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SMITH v. POSITIVE PRODUCTIONS

August 31, 2005.

JONATHAN SMITH, Petitioner-Cross-Respondent,
v.
POSITIVE PRODUCTIONS, Respondent-Cross-Petitioner.



The opinion of the court was delivered by: MICHAEL MUKASEY, Chief Judge

OPINION AND ORDER

Jonathan Smith, better known as the musical artist "Lil Jon," petitions to vacate, or alternatively to modify an arbitration award entered by arbitrator Mark Diamond of the International Centre for Dispute Resolution ("ICDR") in favor of Positive Productions ("Positive"), a Japanese concert promotion company, in the amount of $379,874.00, for costs and damages arising from breach of contracts wherein Smith agreed to perform three concerts in Japan. (See In the Matter of the Arbitration between Positive Productions and Jonathan Smith PKA Lil John and the East Side Boys, Award of Arbitrator dated December 28, 2004 ("Arbitration Award") (Ex. A to Declaration of Bruce Jacobs ("Jacobs Decl.")) Positive opposes the petition and cross-petitions to confirm the award. Both petitions have been brought pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1, 10, & 11. Jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332. For the reasons set forth below, the award is confirmed.

  I.

  The following facts are undisputed unless otherwise noted.

  On January 9, 2004, Smith and Positive entered into a written agreement whereby Smith agreed to perform three concerts to be promoted by Positive on March 12 and 13, 2004 in Yokohama, Japan and March 14, 2004 in Okinawa, Japan. (Ex. H to Jacobs Decl. ("January Agreement")) It was signed by Broderick Morris of Positive and Robert Mitchell, Smith's manager. (Id. at 8) A $35,000 advance was forwarded to Smith's agent, Ujaama Entertainment, Inc. ("Ujaama"). (Id. at 2) The agreement contained an arbitration provision, whereby

 
[a]ny claim or dispute arising out of or relating to [the agreement] or the breach thereof shall be settled by arbitration with the rules and regulations of the American Arbitration Association. The parties hereto agree to be bound by the award and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
(Id. at 8) Pursuant to the agreement, Positive rented venues, purchased airline tickets, arranged for Smith's transportation to and within Japan, reserved lodging, promoted Smith through a variety of Japanese media sources, and sold tickets to the performances. (Positive Opp'n at 6-7; January Agreement ¶¶ 5, 8, 10)

  On March 4, 2004, Smith informed Positive that he would not be able to travel to Japan and perform the shows "because he, or some of his band members, were unable to obtain passports." (Positive Answer to Petition to Vacate or, in the Alternative, Modify Arbitration Award, and Cross Petition to Confirm Arbitration Award ("Positive Answer") ¶ 6) The shows were cancelled and refunds paid on tickets. (Positive Opp'n at 7) Ujaama returned the $35,000 deposit to Positive. (Id.)

  After the March performances were cancelled, the parties negotiated and entered into another agreement, dated May 7, 2004, pursuant to which Smith agreed to perform concerts on June 27, 2004 in Okinawa, on June 29, 2004 in Osaka, and on July 2, 2004, in Yokohama. (Ex. I to Jacobs Decl. ("May Agreement")) The May Agreement refers to the January Agreement, providing that "[u]pon [Smith] performing all of [his] obligations hereunder the [January] Agreement shall be deemed void and superceded [sic] in all respects by this [May] agreement." (Id. at 1) Again, Positive forwarded a $35,000 deposit to Ujaama and prepared for the shows. (Positive Opp'n at 8)

  On June 8, 2004, Positive was informed by telephone that Smith wanted to attend the Black Entertainment Television ("BET") Awards show on June 29 in Los Angeles and preferred not to come to Japan during the last week of June. (Id.) By letter dated June 11, 2004, William Leibowitz, who introduced himself as "the attorney? for TVT Records," confirmed the development. (Ex. C to Jacobs Decl.) In defense of Smith, Leibowitz contended that it "is unrealistic and unfair for [Positive] to suggest that [Smith] — who will literally dominate the BET Awards this year — should refrain from attending and performing and thereby forfeit one of the great moments in his life and career, all so that [he] can perform in front of a few thousand people in Japan." (Id.)

  On June 13, 2004, Gerald Weiner — Positive's lawyer — stated in an e-mail to Leibowitz that "[t]o the best of [his] knowledge [Leibowitz did] not represent Jonathan Smith," that "[t]here is no contractual relationship between [Positive] and TVT Records," and that Leibowitz was "inserting [himself] into a dispute which has been ongoing since March in which [Leibowitz did] not represent any of the parties. . . ." (Ex. D to Declaration of Abid Qureshi ("Qureshi Decl.")) Five days later, Morris of Positive, in an e-mail to Weiner and Leibowitz, stated that a second "no show" in three months "would be very damaging to all." (Id.) He had learned from Erskine Isaac of Ujaama that TVT had booked a radio show for Smith in Los Angeles on July 3. He proposed that the shows be rescheduled so that Smith could perform in Yokohama on July 2 and in Okinawa on July 3, and fly thereafter to Los Angeles for the radio show. (Id.) On June 18, 2004, Leibowitz, again introducing himself as "the attorney for TVT Records," informed Positive that Smith would not appear for the scheduled June and July shows but would attempt to make himself available on later dates. (Id.) Again, refunds were given for tickets and Ujaama returned the $35,000 deposit. (Positive Opp'n at 9) To replace the cancelled shows, Positive booked on about one week's notice another American singer, Trina, for concerts on July 2 and 3 in Yokohama and Okinawa, respectively. (Id.)

