Blatman v Haimoff

[*1] Blatman v Haimoff 2008 NY Slip Op 52120(U) [21 Misc 3d 1121(A)] Decided on October 24, 2008 Supreme Court, New York County Feinman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 October 24, 2008
Supreme Court, New York County

Lajb Blatman, Petitioner,

against

Avner Haimoff and Uri Haimoff, Respondents.



Avner Haimoff and Uri Haimoff, Petitioners,

against

Lajb Blatman, Respondent. For Judgment, pursuant to Article 75 of the CPLR, to Vacate Arbitration Award.



601318 /2008



For Petitioner Blatman:

Toback, Bernstein & Reiss, LLP

By: Brian K. Bernstein, Esq.

15 West 44th Street, 12th Floor

New York, NY 10022

(212) 869-2300

For the Respondents Avner and Uri Haimoff:

Stein Schwartz Chesir & Rosh, LLP

By: Seymour N. Chesir, Esq.

140 East 45th Street, Suite 12B

New York, NY 10017

(212) 697-7220

Paul G. Feinman, J.

The Article 75 proceeding brought pursuant to CPLR § 7510 to confirm the arbitration award of $641,736.23 in Lajb Blatman v Avner Haimoff and Uri Haimoff (Index No. [*2]601318/2008) and the separate, but related, action brought pursuant to CPLR § 7511(b)(1)(iv) to vacate the arbitration award in Avner Haimoff and Uri Haimoff v Lajb Blatman (Index No. 601459/2008) are joined for purposes of decision. For the reasons which follow, the petition to confirm the arbitration award is granted, and the petition to vacate the award is denied.

Factual and Procedural BackgroundLajb Blatman, President of Australia Diamond Supply Ltd., is a member of the New York Diamond Dealers Club ("DDC"). Avner Haimoff and Uri Haimoff ("the Haimoffs") are owners of the Delta Diamond Ltd. (Israel) and are members of the Israel Diamond Exchange in Israel (hereinafter the "IDE") (Pet. to Vacate Arb. Aff.] ¶ 1, Ex. A; Aff. in Opp. to Pet. to Vacate ["Blatman Aff."] ¶ 3). Both the DDC and the IDE are diamond bourses, and are members of the World Federation of Diamond Bourses ("WFDB"). Diamond bourses require all members worldwide to resolve all controversies against each other by arbitration pursuant to the by-laws and rules of the World Federation of Diamond Bourses (Pet. to Confirm Arb. ¶¶ 5-7, Ex. C; Blatman Aff. ¶ 3, Ex. B).

On or about January 8, 2008, Blatman commenced arbitration with the DDC against the Haimoffs and their affiliated companies, Delta Diamonds Ltd. in Israel, Hong Kong, and Shangai, and Nili Jewelry Designs in New York to recover the sum of $588,530 plus other associated fees and charges (Pet. to Vacate Arb. ¶ 1, Ex. A; Blatman Aff. ¶ 2, Ex. B). In his arbitration claim, he alleges that, in August and July 2007, he sold diamonds on behalf of his corporation, Australia Diamond Supply, to Diaglobe Corporation in New York, a diamond dealer affiliated with Delta Diamonds Ltd., Israel (Blatman Aff. ¶ 2; Pet. to Confirm Arb. ¶ 14). Diaglobe agreed to pay the sum of $580,090 for the sale and delivery of the diamonds, but to date, it has not made payment to Blatman (Pet. to Confirm Arb. ¶ 4).

On January 16, 2008, following the filing of the Demand for Arbitration with the DDC, the Haimoffs were notified, by Registered Mail, Return Receipt Requested, of an arbitration hearing scheduled for February 12, 2008 at 3:00 pm before the Arbitration Panel (Pet. to Confirm Arb. ¶ 8). Blatman Aff. ¶ 2). The notice was sent to the Haimoffs at their offices in Ramat Gan, Israel, Hong Kong and Shanghai, China and New York (Pet. to Confirm Arb. ¶ 8, Ex. E; Affidavit of Martin Hochbaum in Opp. to Pet. to Vacate Arb. ["Hochbaum Aff."] ¶ 4, Ex. B). A copy of the notice was also sent to Shoshy Joskowicz, Legal Advisor to the IDE (Pet. to Vacate Arb. ¶ 4, Ex. A).

