Avamer Assoc., L.P. v 57 St. Assoc., L.P.
Annotate this CaseDecided on February 24, 2009
Supreme Court, New York County
Avamer Associates, L.P. and AVAMER 57 FEE, L.L.C., Petitioners,
against
57 St. Associates, L.P., Respondent.
601430/08
Petitioners were represented by Jay R. Fialkoff, Esq., of Moses & Singer LLP and Respondent was represented by Paul C. Saunders, Esq., of Cravath, Swaine & Moore, LLP.
Eileen Bransten, J.
Avamer Associates, L.P. and Avamer 57 Fee, L.L.C. (collectively "Avamer")
petition pursuant to CPLR 403, 7510, 7511, and 7514 for an order: (i) confirming the December
6, 2007 final award (the "Final Award"), as clarified in the January 16, 2008 decision (the
"Clarification"); and (ii) vacating the modified award dated February 25, 2008 (the
"Modification"). 57 St. Associates, L.P. ("the Studley Group") opposes the petition and
cross-petitions, pursuant to CPLR 7510, for an order confirming the Final Award, the
Clarification, and the Modification.
BACKGROUND
Avamer and the Studley Group entered into an agreement, dated August 3, 1982 (the "Agreement"), forming an entity known as 5757 Associates (Petition ¶ 4). 5757 Associates acquired a long-term net-ground lease (the "Ground Lease") at 57 West 57th Street (the "Building") (id. at ¶ 5). The Agreement included an arbitration clause requiring arbitration of any and all disputes arising under the Agreement (id. at ¶ 11).
In 2004, Avamer Fee, an affiliate of Avamer, acquired a fee ownership of the Building for $25 million (id. at ¶ 13) and then asked the Studley Group if it wanted to participate in ownership of the fee (id. at ¶ 14). The Agreement did not provide any ownership arrangement of the fee (id. at ¶ 15) and, unable to reach a participation arrangement, the parties negotiated, among other things, a buy-out, by Avamer, of the Studley Group's interest in 5757 Associates (id. at ¶ 16). When no buy-out agreement could be reached, the Studley Group commenced an arbitration before the American Arbitration Association ("AAA") (id.).
The relief demanded by the Studley Group was: (a) removal of Avamer as managing partner of 5757 Associates; (b) installation of itself as managing partner; (c) transfer of ownership of the fee interest of the Building to 5757 Associates; (d) dissolution of 5757 Associates; (e) an order that, upon dissolution, the Studley Group is entitled to 50% of the proceeds from the sale of both the fee [*2]interest in the Building and the partnership; (f) an accounting of 5757 Associates' assets and finances; (g) reimbursement for the costs of arbitration; and (h) punitive damages (id. at ¶ 18).
On December 6, 2007, the arbitration panel issued the Final Award, which provided, among other things, that: the Studley Group was granted a 15% interest in the current value of the property less expenses incurred since the closing on the fee interest on October 28, 2004; the 15% interest was the appropriate interest in the partnership and the partnership opportunity; Avamer was to pay the Studley Group $9,795,734.90, which represented the value of the Studley Group's partnership interest and any damages due for any lost opportunity (id. at ¶¶ 23-24; Petition, Ex 1).
Following issuance of the Final Award, a dispute arose over its interpretation. The Studley Group construed the award as providing it with a fixed amount of damages and additionally that the partnership assets be liquidated and sold with the Studley Group to receive 15% of the proceeds of the sale of the leasehold (i.e., the $9,795,734.90 Award plus 15% of the proceeds from the liquidation sale) (Petition at ¶ 27). Avamer, in contrast, construed the award as mandating payment of $9,795,734.90, representing the entire amount due.
On December 11, 2007, Avamer wrote to the arbitration panel, requesting a clarification of the Final Award (id. at ¶ 30). On December 13, 2007, the Studley Group responded that no clarification was needed (id. at ¶ 31). On the same day, the Studley Group petitioned for an order confirming the Final Award (id.). On December 18, 2007, the arbitration panel informed the parties that its responsibilities were carried out and its function was complete (id. at ¶ 32).
