United States District Court, S.D. New York
SHELDON STONE, AS TRUSTEE OF THE STONE FAMILY TRUST, Petitioner,
THEATRICAL INVESTMENT CORP. and JON PLATT, Respondents
For Sheldon Stone, as Trustee of The Stone Family Trust, Petitioner: Ronald William Meister, Scott Phillip Ceresia, LEAD ATTORNEYS, Cowan, Liebowitz & Latman, P.C., New York, NY.
For Theatrical Investment Corp., Jon Platt, Respondents: Julia Jordan Peck, Tai-Heng Cheng, Robert Steven Trisotto, LEAD ATTORNEYS, Quinn Emanuel Urquhart & Sullivan LLP, New York, NY.
OPINION & ORDER
PAUL A. ENGELMAYER, United States District Judge.
Sheldon Stone petitions here on behalf of the Stone Family Trust (" SFT" ) to confirm an arbitration award pursuant to § 9 of the Federal Arbitration Act (" FAA" or " Act" ), 9 U.S.C. § 1 et seq. Respondents Jon Platt and Theatrical Investment Corp. (collectively, " TIC" ) oppose the petition and cross-move to vacate the arbitration award under § 10 of the FAA. For the following reasons, SFT's petition to confirm the arbitration award is granted, and TIC's cross-petition to vacate the award is denied.
A. Factual Background
On June 1, 2009, SFT and TIC entered into a joint venture agreement to invest in theatrical productions. SFT Decl. Ex. A, TIC Decl. Ex. 6 (" Agreement" ). Jon Platt signed the Agreement in his capacity as TIC's President and sole shareholder;
Sheldon Stone signed it in his capacity as a Trustee acting on behalf of SFT. See id. at p. 4. Under the Agreement, each party was directed to make an initial capital contribution of $700,000 to finance Broadway shows, off-Broadway productions, and national tours of various plays. Id. § § 1, 3(a). Between the creation of the joint venture in 2009 and its termination in 2011, SFT made total capital contributions of $1.66 million. Petition ¶ 14. These capital contributions were to be returned, and any profits obtained from the joint venture's investments were to be distributed to the parties, according to a formula set out in the Agreement. See Agreement § 3(b). The Agreement also provided that it would remain in effect until either party terminated it in writing. Id.
To resolve any disputes, the parties agreed to submit to " arbitration before a single arbitrator in New York City, pursuant to the then-existing rules of the American Arbitration Association," and to accept " [a]ny award rendered" as " final and conclusive." Id. § 7. The parties also agreed that the " Agreement shall be governed by and construed in accordance with the laws of the State of New York." Id. § 8.
Pursuant to the Agreement, the joint venture invested in various productions including The Book of Mormon, " one of Broadway's biggest hits," and Enron, which was not a success. Petition ¶ 15; Cross-Petition ¶ ¶ 12-13 & n.3-4. SFT alleges that TIC received millions of dollars in capital returns and profit distributions from the joint venture's investments, yet failed to pay anything to SFT. Petition ¶ 16. SFT further alleges that TIC breached the Agreement by commingling funds, failing to maintain proper records, and claiming joint venture expenses as tax deductions for Platt's personal company. Id. ¶ 17. TIC disputes these allegations; however, it agrees that the relationship between the parties " began to sour" in 2011. Cross-Petition ¶ 11. On December 22, 2011, SFT terminated the joint venture and demanded that TIC immediately return all funds the joint venture owed to SFT. Id.
On February 22, 2012, SFT served a Demand for Arbitration on TIC. Petition ¶ 19. The demand sought, inter alia, an accounting of SFT's interest in the joint venture and full payment of SFT's share of returned capital and proceeds. SFT Decl. Ex. B (" Demand for Arbitration" ). Laverne Y. Berry, Esq. was thereafter appointed as the arbitrator. Petition ¶ 20. Over the next year and a half, the parties participated in extensive discovery and pre-hearing proceedings, which included production of more than 7,000 pages of documents. Id. ¶ 21.
On January 25, 2013, while discovery was ongoing, Berry held a preliminary hearing. See TIC Decl. Ex. 4 (" Order #5" ). Counsel for both parties attended. Id. On February 1, 2013, Berry issued an order following up on that hearing. Id. The order directed SFT to provide Berry with " an updated list of all theatrical productions, which [SFT] claims are covered under the Joint Venture Agreement," id. ¶ 2, and directed TIC to provide SFT with quarterly " distribution statements and payments due" for the productions identified by SFT, id. ¶ 5. It also invited the parties to request an additional preliminary hearing. Id. ¶ 1.
