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February 21, 2001


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


Ottawa Office Integration Inc. moves, pursuant to Fed.R.Civ.P. 81(a)(3) and 9 U.S.C. § 9 of the Federal Arbitration Act ("FAA"), to confirm two arbitration awards, and defendants FTF Business Systems, Inc. and Martin Burke move, pursuant to New York law and 9 U.S.C. § 10 of the FAA to vacate those awards. FTF and Burke contend that the arbitrator committed misconduct when he denied their request for an adjournment based on the ill health of their primary witness. The motion to confirm the arbitration awards is granted and the motion to vacate the awards is denied on the grounds that the arbitrator had a "reasonable basis" for denying the adjournment because defendants repeatedly failed to provide adequate evidence to support their witness's asserted unavailability.


In November of 1999, Ottawa filed this diversity action for breach of contract alleging that FTF and Burke did not pay Ottawa for computer equipment it had delivered pursuant to a contract and a guaranty agreement. The contract provides in part that "This Agreement shall be governed by, and construed and interpreted in accordance with the laws of the State of New York. Both parties agree to submit disputes to a mutually agreed upon arbitration Mediator." (Steinberg Aff. Ex. A at 4b ¶ 4.) The guaranty agreement provides in part that "Any disagreement or enforcement of this Guaranty will be subject to the New York State Arbitration rules. Any decision rendered pursuant to their ruling shall be final and binding." (Id. at 5 ¶ E.)

After this action was commenced, FTF and Burke moved to dismiss the complaint in favor of arbitration. The action was referred to the court annexed mediation office for voluntary mediation. As a result of that process, the parties agreed in writing to "proceed to final and binding arbitration as promptly as possible of all claims and counterclaims arising out of the contract and guarant[y] in dispute here." (Steinberg Aff. Ex. B ¶ 1.) The stipulation that embodied that agreement and was "so ordered" by this Court on February 3, 2000, also provided that "This Court shall retain jurisdiction over this action for any future proceedings arising out of this arbitration." (Id. at ¶ 2.) Because the parties were unable to agree on an arbitrator, the Court, pursuant to the stipulation, appointed Ronald Meister, Esq. to arbitrate the dispute. (Steinberg Aff. Ex. C.)

On March 31, 2000, the parties "confirm[ed] their submission to binding arbitration" in a document entitled "Arbitration Agreement" and provided, in relevant part, that "[The arbitration] shall be governed by the United States Arbitration Act, 9 U.S.C. § 1-16." (Steinberg Aff. Ex. D.)*fn1

The arbitrator scheduled a hearing for May 2 and 3. One week before it was to take place, FTF and Burke requested an adjournment because Burke — a party and defendants' primary witness — was ill. (Holman Aff. Ex. K.) They submitted a letter on a plain sheet of paper without letterhead from a Dr. Alexander Chen that Burke had been diagnosed in 1995 with Wegener's Granulomatosis, which means that "he has an overactive immune system." (Id.) The arbitrator granted the requested adjournment and rescheduled the hearing for June 6 and 7. (Holman Aff. Ex. Q.) He also ordered that any further requests for adjournments based on Burke's health be accompanied by "a physician's affidavit describing Mr. Burke's diagnosis, any reason(s) he cannot travel or testify, his prognosis, and a clear statement of the date by which it is anticipated he will be able to travel and testify," relevant medical records, and "a waiver of Burke's physician-patient privilege sufficient to permit complainant and the [arbitrator] to review and inquire into Mr. Burke's medical records, physical condition and ability to travel and testify." (Id.) In addition, FTF and Burke were directed to give notice on or before May 26 if they believed that Burke would be unable to participate in the June hearing. In that case, the arbitrator wrote that he would conduct "an evidentiary hearing" to determine Burke's competency to testify. (Id.)

A few days later, the arbitrator granted Ottawa's request for a further adjournment so that Ottawa's counsel could attend his daughter's college graduation. (Holman Aff. ¶ 26, Ex. R.) The hearing was moved, with the consent of the parties, to June 28 and 29.