On December 21, 2007, the Studley Group sought a temporary restraining order and a preliminary injunction, enjoining Avamer from negatively affecting the ground lease (Fialkoff Aff ¶ 34). The Court (Freedman, J.) issued an order directing the arbitration panel to clarify "whether the $9,795,734.90 represents 15% of the value of the fee and the ground lease or just the interest in the fee (partnership opportunity)" (Petition, Ex 2). On December 26, 2007, the parties sent AAA a joint letter, along with the Court's order and asked the arbitration panel to clarify the Final Award (Petition ¶ 34).
On January 16, 2008, the arbitration panel rendered the Clarification, which provided that $9,795,734.90 accounted for the Studley Group's interest in both the leasehold and the fee, collectively referred to as the property (Petition ¶ 36).
On January 22, 2008, pursuant to Rule 46 of the Commercial Rules of the AAA, the Studley Group requested a modification of the Final Award as clarified, alleging there was a "substantial computational error" in the Final Award (id. at ¶ 41). On February 4, 2008, Avamer objected to the request for modification (id. at ¶ 47).
On February 25, 2008, finding that it made a computational error within the meaning of AAA Rule 46, the arbitration panel issued the Modification, which provided that the "correct calculation . . . is . . . in the amount of $12,527,357.05" (Petition, Ex 4, at 1).
Avamer now petitions, among other things, to confirm the Final Award, as clarified on January 16, 2008, and to vacate the Modification. The Studley Group cross-petitions to confirm the Final Award, as clarified, and the Modification.
DISCUSSION [*3]
CPLR 7509 [FN1] provides that "[o]n written application of a party to the arbitrators within twenty days after delivery of the award to the applicant, the arbitrators may modify the award upon the grounds stated in subdivision (c) of section 7511." CPLR 7511 (c), in turn, sets forth the exclusive grounds for modifying an arbitrator's award as follows: (1) there was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award; or (2) the arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or (3) the award is imperfect in a matter of form, not affecting the merits of the controversy.
Avamer argues that the Studley Group was time barred from requesting a modification of the Final Award because the 20-day statute of limitations pursuant to Rule 46 expired on December 26, 2007 and it did not seek modification until January 22, 2008. Avamer urges a strict application of CPLR 7509, which precludes requests to modify awards outside the time period. Yet, the cases it relies on are unavailing. In 1199 SEIU v St. Luke Residential Health Care Facility, the arbitrator issued a written decision and an award, which were delivered to both parties in July of 2003 (2005 WL 1828762, *5 [ND NY 2005]). Well over a year later, by letter dated September 7, 2004, the union contacted the AAA to request clarification of the award (id. at *2). On October 27, 2004, the arbitrator issued a clarification (id.), and in December of 2004, the union sought confirmation and enforcement of the clarified award (id.). In denying the petition, the court concluded that, as a matter of law, the union's request was untimely and unremarkably held that the arbitrator had no authority to clarify the award because the union failed to timely seek clarification of the award (id. at *5).
The same outcome was warranted in Melun Indus. v Strange, 898 F Supp 995 [SD
NY 1992]. There, a second award was delivered on March 27, 1991 and, in response, plaintiff
stated in a letter to the arbitrator, dated April 8, 1991:
"Please be advised that [plaintiff] is reviewing the award issued by [the arbitrator]
on March 27, 1991 and reserves the right to seek clarification and possible adjustment of several
of the findings therein, in particular, the findings with respect to the contract profitability
estimates, since our client is of the opinion that the evidence previously submitted supports a
larger adjustment in favor of [plaintiff]" (898 F Supp at 998).
However, it was not until April 30, 1991, more than a month after the award was
rendered, that plaintiff wrote to the arbitrator, challenging the second award as erroneous and
requesting modification (id. at 998). Because the April 8, 1991 letter reserving the right
to seek clarification did not constitute an actual request for modification or operate to extend the
time to make a request, the court determined that plaintiff did not timely apply for [*4]modification within 20 days (id. at 1001).
