Matter of 544 Bloomrest, LLC v. Harding

Summary

The Appellate Division, First Department modified an order confirming an arbitration award by vacating punitive damages, sanctions, and attorneys' fees that had not been demanded in the arbitration. The court otherwise upheld the award, including the findings concerning conversion by fraud, the individual respondent's personal liability, dismissal of counterclaims, and arbitration costs. The court held that an arbitrator may not award relief beyond the issues and remedies presented by the parties.

Holdings

1. Respondents' challenges to the arbitrator's award on Bloomrest's conversion-by-fraud claim and dismissal of their breach-of-contract counterclaims, insofar as they asserted only errors of law or fact, were not subject to judicial review.
2. A corporate officer or director is not immune from personal liability when there is evidence that the individual personally participated in the fraud or had actual knowledge of it.
3. An arbitrator exceeds her power by awarding punitive damages, sanctions, or attorneys' fees that were not demanded in the particular arbitration.
4. AAA Commercial Rule 47(d) does not authorize an award of attorneys' fees unless all parties requested the award or it is authorized by law or by the arbitration agreement; even where the arbitrator otherwise has authority, the fees must have been demanded in the particular arbitration.
5. The arbitration-cost portion of the award was properly confirmed because Bloomrest requested those costs in its demand and AAA Commercial Rule 47(c), as well as CPLR 7513, authorized the arbitrator to assess them.

Questions Presented

1. Whether respondents' challenges to the arbitrator's determination concerning conversion by fraud and dismissal of their breach-of-contract counterclaims were subject to judicial review.
2. Whether a corporate officer or director who personally participated in or had actual knowledge of fraud may be held personally liable.
3. Whether an arbitrator exceeds her power by awarding punitive damages, sanctions, or attorneys' fees that were not demanded in the arbitration.
4. Whether arbitration costs were properly awarded and confirmed when they were requested in the arbitration demand and authorized by the applicable arbitration rules and CPLR 7513.

Disposition

reversed_and_remanded