The opinion of the court was delivered by: Wexler, District Judge.
In the above-referenced action, plaintiffs Bharat D. Agarwal
("Bharat") and Pramila Agarwal ("Pramila"), who assert claims
against defendants Ashok K. Agrawal ("Ashok") and Mira Agrawal
("Mira"), seek to enforce an arbitration award entered pursuant
to an agreement between the parties. Currently before the Court
are plaintiffs' motions for judgment on the pleadings pursuant
to Rule 12(c) of the Federal Rules of Civil Procedure, or for
summary judgment pursuant to Rule 56(c) of the Federal Rules of
Civil Procedure, as well as defendants' cross-motion pursuant
to 9 U.S.C. § 10 seeking to vacate the award of the arbitrator.
After a brief statement of the background facts, the Court will
turn to address the motions.
Plaintiffs are residents of the state of West Virginia and
originally brought an action in an attempt to compel a prior
arbitration agreement made with defendants Ashok and Mira, both
residents of New
York. This controversy stems from the alleged misconduct of
defendants, purportedly in violation of the terms of two
separate shareholder agreements, the first signed by the
parties in 1986, and the second four years later in 1990.
Pursuant to these agreements the parties formed a joint real
estate venture, each owning 50% of the shares in the Ashley
Development Corporation ("ADC"), for the purpose of building a
real estate development in Wading River, New York. The parties
also signed an employment agreement which provided for,
inter alia, compensation for services performed by Ashok, as
acting president of the corporation. Briefly stated, plaintiffs
sought arbitration to resolve disputes between the parties
regarding alleged overcharges and other misconduct by
Late in 1989, a dispute arose between the parties with regard
to the amount of charges made to ADC by Ashok, as well as an
alleged disparity in the capital contributions made to ADC as
between Bharat and Ashok. Thereafter, Bharat made a request for
an arbitration proceeding pursuant to the terms of the 1986 and
1990 shareholder agreements; a hearing was set for October 31,
1990, and November 1, 1990. Defendants then requested, and
obtained, an adjournment to January 15 and 16, 1991. After the
resignation of defendants' attorney soon thereafter, another
request for an adjournment was made by defendants, although
defendants had, at an earlier date, represented that they would
not seek "any further adjournment." See Donley Aff. at exhibit
E. The requested adjournment was subsequently denied. After the
first two dates of hearings on the 15th and 16th of January, a
third day of hearings was scheduled for February 1, 1991, which
allowed defendants time to prepare further testimony.
Thereafter, the parties submitted post-hearing and reply
briefs. On April 22, 1991, the arbitrator entered an award
which directed that defendants pay plaintiffs $620,000, with
interest, effective May 23, 1991. As noted above, plaintiffs
currently seek judgment based on that award; defendants seek to
vacate the arbitration award.
Pursuant to Rule 56(c) of the Federal Rules of Civil
Procedure, a party is entitled to summary judgment when it is
shown that "there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter
of law." Fed.R.Civ.P. 56(c). The Supreme Court reiterated this
standard in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986), when it stated that "[t]he plain
language of Rule 56(c) mandates the entry of summary judgment .
. . against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's
case, and on which that party will bear the burden of proof at
trial." Id. at 322, 106 S.Ct. at 2552. Moreover, all reasonable
inferences must be construed in the non-moving party's favor.
Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57
(2d Cir. 1987).
Pursuant to section 10(a) of the Federal Arbitration Act,
("the Act"), 9 U.S.C. § 10(a), a district court may vacate an
arbitration award when the arbitrator is guilty of misconduct
"in refusing to postpone the hearing, upon sufficient reason
shown, or in refusing to hear evidence pertinent and material
to the controversy; or of any other misbehavior by which the
rights of any party have been prejudiced." 9 U.S.C. § 10(a)(3).
Misconduct typically arises where there is proof of either bad
faith or gross error on the part of the arbitrator. See United
Paperworkers Int'l v. Misco, Inc., 484 U.S. 29, 40, 108 S.Ct.
364, 372, 98 L.Ed.2d 286 (1987) (citations omitted). A court's
jurisdiction under section 10 of the Act "is severely limited,
since, if it were otherwise, the ostensible purpose for resort
to arbitration, which is the avoidance of
litigation, would be frustrated." C.A. Tinaway v. Merrill Lynch
& Co., 658 F. Supp. 576, 578 (S.D.N.Y. 1987) (quoting Amicizia
Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp.,
274 F.2d 805, 808 (2d Cir.), cert. denied, 363 U.S. 843, 80
S.Ct. 1612, 4 L.Ed.2d 1727 (1960)). The Second Circuit has
expressly stated that such limited review "reflects the narrow
reading we have consistently accorded our authorization, under
the Federal Arbitration Act, to vacate arbitration awards on
the ground that the arbitrator has overstepped his power." U.S.
