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June 29, 2000


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


Plaintiff Charles S. Polin, the former president of She Knows!!, a division of defendant Kellwood Company, commenced this litigation in this Court in 1993, alleging that he was fraudulently induced by Kellwood to accept employment; that defendants Harding, head of Kellwood Sportswear, and Kellwood Sportswear itself, tortiously and negatively interfered with his employment relationship with Kellwood; and that Kellwood then terminated his employment in an act of wrongful age discrimination. After four years of pre-trial litigation and numerous rancorous discovery disputes,*fn1 the parties began discussing arbitration as a means to settle the controversy, and on September 27, 1997, Polin's counsel, Arthur Wisehart, wrote to Kellwood's counsel, Steven Wall, giving him the name of Jonathon Liebowitz as an arbitrator. By January 15, 1998, both sides had designated Liebowitz as the neutral arbitrator, and Liebowitz that day wrote both Wisehart and Wall accepting and confirming with them a per diem fee rate for his service of $2000 per day.*fn2 Two partisan arbitrators had already been chosen: Kenneth Kleinman, by Kellwood, and Martin Freeman, by Polin. Thereafter, on February 25, 1998, the parties in a by-then written Arbitration Agreement confirmed that it was in their "mutual best interest to submit to final and binding arbitration all the claims brought by Polin."*fn3 The agreement specified that the arbitration was to be "subject to the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, . . . and the terms and conditions of this Agreement."*fn4 It provided that in the event of a conflict between the AAA rules and the arbitration agreement, the agreement would control, and that on review of any arbitration award the Federal Arbitration Act, 9 U.S.C. § 10 and 11, should apply. The agreement further provided 1) that "the arbitration panel shall have the authority to provide whatever remedies are currently available under law for the claims asserted by Polin in the action captioned Polin v. Kellwood Company et al., Civil Action No. 93-7876(RO), as part of its final and binding arbitration award[s]," 2) that (the AAA rules applying) the "arbitrator may grant any remedy or relief that the arbitrator deems just and equitable, including any remedy or relief that would have been available to the parties had the matter been heard in court. The arbitrator shall, in the award, assess arbitration [f]ees, expenses, and compensation as provided in Section 36, 37, and 38 in favor of any party[,]" 3) that "[t]he arbitrator shall have the authority to provide for the reimbursement of representative's fees, in whole or in part, as part of the remedy, in accordance with applicable law," and 4) that under AAA rules "All expenses of the arbitration . . . shall be borne equally by the parties, unless they agree otherwise or unless the arbitrator directs otherwise in the award." (emphasis added). Here, Polin and Kellwood did agree "otherwise", to wit, that Polin would pay for Martin Freeman, the arbitrator selected by him, and Kellwood would pay not only the administrative costs of the arbitration and the full costs of the arbitrator it selected, Kleinman, but also the full costs of the neutral arbitrator, Liebowitz, that Wisehart had proposed. Also, here, "the arbitrator[s] [did] direct[] otherwise in the award." See infra pp. 246-50. Further, they agreed "that judgment upon the arbitration award may be entered in any federal or state court having jurisdiction," which included this Court. This action in this Court was then placed on the suspense calender.

The arbitration proceedings were held in New York City and began with opening statements on April 1, 1998, and continued April 2 and 3, Wisehart presenting evidence on behalf of Polin. The proceedings were then adjourned to June 1. On May 22, however, apparently in response to Kellwood's opening statement that She Knows!! lost eight million dollars, Polin, by subpoena to Kellwood, demanded the production of a large volume of financial documents. Kellwood moved to quash the subpoena contending that it was not permitted by the arbitration agreement which precluded any further discovery under the circumstances, that Polin had already been provided with over 5000 pages of financial records, and that compliance with Polin's new demand "would take weeks, if not months, to gather such documents, and a tractor-trailer to deliver such documents." Later on the day that Kellwood submitted its motion, Wisehart, wishing to have a hearing and ruling on the motion, telephoned neutral arbitrator Liebowitz and Steven Wall, Kellwood's attorney. Unknown to them, Wisehart had a reporter at his end taking the conversation down. Liebowitz refused to rule on the motion because he had not read the papers and asserted that two arbitrators were necessary to make a ruling. While still on the phone, however, Liebowitz complained that his April 6 invoice had not been paid by Kellwood (the party) as Wisehart and Wall had agreed.*fn5 He specifically reminded Wisehart and Wall in apologetic terms that he had the authority under the AAA rules to suspend the proceeding until he was paid, though he did not wish to do that. At the end of the conversation, somehow Liebowitz sensed that Wisehart was recording it,*fn6 and upon being told that it was so, Liebowitz informed Wisehart that the recording was unauthorized and would be rejected if offered as part of the arbitration record. The transcript, as it turns out, however, is instructive here. Sometime later, the panel granted Kellwood's motion to quash.

