Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust

Citation729 F.3d 99
Decision Date30 August 2013
Docket NumberDocket No. 12–3247–cv.
PartiesKOLEL BETH YECHIEL MECHIL OF TARTIKOV, INC., Plaintiff–Appellee, Sylvia Beilush, Trustee of the Frankel Purchasing Trust, Liebush Frankel, Frankel Purchasing Irrevocable Trust, Frankel Purchasing Irrevocable Trust, Consolidated–Plaintiffs–Appellees, v. YLL IRREVOCABLE TRUST, Kochav S.A.R.L., a Luxembourg S.A.R.L., Defendants–Appellants, Meridian Trust Company, as Trustee of YLL Irrevocable Trust, Wilmington Savings Fund Society, FSB, Defendants.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

OPINION TEXT STARTS HERE

Brian Dale Graifman, Gusrae Kaplan Nusbaum PLLC, New York, NY, for DefendantsAppellants. Also on the brief: Philip J. Loree, Loree & Loree, Manhasset, NY, of counsel for DefendantsAppellants.

Ira S. Lipsius (David BenHaim, Phillip M. Manela, on the brief), Lipsius–Benhaim Law, LLP, Kew Gardens, NY, for PlaintiffAppellee.

Before: POOLER and LIVINGSTON, Circuit Judges, GOLDBERG, Judge. *

RICHARD W. GOLDBERG, Judge:

This case involves a dispute between PlaintiffAppellee Kolel Beth Yechiel Mechil of Tartikov, Inc. (Kolel) and DefendantsAppellants YLL Irrevocable Trust and Kochav S.A.R.L. (Appellants) regarding life insurance policies. The parties disputed ownership of the policies and, according to their contract, submitted the dispute to a rabbinical arbitration panel. On April 10, 2012, the arbitration panel appointed by the parties entered an award mandating the immediate transfer of the insurance policies at issue to Kolel. However, only two of the three panel members signed the award, and shortly thereafter Appellants filed an action seeking a temporary restraining order on enforcement of the award and followed with a motion for vacatur. Kolel subsequently submitted its own motion for confirmation of the arbitration award. The district court granted Kolel's motion for confirmation and denied Appellants' motion for vacatur. Appellants then filed a motion for reconsideration, which was also denied.

Appellants appeal the district court's decision, arguing (1) that the district court erroneously denied their motion for vacatur because the neutral arbitrator was evidently biased in favor of Kolel and corrupt; (2) that the district court should have granted their motion for vacatur because the arbitrator's bias resulted in a premature decision without consideration of material and pertinent evidence; and (3) that the district court erroneously denied their motion for reconsideration. We conclude, inter alia, that Appellants have not presented any evidence that meets the high burden of proof necessary to vacate an arbitration award, and therefore the district court properly denied their motion for vacatur and granted Kolel's motion for confirmation of that same arbitration award. Appellants' appeal of the district court's denial of their motion for reconsideration is similarly unsustainable. Therefore, we AFFIRM the decisions of the district court.

BACKGROUND
A. The Underlying Dispute and Procedural History

This case involves a dispute between Kolel and Appellants regarding ownership of life insurance policies (“the Policies”). On March 15, 2011, Kolel sold the Policies to Appellants pursuant to a written purchase agreement (“the Contract”). Under the Contract, Appellants agreed to pay the premiums on the Policies, and in the event of a death of an insured, Kolel and Appellants would divide the death benefits. On October 28, 2011, Kolel filed a complaint alleging that Appellants had failed to pay the premiums, allowing the policies to lapse and breaching the contract. In February 2012, the parties agreed to arbitrate the dispute by written agreement (the “Arbitration Agreement”). The Arbitration Agreement is composed of two documents, the Agreement, dated January 12, 2012 and the Contract of Arbitration, dated February 2012. The Arbitration Agreement provides that a panel of three rabbis (“the Panel) arbitrate the case. Each party designated a rabbi to represent it on the panel, and together the parties agreed that Rabbi Shlomo Kaufman would serve as the third, neutral, arbitrator.

In the Arbitration Agreement, the parties agreed that they sought a speedy resolution of the case within two months, and granted the Panel wide latitude in how to reach a decision. The Arbitration Agreement allows the panel members to “make their award based upon Din Torah, compromise,settlement, or any other way they wish to reach a decision.” In addition, the Arbitration Agreement notes that [t]he Members of the [Panel] need not disclose, to the Parties or to anyone else the ... basis for their award ...,” the decision could be made by two of the three arbitrators, and the parties waived any procedural or evidentiary rights. The panel held at least seven sessions, beginning February 10, 2012, and no record was made of the proceedings. On April 10, 2012, the Panel issued the Arbitration Award (“the Award”), which mandated the immediate transfer of the policies to Kolel. However, only two of the arbitrators signed the award: Rabbi Kaufman and Rabbi Grausz, Kolel's appointed arbitrator. Rabbi Bergman, the Appellants' appointed arbitrator, did not sign the award.

