In re Application to Papakonstadinou
| Decision Date | 11 June 2021 |
| Citation | 2021 NY Slip Op 50543 (U) |
| Parties | In the Matter of the Application to Confirm an Arbitration Award of Theodore Papakonstadinou and AKTOR CORPORATION, Petitioners, Nikolaos Sparakis, LIZBETH GOZZER and GOZZER CORPORATION, Respondents. |
| Court | New York Supreme Court |
Unpublished Opinion
RICH MICHAELSON MAGALIFF, LLP ATTORNEYS FOR PETITIONERS
(HOWARD P. MAGALIFF, OF COUNSEL)
HINMAN STRAUB P.C. ATTORNEYS FOR PETITIONERS
(JAMES T. POTTER, OF COUNSEL)
MILBER MAKRIS PLOUSADIS & SEIDEN, LLP ATTORNEYS FOR NIKOLAOS SPARAKIS AND LIZBETH GOZZER
(JOSEPH J. COOKE, OF COUNSEL)
RICHARD M. PLATKIN A.J.S.C.
Petitioners Theodore Papakonstadinou and Aktor Corporation bring this special proceeding pursuant to CPLR article 75, seeking an order under CPLR 7502 and 7510 confirming an arbitration award dated, as amended on December 8, 2020, and entry of judgment thereupon under CPLR 7514 (a). Respondents Nikolaos Sparakis and Lizbeth Gozzer oppose the verified petition (see NYSCEF Doc No. 1 ["Petition"]) and cross-petition under CPLR 7511 to vacate or modify the award (see NYSCEF Doc No. 10 ["Cross Petition"]).
BACKGROUND [1]
Petitioner Theodore Papakonstadinou is a director and owner of 95% of the voting shares of respondent Gozzer Corporation ("Gozzer Corp." or "Corporation"), a domestic corporation with its principal place of business at 1043 Broadway, Albany, New York. The remaining 5% of the shares are owned by respondent Lizbeth Gozzer ("Gozzer").
In 2009, respondent Nikolaos Sparakis sought assistance concerning Gozzer Corp. from Papakonstadinou, his then-friend. Sparakis had formed the Corporation to operate a construction business, but the Corporation's stock had been put in the name of Gozzer, with whom Sparakis was in a personal relationship, for various reasons. However, Gozzer lacked experience in the construction industry, which left the Corporation unable to obtain bid bonds.
In January 2012, Papakonstadinou agreed to assist Sparakis by providing capital to Gozzer Corp. and by assisting in preparing bids and obtaining bonds. In exchange, Gozzer transferred 95% of the Corporation's shares to Papakonstadinou. The parties apparently agreed that Papakonstadinou's investment would be repaid, and profits from the venture would be shared in some manner (see Cross Petition, ¶ 4; NYSCEF Doc No. 46, ¶ 4). A dispute thereafter arose between Papakonstadinou and Sparakis regarding their agreement (see Cross Petition ¶ 5; NYSCEF Doc No. 46, ¶ 1).
In 2015, Sparakis and Gozzer commenced an action in Queens County against Papakonstadinou, Gozzer Corp. and Aktor Corporation ("Aktor"), a construction company owned by Papakonstadinou (see Sparakis v Gozzer Corp. Queens County Index No. 712508-15 ["Queens Action"]). Sparakis and Gozzer alleged, among other things: (i) failure to repay Sparakis for loans made to the Corporation; (ii) failure to pay Sparakis an annual salary; (iii) breach of the duty to properly operate and manage Gozzer Corp.; (iv) fraud, predicated on allegations that Papakonstadinou misrepresented that the assets of Gozzer Corp. would be split and its shares would be transferred to Sparakis and/or Gozzer; and (v) breaches of fiduciary duties owed to the Corporation, including diversion of corporate funds and assets. In an answer with counterclaims, Papakonstadinou and Gozzer Corp. alleged similar wrongdoing by Sparakis and Gozzer.
As a result of discovery violations, Supreme Court, Queens County (Grays, J.) issued an order on January 17, 2018 striking the answer of Aktor and ordering an inquest on damages (see NYSCEF Doc No. 13). The trial of the Queens Action was scheduled to begin on April 1, 2019.
In November 2018, Papakonstadinou brought a special proceeding in this Court under Business Corporation Law article 11, seeking the dissolution of Gozzer Corp., appointment of a temporary receiver and an order restraining Sparakis and Gozzer from transacting the business of Gozzer Corp. (see Albany County Index No. 907137-18 ["Dissolution Proceeding"]). In a Decision & Order dated January 31, 2019, the Court denied Sparakis and Gozzer's motion to dismiss the dissolution petition and issued the requested preliminary injunction (see Matter of Papakonstadinou [Gozzer Corp.], 62 Misc.3d 1217 [A], 2019 NY Slip Op 50164[U] [Sup Ct, Albany County 2019]).
