Ozkaptan v. CitiGroup, Inc.

Background

Baris Ozkaptan petitioned under the Federal Arbitration Act and the New York Convention to confirm an arbitration award issued on October 1, 2019. The arbitrator directed Citigroup, Inc. to pay Ozkaptan $1,361,026.60 plus nine-percent interest from September 11, 2019, until full payment. The award did not discuss tax withholding.

Ozkaptan had sought damages for deferred compensation that he said was forfeited after his employment was improperly terminated. Because he had been employed in the United Kingdom during the relevant events, Citigroup sought guidance from Her Majesty’s Revenue and Customs, the relevant United Kingdom tax authority. HMRC advised that the payment, excluding interest, would be treated as earnings subject to withholding and that the interest component was taxable at the basic rate.

Citigroup calculated and withheld taxes, paid Ozkaptan the remaining amount, and sent the withheld amounts to the United Kingdom government. Ozkaptan had received $848,530.80 in award payments and argued that Citigroup had not complied with the award because he had received less than the stated award amount. Citigroup cross-petitioned for confirmation and argued that its payments, after the tax withholdings, satisfied the award. Neither party challenged the award’s validity.

Court’s analysis

The court explained that confirming an arbitration award turns the award into a court judgment. Because both parties asked for confirmation and neither argued that the award should be vacated, modified, or corrected, the court confirmed it.

The court separately considered compliance with the award. It treated Ozkaptan’s petition as also asking the court to enforce the award because the parties had fully briefed that issue. The court considered whether ordering Citigroup to pay the withheld amounts to Ozkaptan would conflict with public policy under the New York Convention. That exception is narrow, but the court concluded that enforcing the award in the manner Ozkaptan requested would require Citigroup to pay amounts it had already sent to the United Kingdom government and might require additional tax payments.

The court distinguished cases in which the respondent had provided unclear evidence of foreign tax obligations. Here, Citigroup had provided a specific ruling from the relevant United Kingdom tax authority concerning this award and had remitted the tax payments. The court stated that an award silent about taxes should be read to allow legally required tax withholding when necessary to avoid violating public policy. It also stated that Ozkaptan could seek a refund from United Kingdom authorities if he believed the award was not taxable.

Ruling

Judge Jesse M. Furman concluded that Citigroup had already complied with the award. The court therefore granted Ozkaptan’s petition in part and denied it in part: it confirmed the award but declined to order Citigroup to pay an additional sum. The court granted Citigroup’s cross-motion, directed the clerk to enter judgment consistent with the opinion, and closed the case.