In any event, in order to avoid Liebowitz effecting a delay of the proceedings, which Wisehart had specifically stated he did not want since it would cause him "substantial injury", see supra note 5, on June 1, Kellwood's law firm forthwith paid Liebowitz' April 6 invoice, aware some "glitch" had delayed Kellwood Company processing the invoice. Wisehart continued Polin's direct case that day and the next, at which time the proceedings were adjourned to August 5. Liebowitz then submitted another bill to Kellwood on June 10, and again, in order to avoid delay, Kellwood's law firm paid that bill on June 24.

The proceedings resumed on August 5 with Wisehart continuing Polin's direct case for three days through August 7, at which time Wisehart rested Polin's direct case. The record then reads:


Mr. Wisehart, have you presented all witnesses and documentary evidence, who or that, in your professional judgment, should have been presented on behalf of your client, Mr. Polin, on your direct case?
MR. WISEHART: Yes, subject to my specific — subject to certain exceptions I've noted as to evidence that was not made available.
ARBITRATOR LIEBOWITZ: I don't understand that answer. What evidence?

MR. WISEHART: The rulings that we couldn't produce.

ARBITRATOR LIEBOWITZ: Except for rulings of the panel, the other side was heard and we made rulings. Your answer is yes?
MR. WISEHART: Except for those rulings that we took exception to.
ARBITRATOR LIEBOWITZ: There's always exceptions to rulings and to adverse rulings. Other than that, you've put your case in and had your chance; right? That's all we want to know.


(Tr. of Aug. 7, 1998 at 1364-65).

Thereupon, Wall stated he was going to move to dismiss all the claims, asserting insufficient evidence to sustain them. Wisehart immediately complained that he was being treated unfairly because he was going to call two more witnesses, Sherri Polivka and Paul Celona but couldn't. The panel reminded Wisehart that he could have called Celona as part of his direct case had he chosen to, but to give Wisehart every opportunity to present Polin's case, the panel scheduled a telephone conference for August 14, a week later, so Wisehart could present an offer of proof as to Celona and Polivka, Polin's alleged successor at She Knows!!.

At that telephone conference, (as the panel later recited in its opinion of April 10, 1999, at 35), Wisehart represented that Celona would testify that Enoch Harding, president of Kellwood Sportswear, located in Rutherford, refused to or incorrectly supplied pants, samples, or patterns. Wisehart also represented that Celona would testify that Kellwood Sportswear did not understand the juniors market which She Knows!! was in and was unwilling to understand that market. He represented Celona would testify that Harry Holding, Kellwood's vice president of marketing, accused Harding of "sabotaging" She Knows!!, and that Tim November, a Kellwood Sportswear scheduler, told Celona he could not ship available goods to She Knows!! because Harding had prohibited him and he was fearful of Harding. The panel, accepting Wisehart's representations, agreed to hear Celona, but it rejected the offer of proof as to Polivka.

With this before it, on October 14, 1998, the panel granted Kellwood's motion for judgment on the fraudulent inducement and age discrimination claims (arbitrator Freeman dissenting) but, based essentially on Wisehart's offer of proof as to Celona, the panel denied the motion to dismiss Polin's claim that Harding and Kellwood Sportswear tortiously interfered with Polin's employment relation with defendant Kellwood Company and required Kellwood to go forward with its proof on this issue.

But before this could happen, the panel and the parties participated in a subsequent telephonic conference because Wisehart requested the arbitrators sign subpoenas for four witnesses for Polin's rebuttal case, Mr. Joseph, Sherri Polivka, Gary Jastrow, and D.L. Thompson. The panel, concerned that the testimony would be repetitious of Polin's direct case and perhaps not relevant to any issue yet to be raised by Kellwood's defense, decided to allow Kellwood to put on its case before signing the subpoenas.*fn7

Two days after the panel declined to sign these subpoenas and three days before Kellwood was to put on its defense, Wisehart, on October 23, a Friday, wrote and delivered a letter to the American Arbitration Association making a number of factual allegations, viz.: that some three months earlier, on August 7, 1998, in an off-the-record discussion, Liebowitz "stated that if counsel for Polin states that he has not received a fair hearing, he [Liebowitz] will abandon the case and will decline to decide the dispute to be arbitrated," (Letter from Wisehart to the AAA of Oct. 23, 1998, at 2-3), that "the defendants have been making payments directly to the neutral arbitrator [Liebowitz], by-passing the American Arbitration Association, a procedure that is objectionable,"*fn8 (id. at 4), and that "the neutral arbitrator's ruling on this [refusal to require Kellwood to provide daily transcripts] and other procedural matters is believed to be influenced by Kellwood's ability to withhold or delay payments to the neutral arbitrator if Kellwood disagrees with his rulings," (id. at 5). Wisehart closed his letter by asserting:

