Matter of Ames v Garfinkel

[*1] Matter of Ames v Garfinkel 2006 NY Slip Op 50170(U) [11 Misc 3d 1051(A)] Decided on January 26, 2006 Supreme Court, New York County Stone, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 26, 2006
Supreme Court, New York County

In the Matter of Dorothy Ames, Petitioner,

against

David A. Garfinkel, Respondent.



111984/05

Lewis Bart Stone, J.

Petitioner, Dorothy Ames ("Ames") commenced this proceeding by Notice of Petition, dated August 25, 2005, under Article 75 of the Civil Practice Law and Rules ("CPLR") to confirm an arbitration award (the "Award") of June 15, 2005 rendered in her favor against respondent David Garfinkel ("Garfinkel"), in the amount of $444,677 plus interest. On September 12, 2005, Garfinkel submitted his answer, asserting five affirmative defenses, viz, that (1) the Award violates Federal Arbitration Act ("FAA") §10(a)(3), (2) the Award violates CPLR §7511(b)(1), (3) the arbitrators manifestly disregarded the law and (4) the arbitrators manifestly disregarded the evidence and (5) the arbitrators denied Garfinkel representation by counsel in violation of CPLR §7506(d).

By his answer, Garfinkel also Cross-Moves to dismiss the petition, vacate the Award and to resubmit the dispute to a different arbitration panel.

Underlying this dispute is Ames' claim for damages allegedly resulting from certain fraudulent and illegal activities of Garfinkel and his securities firm, the First Montauk Securities Corporation ("First Montauk") and David Kurinsky ("Kurinsky") (another principal of First Montauk). The arbitration was held under National Association Securities Dealers ("NASD") rules. Before the hearing, Ames settled with First Montauk and Kurinsky. Garfinkel did not settle, and the arbitration against him proceeded. Before the hearing, Garfinkel moved to stay arbitration several times on the grounds that he suffered from brain cancer and could neither appear nor aid in his defense. The panel initially granted Garfinkel's requests for adjournments but eventually denied a motion for a further continuance and proceeded to arbitrate the [*2]dispute, requiring Ames to present her full case, which she did, and following such presentation the Award was rendered. Neither Garfinkel nor his counsel participated further other than to appear to object to the panel's failure to grant the continuance.

An arbitration award may only be vacated on a ground set forth in applicable statute or case law. One ground asserted for vacation in Garfinkel's Cross-Motion, that the arbitrators manifestly disregarded the evidence, is not recognized by any statute or any case law and is rejected. The other grounds asserted are based on statutory or case law; they will be addressed below.

Initially, Ames asserts that Uram v. Garfinkel, (NY County Sup. Ct., Index No. 116354/03, Shafer, J., (2004),which confirmed a different arbitration award against Garfinkel, and its affirmance (Uram v. Garfinkel, 16 AD3d 347(1st Dept. 2005)) requires this Court to grant the Petition and deny the Cross Motion without further consideration. This Court disagrees.

Uram arose out of the same fraudulent activity alleged here. The Uram arbitrators had determined, on the facts before them, not to grant Garfinkel's motion to adjourn the proceeding, finding that, under the conflicting facts relating to Garfinkel's condition and the reasons for his new counsel's unpreparedness and conflicts with other cases, it was not misconduct under FAA §10(a)(3) for the arbitrators to deny Garfinkel's request for adjournment. The Uram arbitrators had earlier granted Garfinkel's request to adjourn by reason of his cancer on April 24, 2002 but on April 8, 2003 denied a subsequent request made on December 19, 2003. Garfinkel's second counsel withdrew on June 6, 2003, and new, third, counsel reapplied for another adjournment on three grounds, viz, Garfinkel's condition, which had continued, new counsel's other engagements and the short time to hearing. The arbitrators denied this application on July 16, 2004 and proceeded to the hearing. Garfinkel served no papers by the May 2, 2005 hearing date, although his new counsel attended and again sought an adjournment, which was again denied. It was on that fact pattern that Justice Shafer and the First Department ruled.

