Alliance Capital International Bank v. Wadiah Capital

Background

Alliance Capital International Bank deposited funds with Wadiah Capital for processing payment orders. Wadiah Capital did not process two orders totaling $2,015,859.46. The parties later signed a Payment Agreement under which Wadiah Capital acknowledged its obligation to return the principal plus accrued interest by September 28, 2023. The agreement required binding arbitration administered by JAMS.

Wadiah Capital did not make the required payment. Alliance filed an arbitration demand on October 25, 2023. The parties agreed to a February 5, 2024 hearing, with February 7 available if needed. JAMS temporarily removed the dates from its calendar because Wadiah Capital had not paid its arbitration fees. Alliance offered to advance those fees, did so, and the hearing was reinstated.

On the morning of February 5, Wadiah Capital’s principal, Shlomo Ovadiah, told JAMS that he could not attend because of other commitments and an unspecified private or personal matter. The arbitrator declined to postpone or cancel the hearing. The hearing proceeded without Ovadiah or another representative for Wadiah Capital. The arbitrator considered Alliance’s testimony and documents and later issued a Final Award finding for Alliance on its breach-of-contract and attorney-fee claims. The award totaled $2,213,944.36.

Wadiah Capital’s request to vacate

Alliance asked the court to confirm the arbitration award under Section 9 of the Federal Arbitration Act. Wadiah Capital opposed confirmation through an affidavit filed on June 18, 2024, nearly four months after the award was filed with JAMS on February 22, 2024. The affidavit asked the court to dismiss or vacate the award and argued primarily that the arbitrator should have postponed the hearing, that the proceeding was unfair, and that the arbitrator was biased. It also argued that Wadiah Ventures Inc., rather than Wadiah Capital, had entered the Payment Agreement; the court rejected that argument because the agreement identified Wadiah Capital as the contracting party.

The court held that Wadiah Capital’s request to vacate—or its functional equivalent, dismissal—was untimely. Section 12 of the Federal Arbitration Act requires notice of a motion to vacate, modify, or correct an award within three months after the award is filed or delivered. The court held that this deadline also barred Wadiah Capital from raising its objections as a defense to Alliance’s confirmation petition.

Merits of the objections

The court nevertheless considered the objections and concluded that they would fail on the merits. Under Section 10(a)(3) of the Federal Arbitration Act, an award may be vacated when an arbitrator improperly refuses to postpone a hearing after sufficient cause is shown, or otherwise conducts the proceeding in a way that prejudices a party’s rights. The court found a reasonable basis for the arbitrator’s decision because Ovadiah had agreed to the hearing date, received notice of it, waited until the morning of the hearing to report that he could not attend, and did not clearly explain the reason for his unavailability or why a substitute representative could not appear.

The court also found no fundamentally unfair proceeding. Wadiah Capital had been given an opportunity to attend and present evidence, and the arbitrator relied on Alliance’s testimony and documents rather than simply treating Wadiah Capital’s absence as an automatic basis for judgment.

The court rejected the claim of evident partiality under Section 10(a)(2). It concluded that the arbitrator’s decision to proceed reflected a desire to resolve the dispute without further delay, not bias against Wadiah Capital. The court also found that Wadiah Capital had not shown a violation of JAMS rules sufficient to justify vacating the award.

Interest, costs, sealing, and disposition

The court granted Alliance’s petition as to confirmation of the arbitration award and pre-judgment interest. It directed entry of judgment for $2,213,944.36, plus pre-judgment interest at nine percent per year from February 21, 2024, through the date judgment was entered. The court stated that post-judgment interest applies as a matter of law and that Alliance could seek taxation of allowable costs from the Clerk of Court.

The court declined to seal the opinion because the public-access presumption outweighed Wadiah Capital’s unsupported concern about its reputation. It directed Wadiah Capital to file a copy of Ovadiah’s affidavit with only the identified financial account numbers redacted. The Clerk was directed to terminate the listed motions.