Odeon Capital Group LLC v. Ackerman
864 F.3d 191
| 2d Cir. | 2017Background
- Bret Ackerman, a former bond trader, arbitrated multiple claims against Odeon Capital Group and its principals; the FINRA panel awarded him $1,102,193 for unpaid wages and attorneys’ fees under New York law.
- Odeon petitioned to vacate the award alleging arbitrator misconduct and manifest disregard of law, and sought to amend its petition to allege fraud based on alleged perjured testimony by Ackerman about a FINRA investigation.
- At arbitration Ackerman testified the FINRA OTR investigation was closed and that FINRA told him there was nothing improper about a 2014 trade; after the arbitration FINRA requested another OTR and Ackerman later entered an AWC accepting a trading ban.
- The district court denied Odeon’s motion to amend to add fraud and denied vacatur, finding any alleged perjury was not material to the wage award; it also denied Ackerman’s request for attorneys’ fees.
- On appeal, the Second Circuit affirmed the denial of Odeon’s amendment and vacatur, holding fraud-based vacatur requires a nexus between the fraud and the arbitrators’ decision; it vacated the denial of attorneys’ fees and remanded, concluding New York Labor Law § 198(1-a) entitles a prevailing employee to fees in proceedings to confirm arbitration awards for unpaid wages.
Issues
| Issue | Ackerman's Argument | Odeon's Argument | Held |
|---|---|---|---|
| Whether alleged perjury by Ackerman warrants vacatur for fraud under 9 U.S.C. § 10(a)(1) | Testimony was truthful; any alleged misstatements were immaterial | Alleged perjury about FINRA investigation fraudulently procured the award and tainted proceedings | Vacatur denied: petitioner must show fraud materially related (nexus) to the arbitrators’ decision; Odeon failed to show materiality |
| Standard for materiality in fraud-based vacatur | N/A (defensive) | Any perjury by prevailing witness undermines whole award | Court adopts standard: fraud must have nexus to basis for panel’s decision; need not prove different outcome |
| Whether district court correctly denied Ackerman’s request for attorneys’ fees | Fees awarded under NY Labor Law §198(1-a) for prevailing employee in action to recover unpaid wages, including special proceedings to confirm awards | Statute doesn’t expressly cover confirmation/vacatur special proceedings so fees not mandatory | Denial vacated and remanded: §198(1-a) applies to special proceedings to confirm awards for unpaid wages; district court must calculate fees |
| Whether amendment to add fraud claim should have been permitted | N/A | Amendment futile because perjury not material to award | Denial of leave to amend affirmed (futility for lack of materiality) |
Key Cases Cited
- Karppinen v. Karl Kiefer Mach. Co., 187 F.2d 32 (2d Cir. 1951) (materiality requires nexus between alleged perjury and arbitrators’ decision)
- Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378 (11th Cir. 1988) (perjury by expert that affected the only evidence on a central issue can justify vacatur)
- MidAmerican Energy Co. v. Int’l Bhd. of Elec. Workers Local 499, 345 F.3d 616 (8th Cir. 2003) (vacatur where arbitral rationale expressly relied on witness’s credibility)
- Int’l Chem. Workers Union v. BASF Wyandotte Corp., 774 F.2d 43 (2d Cir. 1985) (fees not recoverable under American Rule absent statutory or equitable authority)