Concourse Beauty School, Inc. v. Polakov

• Decision Date: 09 May 1988
• Docket Number: No. 87 Civ. 1712 (RJW).,87 Civ. 1712 (RJW).
• Citation: 685 F. Supp. 1311
• Parties: CONCOURSE BEAUTY SCHOOL, INC., Plaintiff, v. Michael P. POLAKOV and Design and Construct of South Florida, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

685 F. Supp. 1311

CONCOURSE BEAUTY SCHOOL, INC., Plaintiff, v. Michael P. POLAKOV and Design and Construct of South Florida, Inc., Defendants.

No. 87 Civ. 1712 (RJW).

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

May 9, 1988.

COPYRIGHT MATERIAL OMITTED

Rogovin & Golub, New York City (Benjamin J. Golub, of counsel), for plaintiff.

Leiby and Elder, Miami, Fla. (David R. Elder, of counsel) Blau, Kramer, Wactlar & Lieberman, P.C., Jericho, N.Y. (Edward S. Wactlar, of counsel), for defendants.

OPINION

ROBERT J. WARD, District Judge.

Plaintiff Concourse Beauty School, Inc. ("Concourse") has moved pursuant to section 10 of the Federal Arbitration Act, 9 U.S.C. § 10, (the "Act") to vacate an arbitration award entered on December 28, 1987. For the reasons that follow, plaintiff's motion is denied.

BACKGROUND

Concourse, a New York corporation originally commenced a federal action for fraud, breach of contract, and negligence against Design and Construct of South Florida, Inc. ("Design") and its principal, Michael Polakov. The suit was brought in the Southern District of New York predicating federal jurisdiction on diversity of citizenship.

Pursuant to an arbitration agreement contained in the parties' contract, defendants initiated an arbitration proceeding in Florida. Concourse subsequently moved this Court to stay the arbitration until the resolution of the federal lawsuit. On September 21, 1987, the Court denied plaintiff's motion, finding that the dispute fell within the contract's broad arbitration clause. On December 22, 1987, the arbitration panel awarded $119,630.52 to Design.

Plaintiff now moves to vacate the arbitration award pursuant to section 10 of the Federal Arbitration Act. Concourse asserts four grounds in support of its motion: (1) The arbitrators exceeded their authority by considering an oral agreement for additional work ("extras") not governed by the arbitration clause; (2) The arbitrators' refusal to grant a short postponement was improper; (3) The arbitrators exceeded their authority by awarding more damages than requested; and (4) The arbitrators exhibited evident partiality and bias in favor of defendants.

DISCUSSION

I. Subject Matter Jurisdiction

Before the Court can address the merits of the within motion, it must determine if it has subject matter jurisdiction over the motion to vacate and whether venue is proper in the Southern District of New York. Defendants claim that a Florida state court is the proper forum for review and confirmation of the arbitration award.¹ Plaintiff, on the other hand, contends that this Court has jurisdiction to review the arbitration award and that venue properly lies in the Southern District of New York.

Article 13 of the parties' American Institute of Architecture ("AIA") contract provides that judgment may be entered upon the arbitration award in accordance with applicable law in any court having jurisdiction thereof. The Court has satisfied the requirements for jurisdiction over this action under the Act in that there is both diversity of citizenship and a contract evidencing a transaction involving commerce. Moreover, even without such explicit contractual authority giving this Court the right to enter judgment, this Court would still have jurisdiction to evaluate the award. The Second Circuit has held that a court which orders arbitration retains jurisdiction to determine any subsequent application involving the same agreement to arbitrate. Smiga v. Dean Witter Reynolds, Inc., 766 F.2d 698, 705 (2d Cir. 1985), cert. denied, 475 U.S. 1067, 106 S.Ct. 1381, 89 L.Ed.2d 607 (1986) (citing Marchant v. Mead-Morrison Mfg. Co., 29 F.2d 40, 43 (2d Cir.1928), cert. denied, 278 U.S. 655, 49 S.Ct. 179, 73 L.Ed. 565 (1929)). A refusal to stay arbitration is essentially the equivalent of an order to compel arbitration. Id. Thus, this Court's September 21, 1987 Order refusing to stay the Florida arbitration gives this Court jurisdiction over the within motion to vacate.

With respect to proper venue, sections 9 and 10 of the Act, respectively provide that an application to confirm or vacate an arbitration award may be made to the United States Court in and for the district wherein such award was made. 9 U.S.C. §§ 9, 10. Although the Act clearly imparts subject matter jurisdiction to the federal courts to confirm or vacate an arbitration award, there is a split of authority within the Circuits as to whether proper venue rests exclusively in the district court where the arbitration award was made or whether any district court with subject matter jurisdiction can confirm or vacate the award.

Since the award in this case was made in Dade County, Florida, this Court must determine whether proper venue for the motion to vacate is in the Southern District of Florida or the Southern District of New York.

