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COOK CHOCOLATE CO. v. SALOMON INC.

September 26, 1990

COOK CHOCOLATE COMPANY, A DIVISION OF WORLD'S FINEST CHOCOLATE, INC., PLAINTIFF,
v.
SALOMON INC., PHILIPP BROTHERS, INC., PHILIPP BROTHERS TRADING CORPORATION, PHILIPP BROTHERS COMMODITIES CORP., COCOA MERCHANTS LTD., DANIEL F. TULIG, MARK GLOWATZ, AND ESTHER GREENFIELD, DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiff Cook Chocolate Company ("Cook") has moved under Sections 10(b) and 10(c) of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10(b), 10(c), to vacate an arbitration award entered in favor of defendants Salomon Inc. ("Salomon"), Phillip Brothers, Inc. ("PBI"), Phillip Brothers Trading Corporation ("PBTC"), Phillip Brothers Commodity Corporation ("PBCC"), Cocoa Merchants, Limited ("CML") (collectively, "Phibro") and Daniel F. Tulig ("Tulig"), Mark Glowatz ("Glowatz") and Esther Greenfield ("Greenfield") (collectively, "the individual defendants"). The defendants have cross-moved under Section 9 of the FAA, 9 U.S.C. § 9, for an order confirming the award, and also for sanctions against Cook's attorneys under Rule 11 of the Federal Rules of Civil Procedure. Because there are insufficient grounds to vacate the award under § 10, Cook's motion is denied, and the defendants' cross-motions to confirm the award are granted. The motion for sanctions under Rule 11 is denied.

The Parties

Prior Proceedings

Cook originally filed its complaint on August 4, 1987 charging Phibro and the individual defendants with violations of the Commodity Exchange Act ("CEA"), 7 U.S.C. § 6b(A)-(D), and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, and asserting several common law cause of action, in connection with Cook's purchase of physical cocoa through Phibro. On March 22, 1988, the defendants' motion to stay the litigation pending arbitration before the Cocoa Merchants' Association of America, Inc. ("CMAA") was granted. During the course of the arbitration, Cook returned to this court seeking an order directing the defendants to comply with its subpoenas for production of documents and also an order disqualifying Tulig's counsel for a conflict of interest. On October 27, 1988, this court denied Cook's motion, stating that "Cook will be able to challenge the arbitrators' award after the process is complete. . . ." October 27, 1988 Slip op. at 2, 1988 WL 120464. The time for that challenge has now arrived.

The Arbitration

The arbitration panel consisted of three individuals who were in the business of trading cocoa and cocoa futures: John Bell ("Bell"), the chairman of the panel, the manager of the New York Cocoa Department for Woodhouse Drake & Carey (Trading) Inc., an international commodity trading firm; James Jenkins ("Jenkins"), a senior physical cocoa trader at Gill & Duffus, Inc. and vice president of Gill & Duffus Futures, Inc., both part of an international commodity trading firm; and Jack Ward ("Ward"), president of Baretto Peat, Inc., the United States branch of one of the world's largest processors of cocoa beans and producers of cocoa products. The hearings before the panel entailed nine days of testimony stretched out over more than four months, and generated a transcript of over 2000 pages. Following the close of the hearings, on March 22, 1989, the panel announced an award dismissing all of Cook's claims against the defendants, awarding costs and attorneys' fees to all of the defendants ($392,459.28), and assessing the CMAA's expenses for the arbitration against Cook ($121,017.04). The award also provided for Cook to reimburse the CMAA for any expenses incurred in confirming or collecting the award.

On June 22, 1989, Cook moved to vacate the award under 9 U.S.C. § 10.*fn1 The defendants cross-moved for confirmation of the award under 9 U.S.C. § 9,*fn2 and sought sanctions against Cook's attorneys for filing the motion to vacate. After the motion had been fully briefed and argued by both sides, on November 21, 1989, Cook filed a second motion seeking to overturn the award under Rule 60(b) of the Federal Rules of Civil Procedure,*fn3 or in the alternative to supplement its earlier motion to vacate. The motion was briefed again and argued on February 16, 1990. After further submissions by the parties, the motion was considered fully submitted on June 21, 1990.

Cook initially advanced five grounds for overturning the panel's award:

  (1) The panel refused to disclose the
  relationships between the arbitrators and any of
  the parties.
  (2) The panel refused to enforce Cook's subpoenas
  to Phibro for the production of documents, thereby
  denying Cook access to the evidence necessary to
  prove its case.
  (3) The arbitrators interfered with Cook's
  presentation of evidence by questioning Cook's
  witnesses and by altering the order in which
  Cook's witnesses testified.
  (4) The panel refused to apply the Commodity
  Exchange Act ("CEA") and the Racketeer Influenced
  and Corrupt Organizations Act ("RICO") to Phibro's
  behavior.
  (5) The arbitration was tainted by the conflict of
  interest of Tulig's counsel and by the
  "[in]ability" of the attorney representing the
  panel "to render competent advice."

Plaintiff's Memorandum of Law in Support of Motion to Vacate Arbitration Award (hereinafter "Cook 6/22/89 Mem.") at 23-36.

In its November 21 motion, Cook essentially repeated many of the same arguments, but sought to bolster its claim by reference to additional documents which had by then come to Cook's attention as the result of other litigation involving the Phibro defendants and counsel for Cook. Cook asserted that these documents proved conclusively that the testimony given by the individual defendants in the arbitration had been perjurious, that Phibro's counsel had misled the arbitrators, and that the panel itself had behaved in a fraudulent manner. Plaintiff's Memorandum of Law in Support of Motion Pursuant to Rule 60(b) of the Federal Rules of Civil Procedure (hereinafter "Cook 11/21/89 Mem.") at 19-40.

Unfortunately for Cook, their own arguments merely succeed in demonstrating that none of the evidence can be said to prove anything conclusively. As a result, there are simply ...


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