The Studley Group responds that the 20-day statute of limitations did not run until after the arbitration panel issued its decision clarifying the Final Award on January 16, 2008, and therefore, its request for modification on January 22, 2008—within 20 days of the Clarification—was timely.
Avamer rejoins that neither AAA Rule 46 nor CPLR 7509 provides for a "resetting" of the 20-day statute of limitations upon clarification, and thus, the untimely request and resulting modification must not be given effect. Avamer also contends that there is no basis for modification because changing the award is only permitted upon a ground set forth in AAA Rule 46 or CPLR 7511 (c) and there was no computational error here.
Regardless of the timeliness, the Modification must be vacated because the arbitration panel did not have the authority to alter the award. The modification must have been made upon a ground permitted by Rule 46 (CPLR 7511 [c]).
Rule 46 of the AAA Commercial Arbitration Rules provides that "[w]ithin 20 days after the transmittal of an award, any party, upon notice to the other parties, may request the arbitrator, through the AAA, to correct any clerical, typographical, or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided."
The arbitration panel here stated in the Modification that:
"We find we made a computational error within the meaning of AAA Rule R-46.
Accordingly, we have the power to timely correct and modify the Award and we do so. We
accept certain of Claimant's calculations as set forth in its January 22, 2008 submissions to
the Tribunal. The correct calculation of our Award is that we award damages to 57th St.
Associates, L.P. in the amount of $12,527,357.05." (Mem in Opp to Petition, Ex 6, at 1
[emphasis added].)
Avamer contends that in order to constitute a computational error, the mistake must be clear on its face—such as "1+1=3." Avamer argues that the Final Award contains no computation to derive any error from.
The Studley Group counters that the Final Award, as clarified, was computed as 15% of the partnership and the partnership opportunity, less expenses (see Petition, Ex 1, at 4). The partnership was valued at $80 million, according to the Studley Group, and because $9,795,734.90 is clearly less than 15% of the partnership alone (approximately $12 million), it argues that there must have been a computational error. The Studley Group maintains that the correct calculation should have been 15% of the value of the leasehold plus 15% of the value of the fee, less proportionate expenses, for a total final award of $16,310,127.02 (see Petition, Ex 34, at 4). It attributes the difference between its calculation and the arbitration panel's calculation to the expenses deducted, speculating that the arbitration panel simply had the view that more expenses should be deducted (see Tr 8/21/08 at 25:2-13).
In modifying the already clarified award, the arbitration panel accepted some, but [*5]rejected others of the Studley Group's arguments, which confirms that the error was not apparent from the face of the award and was not simply computational error (Petition, Ex 4, at 1 ["We accept certain of Claimant's calculations as set forth in its January 22, 2008 submissions to the Tribunal"]). By reconsidering the figures used in arriving at the Final Award, the arbitration panel improperly revisited the merits of the claim (see cf. Silverlining Interiors, Inc. v Carroll, 4 Misc 3d 1016[A], 2004 NY Slip Op 50908[U], *2 [Sup Ct, NY County 2004] [rejecting modification on the ground of mathematical miscalculation, reasoning that the figures the arbitrator used, not something mathematical, were being challenged]).
The arbitration panel was not authorized to modify the award based on new calculations and use of new figures. Therefore, the Modification must be vacated.
Accordingly, it is
ORDERED that Avamer's motion to confirm the clarified award dated January 16, 2008 is GRANTED; and it is further
ORDERED that Avamer's motion to vacate the Modification is GRANTED; and it is further
ORDERED that the Studley Group's cross-petition is DENIED.
Settle Judgment.
This constitutes the Decision and Order of the Court. Dated: New York, New York
February ___, 2009
E N T E R
Hon. Eileen Bransten
Footnotes
Footnote 1:The parties did not submit case
law applying Rule 46 of the AAA Commercial Arbitration Rules. Instead, they rely on CPLR
7509 by analogy.
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