On or about January 28, 2008, after receiving the Demand for Arbitration, Avner Haimoff contacted Martin Hochbaum, Managing Director of the DDC, and requested an adjournment of the February 12, 2008 hearing (Hochbaum Aff. ¶ 5; Pet. to Vacate Arb. ¶ 7; Pet. to Confirm Arb. ¶ 9). After being advised to make his application in writing, on January 29, 2008, Haimoff sent Hochbaum a written request, via facsimile, seeking an adjournment until after Passover; sometime after April 28, 2008 (Hochbaum Aff. ¶ 5, Ex. D; Pet. to Vacate ¶ 7). In a letter to Avner Haimoff dated January 31, 2008, Hochbaum acknowledged receipt of Haimoff's letter, and informed him that the DDC's policy is to "adjourn a matter only in special circumstances." Hochbaum also informed him that according to WFDB rules, a case "shall commence within 60 days of its filing date," and as such, the arbitration hearing was being rescheduled to March 4, 2008, the latest date possible under the rules (Hochbaum Aff. ¶¶ 6, 8, Ex. D; Pet. to Confirm [*3]Arb. ¶ 10). This response by Hochbaum was sent to Haimoff via the same facsimile number from which Haimoff sent his written request for an adjournment (Hochbaum Aff. ¶ 7). Hochbaum also sent a facsimile copy of his response letter to the Haimoffs at their Hong Kong, Shanghai and New York offices, and also sent facsimile copies of the letter to both the WFDB and to Joskowicz at the IDE (Hochbaum Aff. ¶ 7).

On March 4, 2008, when the Haimoffs did not appear for the hearing, in accordance with the DDC's bylaws and inner rules, the arbitration was held and the arbitrators proceeded to hear Blatman's evidence (Hochbaum Aff. ¶ 9). On March 6, 2008, the Arbitration Panel, finding the Haimoffs to be "principals of Diaglobe," rendered an award in favor of Blatman in the amount of $641,736.23 and provided for payment of legal expenses to Blatman calculated at fifteen percent (15%) of the confirmed award (which amount to $96,260) for a grand total award of $737,996.66 (Pet. to Confirm Arb. ¶ 4, Ex. A). On March 13, 2008, the DDC sent the Haimoffs the arbitration award and decision by certified mail to all of their office locations in New York, Israel, Hong Kong, and Shanghai (Blatman Aff. ¶ 5, Ex. C).

After receipt of the arbitration award in Blatman's favor, on or about March 20, 2008, the Haimoffs, by their legal representatives, notified the DDC that their non-appearance was the result of their lack of knowledge of the rescheduled arbitration hearing date and requested that the arbitration award be vacated (Pet. to Vacate Arb. ¶ 13, Ex. F). By letter dated March 25, 2008, the DDC responded by informing the Haimoffs' legal representative that his "letter does not accurately portray the situation including the circumstances surrounding the request for an adjournment," and informed him of his right to make an appeal under the DDC's arbitration bylaws (Pet. to Vacate Arb. ¶ 15, Ex. I; Hochbaum Aff. ¶ 11). In a letter dated March 26, 2008, the Haimoffs sought intervention by the WFDB. However, the WFDB informed the Haimoffs that "from the outset, [it] had been copied correspondence by the DDC" relating to the dispute, and pointed out that the DDC's January 31, 2008 letter adjourning the arbitration was sent in reply to the Haimoffs' request for a delay in the arbitration (Blatman Aff., Ex. E). The WFDB further explained that given the arguments made, it would not be able to reschedule the arbitration and cancel the recent decision (Blatman Aff., Ex. E).