Because Uram involved a claim by a different customer of Garfinkel before different arbitrators, it can be neither res judicata nor collateral estoppel here, even though it involved the same alleged fraud. Arbitration awards do not constitute precedent with respect to findings of facts or conclusions of law of an arbitration panel. As Judge Shafer's decision was affirmed by the First Department, Uram binds this Court only as to this Court's scope or method of review of the Award.

The two decisions in Uram are not the only ones relating to Garfinkel's predicament. In his decision in Garfinkel v. Fleishaker, Index No. 010243/05, NY Co. (October 17, 2005) Justice Tolub reviewed yet another arbitration brought by yet [*3]a different customer of Garfinkel, involving the same alleged fraud. Again, Garfinkel attempted to adjourn the proceeding on the grounds of his physical condition, and again the arbitrators refused to do so and proceeded to hear the claimant's case and render an award. Again Garfinkel moved to vacate the award for the failure to grant him a continuance. Justice Tolub rejected this request. While again, for the same reason set forth above Justice Tolub's decision on in Fleishaker which consider the factual findings of the arbitrators are neither res judicata nor collateral estoppel. His decision, like those in Uram, however, gives guidance to this Court on the legal principles to apply in this case.

The panel here, on February 2, 2004, initially granted Garfinkel's application for adjournment by reason of his cancer, setting the hearing for no later than September 2004. The panel subsequently, on Garfinkel's request, further adjourned to "May or June 2005." The hearing was actually held on May 2, 2005, fifteen months after Garfinkel's initial request for adjournment, after the panel, was presented with extensive and conflicting factual material relating to Garfinkel's condition. Unlike in Uram, Garfinkel filed an answer in this arbitration in 2004.

Based on the three decisions above, this Court finds Garfinkel's assertions insufficient to establish any basis for vacation of the Award. While the aggregate fact pattern on which such Courts reached the same conclusions are not materially distinguishable here, the problem faced by this Court is to explain the procedural and substantive legal underpinnings necessary to reach this result.

Garfinkel's first and second affirmative defenses assert that the failure to grant the adjournment violates respectively, FAA §10(a)(3) and CPLR §7511(b)(1). His first affirmative defense also asserts that FAA §10(a)(3) binds this Court as a matter of Federal preemption, notwithstanding any New York law to the contrary. There is no dispute that arbitration in this case is required by FAA §2 as the dispute arose under a "contract evidencing a transaction involving commerce."

While it is settled law that at least certain FAA provisions, i.e., Sections 2, 3 and 4, preempt state law, it is not clear that all provisions of the FAA do. A study of arbitration issues conducted in connection with the promulgation of the Uniform Arbitration Act (2002) by the National Conference of Commissioners on Uniform State Law noted:

"The other issues to which the FAA speaks definitively lie at the back end of the arbitration process. The standards and procedure for vacatur, confirmation and modification of arbitration awards, are the subject of Sections 9, 10, 11, and 12 of the FAA. In contrast to the "front end" issues of enforceability and substantive arbitrability, there is no definitive Supreme Court case law speaking to the preemptive [*4]effect, if any, of the FAA with regard to these "back end" issues. This dimension of FAA preemption of state arbitration law is further complicated by the strong majority view among the Untied States Circuit Courts of Appeals that the Section 10(a) standards are not the exclusive grounds for vacatur." Prefatory Note to the Uniform Arbitration Act. 7 ULA4 (2005).

Neither party here has offered subsequent Federal authority on this issue. While there may be good policy arguments that arbitration should be carried out under a uniform regime for all purposes in the United States, Congress has not adopted such a policy. The FAA, as enacted, does not require such a result even as to whether arbitration is required in a specific case.

