Steyn v. CRTV, LLC

• Decision Date: 02 July 2019
• Docket Number: 9002,9002A,Index 650887/18,9002B
• Citation: 103 N.Y.S.3d 415,175 A.D.3d 1
• Parties: In re Mark STEYN, et al., Petitioners-Appellants-Respondents, v. CRTV, LLC, Respondent-Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

175 A.D.3d 1

103 N.Y.S.3d 415

In re Mark STEYN, et al., Petitioners-Appellants-Respondents,

v.CRTV, LLC, Respondent-Respondent-Appellant.

9002

9002A

9002B

Index 650887/18

Supreme Court, Appellate Division, First Department, New York.

ENTERED: JULY 2, 2019

Ervin Cohen & Jessup LLP, Beverly Hills, CA (Michael D. Murphy of the bar of the State of California, admitted pro hac vice, of counsel), and Fishkin Lucks LLP, New York (Erin C. O'Leary of counsel), for appellants-respondents.

Browne George Ross LLP, New York (Jeffrey A. Mitchell and Judith R. Cohen of counsel), for respondent-appellant.

Dianne T. Renwick, J.P., Judith J. Gische, Barbara R. Kapnick, Cynthia S. Kern, Peter H. Moulton, JJ.

RENWICK, J.P.

This appeal stems from an article 75 proceeding seeking to confirm an arbitration award rendered in favor of petitioners, Mark Steyn, Mark Steyn Enterprises,¹ and Oak Hill Media (OHM), and against respondent CRTV, LLC (CRTV). The arbitrator found that respondent CRTV breached the respective contracts it had entered with Steyn and OHM, and awarded petitioners breach of contract damages, as well as attorneys' fees. Supreme Court confirmed the breach of contract damages awards, but vacated the attorneys' fees award. On appeal, petitioners challenge the vacatur of the arbitrator's award of attorneys' fees, while respondent challenges only the breach of contract damages awards rendered in favor of petitioner OHM.²

The primary issues presented on this appeal are 1) whether the arbitrator manifestly disregarded the law when she awarded attorney's fees in favor of Steyn as the prevailing party; and 2) whether the arbitrator exceeded her power by addressing OHM's counterclaims against CRTV when CRTV never agreed to arbitrate any dispute with OHM. For the reasons explained below, we reject CRTV's argument on the first issue, that the arbitrator manifestly disregarded the law when she awarded attorney's fees, but, we agree with CRTV on the second issue, regarding the threshold question of arbitrability, because CRTV objected, at the inception of the proceedings, to the arbitrator's jurisdiction over OHM's counterclaims.

Procedural and Factual Background

This appeal stems from a dispute between Mark Steyn, a renowned author and television and radio personality, and CRTV, an online television network, currently known as BlazeTV, which features conservative commentators such as Glenn Beck and Phil Robertson. In 2016, CRTV and Steyn entered into a "Binding Term Sheet" (Term Sheet) for the production and distribution of a television show to be produced in Vermont. In the Term Sheet, the parties promised to cooperate and work with each other, but their ultimate responsibilities were divided. CRTV retained control over business decisions for "hiring a production staff and building a set in Burlington, Vermont." Steyn was responsible for delivering 200 shows a year, each 48 minutes long. His responsibilities to deliver content were to begin as soon as the Burlington studio was "fully functioning."

The Term Sheet provides that the document "shall be governed by the laws of the United States and the State of New York, without reference to conflict of law principles." The Term Sheet further provides that the parties agree that any unresolved disputes "shall be settled exclusively by confidential binding agreement in accordance with the Federal Arbitration Act" and "[r]ules of the American Arbitration Association (AAA) applicable to general commercial disputes."

In a separate letter memorandum, an entity related to Mark Steyn, OHM, was retained to provide services to Steyn. Under the letter memorandum, which did not contain any arbitration clause requiring binding arbitration, OHM agreed to procure guests for the show, as well as hire third parties such as makeup artists and public relations firms. OHM principal Melissa Howe, who was also a business partner of Mark Steyn and his manager, executed the letter memorandum agreement.

In February 2017, CRTV abruptly cancelled the show after just two months on the air. The network claims cancellation was due to poor performance by its host. Mark Steyn, however, claims that he performed his obligations under the Term Sheet, but that "extraordinary personnel problems, construction delays, and technical shortcomings in the Steyn studio largely prevented content production." On February 20, 2017, CRTV served Steyn with a demand to arbitrate their dispute, alleging, among other things, breach of contract by Steyn. On March 14, 2017, CRTV filed an amended demand for arbitration that pleaded its claim with specificity. On March 22, 2017, Steyn and OHM served an answering statement and counterclaims. The counterclaims asserted various claims, including breach of contract, and sought breach of contract damages, as well as punitive damages and attorney's fees. CRTV answered Steyn's counterclaim, denying the allegations wholesale and seeking dismissal and "an award of attorneys' fees and costs." On August 18, 2017, Steyn filed a second amended answer and counterclaim, again seeking attorneys fees. On September 1, 2017, CRTV answered Steyn's second amended answer with counterclaims, again denying all material allegations, and demanding, inter alia, attorneys' fees.