B. Action for Vacatur in the District Court

Shortly after the Panel issued the Award, and before the policies could be transferred to Kolel, Appellants filed an action seeking a temporary restraining order enjoining enforcement of the award and also an order “nullifying and vacating” the award. Appellants based their action for vacatur on allegations that Kaufman was corrupt and partial to Kolel. Appellants submit many allegations against Rabbi Kaufman; however, only one allegation is relevant because it is submitted by an impartial witness and pertains to Rabbi Kaufman's actions during the arbitration proceedings. Appellants claim that on March 30, 2012—prior to the issuance of the award—David Paneth overheard Kaufman in his office telling non-party Zisha Gelb to [t]ell [the president of Kolel] that he has to give me another week and he will receive a ‘psak’ [a ruling or decision] in his favor.” Appellants also claim that Kaufman subsequently proceeded to “ice out” Rabbi Bergman (Appellants' appointed arbitrator) from the proceedings, abruptly cut off Appellants' first fact witness, and rushed the panel to a premature decision before the presentation of the evidence.

LEGAL FRAMEWORK
A. Standard of Review

This Court reviews a district court's decision to confirm or vacate an arbitration award de novo for questions of law. Scandinavian Reins. Co. v. Saint Paul Fire & Marine Ins. Co., 668 F.3d 60, 71 (2d Cir.2012). We review findings of fact for clear error. Id. We review a decision to deny an evidentiary hearing for abuse of discretion. Zappia Middle E. Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir.2000). This Court also reviews de novo a motion for reconsideration. See Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 52 n. 4 (2d Cir.2012) (applying a de novo, rather than abuse of discretion, standard in reviewing an order denying reconsideration of an order).

B. Federal Arbitration Act and UN Convention

The role of a district court in reviewing an arbitration award is “narrowly limited” and “arbitration panel determinations are generally accorded great deference under the [Federal Arbitration Act].” Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 19 (2d Cir.1997). This deference promotes the “twin goals of arbitration, namely settling disputes efficiently and avoiding long and expensive litigation.” Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d 396, 405 (2d Cir.2009). Consequently, the burden of proof necessary to avoid confirmation of an arbitration award is very high, and a district court will enforce the award as long as “there is a barely colorable justification for the outcome reached.” Rich v. Spartis, 516 F.3d 75, 81 (2d Cir.2008) (internal quotation marks omitted).

Appellants argue that the award should be vacated under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 10(a) (2006), and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), 9 U.S.C. §§ 201–08. A district court must confirm an arbitration award unless the party seeking vacatur establishes any of the limited exceptions listed in § 10(a) of the FAA. See Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 582, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008).

Specifically, Appellants challenge the award under § 10(a)(2) of the FAA. This section allows for vacatur “where there was evident partiality or corruption in the arbitrators, or either of them.” 9 U.S.C. § 10(a)(2). “Evident partiality may be found only ‘where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.’ Scandinavian, 668 F.3d at 64 (internal citations omitted). Although a party seeking vacatur must prove evident partiality by showing “something more than the mere ‘appearance of bias,’ Morelite Constr. Corp. v. N.Y.C. Dist. Council Carpenters Benefit Funds, 748 F.2d 79, 83 (2d Cir.1984), [p]roof of actual bias is not required.” Scandinavian, 668 F.3d at 72. Rather, “partiality can be inferred ‘from objective facts inconsistent with impartiality.’ Id. (quoting Pitta v. Hotel Ass'n of N.Y.C., Inc., 806 F.2d 419, 423 n. 2 (2d Cir.1986)). A showing of evident partiality must be direct and not speculative. See Sanford Home for Adults v. Local 6, IFHP, 665 F.Supp. 312, 320 (S.D.N.Y.1987). Although this Court has spoken to the standard regarding “partiality,” see Scandinavian, 668 F.3d at 64, we have not yet articulated the standard for vacating an award under the “corruption” ground of § 10(a)(2). In Karppinen v. Karl Kiefer Mach. Co., 187 F.2d 32, 34 (2d Cir.1951), we stated that under 9 U.S.C. § 10(a), [t]he award here must stand unless it is made abundantly clear that it was obtained through...

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