Although the Second Circuit has not yet specifically ruled on whether a district court outside the district where an arbitration award was made has jurisdiction over a suit to vacate the award pursuant to section 10 of the Act, the Second Circuit has held that a district court outside the district where an arbitration award was made has jurisdiction over a suit to confirm the award pursuant to section 9 of the Act. Smiga v. Dean Witter Reynolds, Inc., supra, 766 F.2d at 706.

In Smiga, the Second Circuit held that "once a federal court has subject matter jurisdiction over an action, it may confirm an arbitration award even though it was not the district where the award was granted." Id. See also Motion Picture Laboratory v. McGregor & Werner, 804 F.2d 16, 19 (2d Cir.1986) (section 9 should be read as permissive rather than exclusive); NII Metals Services, Inc. v. ICM Steel Corp., 514 F.Supp. 164, 166 (N.D.Ill.1981) (consistent with principles of judicial economy, venue provision of section 9 did not preclude confirmation of an award in a district other than where the award was rendered); Paul Allison, Inc. v. Minikin Storage of Omaha, Inc., 452 F.Supp. 573, 574 (D.Neb.1978) (venue provisions of section 9 should be read as permissive rather than exclusive).

On the other hand, a number of courts have held that the venue clauses in both sections 9 and 10 of the Act are mandatory, vesting exclusive jurisdiction in the district court where the arbitration award was granted. See e.g., Central Valley Typographical Union, No. 46 v. McClatchy Newspapers, 762 F.2d 741, 744 (9th Cir. 1985) (section 10 limits jurisdiction to vacate an award to the district where the award was made); Island Creek Coal Sales Co. v. City of Gainesville, Florida, 729 F.2d 1046, 1050 (6th Cir.1984), cert. denied, 474 U.S. 948, 106 S.Ct. 346, 88 L.Ed.2d 293 (1985) (section 9 provides for exclusive jurisdiction in district court where award was made); City of Naples v. Prepakt Concrete Co., 490 F.2d 182, 183 (5th Cir.), cert. denied, 419 U.S. 843, 95 S.Ct. 76, 42 L.Ed.2d 71 (1974) (suit to vacate must be brought in the district court for the district in which the award was made); United States ex rel. Chicago Bridge & Iron Co. v. ETS-Hokin Corp., 397 F.2d 935, 939 (9th Cir.1968) (section 10 limits jurisdiction to vacate an award to the district where the award was made); Enserch Int. Exploration v. Attock Oil Co., 656 F.Supp. 1162, 1165 (N.D.Texas 1987) (Congress intended section 10 to render exclusive jurisdiction in one federal court); Arthur Imerman Undergarment Corp. v. Local 162, 145 F.Supp. 14, 17 (D.N.J.1956) (venue provisions of section 9 are mandatory so award must be confirmed in district where it was made).

This Court holds that had the Second Circuit been confronted with a section 10 case it would likewise have found that the venue provision is permissive rather than exclusive. This conclusion is supported by the fact that the Second Circuit has recently referred to a motion to vacate as an "essentially identical action" as a motion to confirm. Motion Picture Laboratory v. McGregor & Werner, supra, 804 F.2d at 19. See also Enserch Int. Exploration v. Attock Oil Co., supra, 656 F.Supp. at 1164 n. 5 (sections 9 and 10 of the Act have similar jurisdiction and venue provisions and are referred to interchangeably).

Having found the venue provision in section 10 to be permissive, this Court must now determine whether in its discretion it should entertain the motion to vacate. In Motion Picture Laboratory v. McGregor & Werner, supra, 804 F.2d at 19, the Second Circuit held that a judge in the Southern District of New York should not have entertained a motion to confirm an award made in Florida even though venue was not improper in New York. The circumstances giving rise to that decision, however, are not present in this case.

Unlike Smiga and the instant case, the parties in Motion Picture had "absolutely no ties to the Southern District of New York." Id. In addition, the defendant in Motion Picture had previously filed a motion to vacate the arbitration award in the Middle District of Florida at the time the plaintiff filed the motion to confirm in New York. Id. Although the Second Circuit cited to the Smiga permissive venue rule, the Court based its decision on the "well-settled" first filed rule. Id. "Where there are two competing lawsuits, the first suit should have priority, absent the showing of balance of convenience in favor of the second action, or unless there are special circumstances which justify giving priority to the second." Id. (quoting Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 790 (2d Cir.1986)).

While in the Motion Picture case, the Florida action was filed first and the suit in the Southern District of New York was tainted with signs of forum shopping, id., in the instant case, plaintiff's motion to vacate was filed in the Southern District of New York before the motion to confirm was filed in Florida state court. In addition, plaintiff has strong ties to New York in that it is a New York Corporation with its principal place of business in the...