For example, while the United States Supreme Court in Circuit City Stores v. Adams, 532 US 105 (2001) held that FAA, by its terms, covers employment contracts generally, "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or domestic commerce" are excepted. 9 USCA §1. Similarly, a contract to arbitrate is "valid, irrevocable, and enforceable save upon such grounds as existent law or in equity for the revocation of any contract." (Emphasis added). FAA §2. By referencing state contract law and grounds for revocation thereunder, the FAA relates back to the state whose law applies. As different states can and do approach the grounds for contract revocation differently, Congress, in the FAA expressly adopted a regime of possible differential outcomes of the enforcement of arbitration agreements.

This is an actual and not a theoretical result. For example, after the remand of Circuit City supra, which held that an arbitration clause in an employment agreement was subject to the FAA, the Ninth Circuit applied the California rule of Armendariz v. Foundation Health Psychecare Services, Inc., 24 Cal. 4th 83 (2000) to reject the arbitration agreement under California for unconscionability, after analyzing the entire employment agreement. See Circuit City v. Adams, 279 F3d 889 (9th Cir. 2002). A New York Court would have ruled differently, limiting its consideration of unconscionability to the arbitration clause itself, relegating the question of unconscionability of the remainder of the agreement to the arbitrator once the Court found that if the arbitration agreement was not itself unconscionable (see, e.g., Matter of Weinrott (Carp), 32 NY2d 190 1973).

Even though the NCCUSL report, supra, considered it was possible that the United States Supreme Court might extend the principle of preemption to enforcement, NCCUSL itself in adopting the UAA (2003), used slightly different [*5]language in UAA (2003) §23[FN1] to set forth its grounds for vacation, viz:

"1) the award was procured by corruption, fraud, or other undue means; 2) there was: a) evident partiality by an arbitrator appointed as a neutral arbitrator; b) corruption by an arbitrator; or c) misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding; 3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to Section 15, so as to prejudice substantially the rights of a party to the arbitration proceeding; 4) an arbitrator exceeded the arbitrator's powers; 5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection under Section 15(c) not later than the beginning of the arbitration hearing; or 6) the arbitration was conducted without proper notice of the initiation of an arbitration as required in Section 9 so as to prejudice substantially the rights of a party to the arbitration proceeding."

Using different language from the FAA creates the inference that the NCCUSL intended to create different standards for vacating an award, effectively indicating that State standards for the review of an award were not, in NCCUSL's opinion, to be preempted by FAA.

In Volt Information Sciences, Inc. v. Leland Stanford Jr. Univ., 489 US 468 (1989), the United States Supreme Court acknowledged that

"the FAA contains no express preemptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration. But even when Congress has not completely displaced state regulation in an area, state law may nevertheless be preempted to the extent it actually conflicts with federal law - that is, to the extent that it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' Hines v. Davidowitz, 312 US 52, 67 (1944)." Id. at 477.

Federal Arbitration Act Provisions

FAA §10(a) sets forth the grounds for vacating an award on the application of a party, as follows:

In any of the following cases the United States District Court in and the district wherein the award was made may make an order vacating the award upon the [*6]application of any party to the arbitration;

"1) Where the award was procured by corruption, fraud, or undue means.

2) Where there was evident partiality or corruption in the arbitrators, or either of them.

3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made."

Not only does this language not require FAA §10(a)(3) to be preemptive, it even implies that such provision is not. By reciting that "the United States Court in and for the district wherein the award was made" may make an order vacating the award on the application of a participating party to the arbitration, §10(a)(3) by its terms explicitly only binds Federal courts by addressing their powers rather than providing a rule of positive law, as does FAA §2. Thus normal rules of statutory construction would result in §10(a)(3) being non-preemptive, except to the extent that state law "as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Volt Information Sciences, Inc., supra.

CPLR Provisions

The provisions under CPLR §7511 parallel to FAA §10(a)(3) for challenges to an arbitration award by a participating party are:

i) corruption, fraud or misconduct in procuring the award; or

ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession;

iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or [*7]

iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.

CPLR §7511(b)(1) differs from FAA §10(a)(3) in that the language "misconduct in refusing to postpone the hearing on sufficient cause shown" is absent in the CPLR. While misconduct remains a ground for vacation, failure to adjourn is not statutorily defined as misconduct.

