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Merchant Cash & Capital, LLC v. Ko

United States District Court, S.D. New York

June 19, 2015




Plaintiff Merchant Cash & Capital LLC ("Merchant Cash") has filed this motion for summary judgment on its petition for confirmation and enforcement of an October 23, 2014 arbitration award (the "Final Award") pursuant to the Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1-16. To date, Defendant Jang Hwan Ko d/b/a Jeff's Garage ("Ko" or "Jeff's Garage")[1] has neither acknowledged Plaintiff's confirmation petition nor otherwise sought relief from the Final Award. For the reasons set forth in the remainder of this Opinion, Plaintiff's motion is granted.


A. Factual Background

Plaintiff Merchant Cash is a limited liability company that operates in New York City and purchases receivables from other businesses. Defendant Ko is the sole proprietor of Jeff's Garage, an auto body shop based in Santa Clara, California. On December 12, 2013, Plaintiff and Defendant entered into an agreement (the "Merchant Agreement"), pursuant to which Defendant sold $163, 800.00 of his sales receivables to Plaintiff for an upfront sum of $140, 000.00 (less a $300 fee). (56.1 Stmt. ¶ 7).

As required by the Merchant Agreement, Defendant used a designated bank account at BBCN Bank for all business deposits related to Jeff's Garage. (56.1 Stmt. ¶ 8). He was also obligated to change the business' credit card processing company from Citi National Merchant Service to North American Bancard. ( Id. ). On December 13, 2013, Defendant received a credit card processing terminal from Sure Payment Solutions, a small-business financing company that facilitated communication between the two parties, and ran a $1 test transaction through the machine using his credit card ending in 9221. ( Id. at ¶ 9). Later that same afternoon, [3] Plaintiff wired $139, 700.00 to Jeff's Garage's bank account at BBCN. (Final Award 11). From December 13 to 24, Jeff's Garage processed all credit card transactions through the North American Bancard terminal and remitted $5, 463.20 of its revenue to Plaintiff, leaving an unpaid balance of $158, 336.80. (56.1 Stmt. ¶ 11). Thereafter, Jeff's Garage "withdrew all of the money from its account at BBCN, ... ceased using the North American Bancard terminal, and refused to make further payments to [Plaintiff]." ( Id. ).

B. Procedural Background

After Defendant refused to make further payments, Plaintiff filed suit with the Court on February 3, 2014, claiming breach of contract, breach of representations and warranties, and breach of a personal guarantee against Defendant. (56.1 Stmt. ¶ 13). At Defendant's insistence and with Plaintiff's acquiescence, the parties agreed to arbitrate the dispute before the American Arbitration Association (the "AAA") ( id. at ¶¶ 15-16), and the Court entered an Order staying the case pending arbitration (Apr. 17, 2014 Order (Dkt. #8)).

After initial pleadings had been exchanged before the Arbitrator, on July 26, 2014, Defendant's counsel David Wong notified the Arbitrator that he and his firm would no longer represent Defendant because of "irreconcilable differences" with his client. (Final Award 4). The Arbitrator issued an Order on August 7, 2014, informing Defendant of his right to represent himself, yet strongly urged Defendant to enlist the assistance of someone comfortable with oral and written English to assist him in the proceedings. ( Id. at 5). The Arbitrator also notified Defendant on August 29, 2014, that if he chose not to participate in the proceeding, the matter might nonetheless be heard, and an award might be granted. ( Id. at 6). Defendant did not respond to these notifications.

Throughout August and September, the Arbitrator repeatedly reached out to Defendant regarding discovery requests and administrative matters related to the proceedings, to no avail. ( See Final Award 6-7). After notice to Defendant, the Arbitrator conducted preliminary hearings in his absence and, in a September 15, 2014 email, the Arbitrator notified Defendant of the October 6, 2014 deadline to submit papers supporting his argument. ( Id. at 7). Again, Defendant failed to respond. On October 9, 2014, the Arbitrator sent an email advising the parties that the hearing scheduled for October 20, 2014, would take place via telephone conference, and that since he had not received opposition papers by the October 6 deadline, he would analyze the materials before him on the merits. ( Id. at 8). On October 20, 2014, the Arbitrator conducted the hearing with Plaintiff's representatives present and "neither [Defendant], nor anyone representing his interests dialed in or participated in the call." ( Id. ).

Even in the absence of a formal opposition from Defendant, the Arbitrator considered certain facts contained in a police report, submitted by both sides, that favored the narrative contained in the Answer that defense counsel had submitted at the commencement of the arbitration. (Final Award 3, 11).[4] Ultimately, for various evidentiary reasons set forth in the Final Award, the Arbitrator did not accord much weight to the report. ( Id. at 11).

On October 23, 2014, the Arbitrator awarded the outstanding balance of $158, 336.80 to Plaintiff without interest. (Final Award 13). He further held that each side should bear its own costs, and thereby declined to award attorneys' fees. ( Id. ).

In accordance with the Court's November 14, 2014 Order (Dkt. #17), Plaintiff filed the instant motion for summary judgment on December 18, 2014 (Dkt. #18).[5] Defendant did not file any opposition and has still not appeared in this action.


