IN RE: CREDIT SUISSE SECURITIES (USA) LLC (2020)

Petitioner seeks to vacate an arbitration award finding it liable to respondent, a former investment adviser in its U.S. private banking division, for deferred compensation benefits that had not yet vested before his departure.  It is undisputed that, if respondent were involuntarily terminated without cause, these benefits would immediately vest, but that if he voluntarily resigned, he would forfeit any right thereto.

The arbitration panel did not engage in misconduct in excluding certain evidence, as this did not violate fundamental fairness (see 9 USC § 10[a][3];  Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 20 [2d Cir. 1997] ).  Evidence of respondent's negotiations with certain other potential employers was reasonably excluded as cumulative.  The panel also acted reasonably in proceeding without the live testimony of a particular defense witness when scheduling difficulties prevented his timely appearance, as several other defense witnesses had already testified, and his testimony in an earlier, similar case was available for review.  The panel assured petitioner that it was capable of setting aside any testimony not relevant to the instant dispute, and there is no indication that it did not do so.

Vacatur is also not warranted on the basis of manifest disregard of the law, which requires a finding that the arbitrators refused to apply or altogether ignored a governing legal principal of which they knew and that the law so ignored was well defined, explicit, and clearly applicable to the case (see Zurich Am. Ins. Co. v. Team Tankers A.S., 811 F.3d 584, 589 [2d Cir. 2016] ).  Contrary to petitioner's contention, the law is not clear that its announcement of the closing of the U.S. private banking division, i.e., respondent's inevitable termination, did not constitute a constructive discharge (see Chertkova v Connecticut Gen. Life Ins. Co., 92 F.3d 81, 89–90 [2d Cir. 1996];  Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1188 [2d Cir. 1987];  Bader v. Special Metals Corp., 985 F Supp 2d 291, 310 [N.D. N.Y.2013];  see also generally Morris v Schroder Capital Mgt. Intl., 7 N.Y.3d 616, 621, 825 N.Y.S.2d 697, 859 N.E.2d 503 [2006] ).  Unlike the cases relied upon by petitioner, this case does not involve the employer company's purchase or acquisition by another company (see Evans v. Winston & Strawn, 303 A.D.2d 331, 333, 757 N.Y.S.2d 532 [1st Dept. 2003];  Criscuolo v Joseph E. Seagram & Sons, Inc., 2003 WL 22415753, *8, 2003 U.S. Dist LEXIS 18991 [S.D. N.Y., Oct. 21, 2003];  Boss v Advanstar Communications, Inc., 911 F Supp 109, 110, 112 [S.D. N.Y.1995] ).

The panel also did not ignore or refuse to apply clear law governing the calculation of damages.  Although damages for breach of an employment agreement may be offset by replacement compensation paid by a new employer (see Cornell v. T.V. Dev. Corp., 17 N.Y.2d 69, 74, 268 N.Y.S.2d 29, 215 N.E.2d 349 [1966];  Donald Rubin, Inc. v. Schwartz, 191 A.D.2d 171, 172, 594 N.Y.S.2d 193 [1st Dept. 1993] ), the arbitration panel could reasonably have concluded that the transition payments respondent received from his new employer did not in fact “replace” the deferred compensation benefits withheld by petitioner, as they were subject to additional conditions and restrictions (see In re Lehman Bros. Holdings Inc., 703 Fed Appx 18, 22 [2d Cir. 2017] ).  Moreover, unlike the compensation at issue in the cases relied upon by petitioner, respondent's right to the benefits at issue vested upon his termination without cause.  Petitioner offers no authority for the proposition that mitigation or offset is a defense to payment of vested compensation—at least where, as here, the new company was under no obligation to make a replacement payment (see id. at 21–22).

The arbitrators, however, exceeded their authority by making an award of severance pay, since the issue was not validly before them.

We have considered petitioner's remaining arguments and find them unavailing.  In light of this disposition, we need not reach respondent's argument regarding possible alternative bases for the award.