AV Design Servs. v. Durant

1

AV DESIGN SERVICES, LLC et al., Plaintiffs, v. JAMES M. DURANT et al., Defendants.

Civil Action No. 19-8688-KMW-MJS

United States District Court, D. New Jersey

February 1, 2024

Not For Publication

APPEARANCES:

ANDREW JOHN KYREAKAKIS, ESQ. WEINER LESNIAK LLP Counsel for Plaintiffs and Counter Defendants AV Design Services, LLC Rossen Karadjov, James E. Landy

CHINH TY NGUYEN, ESQ. JAY R. MCDANIEL, ESQ. WEINER LAW GROUP LLP Counsel for Plaintiffs and Counter Defendants AV Design Services, LLC, Rossen Karadjov, James E. Landy

MARY WILLIAMSON CHATTEN, ESQ. DASH FARROW, LLP Counsel for Defendant and Counter Claimant James M. Durant

ARTHUR JOEL ABRAMOWITZ, ESQ. BRUCE S. LUCKMAN, ESQ. SHERMAN SILVERSTEIN KOHL ROSE & PODOLSKY Counsel for Defendant James J. Grimes

CARLO SCARAMELLA LAW OFFICES OF CARLO SCARAMELLA, LLC Counsel for Defendant James J. Grimes and Grant Advanced Video Technology, LLC

OPINION

KAREN M. WILLIAMS U.S. DISTRICT COURT JUDGE

I. INTRODUCTION

This matter comes before the Court by way of Plaintiffs AV Design Services, LLC, Rossen Karadjov, and James E. Landy's Cross Motion to Vacate and/or Modify Arbitration Award (ECF No. 158) (hereinafter “Cr. M. to Vacate”). On May 12, 2023, Defendants James Grimes and Grant Advanced Video Technology LLC entered a Motion to Confirm Arbitration Award (ECF No. 156) (hereinafter “M. to Confirm”) following the conclusion of the mandated arbitration ordered by this Court in its March 17, 2022 Opinion (ECF No. 154). Defendants opposed Plaintiffs' Cross Motion (ECF No. 160) (hereinafter “Opp. to Cr. M.”), and Plaintiffs replied thereto (ECF No. 164). Pursuant to Local Civil Rule 78.1(b), this motion will be decided on the papers without oral argument. For the reasons set forth below, Plaintiffs' Cross Motion to Vacate and/or Modify Arbitration Award (ECF No. 158) is DENIED and Defendants' Motion to Confirm Arbitration Award (ECF No. 156) is GRANTED.

II. BACKGROUND

Plaintiffs Landy and Karadjov and Defendant Grimes were equal members of Defendant AV Design Services LLC (“AVDS”). See Pl.'s Compl. ¶¶ 1, 10-11. In June of 2015, Defendant Durant joined the company as an employee, but later endeavored to purchase a membership interest in AVDS. See id. Ultimately, Defendants Grimes and Durant were terminated, resulting in the ensuing litigation. Pursuant to this Court's March 17, 2022 Opinion (ECF No. 154), the instant case was stayed pending arbitration.

On April 28, 2023, the Honorable Francis J. Orlando, Jr., A.J.S.C. (ret.) granted a Final Arbitration Award and made several factual findings, which the parties do not contest. Cr. M. to Vacate at 2; Opp. to Cr. M. at 1. First, Judge Orlando found that Defendant Grimes was wrongfully dissociated from the business, and that his termination as a minority shareholder constituted oppression.^[1]M. to Confirm at 3-4. Second, Judge Orlando found that Plaintiffs Karadjov and Landy acted in bad faith when terminating Defendant Grimes' employment, thereby breaching the covenant of good faith and fair dealing implicit in the business's Operating Agreement. Id. at 4. Third, Judge Orlando found that the most fair and equitable solution was for Plaintiffs, jointly and severally, to purchase Grimes' membership interest in AVDS for fair value pursuant to N.J.S.A. 42:2C-48(b).^[2]Id. Thus, the final award issued by Judge Orlando included (1) $129,483.00 attributed to Defendant Grimes' capital account, (2) $634,000.00 representing one-third of ADVS' membership interest, and (3) legal fees and costs totaling $1,179,615.52. Id. at Attachment 3. On May 12, 2023, Defendants petitioned this Court to confirm the Arbitration Award.

On June 6, 2023, Plaintiffs filed their Cross-Motion, requesting that this Court vacate or modify the Arbitration Award. Therein, Plaintiffs argue that Judge Orlando overstepped his authority when he imposed joint and several liability on Plaintiffs and that it was misconduct when he fashioned the final Arbitration Award amount. Cr. M. to Vacate at 15-23, 25-26. More specifically, Plaintiffs argue that the value of Grimes' membership interest is overvalued because the calculation includes Plaintiff Landy's “personal goodwill” and impermissibly credited it to ADVS. Id. at 16-17.

III. LEGAL STANDARD

There exists a strong presumption in favor of enforcing arbitration awards, both manifest in the Federal Arbitration Act (“FAA”) and supported by the Third Circuit. See Brentwood Med. Assocs. v. United Mine Workers of Am., 396 F.3d 237, 241 (3d Cir. 2005). Section 9 of the FFA states in pertinent part:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.

