony of potential fact witnesses prior to the arbitration hearing. (Def.'s Vacate Mem., at 2.)

a. The Motion to Dismiss the Counterclaim

On May 1, 2007, AmeriCredit moved to dismiss OMS's counterclaim, pursuant to N.Y.C.P.L.R. 3126(2) and (3), based upon the spoilation of evidence.³ AmeriCredit argued that defendant destroyed the financial records of its activities when the RSA was in force and in the months following the termination of the agreement. By decision dated June 25, 2007 (the "June 25 Decision"), the arbitrator granted Ameri-Credit's motion to dismiss defendant's counterclaim. (See June 25 Decision to Dismiss, Def.'s Exh. E.) Specifically, the arbitrator found, based upon the written submissions, that OMS "knowingly destroyed records necessary to resolve the disputes between the parties." (Id. at 2.)

b. The Arbitration Hearings

With respect to AmeriCredit's claims, Arbitrator Simons held hearings on July 30 and 31, 2007. (Petition to Confirm ¶ 13.) Both parties were present and offered evidence at those hearings. (Id.) Simons issued his arbitration award dated September 7, 2007 (hereinafter, the "Arbitration Award"), in which he awarded AmeriCredit monetary damages in the amount of $449,993.38.⁴ (Petition to Confirm ¶ 14, Pl.'s Exh. E ("Arbitration Award"), at 2.) In making the Arbitration Award, the arbitrator "t[ook] into consideration that Oxford violated its obligations under the contract in several respects." (Arbitration Award, at 2.) Specifically, the arbitrator found that:

Oxford has failed to transmit meaningful records of its activities following termination of the contract, thereby frustrating AmeriCredit's attempt to reconcile the records and Oxford's claims, that its employees deliberately destroyed records that could have resolved the parties' competing claims (and misled AmeriCredit about the destruction of such records), that it did so with the intention of frustrating AmeriCredit's claim and that it has improperly retained in its private accounts funds legally belonging to AmeriCredit in violation of its contract obligations. Accordingly I have resolved disputed questions of fact against Oxford.

(Id.)

The Arbitration Award constitutes a complete and final determination of all claims submitted to arbitration pursuant to the RSA. (Petition to Confirm ¶ 14.) AmeriCredit alleges that OMS has indicated that it does not intend to satisfy the Arbitration Award. (Pl.'s Mem., at 2.)

B. Procedural History

On September 20, 2007, AmeriCredit filed a motion in this Court seeking a judgment to confirm the Arbitration Award. On November 6, 2007, OMS cross-moved to vacate the Arbitration Award. AmeriCredit filed opposition papers to defendant's cross-motion on November 27, 2007. Defendant filed a reply on December 5, 2007.⁵

II. STANDARD OF REVIEW

The FAA represents a strong federal policy favoring arbitration agreements. "Congress enacted the FAA to replace judicial indisposition to arbitration with a `national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts.'" Hall Street Assocs., L.L.C. v. Mattel, Inc., ___ U.S. ___, 128 S.Ct. 1396, 1402, 170 L.Ed.2d 254 (2008) (quoting Buckeye Check Cashing Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006)). The enforcement of arbitration awards is guided by Section 9 of the FAA. Section 9 provides, in pertinent part:

"[A]t any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title...."

9 U.S.C. § 9.

Confirmation of an arbitration award under Section 9 of the FAA is generally "a summary proceeding that merely makes what is already a final arbitration award a...