On May 1, 2008, Blatman filed a petition seeking to confirm the March 6, 2008 arbitration award. The Haimoffs oppose the petition to confirm. On May 14, 2008, they brought a separate proceeding to vacate the award on the ground that the arbitrators failed to adhere to the procedures set forth in CPLR Article 75, including the requirements of CPLR § 7506 (Pet. to Vacate Arb. ¶ 3). First, they allege that the initial Demand for Arbitration, which included the date set for arbitration, was not properly served on them because the Demand was not personally delivered or sent by certified or registered mail (Pet. to Vacate Arb. ¶ 4). Rather, the Haimoffs contend that the Demand was sent via facsimile to the legal advisor to the IDE, in violation of statute, and as such was "fatally defective to the proceeding" (Memo in Supp. of Pet. to Vacate, p. 5). The Haimoffs also insist that they are not principals of Diaglobe,[FN1] as the Arbitration Panel [*4]determined (Memo in Supp. of Pet. to Vacate, pp. 9-10). The Haimoffs next allege that after the date for the arbitration was rescheduled by Hochbaum, the notice of this rescheduling was not properly served upon them, since it was sent by a facsimile that they did not receive (Pet. to Vacate Arb. ¶¶ 2, 8). According to the Haimoffs, their lack of knowledge of the rescheduled date resulted in their non-appearance at the arbitration hearing (Pet. to Vacate Arb. ¶ 2). Finally, they assert that the arbitration award was not properly served on them, since they received only a facsimile copy of the award in clear violation of the requirements of CPLR § 7507 (Pet. to Vacate ¶ 12; Memo in Supp. of Pet. to Vacate, p. 8).

In further support of his petition to confirm, and in opposition to the petition to vacate, Blatman argues that the evidence clearly demonstrates that the Haimoffs received notice of the adjournment and thus, their contention that they lacked knowledge of the adjourned date is without merit (Blatman Reply Aff. ¶¶ 4-6). He also argues that the facsimile method used by the Administrator to respond to the Haimoffs' request for an adjournment was "reasonably calculated, under all the circumstances to provide notice" to the Haimoffs, especially since this was the very method (and facsimile number) Avner Haimoff himself used in making his written request for an adjournment (Blatman Reply Aff. ¶ 8). Blatman further argues that there is nothing in the CPLR that requires a response to a request for an adjournment be sent via certified or registered mail, therefore, the petition to vacate the arbitration award should be denied (Blatman Reply Aff. ¶ 9).

Legal Analysis

New York State has long sanctioned arbitration as an effective alternative method of settling legal disputes in a non-judicial forum (Goldfinger v Lisker, 68 NY2d 225, 230 [1986]). Where the parties have agreed to submit their dispute to binding arbitration, an award should be given effect, unless it is in clear violation of public policy (Hackett v Milbank Tweed, Hadley and McCloy, 86 NY2d 146, 157 [1995]). Thus, the scope of judicial review of an arbitration proceeding is very limited (see CPLR 7511 [b]; see also, Matter of Campbell v New York City Trans. Auth., 32 AD3d 350, 351 [1st Dept. 2006]). In reviewing an arbitration award, "courts are obligated to give deference to the decision of the arbitrator" (Matter of Henneberry, 10 NY3d 278, 284 [2008]), and are not permitted to review mistakes of law or facts (see e.g.,United Paperworkers Int'l Union v Misco, Inc., 484 US 29, 38 [1987]).

Under CPLR § 7511(b) (1), an arbitration award may be vacated only if the rights of a party were prejudiced by (i) corruption, fraud, or misconduct in procuring the award; or (ii) partiality of an arbitrator; or (iii) the arbitrator exceeded his or her power or failed to make a final and definite award; or (iv) the arbitration did not follow the proper procedure (see Fishman v Roxanne Mgt., 24 AD3d 365, 366 [1st Dept. 2005]). Thus, the party seeking to vacate the arbitration award is imposed with a heavy burden to vacate that award (see Lehman Bros. Inc. v Cox, 10 NY3d 743, 744 [2008]).

In the case at bar, the issue before the Court is whether the arbitration award should be vacated under CPLR §7511 (b)(iv) on the ground that the arbitration failed to follow notification procedures. CPLR § 7506 (b) provides in relevant part, that "the arbitrator shall appoint a time and place for the hearing and notify the parties in writing personally or by registered or certified mail not less than eight days before the hearing. The arbitrator may adjourn or postpone the [*5]hearing."