Before the arbitration commenced, CRTV objected to the arbitrator's jurisdiction over OHM's counterclaim. On January 22, 2018, after the conclusion of the hearing and submission of posthearing briefs, the arbitrator issued an interim award, finding that CRTV failed to meet its contractual obligation to provide a fully functional studio, did not have the right to declare a breach, and was in breach of its obligations to Steyn and OHM. Conversely, the arbitrator found that petitioners Steyn and OHM had performed their obligations under the contract, and thus Steyn was entitled to $1.8 million in damages, and OHM was entitled to $908,124 in damages and unreimbursed expenses. Regarding attorneys' fees, the arbitrator observed that petitioners Steyn and OHM had requested fees in their counterclaim, CRTV had requested fees in its answer to the counterclaim, and Rule 47(d) of AAA provides for attorneys' fees where all parties request it, or where it is authorized by law or agreement. Nevertheless, the arbitrator declined to award attorneys' fees at the time of the interim award, requesting that the parties "set forth their claims and positions regarding an award of counsel fees. If counsel fees are to be considered, a fee affidavit shall be submitted and argument may be requested."

By post-interim award briefing, CRTV argued that attorneys' fees should not be awarded because it did not demand such fees in its initial or amended demand, prehearing briefs, or posthearing briefs, and thus there was no "unmistakably clear" intention to seek such fees. CRTV noted that while petitioners requested fees in their initial demand, they did not request them in their briefs or at the hearing. In response, petitioners argued that the Term Sheet, which provided that any disputes would be resolved by arbitration in accordance with AAA rules, thus incorporated AAA Rule 47(d) into the agreement, meaning that the parties agreed that attorneys' fees could be awarded.

In the final award, the arbitrator discussed the issue of jurisdiction over OHM, noting that the letter memorandum, unlike the Binding Term Sheet, did not have an arbitration provision. The arbitrator observed that CRTV had only raised the jurisdictional issue twice, in its answer to the counterclaim and in its posthearing reply brief. Substantively, CRTV participated in defending against OHM's claim, by submitting exhibits and offering testimony to rebut its damages. Ultimately, the arbitrator found that since CRTV did not seek a stay of arbitration as to OHM, and instead participated, it waived any jurisdictional objection. Therefore, the arbitrator awarded OHM $908,124 in contractual damages against CRTV.

Regarding attorneys' fees, the arbitrator found that both parties requested such relief in their pleadings. The arbitrator disagreed with CRTV's contention that the answers to the first and second counterclaims, as well as the AAA cover sheet, did not represent a request. Thus, after a reduction for overhead and other nonrecoverable costs, the arbitrator awarded petitioners Steyn and OHM $1,012,729 in attorneys' fees.

On February 28, 2018, Steyn and OHM commenced this article 75 special petition to confirm the awards that were granted in their favor and against CRTV. CRTV cross-moved to vacate the awards. Initially, Supreme Court affirmed all awards. With regard to attorneys fees, Supreme Court found, the case was similar to Matter of Warner Bros Records [PPX Enters.] , 7 A.D.3d 330, 776 N.Y.S.2d 269 (1st Dept. 2014), where the First Department found that the winning party in arbitration was entitled to attorneys fees where both parties had requested fees in their pleadings. However, upon reargument, Supreme Court reversed itself and vacated the award of attorneys' fees, relying upon the First Department decision in Matter of Matza v. Oshman, Helfenstein & Matza , 33 A.D.3d 493, 494, 823 N.Y.S.2d 47 (1st Dept. 2006), which found that a boilerplate demand for attorneys fees was insufficient evidence of the parties intent to waive the American Rule³ on attorneys' fees.

Discussion

We first address the award of attorneys' fees. We are mindful that courts possess very limited authority to review an arbitration award (see Matter of Goldfinger v. Lisker, 68 N.Y.2d 225, 230–231, 508 N.Y.S.2d 159, 500 N.E.2d 857 [1986] ; see also Matter of Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247, 793 N.Y.S.2d 831, 826 N.E.2d 802 [2005] ). Indeed, the parties agree that manifest disregard of the law is the only appropriate ground to vacate the arbitrator's award of attorneys' fees (see generally Wien & Malkin LLP v. Helmsley–Spear, Inc., 6 N.Y.3d 471, 813 N.Y.S.2d 691, 846 N.E.2d 1201 [2006] ).

For an...