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Sutherland Global Services, Inc. v. Adam Technologies International

United States District Court, W.D. New York

October 29, 2014

SUTHERLAND GLOBAL SERVICES, INC., Petitioner,
v.
ADAM TECHNOLOGIES INTERNATIONAL, SA DE C. V. Respondent.

DECISION and ORDER

MICHAEL A. TELESCA, District Judge.

INTRODUCTION

Petitioner Sutherland Global Services, Inc., ("Sutherland") brings this action to confirm an August 2, 2012 arbitration award (the "award") entered in its favor against defendant Adam Technologies International, SA DE C.V. ("Adam"). Specifically, plaintiff seeks to confirm an award of $871, 109.44 plus interest of $8, 705.20 per month that was awarded to Sutherland after an independent arbitration panel determined that Adam had breached a contract with Sutherland by failing to pay Sutherland for services rendered. Defendant opposes Sutherland's petition, and seeks to vacate the award on grounds that the arbitration panel was improperly constituted; the panel disregarded explicit contractual language in erroneously finding that the defendant breached the agreement; the panel failed to properly interpret and apply the limitation of damages clause contained in the parties' agreement; the panel improperly admitted evidence of settlement communications in the arbitration hearing, and the panel improperly applied New 12cv6439York law in resolving the dispute

Before the court are the parties' opposing motions for summary judgment. Sutherland contends that there are no material issues of fact in dispute, and that as a matter of law, it is entitled to a judgment in its favor confirming the arbitration award. Sutherland additionally seeks sanctions against Adam on grounds that Adam has engaged in vexatious litigation for the purpose of delaying confirmation of the award. Adam agrees that there are no material issues of fact in dispute, but argues that it is entitled to vacatur of the award as a matter of law.

For the reasons set forth below, I grant plaintiff's motion for summary judgment, deny defendant's motion for summary judgment, and confirm the award of the independent arbitration panel in favor of Sutherland. Plaintiff's motion for sanctions is denied.

BACKGROUND

Plaintiff Sutherland Global is a provider of business services to various companies. Among other services, Sutherland maintains and staffs customer service call centers for companies who wish to out-source or supplement their own call centers. Defendant Adam Technologies is, inter alia, a manufacturer and distributor of computer peripherals.

In March, 2009, the parties entered into a Master Service Agreement (the "Agreement" or "MSA"), pursuant to which Sutherland agreed to provide business services to Adam for a fee. Specifically, Sutherland agreed to provide call center services for Adam's software business in Latin America. Sutherland contends that pursuant to the MSA, it provided these services to Adam from April 13, 2009 through January 15, 2010. Sutherland further contends that Adam failed to fully pay for the services it received, despite having received invoices from Sutherland for services rendered.

Under the terms of the MSA, the parties agreed to resolve any disputes by participating in binding arbitration to take place in Rochester, New York. On March 30, 2010, Sutherland filed a demand for Arbitration with the American Arbitration Association ("AAA"). Because the case involved parties from different countries, the AAA assigned the case to the International Center for Dispute Resolution ("ICDR"). Thereafter, pursuant to New York State law, Sutherland filed a notice of intent to arbitrate the dispute.

Rather than proceed with arbitration, Adam brought an action against Sutherland in the State of Texas seeking to stay the proceeding. Sutherland removed the action to federal court, and thereafter, the United States District Court for the Northern District of Texas dismissed Adam's complaint, holding that the parties' dispute was subject to binding arbitration as set forth in the MSA.[1] Adam also brought a separate action against the AAA in Texas state court attempting to enjoin the AAA from arbitrating the dispute. That action was also removed to the District Court for the Northern District of Texas, and the District Court dismissed Adam's complaint.

Prior to going to arbitration, the parties attempted to mediate the dispute before attorney Philip Spellane ("Spellane"). The meditation was unsuccessful, and the parties proceeded to arbitration. Because the parties could not agree on a single arbitrator to hear the pending arbitration, the arbitration was to proceed before three arbitrators. Pursuant to AAA rules and the MSA, each party was to select a single arbitrator, and the two selected arbitrators would then select a third arbitrator to complete a three-person arbitration panel. Plaintiff chose the Honorable L. Paul Kehoe to serve as an arbitrator, and the defendant attempted to appoint attorney Spellane as the second arbitrator. Sutherland objected to the appointment of Spellane on grounds that he had served as a mediator during the parties' past settlement negotiations, and was thus privy to confidential information presented during those negotiations. The AAA determined that because Spellane had conducted the previous settlement negotiations, he was precluded from participating as Adam's designated arbitrator.

Adam sought to arbitrate the AAA's determination that Spellane could not serve as an arbitrator, and in response, Sutherland filed an action in New York State Supreme Court to prevent Adam from doing so. Adam removed the action to this court, and by Decision dated June 22, 2012, I held that Adam had abandoned any claim regarding the arbitrability of determination that Spellane could not serve as an arbitrator. The AAA directed Adam to nominate an alternate arbitrator, and granted Adam several extensions of time to do so. Adam, however, failed to appoint a replacement arbitrator, and as a result, the ICDR appointed the Hon. Richard D. Rosenbloom to serve as an arbitrator on the arbitration panel. Judges Kehoe and Rosenbloom then agreed to appoint attorney James C. Moore as the third arbitrator.

On June 25 and 26, 2012, the arbitration panel conducted a hearing on the parties' dispute. On August 12, 2012, the panel issued a final award of $871, 109.44 in favor of Sutherland, plus interest at a rate of $8, 705.20 per month. The Panel also held that Adam was to reimburse Sutherland $28, 860.00 for attorney's fees.

On August 16, 2012, plaintiff filed the instant action to confirm the arbitration award of the ICDR. On December 21, 2012, I stayed this action pending the resolution of an appeal brought by Adam before the United States Court of Appeals for the Fifth Circuit. According to Adam, the issue in that appeal was "the validity and propriety of the [arbitration] panel and whether the [arbitration] Award should be vacated...." See December 20, 2012 Letter Request to Stay (docket item no. 17) at p. 1. By Decision and Order dated September 5, 2013, the Fifth ...


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