Advanced Aerofoil Technologies, AG et al v. Todaro et al, No. 1:2013cv07181 - Document 11 (S.D.N.Y. 2014)
Court Description: OPINION 104220. Based on the reasoning set forth above, Respondents' motions to dismiss the Petition and confirm the Award are granted. Submit judgment on notice. It is so ordered. Re: 2 MOTION to Dismiss filed by Mark Tarby, Dennis Pfister, Anthony Chalder, Advanced Engineering Technologies, Inc., Charles Byrd, Thomas Todaro. (Signed by Judge Robert W. Sweet on 4/15/2014) (rjm) Modified on 4/17/2014 (nt).
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------- ---------- --- -x ADVANCED AEROFOIL TECHNOLOGI , AG, a Swiss Corporation, ADVANCED AEROFOIL TECHNOLOGIES, INC., a Delaware Corporation, and ADVANCED AEROFOIL TECHNOLOGIES GMBH, a German Corporation Petitioners, - against THOMAS TODARO, ADVANCED ENGINEERING TECHNNOLOGIES, INC., ANTHONY CHALDER, MARK TARBY, CHARLES BYRD, and DENNIS PFISTER Respondents. ---x A P PEA RAN C E S: Petitioners COLE SCHOTZ MEISEL FORMAN & LEONARD, PA 25 Ma Street, Court Plaza North Hackensack, NJ 07601 By: Leo V. Leyva, Esq. James T. Kim, Esq. Lauren M. Manduke, Esq. r the Re s YOUNG & ASSOCIATES 27725 Stansbury Blvd., Suite 125 Farmington Hills, MI 48334 By: Jaye Quadrozzi, Esq. 13 Civ. 7181 OPINION Sweet, D.J. Thomas Respondents Enginee ng Technologies, ("Chal r"), Mark Dennis Pfister Advanced "Pet AG, Aero Char les Byrd Chal ("Byrd"), r and (collectively the "Respondents") Peti tion to Vacate by Advanced il Anthony Advanced Pet Aero the ioners 1 Technologies i tration Awa Advanced Techno GmbH s, Aerofoil Inc. (collectively the ioners" or "AAT") and to confirm the July 16, 2013 "Award" by (" ICDR") the Award"), International in New York, Partial t t ("AET") , ("Tarby"), submitted Technologies Inc. ("Pfister") moved to dismiss ("Petition") Tarby ("Todaro") , Todaro Center New York nal Award, dat Final Award dated for spute (the "Award") March 6, 2013 ril 22, 2013 Resolution (collectively with (the "Partial Final (the "Final Award"), "Awards") . Bas granted and on the reasoning below, Award is con Respondents' motions are rmed. Prior Proceedings On September 17, 2013, Pet ioners filed the Petition in the Supreme Court of New York, New York County. 1 The Petition alleges that Respondents planned and execut t a scheme to start a direct competitor to AAT and to defraud AAT by theft of AAT resources and technologies. Award, the which awarded Pet. dama 8. <]I s Respondents to arbitration based on the same allegations the Petition Petition was Oral "Arbitration U removed to Respondents grounds. October (the 11, 2013, arguments this filed held, October 10, on diversity instant motion make in 2013, the sdiction j to an dismiss on submitted by both parties. t motion the Petition and in ioners' Court and briefing was were Pet On ). the It seeks vacatur of was marked ly submitted, on November 26, 2013. The Allegations Of the Petition The allegations in relevant to the lows: instant action are as AAT manufactures precision investment castings for use in <J[<J[ the power 21-25. generation Byrd, and Pfister transportation and Todaro managers and/or officers of AAT. are former employees of AAT. Byrd, Pfister, Respondents U ) Todaro, formed a Id. Chalder direct Id. <J[ 28. and are <J[ 8. industries. former execut Chalder and Tarby Petitioners allege that Tarby (the competitor to AAT, 2 Pet. "Individual Flowcastings, GmbH (" owcastings") and planned and executed a scheme to steal AAT's resources, technologies and customers. The Individual Respondents March to June 2011. Id. parties Confidential entered "Termination a Agreement"). Termination Agreement of ':II':II the existence scheme. was 26, from Termination 4, ':II ':II signed, AAT On September 2, At 30. or of from 2011, Agreement