On February 11, after receiving and reviewing Petitioner's
responses, the Panel again denied Petitioner's request. (Pet to
Vacate, Ex L at 1.) The Panel stated that its decision was
partially based upon learning that, despite his illness, Bisnoff
had been working approximately 30 hours per week as a stockbroker
— a stressful occupation — and was therefore fit to participate
in, at least, a videotaped deposition or provide telephonic
Despite the Panel's presentation of alternatives, Petitioner
advised the Panel, via letter, of his intention not to testify
under any circumstances. Neither, Bisnoff, nor his attorney
appeared at the hearing. (Resp. Opp. to Pet. ¶ 5.) Thus, the
hearing proceeded without the participation or testimony of
Bisnoff, the sole living witness with any personal knowledge
regarding many of the issues before the Panel. (Pet. Mem. of Law.
On March 30, 2000 the Panel awarded Respondent $134,180 for
which Whale Securities and Bisnoff are jointly responsible and an
additional $224,017 for which Bisnoff is individually liable.
(Award at 4.)
On June 29, 2000, within the three month limitations period
imposed by the Federal Arbitration Act, 9 U.S.C. § 12, Petitioner
filed notice of a petition to vacate the award pursuant to N Y
CPLR § 7511(b)(1) in state court. Thereafter, on July 19, 2000,
Respondent removed the petition to federal court pursuant to
28 U.S.C. § 1441 and 1446.
A. Applicable Law
Prior to removal from state to federal court, Bisnoff argued
that, pursuant to N.Y. CPLR § 7511(b)(1), the arbitration
"[p]anel engaged in misconduct by failing and refusing to grant
Petitioner's reasonable postponement request, and substantially
and irreparably prejudiced [him] by foreclosing him from
presenting material and pertinent evidence at the hearing." (Pet.
to Vacate ¶ 28.)
On July 19, 2000, Respondent filed his notice of Removal from
the Supreme Court of the State of New York, County of New York,
to the Federal District Court for the Southern District of New
York. After removal, in his Reply Memorandum of Law, Bisnoff,
claimed that the award should be vacated according to both
Section 10(a)(3) of the Federal Arbitration Act,
9 U.S.C. § 10(a)(3), and N.Y. CPLR § 7511(b)(1). Bisnoff asserted that the
Panel, in failing to postpone the hearing upon sufficient cause
shown, and in refusing to hear evidence pertinent and material to
the controversy, was guilty of "fundamental unfairness and
misconduct sufficient to vacate the award." See Pet. Rep. Mem.
Judicial Review of arbitration awards is generally governed by
the Federal Arbitration Act when (1) there is "subject matter
jurisdiction i.e. diversity jurisdiction" and (2) "when the
contract calling for arbitration involves a transaction involving
interstate commerce." See Moses H. Cone Memorial Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74
L.Ed.2d 765 (1983) (quoted in, Barbier v. Shearson Lehman
Hutton, Inc., 948 F.2d 117, 118 (2d Cir. 1991)).
In this case, the Court has diversity jurisdiction as Bisnoff,
is a citizen of New York, and Respondent King is a citizen of
Virginia. Not. Removal ¶ 7. In addition, the amount in
controversy is more than $75,000, the statutory minimum for
diversity jurisdiction. See 28 U.S.C. § 1332. Further,
securities dealings between diverse parties constitute
"transactions involving interstate commerce." See Barbier,
948 F.2d at 118 (quoting, 9 U.S.C. § 2 (1994)).
In addition, in Mastrobuono v. Shearson Lehman Hutton, Inc.,
the Supreme Court rejected Shearson's argument that a
choice-of-law clause in an arbitration agreement evidenced an
intent to apply New York State law on arbitrations. The Court
We think the best way to harmonize the choice-of-law
provision with the arbitration provision is to read
[the phrase] `the laws of the State of New York' to
encompass substantive principles that New York Courts
would apply, but not to include special rules
limiting the authority of arbitrators. Thus, the
choice-of-law provision covers the rights and duties
of the parties, while the arbitration clause covers
arbitration; neither sentence intrudes upon the
Mastrobuono, 514 U.S. 52, 63-64, 115 S.Ct. 1212, 131 L.Ed.2d 76
Thus, a standard choice-of-law provision in an arbitration
agreement will not override the federal laws governing
arbitration disputes without the express intention of the parties
to apply state arbitration law.*fn3 Accordingly, because no
express agreement between the parties requires application of
state arbitration law, the FAA is the applicable law in this
B. Standard for Vacatur Under the FAA
"Under the FAA, the validity of an [arbitration] award is
subject to attack only on those grounds listed in [9 U.S.C.] §
10, and the policy of the FAA requires that the award be enforced
unless one of those grounds is affirmatively shown to exist."
