Zeiler v. Deitsch
| Decision Date | 23 August 2007 |
| Docket Number | Docket No. 06-5617-cv.,Docket No. 06-1893-cv. |
| Citation | 500 F.3d 157 |
| Parties | Mayer ZEILER, Flocktex Industries Ltd., De-Lux Industries and Achim Deitsch Textile Industries, Plaintiffs-Counter-Defendants-Appellees, v. Joseph DEITSCH, Mordecai Deitsch, Jacob Pinson, Rachel Sandman, Deitsch Plastic Company, Deitsch Plastic Partners, Deitsch International Sales Corp., Shalvah Partnership, Olde Pointe Associated Limited Partnership, ATC Partnership, Esdee Realty, Orange Investment Company, Willowbrook Venture Company, Annash, Inc. and Greendeer, Defendants-Counter-claimants-Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
Nathan Lewin, Wash., D.C. (Alyza D. Lewin, Lewin & Lewin, LLP, Wash., D.C.; Thomas A. Kissane, Schlam Stone & Dolan, LLP, New York, N.Y., on the brief), for Defendants-Counterclaimants-Appellants.
Leslie A. Lupert, New York, N.Y. (Sarah P. Karwan, Orans, Elsen & Lupert LLP, New York, N.Y., on the brief), for Plaintiffs-Counter-Defendants-Appellees.
Before: NEWMAN, MINER and KATZMANN, Circuit Judges.
The primary issue on the first of these two appeals, which were heard in tandem, is the narrow question of whether, in the circumstances of this case, an arbitration panel composed of three rabbis can proceed to make an award after one member has resigned from the panel. The second appeal concerns the validity of a court order enforcing a judgment that confirmed the three-member panel's earlier awards requiring accountings. These matters arise on an appeal in No. 06-1893 from a judgment of the United States District Court for the Eastern District of New York (Sandra L. Townes, District Judge) vacating the two-member panel's arbitration awards and confirming eight accounting awards previously made by the full three-member panel and an appeal in No. 06-5617, from an order enforcing the District Court's judgment with respect to the accounting awards. We conclude that the arbitration panel was entitled to continue after one member's resignation, that the accounting awards were properly confirmed, and that the enforcement order was properly entered. In No. 06-1893, we reverse the District Court's judgment in part, affirm in part, and remand, and in No. 06-5617, we affirm.
Facts. A somewhat detailed account of the facts is required. Plaintiff-Appellee Mayer Zeiler ("Zeiler") and Defendants-Appellants Joseph Deitsch, Mordecai Deitsch, Jacob Pinson, and Rachel Sandman (collectively "Deitsch") all belong to the Jewish-Orthodox Deitsch family. Zeiler resides in Israel, and Deitsch resides in the United States. They have jointly owned various assets in both the United States and Israel. Plaintiffs-Appellees Flocktex Industries Ltd., De-Lux Industries, and Achim Deitsch Textile Industries are three Israeli corporations that were jointly owned by Zeiler and Deitsch ("Israeli companies"). Defendants-Appellants Deitsch Plastic Co., Deitsch Plastic Partners, Deitsch International Sales Corp., and Annash, Inc. are U.S. corporations that were also owned jointly by Zeiler and Deitsch ("U.S. companies"). Defendants Shalvah Partnership, Olde Pointe Associated Limited Partnership, ATC Partnership, Esdee Realty, Orange Investment Co., Willowbrook Venture Co., Annash, Inc., and Greendeer are real estate entities located in various states in the United States, which are owned jointly by Zeiler and Deitsch ("U.S. real estate").
In the late 1990s, Zeiler and Deitsch decided to sever much of their business relations by dividing the jointly owned assets between them. Due to the complexity of the issues and the various disputes involved in making the division, the parties decided to submit their dispute to arbitration. They agreed that arbitration would occur before a "Beth Din," which is a Jewish religious tribunal comprising three rabbis.
The parties agreed to appoint the members of the Beth Din according to the method known in Jewish law as "Zabla," in which each party elects one arbitrator, and the two appointed arbitrators then pick a third neutral arbitrator as the presiding member of the panel.1 Zeiler appointed Rabbi Moshe Tendler, Deitsch appointed Rabbi Moshe Bogomilsky, and Rabbis Tendler and Bogomilsky selected Rabbi Shmuel Gurwitz as the presiding arbitrator.
After the appointment of the panel, the parties signed, on August 22, 1999, a formal arbitration agreement — a concise, standard-form contract in traditional Hebrew entitled "Arbitration Deed" ("1999 Arbitration Agreement").2 The 1999 Arbitration Agreement stated, in pertinent part, the willingness of the parties to seek resolution of all their disputes by a Beth Din consisting of Rabbis Tendler, Bogomilsky, and Gurwitz, who were to arbitrate the case according to Jewish law. The arbitrators were authorized to enter interim and final awards and to reach decisions by vote of a majority of the members of the panel.
