United States District Court, S.D. New York
FULBROOK CAPITAL MANAGEMENT LLC and SELVYN SEIDEL, Petitioners,
JAMES BATSON, Respondent.
OPINION AND ORDER
J. PAUL OETKEN, District Judge.
Petitioners, Fulbrook Capital Management LLC ("Fulbrook") and Selvyn Seidel ("Seidel"), bring this application to vacate an arbitration award in favor of Respondent, James Batson ("Batson"). Petitioners claim that the award is marred by errors of both procedure and substance. Batson seeks confirmation of the award. For the reasons that follow, Petitioners' application is denied and the arbitration award is confirmed.
A. Factual Background
1. The Employment Agreement
Seidel is the founding Chairman and CEO of Fulbrook, a company in the litigation finance industry. (Dkt. No. 1, Ex. B, Affidavit of Selvyn Seidel in Support of Motion to Vacate ("Seidel Aff.") ¶¶ 3-4.)
In May 2012, Seidel hired Batson as Chief Operating Officer of Fulbrook. (Seidel Aff. ¶ 5.) The terms of the employment, set out in a written agreement between Batson and Seidel (the "Agreement"), included the following: the minimum term of employment was to be one year; the minimum salary for that year was to be $300, 000; and the salary would be paid to Batson in monthly installments. (Dkt. No. 1, Ex. C, at 6.) In addition, the Agreement provided that Seidel personally guaranteed payment of Batson's salary, and that the payment obligation would remain in effect unless Batson's employment was terminated "for Cause" or "voluntarily by [Seidel]." ( Id. ) The Agreement defined "Cause" as "engaging in gross negligence or willful misconduct" or "violating any law or regulation." ( Id. at 6 n.1) The Agreement also contained an arbitration clause. ( Id. at 7.)
Things did not go as planned. Several months into Batson's employment, Fulbrook began to fall behind on its monthly salary payments to him. (Dkt. No. 6, Respondent's Memorandum of Law in Opposition to Motion to Vacate ("Opp. Memo"), at 3.) Batson persuaded Seidel to execute a written amendment to the Agreement (the "Amendment") on November 16, 2012. (Dkt. No. 1, Ex. C, at 8.) Under the Amendment, Petitioners were permitted to defer payment of Batson's salary for the month of October (the "October Payment"), otherwise due on November 5, to December 5. ( Id. ) The Amendment also stated that the payment for "November 2012 and each subsequent month shall become due and payable on the fifth day of the immediately following month, " but that Seidel was entitled to defer such payment for up to 30 calendar days. ( Id. ) If Petitioners failed to adhere to these terms, Batson's full salary for his first year would "accelerate and become immediately and unconditionally due and payable." ( Id. )
Seidel does not dispute the above. He argues, however, that he agreed to the Amendment because Batson "maintained [that] he and his family were, literally, a step away from financial ruin, and needed that money." (Dkt. No. 13, Reply Declaration of Petitioners in Support of Motion to Vacate ("Reply Decl."), ¶ 10.) Seidel states that he learned later-apparently in the course of Batson's cross-examination during the arbitration-that this "was all pure fabrication." ( Id. ¶ 20.)
Batson and Seidel's relationship collapsed not long thereafter. Petitioners failed to make Batson's October Payment by December 5, allegedly on the grounds of Batson's continuing poor job performance and the company's precarious financial condition. ( Id. ¶ 13.) Instead, Seidel sent Batson a notice of termination on December 14. ( Id. ) Seidel eventually made the October Payment to Batson on December 21. ( Id. ¶ 15.)
Notwithstanding the notice of termination, Seidel says that Batson "would not go." ( Id. ¶ 17.) Seidel made partial salary payments to Batson in January and February of 2014, again purportedly because Batson claimed to be in dire financial straits. ( Id. ¶ 16.) Batson finally left his position at Fulbrook on February 25, 2014, demanding the full balance of his salary. Petitioners refused. (Opp. Memo at 3.)
2. The Arbitration
Soon thereafter, Batson commenced arbitration proceedings against Petitioners before the American Arbitration Association ("AAA"). Batson filed a demand for arbitration on April 16, - (Dkt. No. 5, Declaration of James Batson in Opposition of Motion to Vacate ("Batson Decl."), Ex. E); Petitioners responded with an answer on May 21 ( Id. Ex. G). Though Petitioners' pleading was entitled "Answer, Defenses and Counterclaims, " Petitioners wrote: "[W]e are not asserting the counterclaims we could." ( Id. ¶ 51.)
Petitioners had a change of heart-multiple times. On June 12, 2013, following an email exchange with Batson and the AAA,  Petitioners filed an amended pleading asserting counterclaims against Batson and seeking damages in excess of $1 million. ( Id. Ex. I.) Eleven days later, however, Seidel notified the AAA that he intended to withdraw the counterclaims. ...