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October 15, 1991


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.


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.

Denial of Adjournment

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 adjournment.

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 an adjournment.

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 ...

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