Between October 22 and 25, 2013, following additional discovery, Berry conducted a final hearing. Petition ¶ 22. The hearing included the presentation of substantial documentary evidence and live testimony from witnesses, including representatives of each party, accountants for each side,
and an expert on theater investments. Id.
Soon after, on November 5, 2013, Berry issued an interim order that again directed TIC to provide SFT with a " quarterly accounting . . . accompanied by payments of any amounts due" for the 14 shows identified by SFT. TIC Decl. Ex. 5 (" Order #12" ), at ¶ ¶ 1-2. However, Berry stated that " this order for accounting and payments should not be construed to suggest that there has been a final decision on which shows are part of the joint venture." Id. ¶ 2.
On February 28, 2014, Berry issued the first Partial Final Award. SFT Decl. Ex. C, TIC Decl. Ex. 7 (" February 28 Award" ). Because neither party had requested a " reasoned award," Petition ¶ 23, Berry set out the relief she was awarding but did not explain the reasoning underlying her decisions. The Award directed TIC and Platt, " jointly and severally," to pay SFT $911,694 plus pre-judgment interest. February 28 Award § § 1(a)-(b). In calculating this figure, Berry stated that she " assume[d]" that TIC incurred $98,847 in expenses and earned a priority payment of 20% of all revenues received. Id. § 1(a). Berry also included a list of 14 " Authorized Joint Venture Shows," the same 14 shows SFT had identified in February 2013. See id. Ex. A. The Award further directed TIC and Platt to " notify the producer[s] of all of the  shows" that a specified percentage of future distributions " shall be paid directly to" SFT. Id. § 2(a). If TIC and Platt were " unable to secure the consent of any producer," they were directed to forward any distributions " in their entirety to an independent receiver to be appointed by the Arbitrator for distribution in the proper proportions." Id. § 2(c). Berry retained jurisdiction over the matter in order to (a) review SFT's calculation of pre-judgment interest, and (b) " secur[e] an independent receiver, if necessary, for all future distributions." Id. § 3.
On May 23, 2014, Berry issued the second Partial Final Award. SFT Decl. Ex. D, TIC Decl. Ex. 8 (" May 23 Award" ). In addition to reiterating the provisions of the February 28 Award, the May 23 Award included five significant modifications. First, Berry credited TIC for payments it had made to SFT, reducing the amount owed from $911,694 to $307,388.54. Id. § 1(a). Second, Berry awarded pre-judgment interest in the amount of $211,493.43, with post-judgment interest to accrue at nine percent per year. Id. § § 1(c)--(d). Third, Berry established procedures for future distributions from The Book of Mormon, the only " Authorized Show" that was continuing to generate revenue. Id. § § 2(a)-(c). Berry defined The Book of Mormon to include The Book of Mormon on Broadway and The Jumamosi Tour LP, a national tour of the production. Id. § 2(a). Because the producers declined to make payments directly to SFT, Berry directed the parties either to " agree upon and secure a third-party collection agent or receiver" or to each submit " three (3) potential receivers" for Berry to choose from. Id. § 2(b). Fourth, to address TIC's concerns about the potential costs of administering future distributions, see SFT Reply Decl. Ex. 3, at 5-6, Berry established a $5,000-per-year floor for TIC's priority payments. Id. § 2(c). Fifth, although the February 28 Award had directed TIC to bear the costs of arbitration, the May 23 Award stated that the arbitration costs " shall be borne equally by the parties." Id. § 2(d).
On June 23, 2014, Berry issued a Final Award. SFT Decl. Ex. E, TIC Decl. Ex. 9 (" June 23 Award" ). The June 23 Award stated that " Thomas Cyrana, Managing Director and Principal of The RZO Companies, is appointed as Receiver to receive
all future distributions to the Parties as the result of royalties paid by third-parties for the Authorized Shows." Id. It also set out the formula for allocating future distributions to each party. Id.
Finally, on August 11, 2014, Berry issued a " Disposition for Application of Modification of Second Partial Final Award of Arbitrator." SFT Decl. Ex. F, TIC Decl. Ex. 10 (" August 11 Award" ). She noted that this award was " an effort to consolidate the determinations previously set forth" in the February 28, May 23, and June 23 Awards and to clear up " some confusion on the part of the parties." Id. § 1 n.1. The Award ...