November 20, 2008

Application of Inyx, Inc. v. Bartke, 600 828/08 (Sup. Ct., New York County Oct. 21, 2008) (New York Law Journal, Nov. 6, 2008, at 28, col. 1). In this case, GKB&N obtained a rare vacating of an arbitration award under Federal Arbitration Act (FAA), where the arbitrator had granted claimant an award of attorneys' fees based on claimant's post-hearing schedule of attorneys' fees without providing GKN an opportunity of rebuttal, either by evidentiary hearing, cross-examination or argument. Applying for attorneys' fees after the hearing is a tempting shortcut that if handled improperly fails to comply with the requirements for a fair arbitration.

In petitioning to vacate the award, GKN stressed that the arbitrator, New York attorney Carolyn M. Chave, had a published letter proposing that "deciding an arbitration without an oral hearing . . . is an option that arbitrators should always consider. . . . I think it unlikely that a court would overturn an arbitration decided without an oral hearing if all parties had consented in advance in writing to such a decision."

GKN successfully used the arbitrator's own published letter to bolster vacating the award. First, the court (Commercial Division Justice Charles Ramos) agreed with GKN (over claimant's objection) that the FAA applied, due to the nature of the entity and dispute, involving a management position at an international publicly-traded company.

Applying the FAA, Justice Ramos wrote that GKN's "contention that the arbitrator had a predisposition against an evidentiary record because she is a vocal proponent of determining arbitration without holding an oral hearing has some merit. . . . [T]his arbitrator's action of refusing Inyx both an oral hearing or written opposition on the issue of attorney's fees is not sustainable, in light of the fundamental rights involved and the [American Arbitration Association] Rules which require submissions on notice and an opportunity to respond." Justice Ramos therefore granted the petition to vacate, denied the claimant's cross-motion to confirm the award, and remanded to the arbitral forum, stating that he "leaves to the AAA the question of assigning a substitute arbitrator more sensitive to the rights of the parties and its own Rules, to finally hear and resolve the issue of attorney's fees."

Brian D. Graifman & Robert L. Herskovits of GKN represented Inyx, Inc. on the petition to vacate.