As any seasoned commercial litigator knows, courts are generally loathe to overturn the independent decisions of arbitrators.

New York County Commercial Division Justice Charles E. Ramos recently examined the standard for doing so in Daesang Corp. v NutraSweet Co., a dispute arising from Daesang Corporation’s attempted $79,250,000 sale of its aspartame business to iconic sweetener brand NutraSweet.

Daesang commenced the breach of contract action when NutraSweet attempted to exercise its right to rescind the purchase transaction based upon the filing of a suit against the parties by a class of aspartame purchasers for alleged violations of federal antitrust laws. The parties stipulated to the jurisdiction of the International Chamber of Commerce (“ICC”), which ultimately issued a written award dismissing all of NutraSweet’s counterclaims and defenses and awarded Daesang damages of over $100 million. Daesang then commenced the instant proceeding to confirm the ICC’s award, which NutraSweet moved to vacate.

Acknowledging the “presumption in favor of upholding arbitration awards,” Justice Ramos further observed that such deference is not limitless.   The Court explained that an arbitration award may be vacated only if it a) violates a ground set forth in Section 10 of the Federal Arbitration Act; or b) was rendered in “manifest disregard” of the law.

Justice Ramos determined this to be the rare case, finding two exceptional aspects of the ICC’s award to Daesang warranting vacatur. First, the Court held that with respect to NutraSweet’s defense and counterclaim for equitable rescission based on fraud in the inducement, the ICC disregarded, and in fact ignored the “well-established principle that a fraud claim can be based on a breach of contractual warranties where the misrepresentations are of present facts.”

Second, the Court found that the ICC’s outright refusal to consider NutraSweet’s breach of contract counterclaim, which the ICC concluded NutraSweet waived during its closing argument, went “beyond a mere error in law or facts, and amount[ed] to an egregious dereliction of duty.” The Court explained that, beyond the fact that NutraSweet submitted witness statements, live and expert testimony, and took cross-examination on the counterclaim, the portion of the transcript that the ICC based its decision on failed entirely to address the breach of contract counterclaim.

While the Commercial Division’s decision was a sweet success for NutraSweet, this case should serve as a stark reminder to commercial litigators that a successful motion to vacate an arbitration award requires a finding of truly egregious errors and/or “manifest disregard” for well-established law.

 

Several weeks ago, we reported on some recent updates to Manhattan Commercial Division Justice Bransten’s individual practice rules. New York commercial litigators should take note of some recent changes in the Queens County Commercial Division as well.

According to an official announcement from the Queens County Commercial Division, as of April 3, 2017, all Commercial Division motions made before Justices Marguerite A. Grays or Leonard Livote must be made returnable directly before either judge in their respective Commercial Division Parts and on their respective motion days (as opposed to the Queens County’s Centralized Motion Part or “CMP”), with the corresponding Notices of Motion or Proposed Orders to Show Cause bearing the words “COMMERCIAL DIVISION” in boldfaced type.

Justice Grays’s individual practice rules and Justice Livote’s individual practice rules, particularly with respect to Commercial Division motions made before them (again, as opposed to the CMP), are virtually identical. Some specifics worth noting:

• Both judges designate Tuesdays as their motion day, first call at 10:00 a.m.;

• Both judges emphasize the above-referenced “COMMERCIAL DIVISION” marking requirement, cautioning that non-compliance “may result in the motion being calendared in the CMP”;

• Both judges require that all moving papers be filed in hard copy in the Motion Support Office “at least five business days prior to the scheduled return date.” All answering papers, cross-motions, and replies, on the other hand, “will be accepted only on the return date in the Part”;

• Both judges require in-person appearances by counsel or pro se litigants on the return date of all disclosure motions and Orders to Show Cause, cautioning that such “papers will not be accepted from a calendar service”; and

• Both judges require that all applications for adjournment be made in person on the return date. Again, “calendar service or non-attorneys will not be permitted to make applications for adjournments.”

These are welcome distinctions for litigants interested in prosecuting and/or defending their commercial cases expeditiously. Before April 3, 2017, a commercial litigator wishing to make a motion in the Queens County Commercial Division was left to navigate the many and specific procedures of the CMP where motions are seemingly ever subject to the prospect of being “administratively rescheduled,” “marked off,” outright “discarded,” or otherwise delayed because of some other emboldened, highlighted, and/or underscored procedural particularity.