Field v BDO USA LLP
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Field v BDO USA LLP 2014 NY Slip Op 33956(U) November 20, 2014 Supreme Court, New York County Docket Number: 600010/2010 Judge: Saliann Scarpulla Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] ' •I SUPREME COURT OF 1llE STATB OF NEW YORK COUNTY OF NEW YORK : IAS PART 39 --·-··-·-··-··-···-···· ... .................... .. .. ·····--~x DENIS M. FIELD, Petitioner, Index No. 6000 I0/20 I0 -against· BDO USA LLP (FORMERLY BOO SEIDMAN LLP), DECISJON AND ORQER Respondent. - - --·-··--................ ..........................x HON. SALIANN SCARPULLA, J.: In this proceeding. petitioner Denis M. Field ("Field") moves to renew to vacate the arbitration award dated July 17, 2012 issued in Field v. fJu~610'4 J,LP, NOV~ JAMS Case No. 142007120. The facls arc incorporated as stated in the decision/order bitti'tJ of~ filed July 22, 2013, which granted respondent BOO USA LLP's ( BDO") motion to 0 dismiss Field•s petition to vacate the July 17, 2012 arbitration award. Field was the former CEO ofB.DO. In late 2013t after a federal criminal trial, he was acquitted of all criminal charges asserted against him arising from his behavior and actions taken in connection with tax shelters created for clients by BDO's Tax Solutions Group. He incurred millions of dollars in attorneys fees. BOO had a policy of paying its current and fonner partners' legal fees if they became involved in litigation by virtue of their selVice at BOO. In 2004, Field, who had agreed to resign as BOO' s CEO, entered into a settlement ~wccmcnt with BOO to [* 2] indemnity bis legal fees, and ftom 2005-2007, BDO paid the legal fees incurred by Field for the defense of lhc criminal cha.-ges asserted agains& him. Then~ in April 2008, BDO informed Field that it would cap payments of fees for 2008 and 2009, and in January 2010, BDO stopped paying the legal fees altogether. BOO disputed that it had any responsibility to pay Field's legal fees because it believed that Field engaged in improper behavior contmry to BDO's best interests. Specifically, BOO alleged that in 2007. it discovered a 2001 draft memorandwn written by Skadden, Arps, a law finn hired by BDO to mricw the practices and procedures of its tax solutions business, which identified · possible legal concerns and negative IRS reactions to those practices and procedures. According to BDO, Field was awaie of and neglected to disclose that infonnation to BOO, and extensively edited that draft memorandum to remove the possible legal concerns and negative IRS reactions before presenting it to BOO. Boo•s di~overy ·of the memorandum in 2007 prompted its decision to discontinue payments to Field. In April 2010, Field served BOO with a demand for arbitration. The arbitration hearing was conducted on June 25, 2012, and was non--evidentiary, as agreed upon by the panjes. However, the panics were permitted to make presentations in support o.f their positions, and to submit pre- and post-hearing briefs. One of the main issues posed at the arbitration was the meaning of the tenu •'to the extent required by New York and federal law,~• as set forth in the indemnification provision of the parties' 2004 settlement agreement. In the July 17. 2012 arbitration 2 [* 3] award. ~ arbittator found that the indemnifioation provision was governed by New York Parcnership Law and that the partnership wmust indemnify evcey partner ln respect of payments made and personal Uabililies reasonably incumd by him in the ordinary and proper conduct of its busineu..." The arbitrator held. "to be successful on his claim for indemnity, (Field] must allege and prove by a preponderance of the evidence lhat the work he did relating to the tax shelters was ordinary and proper.,, The arbitrator found that Field Uhas not sought to do so.'' The arbitrator further held. There ls disagreement about the extent of what BDO knew about the alleged misconduct prior to entering into the settlement agreement. It appears that Judge Pauley in deciding a motion in the criminal case relying on factual submissions determined that the discovery in 2007 of the drafts of an outside law finn's opinion letter that were extensively edited prior to being shown to BDO's board was a principal fae1or in the deterioration of the relationship between Mr. Field and BOO.. Thus. even if the conduct prior to the signing of the settlement agreement is otrlimits, post signing discoveries would not be. However, Mri Field hu not cited any case that holds that an indemnitec is relieved. of any burden to show that his conduct was proper and ordinary ~ause the indemnitor knew about the conduct before granting the indemnity. Field then commenced a proceeding to vacate the arbitration award. In a dccisiou/order filed July 2~ 2013, this court (Kapnick, J.) granted BDO's motion to dbmiss Field's petition~ Field now moves to renew his petition to vacate the arbitration award. arguing that lbe mbilration award was procured