Eaton Partners, LLC v. Azimuth Capital Mgmt. IV Ltd., No. 18 Civ. 11112 (ER) (S.D.N.Y. Oct. 18, 2019)
Issue Discussed: Whether an arbitrator's failure to postpone a hearing when a witness becomes unavailable provides a basis to vacate the arbitration award
Submitted by Polly Schiavone
Date Promulgated: October 18, 2019
Case: Eaton Partners, LLC v. Azimuth Capital Mgmt. IV Ltd., No. 18 Civ. 11112 (ER) (S.D.N.Y. Oct. 18, 2019)
Issue Discussed: Judicial Review/Manifest Disregard
Court: U.S. District Court for the Southern District of New York
Date Decided: October 18, 2019
Issues Decided: Whether an arbitrator’s failure to postpone a hearing when a witness becomes unavailable provides a basis to vacate the arbitration award
Submitted by: Polly Schiavone, Vice President, Swiss Reinsurance America Holding Corp.
Eaton Partners, LLC (“Eaton”), an investment placement agent entered into a placement agreement (“Placement Agreement”) with Azimuth Capital Management IV, Ltd. (“Azimuth”). Eaton filed a demand for arbitration alleging that Azimuth breached the Placement Agreement by failing to pay Eaton certain fees and accrued interest.
The arbitrator entered an Order, with approval of the parties, requiring each party to submit a list of all fact witnesses expected to be called at the hearing. Azimuth disclosed three witnesses including Jason Montemurro, a partner at Azimuth.
Right before the first arbitration hearing, Montemurro became unavailable because of a family death. The arbitrator discussed several alternatives with the parties including video testimony and adjournment. Azimuth ended up withdrawing Montemurro from the witness list and the initial hearing went forward. At a later hearing, Azimuth sought to introduce a new rebuttal witness and the arbitrator denied that request.
The arbitrator eventually issued an award in favor of Eaton and Eaton filed a petition to confirm the award. Azimuth moved to vacate the award arguing that the arbitrator was guilty of misconduct for failing to postpone the hearing when Montemurro became unavailable and for refusing to accept Azimuth’s rebuttal witness. Azimuth also asserted that the arbitrator showed manifest disregard for the law and improperly favored Eaton in her interpretation of the Placement Agreement. Lastly, Azimuth asked the court to enter judgment in its favor, citing breach of contract and various other legal theories.
In its discussion the Court cites the high burden of proof required to vacate an arbitration award and points out that misconduct can rise to the level of vacatur when and if an arbitrator refuses to accept evidence from a key witness. In addition, the Court points out that it has no authority to review an arbitrator’s decision on the merits.
A review of the arbitration record revealed that Azimuth never made a valid request for postponement of the hearing and that, when withdrawing Montemurro as a witness, Azimuth’s counsel stated: “I don’t think that he is going to be needed”. Also, Azimuth failed to cite any new allegations that the rebuttal witness was intended to address. Finally, the Court found that there was no basis in the record to support Azimuth’s allegations regarding interpretation of the Placement Agreement.
Azimuth’s motion to vacate the arbitration award was denied and Eaton was awarded reasonable attorneys’ fees.