Wall Street Assoc. v. Becker Paribas Inc., 27 F.3d 845, 849 (2d
Cir. 1994). In addition, "[t]he showing required to avoid summary
confirmation of an arbitration award is high, . . . and a party
moving to vacate that award has the burden of proof." Willemijn
Houdstermaatschappij, BV, v. Standard Microsystems Corp.,
103 F.3d 9, 12 (2d Cir. 1997) (citations omitted).
Thus, it is well-settled under Second Circuit jurisprudence
that a district court's review of an arbitration award is
severely limited.*fn4 Arbitration awards are subject only to a
"very limited review in order to avoid undermining the twin goals
of arbitration, namely, settling disputes efficiently and
avoiding long expensive litigation." Folkways Music Publishers,
Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993).
The FAA provides that an arbitration award may be vacated if:
award was procured by corruption, fraud, or undue means; (2) the
arbitrators exhibited "evident partiality" or "corruption"; (3)
the arbitrators were guilty of misconduct; or (4) the arbitrators
exceeded their power. See 9 U.S.C. § 10(a); Halligan v. Piper
Jaffray, Inc., 148 F.3d 197, 202 n. 2 (2d Cir. 1998), cert.
denied, 526 U.S. 1034, 119 S.Ct. 1286, 143 L.Ed.2d 378 (1999).
In the context relevant here, a court may vacate an award when
"the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy . . ."
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." Agarwal v. Agarwal, 775 F. Supp. 588, 589 (S.D.N Y
1991) (citing United Paperworkers Int'l v. Misco, Inc.,
484 U.S. 29, 40, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987)).
The expeditious resolution of disputes requires that
arbitrators be provided with broad discretion and great deference
in their determinations of procedural adjournment requests. See
Alexander Julian, Inc. v. Mimco, Inc, No. 00 Civ. 4131(DC), 2001
WL 477010, at *2 (S.D.N.Y. May 4, 2001) (citing Tempo Shain,
120 F.3d at 19; Prozina Shipping Co. v. Elizabeth-Newark
Shipping, Inc., No. 98 Civ. 5834, 1999 WL 705545, at *2-3
(S.D.N.Y. Sept.10, 1999)). In evaluating an arbitrator's decision
to deny a postponement, courts consider whether there existed a
reasonable basis for the arbitrator's decision and whether the
denial created a "fundamentally unfair" proceeding. See Ottawa
Office Integration, Inc. v. FTF Bus. Sys., Inc., 132 F. Supp.2d 215,
220 (S.D.N.Y. 2001) (citing Tempo Shain Corp. v. Bertek,
Inc., 120 F.3d 16 (2d Cir. 1997); Roche v. Local 32B-32J
Service Employees Int'l Union, 755 F. Supp. 622, 625 (S.D.N Y
Thus, if there exists "`a reasonable basis for the arbitrators'
considered decision not to grant a postponement,' a court should
be reluctant to interfere with the award." Ottawa, 132
F. Supp.2d at 220 (quoting Roche, 755 F. Supp. at 625). Stated
another way, as long as there is at least "a barely colorable
justification" for the arbitrators' decision not to grant an
adjournment, the arbitration award should be enforced. Alexander
Julian, 2001 WL 477010, at *2 (citing Landy Michaels Realty
Corp. v. Local 32B-32J, Serv. Employees Int'l Union,
954 F.2d 794, 797 (2d Cir. 1992)) (additional citations omitted).
In addition, an arbitrator's decision must not violate
principals of fundamental fairness. Tempo Shain, 120 F.3d at
20. A fundamentally unfair proceeding may result if the
arbitrators fail to "give each of the parties to the dispute an
adequate opportunity to present its evidence and argument." Id.
(citing Hoteles Condado Beach v. Union De Tronquistas Local
901, 763 F.2d 34, 39 (1st Cir. 1985)). So long as an
arbitrator's procedural decision is reasonable and fair, it
should not be disturbed. See Ottawa, 132 F. Supp.2d at 220. As
has been stated often, ". . . an arbitrator need not follow all
the niceties observed by the federal courts. He need only grant
the parties a fundamentally fair hearing." Roche, 755 F. Supp.
at 624 (quoting Bell Aerospace Co. Div. of Textron v. Local
516, 500 F.2d 921, 923 (2d Cir. 1974)).
1. Petitioner's Claim of Misconduct
Petitioner asserts that his heart condition constituted
sufficient cause to postpone the hearing, and that the Panel's
failure to grant that request constituted misconduct under the
Act. Petitioner points to the Second Circuit case, Tempo Shain
Corp. v. Bertek, Inc., see infra, to
support his claim.*fn5 See Pet. Rep.Mem. at 4. During the
arbitration proceedings in that case, Bertek, a manufacturing
company, intended to call a crucial witness, who became
temporarily unable to testify because his wife was diagnosed with
a reoccurrence of cancer. Bertek requested that the Panel keep
"the record open until [the witness] could testify." See Id.
The Panel refused to grant this request having concluded that the
witness's testimony would have been cumulative. The district
court affirmed the award and the Second Circuit reversed. In its
decision the Second Circuit stated:
[w]e find . . . no reasonable basis for the
arbitration panel to determine that Pollock's omitted
testimony would be cumulative with regard to the
fraudulent inducement claims. Said differently, the
panel excluded evidence plainly `pertinent and
material to the controversy.' 9 U.S.C. § 10(a)(3).
Tempo Shain, 120 F.3d at 20 (emphasis added).