Here, the Haimoffs' assertion that they did not receive notice of the Demand to Arbitrate in accordance with the requirements of CPLR § 7506 (b) is belied by the documentary evidence evidence to the contrary. Copies of Certified Mail Receipts, dated January 16, 2008, from the U.S. Postal Service show that notice of the Demand for Arbitration was sent to the Haimoffs not only at Diaglobe Corporation and Nili Jewelry Designs in New York, but also at their offices of Delta Diamond in Ramat Gan, Israel, Hong Kong, and Shanghai, China. The Haimoffs' bare contention that they only learned of the arbitration from Joskowicz at the IDE cannot overcome the post office certifications (see Thermasol, Ltd. v Dreiske, 78 AD2d 838, 838 [1st Dept. 1980] [finding that a party's contentions of non-receipt of the demand was unsupported by any personal evidence and did not overcome the post office certification to vacate arbitration award]. Further, a review of the Demand for Arbitration and the accompanying letter reveals that the arbitrators complied with the requirements of CPLR § 7506 (b) by appointing a time and place for the hearing and notifying the parties in writing by certified mail prior to eight days before the hearing (see e.g., Kingsley v Redevco Corp., 61 NY2d 714, 715 [1984] [affirming decision to confirm arbitration award where, despite adequate notice of the hearing date, the employer failed to appear]). Therefore, to the extent the petition to vacate the arbitration award is made on the basis of the service of the original notification, it is devoid of merit.

Another major point of contention between the parties is whether the arbitration award should be vacated because notice of the adjourned or rescheduled date was not either personally delivered to the Haimoffs or sent via registered or certified mail. The Haimoffs contention that, the facsimile notice of the adjourned date violated CPLR § 7506 (b), and that their non-receipt of the notice resulted in their non-appearance at the arbitration, deserve careful consideration. To support their contentions, the Haimoffs rely heavily on the Appellate Division, First Department's holding in PPX Enterprises, Inc., v Ducale Edizione Musicali et al., 53 AD2d 555 [1st Dept. 1976], aff'd 42 NY2d 897 [1977]). However, that case is distinguishable from this one on its facts. In PPX, unlike here, there was a series of procedural mishaps that substantially prejudiced the plaintiff's rights at the initiation of the arbitration. Appellant, an Italian corporation, was mailed a Notice of Demand for Arbitration, however, the notice was mailed to the wrong address and appellant did not receive the Notice of Demand for Arbitration until approximately three months after the mailing (PPX, 53 AD2d at 556).

Further, in PPX, the hearing did not take place on the scheduled date. The arbitration association scheduled a new hearing, to be held four days later, "with a new notice of hearing rather than a mere adjournment"(PPX, 53 AD2d at 556). Appellant did not receive notice of the original hearing date until ten days after the arbitration hearing had already taken place. Notice of the new hearing date did not arrive to appellant until more than three weeks after the hearing was held (PPX, 53 AD2d at 556). The Appellate Division held that "having decided to give [appellant] a new notice of hearing and to treat the old one a nullity, the arbitration association was bound to give [appellant] a valid meaningful notice" (PPX, 53 AD2d at 557). The Court of Appeals subsequently affirmed the Appellate Division's decision finding that the association administrator's contention that the hearing was an adjourned hearing, was "conclusory, and without acceptable legal effect" (PPX, 42 NY2d at 898). [*6]

Two key facts distinguish the factual background of PPX from that of the instant case. First, as previously addressed, this court is persuaded that the Haimoffs actually received the initial Demand for Arbitration, as indicated by the date-stamped certifications from the post office records, in compliance with the statutory requirements of CPLR § 7506 (b). Next, and perhaps most importantly, for purposes of this decision, the DDC did not provide the Haimoffs with a "new notice of hearing." Rather, the Haimoffs received an adjournment based on their very own request. In its response letter, the DDC informed Avner Haimoff that its policy is to "adjourn a matter only in special circumstances,"explained the 60-day commencement rule, and rescheduled the arbitration to March 4, 2008. The contents of this letter clearly evidences an intent to attempt some accommodation of the Haimoffs by an adjournment of the arbitration, even if it was not for as long as the Haimoffs had requested (but see, PPX, 42 NY2d at 898 [finding that the adjournment was conclusory where a new notice of hearing was given]).

While CPLR § 7506 (b) requires that notice of the time and place for the hearing be made in writing, delivered personally or by registered or certified mail, there is nothing in the statute from which to conclude that responses to requests for adjournments adhere to those same specific requirements. Here, the record is devoid of any evidence tending to show that the DDC's response to Avner Haimoff's adjournment request was intended to serve as a new notice of hearing rendering the prior notice a nullity, which under PPX, would require the arbitrator to give notice in accordance with the requirements of CPLR § 7506 (b). The notice of hearing, including all of the information contained therein, remained the same the only change was the adjourned date at the Haimoffs' request.