  On July 8, 2004, Weiner filed a Notice of Intent to Arbitrate and a Demand for Arbitration with the American Arbitration Association and mailed copies of both to (i) Smith at his address "c/o BME Recording, 2144 Hills Ave. NW, Atlanta, Georgia 30318," and (ii) Erskine Isaac at Ujaama at "501 7th Ave. #312, New York, New York 10001." (Affidavit of Gerald B. Weiner ("Weiner Aff.") ¶ 5) Neither these letters nor any subsequent correspondence mailed or faxed to Smith or Isaac was returned as undeliverable. (Id.) Positive claimed that
[Smith] failed and refused to travel to Japan or to appear and perform at the dates originally set forth in the [January] Agreement. Following extensive negotiations [the parties] agreed to reschedule these performance dates to June 27, 29 and July 2, 2004 and a new written agreement was entered into in that regard. [Smith] also failed to travel to Japan or perform on these reschedule dates.
(Ex. B to Jacobs Decl. (Notice of Intent to Arbitrate) at 2) Positive sought $700,000 in damages arising from "these failures." (Id.)

  On July 14, 2004, ICDR sent via express mail an acknowledgment of receipt of the Demand for Arbitration, notice of a deadline to file a statement of defense by Smith, and notice of the date of an administrative conference call to Isaac at Ujaama's New York office. (Positive Opp'n at 3) Smith neither responded to the Demand nor participated in the administrative conference call. (Id.)

  An arbitration hearing was held on December 6, 2004, in New York. (Positive Opp'n at 12) Smith did not appear. (Smith Petition to Vacate or Modify Arbitration Award ¶ 8) Positive presented documentary and testimonial evidence on "the creation and performance under the two agreements, out-of-pocket expenses, lost profits, and attorneys' fees." (Smith Petition to Vacate or Modify Arbitration Award ¶ 9) On December 28, the arbitrator awarded Positive a total of $379,874, which consisted of (i) $184,000 in lost profits, (ii) $138,000 in expenses incurred by Positive, (iii) $7,874 in legal fees, and (iv) $50,000 for loss of reputation and business. (Arbitration Award at 2) These figures appear to track the amounts requested by Positive in its "Statement of Facts" submission. (Ex. B to Qureshi Decl. at 4-5) The arbitrator made the following factual findings:
[Positive] made powerful efforts to fulfill its duties under its agreement with [Smith]. It made accommodations to [Smith] that were above and beyond the terms of the original agreement. Modifications to the original agreement were made by [Positive] at the behest of [Smith] in an effort to ameliorate the breach of the original agreement by [Smith]. Further efforts to ameliorate damages were taken by [Positive] after [Smith] failed to perform [his] duties under the terms of the modified agreement. [Smith] failed to cooperate with these efforts to ameliorate [Smith's] failure to perform under the terms of the modified agreement. Loss to [Positive's] income and reputation has resulted from [Smith's] actions and failure to perform.
(Arbitration Award at 1)

  On February 11, 2005, by his current counsel, Smith submitted a Notice of Request to Correct and/or Vacate Award to the ICDR. (Ex. C to Jacobs Decl.) He argued that he had not received proper notice of the arbitration, that the arbitrator did not have jurisdiction over the matter, and that the award contained "computational errors and is unconscionable." (Id.) On February 23, 2005, the arbitrator denied Smith's request. (Ex. A to Qureshi Decl.)) Smith filed the instant petition on May 16, 2005.

  II.

  The burden on a party seeking to vacate an arbitration award is "a formidable one" in light of the "limited review of arbitration decisions . . . necessary both to effectuate the parties' agreement to submit their disputes to arbitration and to avoid costly and protracted litigation about issues the arbitrators have already decided." Capgemini U.S. LLC v. Sorensen, No. 04-7584, 2005 WL 1560482, at *3 (S.D.N.Y. July 1, 2005) (citing cases).

  An arbitration award may be vacated only on the grounds enumerated in the FAA or if it was arrived at in "manifest disregard of the law." Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2003); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986).

  III.

  Smith argues first that neither he nor Leibowitz — who he claims was his lawyer for disputes arising from the January and May agreements — was given proper notice of the arbitration. He contends that any communications between Positive and Ujaama were insufficient notice because under the May Agreement, Positive was required to give any notices to Smith at "c/o BME Recording, 2144 Hills Ave. NW, No. D-2, Atlanta, Georgia 30318." (May Agreement at Preamble and ¶ 15) However, Ujaama was designated in the January Agreement to receive notices to Smith. (January Agreement at Preamble and ¶ 23 ("Agreement made . . . by and between LIL JON . . . whose address is c/o UJAAMA ENTERTAINMENT. . . .")

  Smith argues further that Positive "could have given [him] proper notice through his legal representative, William R. Leibowitz." (Smith Reply at 6) Positive claims that it "had no knowledge of the identity of Smith's attorneys until February 11, 2005," when Smith's current counsel submitted to the ICDR a Notice of Request to Correct and/or Vacate the Award. (Positive Opp'n at 18) In response, Smith points to the June 18, 2004 letter from Leibowitz to Positive, which he contends indicated that Leibowitz represented ...


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