New York Civil Practice Act ("CPA") 1461(3), the precursor of CPLR §7511(b)(1), contained language identical to FAA §10(a)(3) relating to adjournment. The CPLR as adopted, however, deleted such provision, relying on general language of "misconduct" to address the issue. Applying the principle that "the Legislature, by enacting an amendment of a statute changing the language thereof, is deemed to have intended a material change in the law," ( McKinney's Statutes §193(a)), this Court finds that it was the State Legislature's intent to substitute a different standard than the FAA standard for the vacation of an award where the issue was the failure to grant an adjournment.

Under the CPA and FAA §10(b)(3), once an adjournment was denied, the Court must address whether good cause was shown. By relegating the issue of adjournment to one of arbitral misconduct, the New York Legislature made it more difficult to overturn an award by reason of the failure to adjourn by substituting a standard of "good faith" (i.e., actual misconduct) for "good cause" (where the Court would be required to consider whether the arbitrator had erred) and by shifting the burden of establishing a breach of the standard to the party moving to set aside the award. This follows New York's general approach to uphold arbitral mistakes of law or fact, so long as the arbitrators act in good faith.

By narrowing one more opportunity to attack an arbitral award (without deviating from the theory of arbitration) the New York Legislature thus acted consistently with the Federal policy of the FAA to promote arbitration, rather than in derogation of such act. Under the standard of Volt Information Sciences, Inc., supra, accordingly, CPLR §7511(b)(1) should not be deemed to be preempted.

However, the First Department in Uram v. Garfinkel, supra, seems to have assumed (without discussion) that the entire FAA preempts and supercedes the CPLR for arbitrations subject to FAA §2. Thus, not withstanding the above discussion, this Court may be bound to treat §7511(b)(1) as preempted. However, Uram is a memorandum decision and does not, explore the ramifications of such a rule or [*8]whether CPLR Article 75 is totally or only partially preempted.[FN2] Even Garfinkel himself, by moving in his second affirmative defense, to vacate the Award pursuant to CPLR §7511(b)(1), argues that CPLR §7511(b)(1) has continuing vitality (although he also argues that it is preempted). Further, in Fleishaker, supra. Judge Tolub, after following the First Department's decision in Uram, supra, concludes that "the Court must therefore confirm the award (CPLR §7511(e))" citing a section ostensibly preempted.

Fortunately in the interests of resolving this case, it is unnecessary to determine whether FAA §10(a)(3) or CPLR §7511(b)(1) applies. On the facts here, under neither statute can Garfinkel establish a basis to vacate the Award.

New York Case Law

The Court has found five New York cases addressing whether and to what extent a failure to grant an adjournment constitutes misconduct under CPLR §7511(b)(l) to provide a basis for vacating an arbitration award. They are:

International Components Corp. V. Klauber, 59 AD2d 853 (1st Dept. 1977),

Angel Fabrics Ltd. v. Cravat Pierre, Ltd., 51 AD2d 951 (1st Dept. 1976), app.

div. 39 NY2d 711 (1976),

Woodco Mfg Corp. v. GR&R Mfg, Inc., 51 AD2d 631 (3rd Dept. 1976), [*9]

A&R Const. Co., Inc. V. Gorlin Okun 41 AD2d 876 (3rd Dept. 1973),

Local 964 v. Giresi, 29 AD2d 768 (2nd Dept. 1968).

In the earliest case, Local 964, supra, the Second Department held, in a memorandum decision, that "Failure to adjourn the arbitration is not misconduct' under CPLR §7511 where the party who claims that it is misconduct (here the appellant) is under indictment with respect to the same subject matter as involved in the proceeding." The arbitrator had already granted several adjournments aggregating "some 16 months." In A&R Const. Co., Inc., supra, the Third Department, in a Memorandum Decision stated:

A refusal to adjourn a hearing which forecloses the presentation of evidence may amount to misconduct, but generally the refusal to grant or refuse an adjournment is a matter within the discretion of the arbitrator."

