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LLT INTERN., INC. v. MCI TELECOMMUNICATIONS CORP.

October 7, 1999

IN THE MATTER OF THE ARBITRATION BETWEEN LLT INTERNATIONAL INC., F/K/A LEE, LIU & TONG ADVERTISING, INC., PETITIONER,
v.
MCI TELECOMMUNICATIONS CORPORATION S/H/A MCI TELECOMMUNICATIONS, INC., RESPONDENT.



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

OPINION

Once again petitioner LLT International Inc., F/K/A Lee, Liu & Tong Advertising, Inc. ("LLT") has moved to vacate an arbitration award (the "Award" or the "Second Award"), rendered this time on March 29, 1999, in the continued arbitration between it and respondent MCI Telecommunications Corporation, S/H/A MCI Telecommunications, Inc. ("MCI"). MCI has cross-moved to confirm the Award. For the reasons set forth below, LLT's motion is denied, the cross motion of MCI is granted, and the Award confirmed.

Prior Proceedings

An arbitration between the parties was conducted pursuant to their agreement of July 6, 1994 (the "Agreement"), under which LLT was retained by MCI as an advertising and marketing consultant to assist MCI in its efforts to market its services to the Asian-American community. MCI terminated the Agreement, claiming defective and fraudulent performance by LLT. LLT claimed, inter alia, wrongful termination, and sought payment of unpaid invoices and damages for termination.

The dispute between the parties was arbitrated in Washington, D.C., with fourteen days of hearings, thirteen fact witnesses, thousands of pages of documentary evidence, two expert witnesses, seven fully-briefed motions, two post-hearing memoranda from the parties, and a day of closing arguments. An award was issued on November 19, 1997 (the "First Award") leaving the parties, financially, where they were. The Award was vacated in an opinion of this Court, dated September 24, 1998, familiarity with which is assumed. See LLT Int'l v. MCI Telecommunications, 18 F. Supp.2d 349 (S.D.N.Y. 1998) ("LLT I"). On remand, no additional evidence was presented, and the arbitration panel (the "Panel") conducted a hearing on January 22, 1999.

On March 29, 1999, the Panel rendered the Second Award, stating that MCI and LLT each bore the burden of proving all the elements of their respective claims and counterclaims, and that neither party had sustained that burden.*fn1 As a result, the Panel determined, once again, to "leave the parties where they found them financially."

  More specifically, the Panel found that: [M]CI did
  sustain its burden of proving (a) that LLT materially
  breached the Agreement by failing to perform its
  contractual obligations and to submit proper invoices
  in accordance with the terms of the Agreement, (b)
  that LLT's improper practices in breach of the
  Agreement were pervasive and resulted in substantial
  overcharges to MCI, (c) that LLT's improper practices
  were concealed from MCI and were not discovered by
  MCI until the summer of 1996, (d) that MCI had good
  cause for terminating the Agreement, and (e) that
  MCI's termination notice to LLT dated July 26, 1996
  was valid.
  [M]CI did not sustain its burden of proving (a)
  that LLT's improper performance, billing practices,
  or overcharges constitute fraud, and (b) that MCI is
  entitled to recover any amount from LLT in excess of
  the amount that MCI owed to LLT.
  [L]LT did not sustain its burden of proof with
  respect to all elements of any of its counterclaims.

The Second Award also concluded that "the law of account stated does not relieve LLT of the burden of proving its counterclaims," and that the doctrine of functus officio did not preclude the Panel from reaching its conclusions concerning the parties' satisfaction of their respective burdens. The Second Award's denial of LLT's counterclaims indicated that LLT had not sustained its burden of proving, among other things, "[t]hat LLT fully and properly performed its obligations under the Agreement" or "[t]hat LLT properly billed for its services in accordance with the terms of the Agreement."

LLT moved to vacate the Second Award, MCI moved to confirm it, and both motions were marked fully submitted on June 30, 1999.

Discussion

I. The Standard for Vacatur of an Arbitral Award

As set forth in LLT I, "[t]he grounds for vacating awards are narrow":

  [C]ourts have consistently held that "`arbitration
  awards are subject to very limited review in order to
  avoid undermining the twin goals of arbitration,
  namely, settling disputes efficiently and avoiding
  long and expensive litigation.'" . . . Moreover, the
  burden is on the party seeking to vacate the award to
  establish one of the statutory grounds for that
  relief. Thus, the Second Circuit "adhere[s] firmly to
  the proposition [] . . . that an arbitration award
  should be enforced, despite a court's disagreement
  with it on the merits, if there is a `barely
  colorable justification for the outcome reached.'"

18 F. Supp.2d at 352 (citations omitted). Accordingly, a party seeking to vacate an arbitration award bears a heavy burden of proof. See Warnes, S.A. v. Harvic Int'l., Ltd., No. 92 Civ. 5515(RWS), 1995 WL 261522, at *3 (S.D.N.Y. May 4, 1995) ("Any `colorable ...


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