175 A.D.3d 1
N.Y. App. Div.2019Background
- Mark Steyn and CRTV (now BlazeTV) entered a Term Sheet requiring arbitration under the FAA and AAA rules; a separate letter agreement retained Oak Hill Media (OHM) to provide services for Steyn but did not contain an arbitration clause.
- CRTV terminated the show after ~2 months; CRTV demanded arbitration against Steyn; Steyn and OHM filed counterclaims seeking damages and attorneys’ fees.
- CRTV objected at the outset to arbitrator jurisdiction over OHM (a nonsignatory to the Term Sheet) but otherwise participated in the arbitration; the arbitrator declined to defer the jurisdiction issue and issued awards for breach of contract damages to Steyn and OHM.
- The arbitrator awarded attorneys’ fees to petitioners after finding both sides had requested fees and construing the AAA Rule 47(d) authority to award fees where parties request them.
- Supreme Court initially confirmed awards but, on reargument, vacated the attorneys’ fees award relying on New York precedent that boilerplate fee demands do not satisfy the “unmistakably clear” intent exception to the American Rule; petitioners appealed and CRTV cross-appealed on OHM’s award.
- Appellate Division (1st Dept.) reversed: it reinstated the attorneys’ fees award (no manifest disregard) but vacated the award to OHM for lack of an arbitration agreement between OHM and CRTV (CRTV preserved its jurisdictional objection).
Issues
| Issue | Steyn/OHM (Plaintiff) Argument | CRTV (Defendant) Argument | Held |
|---|---|---|---|
| Whether arbitrator manifestly disregarded law in awarding attorneys’ fees to Steyn/OHM | AAA rules (incorporated by Term Sheet) authorize fees under Rule 47(d) when parties request them; parties requested fees | New York law bars fee awards absent statute, express agreement, or "unmistakably clear" mutual intent; pleadings were boilerplate and insufficient | No manifest disregard: arbitrator reasonably relied on AAA Rule 47(d) and precedent permitting AAA rules to authorize fees despite NY rule limiting awards in court-based arbitration |
| Whether arbitrator had power to decide OHM’s claims (arbitrability) where OHM was nonsignatory | OHM: CRTV participated and thus waived jurisdictional objection; Term Sheet’s incorporation of AAA rules left arbitrability to arbitrator | CRTV: never agreed to arbitrate with OHM; timely objected to jurisdiction and did not consent or sign any submission re OHM | Held for CRTV: issue of arbitrability is for courts absent clear and unmistakable delegation; CRTV preserved its objection and did not waive it by participation |
Key Cases Cited
- Matter of Matza v. Oshman, Helfenstein & Matza, 33 A.D.3d 493 (1st Dept. 2006) (boilerplate fee demands insufficient to show "unmistakably clear" mutual intent to award attorneys’ fees)
- McLaughlin, Piven, Vogel Sec., Inc. v. Ferrucci, 67 A.D.3d 405 (1st Dept. 2009) (arbitrator’s award of fees not manifest disregard where arbitrator’s view of controlling law was plausible)
- Matter of Warner Bros. Records (PPX Enters.), 7 A.D.3d 330 (1st Dept. 2004) (upholding arbitration fee awards under AAA rules where both parties requested fees)
- Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471 (2006) (standard for vacating arbitrator’s award for manifest disregard explained)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995) (FAA can permit arbitral remedies, like punitive damages, despite state-law limits)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitrability is presumptively for courts unless parties clearly and unmistakably agreed otherwise)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (distinguishing judicial and arbitrator questions and reaffirming that arbitrability questions are for courts absent clear delegation)
- AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643 (1986) (courts decide arbitrability unless parties clearly and unmistakably provide otherwise)