The Court found that there were factual questions as to the validity of the reasons given for an adjournment request, and that such facts were given to and resolved by the arbitrators. The Court stated "Our review of the record indicates that this determination was supported by the evidence," and rejected the petition to set aside the Award by reason of the refusal to grant an adjournment.

In Woodco Mfg. Corp., supra, the Third Department considered an arbitrator's failure to grant an adjournment and modified an order of Special Term setting aside the award to require that the matter be reheard by a new arbitrator. The initial arbitration date was October 28, 1974. The petitioner had requested an adjournment to "gather witnesses and transport them from Tennessee." The arbitrator gave the petitioner one short adjournment to November 4th when the two-day hearing began in the absence of the petitioner and its counsel. The Third Department noted that the "sole issue on this appeal is whether the arbitrator's refusal to adjourn an arbitration hearing, under the circumstances herein presented, constituted misconduct such that a new arbitrator should be appointed." Finding that the Supreme Court "by holding that the arbitrator abused his discretion," implicitly held the arbitrator was guilty of misconduct, the Third Department upheld the Supreme Court in setting aside the award, but required the case to be submitted to a different arbitrator.

In Angel Fabrics, supra, the First Department, in a memorandum decision, affirmed Special Term's rejection of petitioner's argument that the improper refusal to grant an adjournment merited a vacation of the Award. The memorandum decision, however, only refers to the unpublished decision of the Special Term for the facts and reasons.

Finally, International Components Corp., supra, the First Department in another [*10]memorandum decision, vacated an arbitration award for misconduct where the arbitrator refused, out of hand, to adjourn the hearing where a party's attorney asked for and was denied an adjournment five days before the hearing because his wife was being treated for cancer (she was operated upon on the day of the hearing). At the hearing, the attorney's associate, who was unfamiliar and not prepared to proceed, appeared, pointed out that the attorney was also a witness whose testimony would not be included and that to proceed would also deprive his client's right to cross examine adverse witnesses. The associate left. The First Department quoted with approval the McKinney's Practice Commentary under §7511 by Peter Thornton (p. 602) who stated "the word misconduct' apparently includes refusing to postpone the hearing upon sufficient cause shown or refusing to hear evidence pertinent and material to the controversy, which were specifically defined as misconduct' in CPA §1462(3). This particular section of the statute is particularly germane to petitioner's appeal; the arbitrator clearly committed the type of misconduct contemplated by the statute." This language continues into the present Practice Commentary now written by Joseph M. McLaughlin.

Although these memorandum decisions do not present an extensive discussion of the issue, they make it clear that some refusals or failures by an arbitrator to adjourn an arbitration proceeding may be grounds for vacation, and some may not. The cases, however, give scant guidance as to how the distinction is made and to what extent an arbitrator's specific consideration or decision on such issue is to receive deference by a Court in review.

Clearly, by deleting the reference to adjournment in substituting §7511 for the former CPA provision, the legislature changed the text of the statute. Although the courts may still consider whether a failure to grant an adjournment constitutes the basis for vacation, they may now only do so to the extent such failure shows misconduct, as distinct from error. The New York cases (except for Angel Fabrics, supra, which does not address the issue) recognize that the test is misconduct, not the mere failure to adjourn.

Under this standard, the proper inquiry here would be whether the arbitrator's refusal to grant the additional adjournment constituted misconduct. As one seeking to set aside an arbitration award has the burden, under CPLR §7511 of establishing the grounds, under New York law, the movant must establish that the failure to grant an adjournment constitutes misconduct. What constitutes misconduct in an arbitration, however, must differ from misconduct in a court proceeding. Arbitrators can get things wrong, both in law and fact, so long as they do not do so with bias or ignore other statutory provisions. Thus, a decision not to adjourn a hearing where the [*11]issues surrounding the need for adjournment were actually considered by the arbitrators, could be upheld, even if the same decision, if made by a Court, would not.[FN3] It would be inversion of priorities for the Courts to have to review the procedural decisions of arbitrators with greater scrutiny than their substantive decisions, especially where it is understood that a principal purpose of arbitration is to bypass the formalities of procedure and evidence to enable a less expensive and more expeditious resolution of disputes.