22. However, it is clear that defendants would withhold any further payments to the neutral arbitrator as a means of coercing him into desisting from granting such additional time necessary to complete the arbitration.*fn9
23. Such a tactic is contrary to the National Rules and the Due Process Protocol, under which it provided that the arbitrator may postpone hearings for good cause shown as provided in paragraph 17, and the further provision that if there is a vacancy, the American Arbitration Association may fill the vacancy in accordance with the applicable provision of the National Rules so that the award can be rendered, as provided in paragraph 13.

(Id. at 6) (emphasis added). One notes, again, that the AAA, the recipient of this letter, had not at any time played any part or role in this case except for the incorporation of its rules in the parties agreement.

Kellwood and the arbitrators were not furnished copies of Wisehart's AAA letter until the next day, Saturday, October 24. The hearings went forward the following Monday starting with Kellwood's defense to the surviving tortious interference claim, as well as Polin's rebuttal case and Kellwood's surrebuttal case, running for two and a half more days, Celona being the last witness closing the proof-taking on Wednesday morning, October 28. But before the hearings had resumed the prior Monday, October 26, Wisehart was told by the panel he would be given an opportunity after the close of proof to tell them the basis for his letter to the AAA.

Wisehart was given the promised opportunity Wednesday afternoon, October 28. However, as an accommodation to Wisehart, the panel agreed to postpone the hearing until the following day to allow Wisehart's attorney time to prepare. See infra pp. 259-61 and note 40. Since Wisehart's letter attacked Liebowitz' reputation, the panel decided to have arbitrator Kleinman preside over the said hearing. The next day, arbitrator Kleinman stated the panel's purpose:

That is as serious an accusation that can be made against an Arbitrator or a judge, for that matter. It can't be any more serious than that. That is Mr. Liebowitz's livelihood, which is in part controlled by the American Arbitration Association. These are extremely serious allegations Mr. Wisehart has leveled against him.
It is our intent to ask him*fn10 why he leveled those accusations and the basis for those accusations, because we don't know what the basis of that is. To us, upon reviewing the record, we don't believe there is a basis for that.
I propose to proceed to ask him [Wisehart] questions. If he decides to refuse to answer questions, then we'll put that on the record and there is nothing else we can do. We can't force him to open his mouth. That's up to you and Mr. Wisehart.

(Tr. of Oct. 29, 1998, at 35-37). Refusing to support his any of his allegations, Wisehart stated he would not answer any questions, "On constitutional grounds as well as jurisdictional grounds." (Id. at 62).

Some three months later, on February 8, 1999, the panel issued a brief ruling on the merits in which it found in favor of Kellwood on the remaining tortious interference claim which had survived only because of Wisehart's unfulfilled representations as to Celona's prospective testimony, whom the panel had by then heard and as to whom they later wrote: "Celona's testimony, then, presented the opposite picture than had been discussed by Wisehart. . . . Wisehart's false representations in this regard misled the panel . . ." (Arbitrators' Opinion of Apr. 10, 1999, at 37). See infra pp. 248-50. The panel unanimously sanctioned Wisehart for his misconduct and contempt of the panel and awarded Kellwood one-half of the arbitration costs to be paid by Wisehart personally. By cover letter attached to this ruling, the panel indicated that an full written opinion would be issued on or before April 12, 1999. In response to this ruling, Polin, on February 25, 1999, filed a petition to vacate the award, for a stay and for other relief.

On April 10, 1999, the panel issued an extensive, detailed forty-six page opinion signed by all three arbitrators, and a six page dissent by Freeman solely on the fraudulent inducement issue. Unlike the October 14, 1998 ruling on Kellwood's motion for judgment in which Freeman dissented both to the dismissal of the age discrimination claim and the fraud in the inducement claim, Freeman in this final opinion dissented only to the dismissal of the fraud in the inducement claim, agreeing with his colleagues to dismiss the age discrimination claim. The April 10 opinion details the panel's reasoning for it unanimously dismissing the age discrimination and tortious inference claims, and unanimously sanctioning Wisehart while finding 2-1 in favor of Kellwood on the fraudulent inducement claim.

As to the panel's determinations on the merits, while dealing with the law hereafter and innumerable collateral issues, I observe at the outset that there is no legal or factual basis whatever to put the panel's findings or conclusions in any question were there not a plethora of alleged collateral issues raised by Polin and Wisehart, and it is as to those that the vast bulk of this opinion hereafter is required to address.