A. Applicable Law

"It is well established that courts must grant an arbitration panel's decision great deference." Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003). The limited review standard is used to ensure that "the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation" are met. NYKCool A.B. v. Pac. Fruit, Inc., 507 F.Appx. 83, 85 (2d Cir. 2013) (summary order) (quoting Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993)). Accordingly, the confirmation of an arbitration award generally is "a summary proceeding that merely makes what is already a final arbitration award a judgment of the court." D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006) (quoting Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984)) (quotation marks omitted).[6] A petition to confirm should be "treated as akin to a motion for summary judgment based on the movant's submissions, " and where the non-movant has failed to respond, the court "may not grant the motion without first examining the moving party's submission to determine if it has met its burden of demonstrating that no material issue of fact remains for trial." D.H. Blair, 462 F.3d at 109-10 (citation omitted).

A motion for summary judgment may not be granted unless all of the submissions taken together "show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see El Sayed v. Hilton Hotels Corp., 627 F.3d 931, 933 (2d Cir. 2010). The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination, the court must view all facts in the light most favorable to the non-moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); El Sayed, 627 F.3d at 933. When the moving party has asserted facts showing that the non-movant's position cannot be sustained, the opposing party must "set forth specific facts demonstrating that there is a genuine issue for trial, " and cannot "merely rest on the allegations or denials" contained in the pleadings. Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009) (citation and quotation marks omitted).

Courts require a "high" showing to "avoid summary confirmation of an arbitration award." Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997) (citation omitted); see also D.H. Blair & Co., 462 F.3d at 110. Further, a party moving to vacate an award bears "the heavy burden of showing that the award falls within a very narrow set of circumstances delineated by statute and case law." Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004) (citation omitted). In particular, courts in this Circuit will vacate an arbitration award "only upon finding a violation of one of the four statutory bases [enumerated in the FAA], or, more rarely, if [the court] find[s] a panel has acted in manifest disregard of the law." Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133, 139 (2d Cir. 2007).[7]

Thus, a party seeking vacatur of an arbitrator's decision "must clear a high hurdle." Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 671 (2010). "The arbitrator's rationale for an award need not be explained, and the award should be confirmed if a ground for the arbitrator's decision can be inferred from the facts of the case. Only a barely colorable justification for the outcome reached by the arbitrators is necessary to confirm the award." D.H. Blair & Co., 462 F.3d at 110 (citations and quotation marks omitted); see also Landy Michaels Realty Corp. v. Local 32B-J Serv. Emps. Int'l Union, AFL-CIO, 954 F.2d 794, 797 (2d Cir. 1992) ("an arbitration award should be enforced, despite a court's disagreement with it on the merits, if there is a barely colorable justification for the outcome reached" (internal quotation marks and citation omitted)).

B. Analysis

Plaintiff has sufficiently supported its petition. First, there are no material facts in dispute: Defendant has not contested any of the material facts upon which Plaintiff's motion for summary judgment is based, and the record discloses no dispute concerning these facts. ( See 56.1 Stmt.).

Second, a colorable basis exists to support the Final Award: the Arbitrator reviewed submissions from both sides (including those that were available from Defendant), endeavored on multiple occasions to include both parties in the proceedings, and ultimately issued a reasoned decision that weighed both parties' positions. (56.1 Stmt. ¶ 17; Final Award). Especially given that "[t]he arbitrator's rationale for an award need not be explained, and the award should be confirmed if a ground for the arbitrator's decision can be inferred from the facts of the case, " D.H. Blair & Co., 462 F.3d at 110 (citation and quotation marks omitted), there clearly exists a colorable basis for the arbitral decision at issue since the Arbitrator set forth his rationale and the grounds for his decision are discernable from the facts of the case.

Finally, there are no grounds for setting aside the Final Award. See D.H. Blair & Co., 462 F.3d at 110 ("[T]he court must grant the award unless the award is vacated, modified, or corrected." (citation and quotation marks omitted)). The Court has reviewed the grounds enumerated in 9 U.S.C. § 10(a), and finds none of them implicated in the instant action. It is undisputed that the parties agreed to proceed under a valid arbitration agreement, that both sides were given the opportunity to participate fully in the arbitration, [8] and that a Final Award was issued. (Final Award 7-8). As noted above, Defendant has made no challenges to the Final Award's legal sufficiency, nor has he made any effort to vacate, modify, or correct the Final Award, and the Court has found no basis to do so sua sponte.


For the foregoing reasons, Plaintiff's motion for summary judgment on its petition to confirm the arbitration award is GRANTED. Judgment shall be entered in favor of Plaintiff and against Defendant Jang Hwan Ko d/b/a Jeff's Garage in the amount of $158, 336.80 in accordance with the Arbitrator's Final Award.[9] Post-judgment interest shall be allowed pursuant to 28 U.S.C. § 1961. The Clerk of Court is directed to enter judgment for Plaintiff, terminate all pending motions, adjourn all remaining dates, and close the case.


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