On the scheduled trial date of the Queens Action, the parties agreed to arbitrate their claims and counterclaims, and they executed a Stipulation for Binding Arbitration to that effect, which was so-ordered by the Court (see NYSCEF Doc No. 15 ["Arbitration Stipulation"]). As part of the stipulation, Papakonstadinou agreed to request a stay of the Dissolution Proceeding, which this Court granted.
The parties then proceeded to arbitrate under the Arbitration Stipulation, which provided that: (1) the arbitration shall be conducted in New York City; (2) the arbitration "shall be subject to the Strike Order," unless reversed by the Appellate Division during the pendency of the arbitration; and (3) the parties agree to "request of the arbitrator a full opinion explaining the reasoning for any award" (id., ¶¶ 1, 4, 11).
The parties jointly selected Hon. Francis G. Conrad, a retired bankruptcy judge and accountant, to serve as the arbitrator ("Arbitrator"). The arbitration commenced on September 9, 2019 and concluded on or about April 1, 2020, following ten days of hearings and the submission of post-hearing memoranda (see Petition, ¶ 2; Cross Petition, ¶¶ 11-12).
The Arbitrator "promised the parties that he would render a decision by May 1, [2020]" (Petition, ¶ 3). By late October 2020, however, the Arbitrator still had not rendered a decision (see id.). "Accordingly, the parties wrote a joint letter to the Arbitrator dated October 28, 2020, which advised that if a decision was not emailed by 5:00 PM on November 15 [2020], the parties would consider the Arbitration terminated and would seek a new arbitrator to re-arbitrate the case" (id.). The Arbitrator responded that this deadline would require his decision to "be truncated" (id., ¶ 4), despite the parties' stipulation calling for a reasoned decision.
On November 6, 2020, counsel for petitioners wrote to advise that if the Arbitrator felt that more time was needed to issue a reasoned decision, his clients were willing to extend the deadline to December 6, 2020 (see id.). Respondents did not join in or otherwise respond to petitioners' unilateral submission.
The Arbitrator did not issue a decision by the November 15, 2020 deadline. On the following day, November 16, 2020, counsel for respondents notified the Arbitrator that respondents considered the arbitration to have been terminated in accordance with the deadline established by the joint letter of October 28, 2020 and requested the Arbitrator to cease work on an award (see id.; NYSCEF Doc No. 22).
Later that day, the Arbitrator informed the parties he had completed his decision, but it still required editing (see NYSCEF Doc No. 23). Respondents' counsel replied on November 17, 2020 that his clients' position, "as set forth in the joint letter of October 28, 2020 and [counsel's] letter of November 16, 2020[, ] remain[ed] the same" (id.).
On, the Arbitrator issued his decision, which he transmitted to counsel via email on December 2, 2020 (see Cross Petition, ¶ 16; NYSCEF Doc No. 2 ["Decision"]). The Decision awarded Sparakis $155, 390 and directed Papakonstadinou to transfer his shares in Gozzer Corp. to Sparakis. On December 8, 2020, in response to emails from counsel regarding errors in the Decision (see Petition, ¶¶ 6-7; Cross Petition, ¶ 17; NYSCEF Doc No. 27), [2] the Arbitrator reduced the sum awarded to Sparakis to $77, 695 (see NYSCEF Doc No. 3).
Petitioners commenced this special proceeding on December 16, 2020, seeking an order and judgment under CPLR 7502 and 7510 confirming the arbitration award as stated in the modified Decision. Respondents oppose the Petition and cross-petition for an order vacating and/or modifying the award.
As a threshold matter, respondents argue this proceeding should have been commenced in Queens County. Respondents next contend that the Arbitrator's Decision is a legal nullity based on his failure to render an award by the deadline jointly established by the parties. Respondents further argue that the Decision was issued in manifest disregard of the Strike Order and the Arbitration Stipulation. Finally, respondents argue that the Decision was irrational in various respects and should be vacated or modified pursuant to CPLR 7511 (c) (1).
Respondents contend this proceeding was brought in an improper county. They refer to a document entitled "Arbitration Hearing Order," which provides that "[t]he arbitration ruling shall be submitted for entry of judgment with the Supreme Court of New York, Queens County, Commercial Division" (NYSCEF Doc No. 16, ¶ 20 ["Order"]).
However, the Order was not signed by the Arbitrator or the parties. Indeed, the record establishes that this instrument was never finalized and, as such, does not represent a binding stipulation or valid order (see id.; NYSCEF Doc Nos. 38-39; see also NYSCEF Doc No. 47, ¶ 4 [respondents concede that "the Arbitrator never forwarded a finalized version"]).
The operative document, the so-ordered Arbitration Stipulation, does not require this proceeding to be brought in any particular county. With respect to geography, it merely requires that: (1) the arbitration be conducted in New York City; and (2) if the parties cannot agree on an arbitrator, they may commence a proceeding in Queens County under CPLR 7504 to have an arbitrator appointed (see Arbitration Stipulation, ¶¶ 1-2).
Where as here, a particular county is not specified in the...
To continue reading
Request your trial