Accordingly, absent the obvious situation such as in Woodco, supra, or International Components, supra, the Court, under State law must accord deference to an arbitrators decision to deny an adjournment, made after hearing the application of the party seeking adjournment in the absence of any independent showing of bias or hostility or other misconduct.[FN4]

Here the arbitrators granted Garfinkel a number of adjournments and had finally decided to grant no more when it seemed apparent to then that further adjournments would not change the situation. They also had before them at the time factual affidavits submitted by Ames as to Garfinkel's activities to contradict the extensive medical evidence submitted by Garfinkel. Other than their failure to adjourn the hearing again, there are no meaningful allegations of misconduct on the arbitrators' part. Thus, to the extent CPLR §7511(b)(1) governs, this Court would find that Garfinkel has not established a basis under the New York standard of misconduct to have the award vacated.

Federal Case Law

Even assuming that FAA §10(a)(3) preempts CPLR §7511(b)(1), this Court finds that Garfinkel has established no basis under §10(a)(3) for vacation of the award.

As there are many more cases decided under the adjournment clause of FAA [*12]§10(a)(3), this Court will only discuss those Federal cases cited by Garfinkel[FN5] and the two state court decisions, two in Uram, supra, and one in Fleishaker, supra, which address setting aside an award under FAA§10(a)(3) for the failure of the arbitrators to adjourn.

Garfinkel, in support of his contention, cites Tempo Shain Corp. V. Bertek, Inc., 120 F3d 16 (2d Cir. 1997). In Tempo Shain, Bertek wished to have Wayne Pollack testify on its behalf, but sought a delay because Pollack was "temporarily unavailable to testify...after his wife was diagnosed with a recurring cancer." Pollack was willing to testify, but wasn't sure when he could, and Bertek's counsel urged that "the panel keep the record open until Pollack could testify either in person or by deposition," id. At 18. The arbitrators did not wait, and concluded the hearing.

While the Court refers to FAA §10(a)(3), they make it clear that, in reversing the District Court's refusal to vacate the award, they were not construing the provisions of such section relating to adjournment, but

"In this case we are primarily concerned whether the arbitration panel committed misconduct in refusing to hear evidence pertinent or material to the controversy." Id. at 20.

Finding that they so refused, the award was vacated.

While cancer was also a problem in Tempo Shain, the Court did not decide the case on the issue of adjournment, the issue Garfinkel raises in this case. Thus, Tempo Shain can provide no direct precedent for Garfinkel.

Tempo Shain is cited in two federal cases also cited by Garfinkel (although they are cited in an attempt to distinguish them). They are Ottowa Office Integration, Inc. v. FTF Business Systems, Inc., 132 F. Supp. 2d 215 (SDNY 2001) and Bisnoff v. King, 154 F. Supp. 2d 630 (SDNY 2001). Both cases involved parties to the arbitration who sought indefinite and continued adjournments by reason of medical problems - a heart condition in Bisnoff and Wegener's granulomatosis in Ottowa. In both cases, after the arbitrators had already granted adjournments, additional adjournments were sought. In both cases, there was substantial material before the arbitrators that gave them some basis to doubt the full legitimacy of the adjournment request. In Bisnoff, the fact that the witness was working 30 hours a week at home but couldn't participate in the hearing by video tape or telephone "led credence to the notion...[he] was not credible." In Ottowa, the witness failed to produce an affidavit [*13]of his physician or supporting information as to his condition, as had been required by the arbitrator for subsequent adjournments when granting the initial adjournment, and had been well enough to discuss settlement on the same day of the hearing at which he sought further delay.

