reasonable basis for the arbitration panel to have
so determined. Id at 17. In a subsequent case, this Court held, "[T]he
essential proposition for which Tempo Shain stands is that, absent a
reasonable basis for its decision, a refusal to grant an adjournment of a
hearing, due to a medical emergency, constitutes misconduct under the
[F.A.A.] if it excludes the presentation of evidence material and pertinent
to the controversy thus prejudicing the parties in the dispute and making
the hearing fundamentally unfair." Bisnoff v. King, 154 F. Supp.2d 630, 638
(S.D.N.Y. 2001). Shain does not require arbitrators to hold oral hearings.
Plaintiffs also attempt to support their claim that live evidentiary
hearings are required by citing, In re Yorktown Sportswear Co. Inc., 1973
WL 17019 (N.Y.Sup.Ct. 1973) (Plaintiffs' Memo., p. 7). In Yorktown, the New
York Supreme Court vacated two temporary injunction awards due to a number
of defects which made the award incomplete and subject to vacatur under
CPLR 7511(b)(1)(iii). While the Yorktown court discusses the lack of
meaningful hearings in its analysis, the court did not hold that due
process requires oral evidentiary hearings.
Even in the context of a judicial (as opposed to an arbitral)
determination, an oral evidentiary hearing is not always the sin qua non
of due process. In SEC v. Elliott, 935 F.2d 1560 [953 F.2d 1556] (11th
Cir. 1992), the Eleventh Circuit directed the District Court to hold an
"evidentiary hearing" for two claimants in a massive receivership, based
on the fact that they had complicated claims, which they had been given
no opportunity to explain. Elliott, 935 F.2d at 1568. The Circuit did
not direct that an evidentiary hearing must be for the other 1,062
claimants. And for the hearing that they did order, the Court of Appeals
"left the structure of the hearing to the discretion of the district
court so long as the [two claimants] can present and argue their facts."
Thus, it can hardly be the case that an arbitral award made on a written
submission, where the parties had discretion to present the arbitrators
with any information they thought relevant, including written sworn
testimony if they wished, violates due process or denies fundamental
fairness. Plaintiffs have only themselves to blame if they did not include
relevant material in their written submissions, against some possibility
that oral hearings would be held. See generally, Porush, 6 F. Supp.2d at
182 ("arbitration is not a trial run in which an arbitral respondent may
sit silently by, take note of the evidence presented without attempting to
clarify the matters presented to the arbitrators, and then, if the result
turns out unfavorably, seek judicial relief on the grounds that the
arbitrators misapprehended the facts.").
Plaintiffs also argue that the Panel also exceeded its power by issuing
awards that are "totally irrational." (Plaintiffs' Memo., p. 8). Plaintiffs
did not mention this legal basis for vacatur in their reply brief or at
oral argument, instead focusing entirely on the due process argument.
For a Court to grant vacatur on the grounds that an award is totally
irrational, "there must be no proof whatever to justify the award."
G.E.I.C.O., 189 Misc.2d at 468 quoting Matter of Peckerman v. D & D
Associates, 165 A.D.2d 289, 296, 567 N.Y.S.2d 416, 420 (1st Dep't 1991).
Plaintiffs argue that "Relying merely on correspondence is not a
rational basis for issuing an award." (Plaintiffs' Memo., p. 8). There is
no support for the proposition that written submissions can not provide a
rational basis for an arbitral award. In the cases that
there is no rational basis of any kind for the arbitral award.
G.E.I.C.O., 189 Misc.2d at 469, 733 N.Y.S.2d at 848 (award vacated when
it relied on the hearsay in one police report and was contrary to a jury
verdict, and was thus "lack[ing in] evidentiary support," "arbitrary,"
and "capricious"); In re: Alstante, 259 A.D.2d 964, 964-965,
668 N.Y.S.2d 321, 321 (motion vacated when arbitrator's decision was
based on an assumption, and was self-contradictory); Recore v. Chateugay
Central School District, 256 A.D.2d 801, 681 N.Y.S.2d 621 (3d Dep't.
1998) (rehearing on motion to vacate ordered when the record suggested
that the arbitrator based his award not on the grievance before them, but
on an arbitral award concerning a previous grievance).
Thus, as long as the written submissions gave the arbitrators some basis
for their determinations, the awards will not be vacate as irrational.
B. Application of the Above Rulings to the Challenged Awards
1. First Award: The Reston Contract
a. Procedural Due Process
Plaintiffs object to "terms and conditions of the Reston agreement which
are being forced on Plaintiffs by the Panel without a hearing." (Affidavit
of Andrew J. Goodman, November 12, 2002, ¶ 4). As detailed in Fact
Section A, supra, the Panel issued the directive that the parties execute
the Reston agreement after extensive negotiation and consideration of the
submissions of both parties. Plaintiffs had numerous opportunities to
present evidence and arguments regarding both how to divide the inventory
and the retention of the Reston Group. The Panel had heard the parties'
positions on the relevant issues as they negotiated the final contract. As
noted above, Plaintiffs do not point to evidence they proffered to the
Panel, but that the Panel refused to hear.
The process described in Fact Section A, supra also establishes that the
directive to execute the Reston agreement was not "totally irrational." The
Panel received lengthy and detailed written submissions regarding the
division of inventory from both the Plaintiffs and the Defendant. See Fact
Section A, supra. Attached to Defendant's sixteen-page submission on the
presentation of inventory were eight supporting exhibits, including
photographs of the joint venture warehouses. (Campisi Aff. ¶ 27). The
parties' attorneys discussed and debated the division of inventory with the
Panel on November 29, 2001 and January 14, 2002. (Campisi Aff. ¶s 24,
31). Before selecting The Reston Group from the lists of consultants
suggested by the parties, the Panel requested that Reston and the other
finalists inspect the joint venture warehouses and submit specific bids.
Id at ¶ 36. After the parties were unable to finalize a contract
with the Reston group, the Panel negotiated directly with Reston to create
a contract. Id at ¶s 40-41. The Panel was well informed of the issues
surrounding the division of the joint venture, and of the specific
provisions of the Reston contract. The directive to execute the Reston
contract was not arbitrary, capricious, or lacking in evidentiary
2. Second Award: Joint Venture Monies