The day before the hearing, FTF and Burke again requested an indefinite adjournment based on the stated fact that Burke's "medical condition has deteriorated" and "his doctors are attempting to stabilize his condition." (Holman Aff. Ex. X.) The request did not include any description of his condition or supporting information, despite the arbitrator's earlier ruling. Ottawa alleged that Burke was not as sick as he claimed and opposed any further adjournments on the grounds that it was the day before the hearing was to take place and: (1) three of its witnesses had arrived in New York from Canada to testify, (2) Burke had submitted no substantiation for his "condition" and, (3) he, in fact, had been well enough to discuss settlement issues with a representative of Ottawa only four days earlier. (Holman Aff. Ex. Y.) The arbitrator denied the adjournment. (Holman Ex. AA.)

At the beginning of the hearing the next morning, FTF and Burke renewed their request for an open-ended adjournment and submitted two letters from Dr. Chen: the first had been previously submitted with the April 26 adjournment request, and the second was undated and again without letterhead. The letters stated that the doctor has advised Burke to "rest at home and avoid any stressful situations." (Holman Aff. Ex. K, BB.) Neither letter was in the form of a sworn affidavit as directed by the arbitrator. (Holman Aff. Ex. K, BB, CC at 5.) FTF and Burke objected to the arbitrator's requirement that Burke waive his physician-patient privilege and turn over his medical records. (Holman Aff. Ex. CC at 8-9.)

The arbitrator denied the renewed request for an adjournment on the grounds that: (1) FTF and Burke did not give proper notice as previously ordered, (2) they did not submit any credible medical evidence, and (3) the submitted letters were vague in describing Burke's asserted inability to testify. (Holman Aff. Ex. CC at 19, 20, DD at 343.) The arbitrator nonetheless ruled that he would leave the record open until August 11 to allow FTF and Burke to supplement the record with oral or written testimony from Burke, provided that they supplied a physician's affidavit and relevant medical records by July 12. (Holman Aff. CC at 20, DD at 334-35.)

FTF and Burke produced only one witness at the June 28 and 29 hearing. That witness testified that she spoke on the telephone to Burke about work-related matters "a few times" a day. (Holman Aff. Ex. DD at 311.) Indeed, she had spoken to him "four [or] five times" on the very day of the hearing. (Id. at 310.) She also testified that Burke had been in the office "a couple of weeks" before the hearing. (Id. at 311.) That witness finished testifying at 3 p.m. FTF and Burke then requested another adjournment because there was not enough time for them to put on the rest of their case. They stated that they had not brought additional witnesses to the hearing that day because they believed the completion of Ottawa's case was going to take more time than it did. Ottawa had represented on the first day of the hearing that it had two witnesses for the second day; however, one of those witnesses was called away on business and could not attend. (Id. at 344-45.) The arbitrator denied defendants' request for a further adjournment "for any purpose other than offering the testimony of Mr. Burke if [defendants] establish that he [was] physically incapable of testifying earlier." (Id. at 345-46.)

On July 12 — the deadline the arbitrator had set for FTF and Burke to substantiate Burke's medical condition — they failed to produce any such substantiation and instead filed a petition in New York Supreme Court to stay the arbitration proceedings and to disqualify the arbitrator on the grounds that the arbitrator had committed misconduct when he refused to grant an adjournment based on Burke's illness and when he requested that both parties pay the arbitrator's estimated fees and costs in advance of the hearing. (Holman Aff. Ex. EE ¶ 4.) Justice Carol E. Huff granted the stay. Ottawa then removed the petition to the United States District Court for the Southern District of New York and U.S. District Judge Richard Berman vacated the stay. (FTF Bus. Sys., Inc. & Martin Burke v. Ottawa Office Integration, Inc., 00 Civ. 5225(RMB), Memo Endorsement dated July 25, 2000.)

In September 2000, the arbitrator awarded Ottawa compensatory damages of $780,035.57 in Canadian dollars, plus interest at the rate of 2% per month from April 1, 1999. One month later, he issued a supplemental award of $129,794.31 in U.S. dollars for attorneys' ...

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