Steel and Carnegie Pension Fund v. Dickinson, 753 F.2d 250,
252-53 (2d Cir. 1985) (citing Andros Compania Maritima, S.A. v.
Marc Rich & Co., 579 F.2d 691, 703 (2d Cir. 1978)).
In the absence of a clear violation or modification under
sections 10 and 11 of the Act, section 9 requires that, "on
application of any party to the arbitration proceedings, the
Court [must] confirm the award." Jardine Matheson & Co. v.
Saita Shipping, Ltd., 712 F. Supp. 423, 426 (S.D.N.Y. 1989)
(citing Steamship Co. v. Multifacs Int'l Traders, Inc.,
375 F.2d 577, 582 (2d Cir. 1967); see also 9 U.S.C. § 9. As noted
above, defendants seek to vacate the arbitration award based on
the grounds that: (1) the arbitrator committed misconduct by
refusing to postpone the hearing; (2) the arbitrator exceeded
his powers; and (3) the arbitration award is violative of
public policy and in conflict with New York law. The Court will
address defendants' arguments seriatim.
Defendants' first contention in support of their argument
that the arbitration award should be vacated is that the
arbitrator improperly denied their request for an adjournment.
To briefly repeat the pertinent facts, plaintiffs initially
filed a demand for arbitration in July of 1990. The initial
hearing dates of October 31 and November 1, 1990, were
rescheduled at the request of defendants. Plaintiffs then
suggested December 6th and 7th, 1990, with the proviso that
defendants not seek any further adjournment. Defendants
preferred to avoid hearings during December, and consequently
in a letter dated October 19, 1990, they sought hearing dates
"any time from January 2, 1991." See Aff. of Ashok Agrawal at
exhibit C. By that letter defendants affirmatively represented
that they would seek no further adjournment. See id.
The arbitrator then set the dates of January 15 and 16, 1991,
for the hearings. It is to be noted that after those dates were
arranged, defendants brought a proceeding in state court to
stay the arbitration.*fn2 Thereafter, defendants' counsel
withdrew from representing defendants in the arbitration,
although he apparently maintained his representation of
defendants in the action pending before this Court. It is
worthy of mention that this Court finds such conduct to be
questionable at best. At any rate, defendants thereafter sought
another adjournment of the hearing. Having considered
defendants' request and plaintiffs' opposition,*fn3 the
arbitrator denied defendants' application for a further
As noted above, the Act authorizes a court to vacate the
arbitrator's award when the arbitrator is guilty of misconduct
in refusing to "postpone the hearing upon sufficient cause
shown,. . . ." 9 U.S.C. § 10(a)(3). A court's review on this
basis is limited to a determination of whether the refusal to
postpone was the result of misconduct by the arbitrator. Storey
v. Searle Blatt Ltd., 685 F. Supp. 80, 82 (S.D.N.Y. 1988);
Fairchild & Co. v. Richmond, et al., 516 F. Supp. 1305, 1313
(D.D.C. 1981). In addition, it is to be noted that "[t]he
granting or denying of an adjournment falls within the broad
discretion of appointed arbitrators." Storey, 685
F. Supp. at 82 (citations omitted). In light of the considerable
deference given to an arbitrator's decisions, together with the
facts presented herein, it is clear that a reasonable basis
existed for the arbitrator's decision to deny the request for
Defendants' reliance on Tube & Steel Corp. of Am. v. Chicago
Carbon Steel Prods., 319 F. Supp. 1302 (S.D.N.Y. 1970), in which
the court vacated an arbitration award on the basis of an
arbitrator's refusal to grant an adjournment, is misplaced.
Among the key differences between that case and the action at
bar are: (1) the arbitrators in Tube & Steel unilaterally moved
the agreed upon date to a time at which they knew respondents
were unavailable; (2) petitioner agreed to the adjournment; and
(3) the arbitrators conducted the hearing in the absence of
respondents. Id. at 1303. In marked distinction to those
circumstances, defendants herein had twice been granted
adjournments, and the third date set for the ...