In September 1999, following several arbitration sessions, the panel entered a framework decision in which it adopted the parties' agreement to sever their commercial connections by granting Zeiler full ownership of the Israeli companies and Deitsch full ownership of the U.S. companies, while retaining joint ownership of the U.S. real estate ("1999 Decision"). The decision then set out a general plan according to which the dissolution of the partnership and the division of the assets would take place. The 1999 Decision also required the parties to jointly shoulder, in relative shares, the tax obligations incurred by the U.S. and Israeli companies until the end of 1997;3 and that Zeiler should receive "a full and accurate listing" of the jointly owned real estate and additional information regarding his pension and insurance rights in the U.S. companies. Finally, the Beth Din ordered that a detailed contract be prepared based on the principles set out in the decision.
From 1999 to 2003 the parties engaged in extensive negotiations in order to implement the 1999 Decision. As various disputes arose along the way, the parties returned to the arbitration panel which in turn entered various detailed decisions. Six such decisions, handed down between July 2000 and April 2003, required, among other things, that Deitsch provide Zeiler with an accounting regarding the U.S. real estate entities, which are jointly owned by the parties but effectively controlled by Deitsch.4 The parties disagree as to whether all these orders, along with a similar provision in the 1999 Decision and a subsequent order in February 2004, regarding Zeiler's life insurance policies (collectively, the "accounting orders"), were fully complied with (as Deitsch contends) or not (as Zeiler contends).
In June 2003, a comprehensive agreement entitled "Shares Sales Agreement" was finally signed by the parties ("2003 Agreement"). The 2003 Agreement implemented the general guidelines of the 1999 Decision and the subsequent orders of the arbitration panel. It specified the details of both parties' obligations, which would lead to splitting the ownership of the Israeli and U.S. companies-mostly, reciprocal transfers of funds, shares, and documents. Among its many provisions, the 2003 Agreement reiterated Zeiler's obligation to pay his relative share (1/6) of tax obligations. The 2003 Agreement also required Deitsch to provide Zeiler with documents regarding the U.S. real estate and Zeiler's pension and insurance rights in the U.S. companies. Lastly, the 2003 Agreement stated:
[T]his Agreement shall be governed and construed pursuant to the Torah law,[5] and the Beth Din shall have exclusive jurisdiction in connection herewith.
"Beth Din" is defined in the 2003 Agreement as:
a judicial tribunal governed by Halachic law, the members of which are the honorable Rabbi Moshe D. Tendler, Rabbi Shmuel C. Gurwitz and Rabbi Moshe Bogomilsky, or any other tribunal governed by Halachic law upon which the Parties mutually agree[.]
As the 2003 Agreement was being implemented, another dispute arose between the parties, this time regarding the amount of Zeiler's share of the taxes paid by Deitsch to the I.R.S. In December 2003 Deitsch filed with Zeiler a reimbursement demand for 1/6 of the taxes allegedly paid by Deitsch, an amount of nearly $800,000. In April 2004, Zeiler sent a letter to the three arbitrators in which he contested Deitsch's demand on the basis of lack of credible documentation. Five days later, and before the Beth Din considered this dispute, Rabbi Tendler, the arbitrator appointed by Zeiler, resigned from the Beth Din. In two letters sent to Rabbi Gurwitz, Rabbi Tendler accused Rabbi Gurwitz of failing to compel Deitsch to abide by the accounting orders, and claimed that Rabbi Bogomilsky (the arbitrator appointed by Deitsch) was biased.
Following Rabbi Tendler's resignation, the two remaining arbitrators, Rabbis Gurwitz and Bogomilsky, entered a decision on May 7, 2004, stating that under Jewish law and in accordance with the 1999 Arbitration Agreement they retained authority over the arbitration. In a letter sent to an Israeli rabbi, Rabbis Gurwitz and Bogomilsky detailed the authorities in Jewish law on which they had based their decision to retain jurisdiction. Their reasoning was based primarily on the fact that the substantive issue — Zeiler's 1/6 share in the joint tax liability — had already been decided by the three arbitrators in 2001, so the remaining dispute concerned only the amount of money to be paid under that liability. In addition, the arbitrators mentioned the 1999 Arbitration Agreement's authorization to decide issues by a majority vote. Rabbis Gurwitz and Bogomilsky then issued a letter to the parties scheduling a session of the arbitration panel to hear argument on the tax dispute.
In response, Zeiler declared that because the panel had lost one of its members, "the Beth Din, as previously constituted, no longer exists and it is for the parties to decide henceforth with...
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