Petitioners owcastings of resigned 29. Id. Id. ':II 8. the had no Respondents' the (the time the knowledge alleged Id. ':II 30. The Termination Agreement contains several provisions: (1) a mutual general against each other, (2 ) a requirement release of all nothing of law that provision, is there by the as well as a covenant not to sue, t parties concerning the Termination Agreement, choice claims id. intended ':II to 5; arbitrate ':lI id. and (4) prevent 5; any (3) a a parties id. 6; dispute New York provision either ':II party that from obtaining injunctive relief to prevent irreparable harm pending the conclusion of arbitration, id. ':II 5. The Termination Agreement also provides that "[eJxcept as specifically set forth herein, the parties attorneys' s way to related will bear their own costs, expenses, and incurred in or arising out of or in any t matters released 3 rein." Pet. Ex. B, Termination Agreement § 10(d). Petitioners and learned of the formation Respondents' alleged conspiracy a Termination Agreement. Id. <J[ 32. 2011, led a er t Complaint the Petitioners strict Court, Northern inst relief Id. <J[ personal Complaint in and Illinois jurisdiction signing of the Consequently, their ral over November in the 34. <J[ in November United the alleged States court co-conspirators. found Respondents, that and That matter was di it ked dismissed Petitioners 2011. complaint in the Southern District of New York Id. owcastings strict of Illinois seeking injunct Respondents The 33. of then filed a December 2011. ssed for lack of subject matter jurisdiction. On September 17, 2012, Petitioners submitted statement of claims to ICDR and commenced the Arbitration. <J[ 35. Petitioners Terminat sought an award declaring Agreement and release were vo that a Pet. the and unenforceable, requiring Respondents to return all property in their possession longing to Petitioners and prohibiting Respondents from using or disclosing information. counterclaims Petitioners' Id. in the <J[ 35. conf Respondents Arbitration 4 and ntial in proprietary turn ("Counterclaims"). submitted A sole On March 6, briefing by the r the Arbitration. (the "Arbitrator") arbitrator was appo 2013, after the submission of evidence and rties and a hearing, Partial nal The Award. trator delivered Partial 1 Award determined that "no credible evidence" was presented by AAT to support claims. Partial Respondents' counterclaim The Pet. ~ which to bear t Award. and the ~ 39; Partial decision fees, on pending submitt Petitioners additional the tional a that ir own attorneys' April 22, br on the Respondents were not s or costs in 1 es and costs. judgment Final Award ~ Id. Arbi trator 2013, nation Agreement awarded 5 of the which required parties 41. iss the against favor of Respondents on the counterclaim Te nal 39. Termination Agreement, On grant of the Termination entitled to an award of attorne terms of t further that the Termination rred Respondents attorne parties issue, It Pet. Arbitrator r damages for bre by Petitioners, briefing. 4.12. id and enforceable. 6.2. ~ ~ Award counterclaim for a declarat Agreement was Award Final s damages in Final Petitioners r breach of the form of fees. costs and reasonable att the Award was issued on July Id. 16, 43. err 2013, Subsequently, which specific sums Petitioners owed Respondents. Award set out 4.1.1-4.8. errerr The Applicable Standard On 12 (b) (6), as true, Mills motion and all in is not 1995), cert. R. County F.3d 1170, aintiff of S Town of Da v. denied, /I 519 U.S. kr 187 1174 (2d will r dence rst (2d Cir. 2001) 117 S. ct. 50, Cir. imately v. N. Y. 56 F.3d 375, en, 808, P. C favor of the pleader. whether a 261 F.3d 179, Real Estate Solutions, Inc. Fed. claimant is entitled to of support the claims. Pond r 12 Corp., to