The opinion of the court was delivered by: Sweet, District Judge.
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.
Cook is a division of World's Finest Chocolate, Inc.
("World's Finest"), a maker of chocolate and confectioneries.
Cook purchases the ingredients, such as cocoa and sugar, for
World's Finest's use in its production. Salomon is a holding
incorporated in Delaware, headquartered in New York. PBI is a
commodities trading firm which is a wholly-owned subsidiary of
Salomon. PBI owns both PBTC, a member of the New York Coffee,
Sugar, and Cocoa Exchange ("NYCSCE"), and PBCC, a licensed
Futures Commission Merchant and also a member of the NYCSCE.
Both PBCC and PBTC trade cocoa futures on the NYCSCE.
Greenfield, Glowatz, and Tulig are former employees of PBI, all
of whom worked at its cocoa trading desk.
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 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
(1) The panel refused to disclose the
relationships between the arbitrators and any of
(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
(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 ...