9 U.S.C. § 9. “The Supreme Court has held that the courts play only a limited role when asked to review the decision of an arbitrator.” E. Atl. States Reg'l Council of Carpenters, UBCJA v. CMS Constr., Inc., No. 22-1615, 2022 WL 17991613 at *3 (D.N.J. Dec. 29, 2022) (quoting Wilkes Barre Hosp. Co. v. Wyo. Valley Nurses Ass'n PASNAP, 453 Fed.Appx. 258, 260 (3d Cir. 2011)). Thus, the Court's ability to review the arbitration award is circumscribed-courts are not authorized to reconsider the merits of an award and must accord arbitration decisions with “exceptional deference.” Id. (quoting Handley v. Chase Bank USA NA, 387 Fed.Appx. 166, 168 (3d. Cir. 2010)).

The moving party bears the burden of proving that the arbitration award should be vacated, and thus “faces a steep uphill battle.” Ario v. Underwriting Members of Syndicate 53 at Lloyds, 618 F.3d 277, 296 (3d Cir. 2010). The Court must “begin with the presumption that the award is enforceable.” Freeman v. Pittsburgh Glass Works, LLC, 709 F.3d 240, 251 (3d Cir. 2013) (internal citation omitted). An arbitration award is “presumed valid unless it is affirmatively shown to be otherwise,” Brentwood Med. Assocs., 396 F.3d at 241, and as long as the award “draws its essence from the . . . agreement, and is not merely [the arbitrator's] own brand of industrial justice, the award is legitimate.” E. Atl. States Reg'l Council of Carpenters, 2022 WL 17991613 at *3 (quoting United Paperworks Int'l Union v. Misco, Inc., 484 U.S. 29, 36 (1987)) (internal quotations omitted). Furthermore, the Court is not to correct any factual or legal errors made by the arbitrator, and can only justify interfering if such errors affect the rights of a party so much so that it may be said that the party was deprived of a fair hearing. See Whitehead v. Pullman Grp., LLC, 811 F.3d 116, 120 (3d Cir. 2016). The Court must grant an order confirming an arbitration award unless the award is vacated, modified, or corrected pursuant to the narrow and exclusive circumstances provided by the FAA. See Hall St. Assocs. LLC v. Mattel, Inc., 552 U.S. 576, 586-87 (2008).

The ability of the Court to vacate an award is limited to four circumstances. “Under the [FAA], a court must confirm an arbitration award unless: [1] it was procured by corruption, fraud, or undue means; [2] the arbitrators demonstrated partiality or corruption; [3] they were guilty of misconduct; or [4] they exceeded their powers.” Anoruo v. Tenet HealthSystem Hahnemann, 697 Fed.Appx. 110, 111 (3d Cir. 2017) (citing 9 U.S.C. §§9, 10(a)(1)-(4)). Similarly, there are only three circumstances where a court may modify or correct an award: (1) where there has been a “material miscalculation” or mistake in identifying a party or property; (2) an award was based upon matters not presented to the arbitrator; or (3) the award is “imperfect” in a matter of form that does not affect the merits of the controversy. See 9 U.S.C. § 11(a)-(c). If one of these latter three events has occurred, the Court may modify and correct the award so as to effectuate its intent and promote justice between the parties. Id.

IV. DISCUSSION^[3]

A. 9 U.S.C. § 10 - Vacatur^[4]

The Third Circuit allows vacatur if the award is “completely irrational”; that is, when there is nothing in the record to justify an arbitrator's decision. Zakarin v. Wells Fargo Advisors, LLC, No. 17-1088, 2017 U.S. Dist. LEXIS 183109 at *5 (D.N.J. Nov. 3, 2017) (citing News America Publications, Inc. Daily Racing Form Division v. Newark Typographical Union, Local 109, 918 F.2d 21, 24 (3d Cir. 1990)); Mutual Fire, Marine & Inland Ins. Co. v. Norad Reinsurance Co. Ltd., 868 F.2d 52, 56 (3d Cir. 1989). While a court cannot vacate an arbitration award due to legal errors, a court may vacate an award if the arbitrator shows “manifest disregard for the law.” Id. (citing Tanoma Min. Co., Inc. v. Local Union 1269, United Mine Workers of America, 869 F.2d 745, 749 (3d Cir. 1990)).

An arbitration award can also be vacated if it “violates a clearly defined public policy as ‘ascertained by reference to the laws and legal precedents.'” Id. (quoting Easter Associated Coal Corp. v. United Mine Workers of America, 531 U.S. 57, 62-3 (2000)).

1) § 10(a)(4) Arbitrator Exceeded his Powers^[5]

Plaintiffs' main contention is that Judge Orlando exceeded his powers as defined by 9 U.S.C. §10 (4). Plaintiffs' various complaints boil down to two specific concerns: they dispute the value of Grimes' membership share as found by the arbitrator and oppose the arbitrator's imposition of joint and several liability. However, the Court finds that this is nothing more than a veiled attempt to obviate the parties' agreement to final and binding...