IN RE: GOODWIN LAW GROUP P.C. (2024)

Order and judgment (one paper) of the Supreme Court, New York County (Arlene P. Bluth, J.), entered May 5, 2023, which denied the petition to vacate or modify the arbitration award dated August 11, 2022, and granted respondents' petition to confirm the same award, unanimously affirmed, without costs.

If the subject matter of the arbitration affects interstate commerce, as here, federal procedural law applies (Masthead Mac Drilling Corp. v. Fleck, 549 F.Supp.854, 856 [S.D.N.Y. 1982];  Matter of Flintlock Constr. Servs., LLC v. Weiss, 122 A.D.3d 51, 54, 991 N.Y.S.2d 408 [1st Dept. 2014]).  In this case, it does not appear that the FAA and the CPLR standards applicable to the judicial review of an arbitration award conflict, as petitioners claim that the award manifestly disregarded the law and was irrational (DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 821 [2d Cir. 1997];  Matter of Spear, Leeds & Kellogg v. Bullseye Secs., Inc., 291 A.D.2d 255, 256, 738 N.Y.S.2d 27 [1st Dept. 2002];  Matter of Riverbay Corp. v. [Local 32–E, S.E.I.V., AFL–CIO], 91 A.D.2d 509, 510, 456 N.Y.S.2d 378 [1st Dept. 1982]).

The arbitrator's rationale for an award need not be explained, and the award should be confirmed “if a ground for the arbitrator's decision can be inferred from the facts of the case” (D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 110 [2d Cir. 2006]).  Only “a barely colorable justification for the outcome reached” by the arbitrators is necessary to confirm the award (id.).  A party seeking to vacate an arbitration award on the basis of manifest disregard of the law must satisfy a two-pronged test, proving that:  “(1) the arbitrator knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrator was well defined, explicit, and clearly applicable to the case” (id. at 111).  Under Delaware or New York law, the managing member of an LLC owes fiduciary duties to the LLC members (see Feeley v. NHAOCG, LLC, 62 A.3d 649, 660 [Del. Ch. 2012];  Pokoik v. Pokoik, 115 A.D.3d 428, 429, 982 N.Y.S.2d 67 [1st Dept. 2014]).

Petitioner Guo's formation of petitioner Goodwin, and her subsequent actions to take control of WBDC and Dupont, along with her failure to disclose the rent default and the transfer of management and the pursuit of a new restaurant opportunity to respondents Wang and Cheng, was sufficient to find at least a “colorable justification” for the result of this arbitration (D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d at 110).  Nor was it irrational for the arbitrator to conclude that Guo and her alter ego Goodwin were liable, yet also conclude that even if Brody was involved with Dupont, he did not convert respondents” investments.  In any event, “courts generally will not look beyond the lump sum award in an attempt to analyze the reasoning processes of the arbitrators” (Barbier v. Shearson Lehman Hutton Inc., 948 F.2d 117, 121 [2d Cir. 1991]).