Both courts, after reviewing Tempo Shain, rejected the attempt to set aside the wards at issue on FAA §10(a)(3) grounds for failing to grant an adjournment, and confirmed the awards. The standard used for making the determination as to whether the line was crossed is whether the panel had a reasonable basis for denying the adjournment. Further, in making such determination, the arbitrators could make determinations of credibility with respect to contested factual issues, and if they did, a court would not be "empowered to second guess the arbitrators' assessment of credibility. Bisnoff at 638.

In this proceeding, although Garfinkel submitted extensive medical records in support of his contentions, Ames submitted an affidavit of Aaron Fleishaker,[FN6] who on personal knowledge set forth examples of Garfinkel's abilities to engage in community, political and business vacation and social activities, notwithstanding his medical problem. The record makes it clear that the panel had considered the conflicting claims at the time it rejected a further adjournment. Thus, as the decision not to adjourn further was based on an issue of credibility and that the Fleishaker affidavit, if credited (which the panel did), provided a reasonable basis for rejection of the request for further adjournment, Garfinkel thus cannot establish a basis, under case law interpretation of FAA §10(a)(3) for the vacation of the Award.

While the three state law decisions (two in Uram and Fleishaker reach the same conclusion, neither address the standards to be used under FAA §10(b)(3) to reach the result.

Manifest Disregard of Law

Garfinkel finally claims that the Award must be vacated as it was made in manifest disregard of the law. This ground for vacation of an arbitral award was developed as a matter of Federal decisional law and has been held by the First Department to apply by preemption to awards made under arbitration agreements which themselves are subject to FAA. Wein & Malkin, LLP v. Helmsley Spear, Inc., [*14]12 AD3d 65 (1st Dept. 2004).[FN7]

The limits on this doctrine of manifest disregard is discussed in Wallace v. Buttar, 378 F.3d 182 (3d Cir. 2004) which states that an arbitral award may be vacated for manifest disregard of Law "only if a reviewing Court" find[s] both that (1) the arbitrators knew of a governing legal principle refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case" (Id. at 189).

Although many Federal cases have considered whether manifest disregard was present, the bar for its application is high and it is rarely applied. In Duferco Int'l Steel Trading v. T. Klavenes Shipping A/S, 333 F.3d 383 (2nd Cir. 2003), the Second Circuit noted that since 1960, it had only by such date "vacated some or part of all of an arbitral award for manifest disregard in...four of at least 48 cases."

As Garfinkel has raised the issue, this Court must address this contention. Garfinkel asserts that the panel here manifestly disregarded the law because their failure to grant an adjournment violated FAA §10. Under the facts here, manifest disregard cannot be established even if the doctrine of manifest disregard applied to procedural, as distinct from substantive provisions of law. Based on the above discussion, even if at the end of the day it is true that FAA §10 preempts New York law, such preemption is no means a rule which is "well defined, explicit and clearly applicable." Further, the doctrine requires that the proponent of the rule of law which was "disregarded" makes such rule clear to the arbitration panel before the panel decides the issue. As arbitrators need not be judges or even lawyers, the failure of a party to present the rule of law explicitly to the arbitrators forecloses such party from claiming that the arbitrators have "manifestly disregarded" it.

The murkiness of the law is itself manifest in Garfinkel's application to the arbitrators seeking adjournment. His application itself asserted itself the applicability of CPLR provisions relating to arbitrator misconduct as a basis for the adjournment, rather than solely FAA §10, which Garfinkel now asserts preempts the CPLR provisions. Thus, Garfinkel himself did not under the standard of "manifest disregard" present a "well defined, explicit and clearly applicable" rule of law.

Garfinkel's third affirmative defense is therefore dismissed.

Denial of Counsel [*15]

Garfinkel's fifth and final basis to vacate the Award is his contention that he, by reason of his inability to consult with counsel as a result of his cancer, has been deprived of his right to counsel in violation of CPLR §7506(d). Garfinkel expands his state law claim to Federal and State constitutional dimension by also citing a series of right to counsel cases in the criminal context.

