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CRC Inc. v. Computer Sciences Corporation

October 14, 2010


The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge


Petitioner CRC, Inc. ("Petitioner" or "CRC") seeks vacatur of a partial arbitration award and disqualification of the American Arbitration Association ("AAA") panel that issued it. The core claim in this petition is that the chairman of the arbitration panel is partial to Respondent Computer Sciences Corporation ("Respondent" or "Computer Sciences") because of certain professional connections between the chairman's law firm and the law firm representing Computer Sciences. For the reasons that follow, I find that at least for now the petition warrants neither vacatur nor disqualification.


Respondent was hired by JP Morgan to perform certain services, and as part of its contract was required to utilize CRC as its sub-contractor for internet technology consulting services. CRC and Computer Sciences entered into an agreement that defined the business relationship between these two entities ("Agreement"). The Agreement included a dispute resolution procedure, which was triggered when CRC commenced this arbitration on July 30, 2004. The Agreement mandated the the services of three "disinterested" arbitrators. CRC appointed Francis Conrad without objection; Computer Sciences appointed John Lovi, initially with no objection, and Lovi and Conrad together selected Richard Silberberg to chair the panel. Silberberg's disclosure statement mentioned a single, past instance of joint work between his law firm (Dorsey & Whitney LLP) and the law firm representing Computer Sciences (McDermott, Will & Emery LLP).

CRC subsequently objected to a late disclosure by Lovi, based on the fact that Lovi had worked on cases with Respondent's counsel Mr. Calandra of McDermott, Will & Emery, had receieved money from Respondent's counsel through 2005, and had received fees from Respondent. Lovi stepped down, and Respondent selected Richard Farren to replace him. Farren was confirmed by the AAA over CRC's objection based on apparent partiality.

Arbitration proceeded, albeit at a snail's pace. A partial award, dated April 1, 2010, dismissed CRC's breach of contract claim but left other claims unresolved.

CRC commenced the present action on June 28, 2010, in New York state court. Following commencement, Silberberg filed a Supplemental Disclosure Statement, explaining that his previous failure to disclose his firm's relationships with McDermott, Will & Emery was due to the way his firm's conflict-database was set up: it simply did not identify those kinds of relationships, and presumably they did not otherwise come to his attention. These actions made all three arbitrators aware of the current petition, but the arbitrators rejected CRC's request for a stay. Respondent removed the action to this Court, and CRC moved for remand back to state court. In an Order dated August 23, 2010, I denied that motion and stayed the arbitration pending resolution of this petition.


I. The FAA Governs this Petition for Vacatur

As a threshold matter, the parties dispute which standard Petitioner must meet in order to merit vacatur and disqualification. CRC argues that New York CPLR 7511(b) governs their petition. Computer Sciences argues that the more deferential Federal Arbitration Act ("FAA") standard governs.

The FAA applies to diversity cases in which the underlying contract "evidenc[es] a transaction involving interstate commerce." Barbier v. Sharson Lehman Hutton, Inc., 948 F.2d 117, 120 (2d Cir. 1991); Pernod Mgmt. Group v. Stewart's Mobile Concepts, Ltd., No. 07 cv 10649, 2008 WL 463720, *2 (S.D.N.Y. Feb. 19, 2008). "[W]here the choice of law provision states that New York law shall govern both the agreement and its enforcement", New York law applies. Pernod Mgmt. Group, 2008 WL at *2 (quoting Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 826 N.E.2d 802, 806 (NY 2005). In the absence of "critical language concerning enforcement", however, the FAA's vacatur rules apply. Id. This Court has applied the FAA's vacatur standard in a diversity case even where the arbitration agreement provided for a state law standard of review for vacatur, because the Supreme Court's decision in Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008),prohibits parties from agreeing by contract to a different standard for vacatur than that set forth in the FAA. See McQueen-Starling v. UnitedHealth Group, Inc., 654 F.Supp.2d 154, 163 (S.D.N.Y. 2009).

In this case, the Agreement's choice-of-law clause merely states that

This agreement and performance under it shall be governed by and construed in accordance with the laws of the state of New York, without ...

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