complaint are accepted gations in ar Molecular "The issue Villa pursuant rences are drawn prevail but whether to smiss to all factual al v. 1993). a Am. (quoting 378 (2d Cir. 136 L. Ed. 2d 14 (1996)). To 12 (b) (6), "a ve motion complaint must accepted as true, on its face.'" a to 544, 570, pursuant to relief 'state a cl Ashcroft v. 550 U.S. dismiss contain sufficient 1, 1937,1940,173 L. Ed. 2d 868 Twombly, to 556 U.S. (2009) 127 S. 6 (quoting Ct. 1955, factual t 662, to is plaus 663, e 129 S. Ct. 1 Atl. 167 L. matter, Corp. Ed. v. 2d 929 (2007) ) . This plaintiffs "nudge[] is need their not only allege claims Twombly, plausible." intended to be facts across an onerous burden, as order to conceivable to sufficient the line from in 550 u.s. at 570. The Petition To Vacate The Award Is Denied Under both New York State and Federal law, of judicial review of arbitral awards is narrow. article that, been 75 evidences the intent once it is clear that a made arbi trated and complied is not with of New scope New York CPLR York Legislature valid agreement to arbitrate has and barred by the the that the limitations, claim the sought authority to of be the arbitrator is plenary consistent with the public policy in favor of Coats, 1261 or Inc., (1984). modifying narrowly N.Y. See arbitration. 61 N.Y.2d an controversies 225, arbitrators 230, (citations omitted). 7511 (b) 473 and award "Courts applied. resolving CPLR § 300, arbitration of N.Y.2d 299, Silverman 7501; § N.Y.S.2d The grounds specified in CPLR § decisions 68 CPLR 508 the N.Y.S.2d few value 159, N.E.2d 7511 for vacating in reluctant undermined." Thus, (c) are lest be are Benmor 461 774, v. number to of disturb this method Goldfinger v. 500 N.E.2d and 857 are the of Lisker, (1986) the list of potential objections in is exclusive. 7 Geneseo Police Benevolent Ass 'n, Coun 1 N.Y.S.2d 384 (4 v. Village of Geneseo, 91 A.D.2d It 1982), aff'd 59 N.Y.2d 726, 858, 458 463 N.Y.S.2d 440, 450 N.E.2d 246 (1983). CPLR § 7511 (b) (1) lists several grounds for vacatur: (b) Grounds vacating. 1. The award shall a party who either or was served with a arbitrate if the court fi party were prejudiced by: (i) corruption, the award; or the application of in the arbitration notice of intention to that the rights of that fraud or mis in procuring (ii) partiality of an arbitrator neutral, except where t confession; or (iii) an arbitrator, or or the award exceeded his power executed it that a 1 and the subject matter submitted was not nted as a was by rson making ly ; or (iv) failure to follow the of this article, unless the party applying to vacate award continued with the arbitration wi notice of the defect and without object Petitioners contend that his power in the Arbitration by, the Arbitrator " among other things, to applicable case g ng a completely irrational well as provisions of the Termination Agreement that were spute, construction (i) law effect, making a new contract for the parties, 8 as Pet. 'Il 54, and (ii) s because the law the in Peti tioners contend that tration the Termination are r than attorneys' Op. fees at 3. the their CPLR York law, a 7511 (b) (1) § powers in the that the parties and costs, the "Artvale" awarding over disregarding Respondents of .1 fees attorneys' in manifest provisions provide (i.e., Petitioners' e i own law to of expressly common New in the Arbitrator exceeded his that for federal violation ignoring Agreement responsible appl Pet. by Arbitrator , doct ) $300,000 in governing contentions essentially law. 11 and application of the law to Arbitrator's choice of cts. An arbitrator deemed will power" within the meaning of CPLR (1) the arbitrator has limitation on his irrational; or (3) exceeded ity; a the Wingdale 463 Teachers' N.E.2d 32 Ass'n r (N. Y. (2 ) Union a "exceeded specifically the a Free 61 N.Y.2d 913, 1984); have 7511 (b) (1) (iii) violates Dover Board of Educ. § to Rochester decision only when: enumerated is totally strong public School 915, st. his v. licy. Dover- 474 N.Y.S.2d 716, Sch. Dist. v. 1 The "manifest dis doctrine is a federal doctrine that allows vacatur of an arbitral award outside of the explicit grounds set in Section 10 of the Federal Arbitration Act ("FAA"). See Sidarma Societa Italiana Di Armamento Spa v. Holt Marine Indus., Inc., 515 F. Supp. 1302, 1306 (S.D.N.Y. 1981). Petitioners' arguments 1 manifest disregard to CPLR § 7511 is thus seen as contentions of the Awards' violations of federal law. 9 chers Ass'n, Rochester 578, 41 N.Y.2d 582, 394 N.Y.S.2d 179, 362 N.E.2d 977 (N.Y. 1977). As an initial matter, vacatur on to the extent grounds that t to decide Petitioners seek Arbitrator lacked the authority "[a 1 party who actively participates controversy, in arbitration without seeking a stay pursuant to CPLR 7503 (b) waives the right arbitrability 923 Cortland), Ma t ter v. of 827, the a 778, In (3d 780 re Dep't of Teachers, Ci ty Sch st. 72, 79, Educ. 1 of N.Y.3d 394 N.Y.S.2d 179. the dispute." determinat Federa tion Dist., Rochester City filed al j a N.Y.S.2d of Uni Board N.E.2d of to 769 Counterclaims. tration pro Agreement that AAT did not 2, City 451 the N.Y., (N.Y. its the seek power to decide the controversy." In at 781. 10 in award Of also 801 2003): 41 N.Y.2d 578, 583, a stay rator's power. provis the AFL-CIO in the Arbitration on the basis t to "waived see aims for damages ir 1 right Petitioners of (Cnty. 2011); Local 362 N.E.2d 977, Counterclaims were in excess of the a Arbitrator Jandrew N.Y.S.2d Respondents made of of contest the Te attorneys' they of the the Even if ion s, the arbitrator's re Jandrew, 923 N. Y ¢ S. 2d Furthermore, "[t] he Court of Appeals has 'stated time and again that an arbitrator's award should not be vacated for errors of law and fact committed by the arbitrator and the courts should not assume the role of overseers to mold the award to conform to their sense of Prudence Wien & (N.Y. Orla, Inc., N.Y.S.2d applying his them rather An own to than arbitrator sense be the of and letter of do and making an the (2d Inc., "may law Miro Leisure Corp. 424 Malkin LLP v Helmsley-Spear, 2006)). finds 922 justice.'" Oep't 2011) v. (citing 6 N.Y.3d 471,479-480 justice equity award to as he the facts reflecting agreement .... " sees the as it, he spirit Silverman, 461 consideration of N.E.2d 1261, 61 N.Y.2d at 308, 473 N.Y.S.2d 774. The both the before did Arbitrator language reaching not bar his the review of the in clearly made the Termination conclusion that Counterclaims. fees. does Final Award shows that Id. not allow the Specifically, Termination Agreement did not for attorneys' fees the law Agreement 2.9-2.11. A carefully reasoned of costs Arbitrator contain 11 'll'll Award the arguments that the Termination recovery in and Termination it was on the recovery of costs and fees," id. claim Agreement the Final in its rej ection of Petitioners' Agreement careful "an and noted absolute attorneys' that the prohibition 'll 2.9; concluded that "a connection with mandatory arbitration exception may in the not recovered," id. Agreement \\to Termination 2.10; t}[ the that the preclusion of costs and fees can be and should be read to apply to breaches of the parties' Ie open the and of covenants not to sue," id.; possibility of claiming and that \\the parties reimbursement for costs s in connection with judicial litigation and arbitration aims not relating to matters released in the Agreement," id. t}[ 2.11. [Termination] These determinations were well wi thin the Arbitrator's authority. Petitioners contend that applied