As arbitration is a civil matter, concerns of the criminal law that an accused has certain extensive rights to be present at a proceeding affecting him (U.S. Const. Amendment VI), to have and consult with counsel in a criminal case (Gideon v. Wainwright, 372 US335 (1963)), and be competent at the hearing and able to aid in his defense (See, e.g. New York Criminal Procedure Law §730), are absent. A civil matter could, for example proceed, even if a party were dead (or brain dead) and clearly unable to participate. As long as the result of the proceeding does not brand a party as a criminal or deprive him of his freedom,[FN8] these special concerns of the criminal law do not apply to enable Garfinkel to deprive Ames, an adverse civil litigant, of her rights to a speedy resolution of her rights to recover on her claims. She has, as a result of adjournments granted, had to wait for over three years from the time she filed her demand for arbitration in January, 2003 until the award was rendered on June 15, 2005, for redress for the wrongs found by the arbitrators to have been committed against her by Garfinkel. Thus, the decision of the arbitrators to deny a further adjournment, which constitutes one more decision of the arbitrators, may not be challenged on the constitutional grounds asserted by Garfinkel but may only be challengeable on grounds permitted in law for the challenge of the award itself.

Garfinkel's challenge under §7506(d) is equally unavailable. Garfinkel has appeared by counsel at all relevant times. The arbitrators have therefore not violated his rights under CPLR §7506(4).

Accordingly, Garfinkel's affirmative defenses which complain, in one way or another, of the arbitrators' moving ahead despite Garfinkel's condition and denying him further continuances for such reason are rejected and his Cross Motion is denied.

The petition is granted. Settle Order.

This is the Decision and Order of the Court.

DATED:JANUARY 26, 2006

NEW YORK, NEW YORK

Hon. Lewis Bart Stone

Justice of the Supreme Court Footnotes

Footnote 1: The UAA (2003) has been adopted by twelve states, but not New York.

Footnote 2: There are various other differences between the FAA and the CPLR which would seem to raise serious doubts about a blanket preemption. Two examples are the applicable statute of limitations and the application of the Federal "Final Judgment Rule" to state court proceedings. Under CPLR §7511(a), an application by a party to vacate an award must be commenced within 90 days after the delivery of the award to him. Under FAA §12, notice of motion to vacate an award must be served on the adverse party within three months after the award is filed or delivered. Which rule must a New York Court apply? Similarly, in New York, a party may appeal to the Appellate Division from any ruling of the Supreme Court. Under FAA §16(b), the federal "final judgment rule" applies inter alia to foreclose an appeal from a District Court order compelling arbitration. Does that preempt the Appellate Division from considering an appeal of a similar order of the Supreme Court? In fact, the preemption of state procedural rules which do not provide "an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" are themselves such an obstacle, as they would impose on each state court the obligation to decide in many more cases brought to enforce or to reject an arbitration award whether the FAA did or did not apply, in order to determine which procedure to use. Adding the necessity to make such determination (and thus creating an addition litigable issue) imposes an added burden of cost and delay to the arbitration process, clearly not a purpose or objective of Congress.

Footnote 3: Under the prior CPA language (as well as the FAA language) as an independent ground for reversal was failing to postpone a hearing upon good cause shown, should require the reviewing Court to make the factual determinations as to whether good cause was shown.

Footnote 4: A decision to deny a request for adjournment without giving a fair opportunity to present reasons therefore may itself be per se misconduct as would any other complete foreclosure of a hearing on a material relevant issue before the arbitrator.

Footnote 5: The Court assumes Garfinkel has submitted the cases most favorable to himself.

Footnote 6: The same affidavit had been submitted in Fleishaker, supra, where the panel also rejected Garfinkel's request for further adjournments. Counsel for Ames here was also counsel for Fleishaker in such case.

Footnote 7: Although the Fourth Department seems to take a contrary view (In Re Buffalo (Buffalo Police Benev. Assn.), 13 AD3d 1202 (4th Dept. 2004) this Court is bound by the First Department Decision.

Footnote 8: See In re Gault, 387 US 1 (1967)