through bud. Field maintains that in 2013~ during the course of bis aiminal trial, be discovered the 2011 deposition testimony ofLeland 3 [* 4] Graul ("Graul"), who in 2000 was a member of BDO's risk management committee. Graul's deposition testimony was from a separate action BOO had commenced against Morgan, Lewis & Bockius, LLP. to which Field was no1 a part)' ("MLB action"). Field only becaq1e aware of the deposfcion testimony during his crJminat trial, through a subpoena issued to BDO•s general counsel at the time, Mr. Univer. Aetording to Field. Oraurs testimon)', in effect, demonstrated that BDO's risk management committee had be_en shown a copy of the subject draft memorandum in 2000 or 2001. several years before BOO decided to stop indemnifying Field's legal fees. As such, BDO's claim that Field wrongfully concealed the draft memorandum from BOO and extensively edited it, which precipitated BDO's decision to stop indemnifying Field's legal fefS. was false and inconsistent with Graul's testimony that the memo was disclosed. Field contends that BDO misled the arbitrator and withheld lhc Graul deposition testimony, which it was aware of, having represented.BOO in the proceeding that yielded that testimony. Field clahns that he was reasonably justified in failing to present these facts previously because he had no way of knowing that the testimony existed. In opposition, BOO argues that (I) Field's counsel had access to Graul's testimony as early as June 2012, yet only filed the current motion in 2014; (2) BDO provided lhe arbitraior and Field's counsel with a copy of a summary judgment decision in the MLB action, which fully disclosed that depositions had been taken in the MLB action and 4 [* 5] referenced the subject draft memorandwn: (3) Graul did not definitively testiJ)' that he saw the subject draft memorandum; and (4) even if Graul did tcstity that he saw the subject draft memorandum. lhc arbitrator clearly held that Field was not relieved from his burden ·10 show thal his conduct was proper and ordinary. Dlscgplon On a motion to renew_ the movant must provide the coun with new infonnation that was not previously available with due diligence. See Dlsston Co. v. Akliebolag, 187 A.D.2d 283 (1" Dept.. 1992); Levitt v. Co~ty o/Sujfollc, 166 A.D.2d 421 (2nd Dept. 1990). Under the Federal Arbitration Act, which applies to this proceeding. an arbitration award may be vacated '6where lhe award was procured by corruption. fraud or widue means." 9 U.S.C.. Section lO(a)(I). Section lO(a)(l)'s fraud provision serves as grounds for vacating an arbitration aW&U'd only if the offended party proves the &aud by clear and convincing evidence. shows the fraud was not discoverable by due diligence before or during the proceeding, and shows that the ftaud was materially related to an arbitration issue. See McCar1hy v. Smith Barney, Jnc.• SS F. Supp. 2d 288 (S.O.N.Y. 1999). Here, Field has not proven that the arbitration award was procured by ti'aud. Field bu not demonstrated. by clear and convincing evidence, that BOO &auduJcntly concealed evidence ftom the arbitrator. According to BOO, inlune 2012. it provided the arbitrator with a copy of a summary judSDlCDt <leas ion in the MLB acUon, which fully disclosed thot depositions had been taken in the MLB action, and rcfcrenced the subject draft s [* 6] memorandum. In any event, any failure by BOO to specifically provide the arbitrator with the Graul deposition testimony was not materially related to an arbitration issue. The subject testimony merely provides that at a risk management conunittce meeting in 2000 or 200 J, a copy of a memorandum prepared by Skadden was passed around, which Graul only skimmed. He did not know if it was a final report or a dnft report. He testified that ·~t did not say draft." He had no recollection of its contents. The evidence presented does not support an inference that the memorandum that he skimmed at the 2000 or 2001 meeting, was the subject draft memorandum. Finally, the arbitrator held, ''to be successful on his claim for indemnity, [FieJd] must allege and prove by a preponderance of the evidence that the work he did relating to the laX shelters was ordinary and proper." Even if Field had proven by clear and convincing evidence that BOO fraudulently withheld Graul's testimony from the arbitrator, and even if Graul clearly and unequivocally testified that he had seen the 6 [* 7] subject 2001 draft memorandum. lhat alleged fraud is still not materially related to die issue at arbitration of whether Field's work was "ordinary and proper... In accordance with the foregoing, it is hereby ORDERED that plaintitTDenis M. Field's motion to renew his petition to vacate the arbitration award dated July 17, 2012 is denied. This constitutes the decision and order of this Cow1. Dated: New Yark. New York November a() , 2014 ENTER: J.S.C. ON. SALIAN SCARPULLA Fl LED NOV .I:& 2014 ~ ~AK'SOFflCI! NEWVOAK 1
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