Yosef Magid, Jacob Rottenberg v. Ari Waldman
20-3216(L)
| 2d Cir. | Feb 25, 2022Background
- Petitioners Yosef Magid and Jacob Rottenberg sought confirmation of an arbitration award in the Southern District of New York; respondent Ari Waldman opposed vacatur and appealed the confirmation order.
- The arbitrator awarded relief to Petitioners and also included attorneys’ fees for later enforcement proceedings; the district court confirmed most of the award but vacated the fees portion.
- Waldman alleged the arbitrator was partially biased: the arbitrator’s law clerk, Rabbi Gavriel Stern, was the father‑in‑law of one petitioner’s brother and had a separate business relationship with the arbitrator.
- Waldman knew of the clerk relationship by August 27, 2019, yet proceeded with arbitration (submitted a summation and followed up), and did not seek the arbitrator’s disqualification before the award.
- The district court found (1) partiality was not clearly shown and (2) Waldman waived any partiality objection by proceeding with arbitration despite knowledge of the facts, and (3) the arbitrator exceeded authority by awarding attorneys’ fees for subsequent enforcement proceedings.
Issues
| Issue | Petitioners' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration award should be vacated for evident partiality | Partiality not proven; relationships were attenuated and did not cross the line | Arbitrator’s clerk’s family/business ties to Petitioners created evident partiality | No vacatur for partiality; relationships were insufficiently direct and, in any event, waived by Waldman |
| Whether Waldman waived his partiality objection | N/A | Waldman had actual knowledge of the facts and proceeded with arbitration, so he waived the right to later object | Waiver found; Waldman proceeded after learning of the relationships, so he cannot now object |
| Whether arbitrator had authority to award attorneys’ fees for enforcement proceedings after arbitration | Fees for enforcement were within arbitrator’s authority or consented to by Waldman | Arbitrator lacked authority absent an agreement, statute, or bad‑faith finding; no bad faith was found | Arbitrator exceeded authority; district court correctly vacated the fee award |
| Which law governs review (FAA vs NY CPLR) and applicable standards | Petitioners noted NY CPLR relevance | Waldman noted FAA standards; both standards similar here | Court applied FAA/NY standards as substantially similar and reviewed de novo for legal questions |
Key Cases Cited
- A&A Maint. Enter., Inc. v. Ramnarain, 982 F.3d 864 (2d Cir. 2020) (standard of review for confirmation/vacatur of arbitration awards)
- Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir. 2003) (deference and review standards for arbitration rulings)
- Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576 (2008) (FAA’s relationship to state arbitration law)
- D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir. 2006) (high burden to vacate an arbitration award)
- Scandinavian Reins. Co. v. St. Paul Fire & Marine Ins. Co., 668 F.3d 60 (2d Cir. 2012) (evident partiality standard: whether a reasonable person would conclude an arbitrator was partial)
- Morelite Constr. Corp. v. N.Y.C. Dist. Council Carpenters Benefit Funds, 748 F.2d 79 (2d Cir. 1984) (family relationships that can support vacatur are rare but can be dispositive)
- J.P. Stevens & Co. v. Rytex Corp., 34 N.Y.2d 123 (N.Y. 1974) (knowledge of potential bias and failure to object constitutes waiver)
- Sammi Line Co. v. Altamar Navegacion S.A., 605 F. Supp. 72 (S.D.N.Y. 1985) (American rule: attorneys’ fees generally not awarded absent agreement or statute in arbitration)
- ReliaStar Life Ins. Co. v. EMC Nat’l Life Co., 564 F.3d 81 (2d Cir. 2009) (bad‑faith exception permitting fee awards in arbitration when arbitrator’s authority is broad)
- Hooper Assocs., Ltd. v. AGS Computs., Inc., 74 N.Y.2d 487 (N.Y. 1989) (under New York law, attorneys’ fees are incidents of litigation and require authorization)
- Brown v. Brown‑Thill, 762 F.3d 814 (8th Cir. 2014) (holding that lack of authorization for fees in arbitration implies no authorization for post‑award enforcement fees)