Artvale, Inc. v. Rugby t Arbitrator impermissibly cs Corp., 363 F. 2d 1002 (2d Cir. 1966), since Artvale is federal common law and not New York law, and this adoption of federal common law exceeded the reached his Arbitrator's powers. Notwithstanding initial conclusion sed Counterclaims that regarding on the Arbitrator t the permissibility language in the of the Termination Agreement, application of Artvale was not an exercise of power in of excess the grant Termination Agreement. provided to the Arbitrator under Artvale is the Second Circuit's view on New York law pertaining to litigation expenses due to a who breaches a covenant not to sue. 12 363 F.2d at 1008. party Artvale See Versa tile has never been endorsed by New York state courts. Housewares (S.D.N.Y. Gardening & However, 2010). [Peti tioners] and Inc., Sys., 819 the Final as Respondents cite [d] F. Award the support their arguments," see Final Award the Arbitrator ~ id. that was Artvale. protected under 'offer [s] even a the outcome reached.'" N.Y.3d at considered 479, the 473 law decision "good faith" award must be claim to the justification for LLP, 461 The Arbitrator Artvale case, upheld when Malkin general, to exception 774. & 245 "[b] oth rej ected AAT's N.E.2d 1261, specifically Petitioners' arguments with respect to Artvale. ~~ noted, construction of the the N.Y.S.2d in 230, 2.13, and in the end ~ barely colorable Wien 2d Artvale the Arbitrator "An arbitration Id. arbitrator Petitioners' In doing so, 2.20. it rej ected Supp. 6 clearly and the See Final Award 2.21-2.26. The Final Award provides more than mere "colorable justification" for its decision, and exceed his power in violation of CPLR With respect to the Arbitrator alleged errors Petitioners' arises not that the 7511. § contention Arbitrator engaged in manifest disregard of the law, Arbi trator' s did to a level none of the that would meet the federal standard. Under the manifest disregard doctrine, an award if of law." can be vacated Duferco Intl. it exhibits a Steel Trading v T. 13 "manifest disregard Klaveness Shipping A/S, 333 Co., 383, F.3d 388 306 F.3d 1214, Witter Reynolds doctrine is 1216 Inc., use is instances where (2d Cir 2002) 121 F.3d 818, 821 and is limited some only egregious v DiRussa (2d Cir t v Dean on ne The of last exceedingly se riety Iron 1997)). "doct to imp i tectural (citi limited U "severely resort-its Goldman (2d Cir 2003); rare the part of the arbitrators is apparent, but where none of the provisions of the Duferco, FAA apply.u simple error understand in or 333 F.3d at 389. law apply interpretation of or a it law. rd. U arbitrators knew of a apply it or igno arbitrators it a manifest well Arbitrator's required tial rd matter, based (2) an to erroneous disregard can both that the be (1) law ignored by explicit, Buttar, insofar the on the an F.3d and defined, 9,12 and clea 378 F.3d 182, BV Cir. 14 Petitioners' insufficiency explanation (2d as Awards, termaatschappij, 103 than nd[sl Wallace v. reasoning to Will Corp., an arbitrators s and internal quotation marks omit tat dis more Manifest ther, applicable to the case. u As the legal principle yet refused to was (2d Cir. 2004) is ewing court found "only if a the by i it; t It must be "more than a "arbitrators for v. 1997) 189 ) . claim of t are not cision. u their Standard y Mi (citation tems ted) . Petitioners contend that two legal Arbitrator's issues, application of Centro Empresarial Cempresa 952 N.E.2d 995, analysis Review on of 17 N.Y.3d 269, Artvale, the 929 N.Y.S.2d 2 constitute Awards v. shows mani st (N.Y. SAB, 2011), sregard rs' Pet Movil Am. and of law. contentions are incorrect. First, the Arbitrator's meet the contend high standards that the st r Arbitrator ignored Global Minerals 824 N.Y.S.2d 210 & (1st Corp. ' t 