The law is well-settled that the means selected for providing notice must be "reasonably calculated, under all the circumstances to provide notice" (Mullane v Cent. Hanover Bank & Trust Co., 339 US 306, 314 [1950]). The Haimoffs' request was sent via facsimile. Given the absence of statutory or contractual requirements to the contrary, the DDC's facsimile response to the facsimile request for an adjournment was an appropriate means to provide notice to the Haimoffs. It should be noted that the Haimoffs claim that they did not receive the DDC's facsimile response to the request for adjournment lacks candor. The facsimile confirmations submitted by DDC regarding the arbitration serve as persuasive proof that the facsimile was indeed sent to and received by the Haimoffs, the IDE and the WFDB. Both the IDE and the WFDB acknowledge receipt of the adjournment by facsimile. Ironically, the Haimoffs aver that they did not receive this facsimile, although it was sent to their many office locations, including Diaglobe in New York, Nili Jewelry Designs in New York, and Delta Diamond, Israel, Hong Kong, and Shanghai.

Assuming, however, as the Haimoffs contend, they did not receive notice of the adjournment until after the March 4, 2008 hearing, it is nonetheless undisputed that they were at least aware of the February 12, 2008 originally scheduled arbitration hearing, for which they sought an adjournment. Had the Haimoffs made any effort to attend the hearing on February 12th they would have learned of the adjourned date well in advance of the March 4th. Their failure to appear at the arbitration amounts to nothing more than an obvious disregard and conscious decision to refrain from attending the arbitration (see e.g., Thermasol, 78 AD2d at 838 ["we are convinced that the respondent received sufficient notice of the arbitration proceedings and is [*7]merely utilizing this dilatory attempt to stave off payment of his just debts"]).

The Haimoffs' final argument is that the arbitration award should be vacated because the award was not served in accordance with the provision of CPLR § 7507. Instead, they allege that they received only a facsimile copy from the legal advisor to the IDE. CPLR § 7507 provides, in relevant part, that "the arbitrator shall deliver a copy of the award to each party in the manner provided in the agreement, or, if no provision is so made, personally or by registered or certified mail, return receipt requested." Here, evidence of postal record receipts showing a mail date of March 13, 2008, serves as ample proof that notice of the arbitration award was mailed to the Haimoffs at various office locations as required by the statute. Thus, their argument here too, is patently without merit.

The evidence presented sufficiently demonstrates that the notice provisions of the arbitration agreement and CPLR Article 75 were satisfied. Thus, the Haimoffs' claims that their rights were substantially prejudiced by the arbitrators' actions in failing to adhere to CPLR §7511 (b) (iv) must be rejected. Accordingly, it is

ORDERED that the petition to vacate the arbitration award in Avner Haimoff and Uri Haimoff v Lajb Blatman (Index No. 601459/2008) is denied; and it is further

ORDERED and ADJUDGED that proceeding filed under Index No. 601459/2008 is dismissed with costs and disbursements; and it is further

ORDERED that the petition in Lajb Blatman v Avner Haimoff and Uri Haimoff (Index No. 601318/2008) is granted and the award rendered in favor of Lajb Blatman and against Avner Haimoff and Uri Haimoff is confirmed; and it is further

ORDERED and ADJUDGED that Lajb Blatman, having an address at 140 East 45th Street, New York, NY 10017, have judgment and recover against Avner Haimoff and Uri Haimoff, having an address at 15 West 44th Street, 12th Floor, New York, NY 10036, in the amount of $641, 736.23, plus legal expenses at the rate of 15% of the confirmed award, in the amount of $96,260 for the total Arbitration Award amount of $737,936.66, together with costs and disbursements of this proceeding as taxed by the Clerk of this Court in the amount of $________________ for a total of $ $________________ and that Lajb Blatman have execution therefor.

This constitutes the judgment and order of the court.

Dated:October 24, 2008____________________________________

New York, New YorkJ.S.C.

2008 Part 12 D & O_601318_2008_001 & 601459_2008_001rg Footnotes

Footnote 1: According to the Haimoffs, Diaglobe is owned by their brother, Sam Haimoff, and the company is experiencing financial difficulties, which resulted in the filing of an Involuntary Petition against it in bankruptcy (Pet. to Vacate Arb. ¶ 16).