Thus, as to the age discrimination claim, the panel found, "There was no evidence to support it", (id. at 25); that it was "frivolous", (id.); not "even a colorable claim", (id. at 25-26), because Polin presented no evidence to support his claim other than he was within the protected age group when hired.*fn11 The panel found that:

[a]side from Polin's beliefs that Sherri Polivka of Kellwood is `youthful looking,' [that] Polin should have remained at Kellwood, and that he rather than Polivka should have headed up a continued She Knows!! operation, a claim which conflicts with the evidence of Polin's own part in bringing about the demise of She Knows!!, partly contained in the testimony of Polivka*fn12 herself, there is simply no ground for a claim of age discrimination.

(Id. at 26).

During the arbitration, Polin had proceeded on a theory of disparate treatment age discrimination. Polin presented no evidence that he was qualified for the position or "that Kellwood's failure to retain him was motivated by age discrimination." The panel found that Polin, though an expert salesman, took on responsibilities as president of She Knows!! which were beyond his capabilities. Additionally, the panel found that Polin's supposed replacement, Polivka, was forty years old and within the same protected age group and that individuals other than Polin had been terminated or retired from Kellwood after their divisions lost money.

As to Polin's tortious interference claim, which was based on his assertion that Harding had intentionally undermined or "sabotaged" Polin's division, this essentially was to come from the testimony of Paul Celona that Wisehart had earlier told the panel would so testify — but — Celona, when before them did not, see infra pp. 248-50, and the panel therefore found this claim "not proved."

With regard to the sanctioning of Wisehart personally for misconduct, the panel based its authority to make this determination and so act on the agreement, the AAA rules, and the applicable law. The panel cited the agreement which incorporates the AAA rules including rule 32(c) and (d), authorizing, respectively, any remedy available had the matter been heard in court and attorney's fees as a remedy in accordance with applicable law. The panel then observed that since federal courts "have equitable power to award sanctions when counsel has `acted in bad faith, vexatiously, wantonly or for oppressive reasons,' First National Supermarkets, Inc. v. Retail, Wholesale and Chain Store Food Employees Union Local 338, 118 F.3d 892, 898 (2d Cir. 1997)," and since Rule 11 of the Federal Rules of Civil Procedure provides authority to sanction parties or attorneys for filling and continuing a frivolous claim, so, too, does the panel because it had been given the authority under AAA rule 32(c) to fashion any remedy a court would have the power to fashion. Moreover, the New York City Human Rights Law permits an award of attorney's fees and costs to the prevailing party in an age discrimination claim,*fn13 and the panel also based its award on that as well. (Arbitrators' Opinion of Apr. 10, 1999, at 31-33).

As to the factual basis for the sanctioning of Wisehart, the panel found that Wisehart had made "false representations" with regard to what Paul Celona would testify to. (Id. at 34). They found that Celona's testimony*fn14 was "at significant variance from Wisehart's representations." (Id. at 36). They stated:

Celona's testimony, then, presented the opposite picture than had been described by Wisehart. Rather than intentional sabotage and refusals to assist, there were substantial efforts by Rutherford to work with She Knows!! and difficult management decisions to allocate resources. Rather than showing the destruction of She Knows!! by the actions of Harding, Celona testified that She Knows!! sowed its own seeds of destruction, by changing the business plan to seek earlier deliveries of far more extensive lines. Had Celona's testimony been represented accurately by Wisehart, there would have been substantial possibility that the tortious interference claim might have been dismissed, thus obviating the need for three additional days of hearing. Wisehart's false representations in this regard misled the Panel, were a serious breach of professional responsibility, and may well have led to significant increased expense to Kellwood.

(Id. at 37).

It appears that Wisehart misrepresented the testimony not only of Celona but also of Polivka. However, that misrepresentation had no impact on any panel decision because the panel had rejected that offer of proof. In its opinion, the panel also found that Wisehart 1) falsely accused Kellwood and its counsel of interfering with witnesses testimony, of maintaining false financial documents, and of destroying evidence; 2) improperly transcribed a telephone conference with Liebowitz and Kellwood's counsel without telling either party; 3) unduly prolonged the hearings by a constant repetition of questions, a reiteration of the same areas of inquiry, and by continuously interposing spurious objections; 4) pursued a frivolous age discrimination claim; and 5) committed a contempt of the panel by sending a letter to the AAA before the proceedings had terminated containing false and unsubstantiated statements about arbitrator Liebowitz, which it considered to be a serious breach of professional ethics. (Id. at 34-46). For all of the reasons listed, the ...

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