2006), Pet. Opp. at 7; disregard. rly Metals point regarding Petitioners' a release. ication of Centro fails to v. Petitioners applied Holme, and Centro 35 A. D. 3d 93, when Global was directly on aims r fraudulent inducement of see also Partial Final Award ~ 4.1. The Awards do not support Petitioners' contention. Both Centro ring br in their post fs. See Pet. Opp. at 7; Resp. s Reply The issue as to whether one case or the other applied was at 7. thus were addressed by the part obal rais devoted appl rator. to several pages s. Moreover, Centro and post s Partial Final and explain analyze to to the 1 The See Partial Final Award Award Centro's ~ was decided by the New York Court of Global, a First Department decision. 15 also 4.1 4.6. Is the Arbi trator chose to cite to the court of "final autho Union L. Trust Ed. 109 "egregious v. u.s. d, 311 Fi (1940), ty on [New York] rather of 177, 61 S. Ct. does not legal 190 ("[M]anifest disregard of doctrine to an would 378 F. 3d [is only in the most egregious vacate arbitral awa 85 that See Wallace, law 176, amount principles" from Fidelity Global than ion misappl state law", 169, a finding of manifest disregard. justi at Co. an opinion tro, and apply used] to instances of sapplication of legal principles."). Second, with regards to t application of Artvale, the Arbitrator's decision to apply Artvale does not rise to level of statutory vacatur manifest sregard for the manifest disregard is at See Fahnestock Cir.), 502 aff'd confirm an decision & Co., can be 942 award inferred Inc., F.3d at 190 for 12 ir (same). 592 F.3d (arbitrators v. Waltman, if even 329, T. for a and thus In 935 F.2d (2d a explanation Cir. 2010) i 515 (2d for for Demps it is Pipe Wallace, & 378 not need to provide an explanation sion); Willemijn Houdstermaatschappij, As for court must ground Co Metals, LLC v. 339 512, addition, an ew statutory vacatur. justifiable where cannot be judicial strict as (1991). deficient or non-existent. Supply, standard least as Inc. U.S. arbitral under CPLR 7511 previously noted, 16 the Arbitrator's 103 F.3d at decision to apply Artvale was See Final Award id not ~~ of 2.21-2.26. Second Circuit's any colorable while Artvale involved Moreover, interpretation of justification. New York law regarding ion expenses due to a party who breaches a liti covenant not and New York state courts have not adopt the Second to sue, Circuit's view, New York courts have not rejected Artvale. Opp. No clear governing legal at 5. nciple or well explicit and clear law was ignored by the Arbitrator. the trator's choice manifest disrega on manifest Wallace, have statuto not F. 3d at 189 shown or the to vacate an arbitral that the awa citation thin a ve )). 9 U.S.C. § the the 7511 (e) § a § 11. 11 Yonir Tech., Inc. bear. federal court showing rcumstances quotat provides be that marks upon a court should confirm an awa 9 provides unless the award is vacated, rs of narrow set of (internal must committed Petit heavy bu upon an application for an order to confirm an arbitration award, or Award Arbitrator burdens law." CPLR denial of a motion to vacate, The F.A.A., that ("A party petitioning a award bears falls omitt that law, ed by statute and case del Artvale sub silentio was not adopt grounds disregard 378 As such, of the law. Petitioners vacated to Pet. modified, v. 17 the court must do so, or corrected under Duration Systems (1992) § 10 Ltd., 244 F. Supp. 2d 195, 211 (S.D.N. Y. ssed and the Award con Petition must be Accordingly, 2002). rmed. Conclusion Based on the motions granted. to ss reasoning set the Petition and rth above, confirm the Submit judgment on notice. It is so ordered. New York, NY April I 2014 r, U.S.D.J. 18 Respondents' Award are
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