785 F. Supp. 2d 411
S.D.N.Y.2011Background
- General Security petitioned to confirm an arbitration award under the FAA in SDNY.
- AequiCap opposed, seeking vacatur or modification of the award, including the attorney’s fee award.
- Arbitration clause in the Underwriting Agreement, incorporated into the ACCA, provided for panel arbitration with a three-arbitrator panel and a written award.
- The panel granted General Security’s motion for summary judgment, ordered payment of $426,802 plus interest, and awarded attorney’s fees to General Security to be determined at a later hearing.
- AequiCap later withdrew its counterclaim without prejudice; a separate hearing fixed the attorney’s fees at $239,946, which General Security sought to have confirmed by the court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the panel exceeded its powers by awarding attorney’s fees | General Security argues broad arbitration authority includes fee awards | AequiCap contends fee award exceeded authority under the clause | No; panel had inherent authority to award fees under a broad clause |
| Whether the fee award violated New York law under manifest disregard | General Security asserts law was not clearly applicable to bar fees | AequiCap claims NY CPLR 7513 prohibits such awards absent express consent | No; law was not clearly applicable to mandate vacatur under manifest disregard |
| Whether the arbitration clause is broad enough to authorize fee-shifting | Clause broadly encompasses disputes and relief without limits | Clause was not intended to allow such fee awards | Yes; broad clause gave inherent authority to award fees |
Key Cases Cited
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (U.S. 1995) (arbitration clause can encompass punitive damages; choice-of-law does not restrict arbitrator authority under FAA)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (choice of law may include substantive NY law but not restrict arbitral authority on fees)
- ReliaStar Life Ins. Co. v. EMC Nat'l Life Co., 564 F.3d 81 (2d Cir. 2009) (broad arbitration provisions confer inherent authority to sanction and award fees)
- Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir. 2003) (arbitration awards reviewed narrowly for excess of powers; manifest disregard recognized later)
- T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010) (three-step test for manifest disregard; explicit applicability of law required)
- Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108 (2d Cir. 1993) (arbitration awards receive limited review; confirmation is preferred)