Aksman v. Greenwich Quantitative Research LP

Background

Greenwich hired Michael Aksman as a senior portfolio manager for a planned fund. The parties signed an Employment Agreement and a Restrictive Covenants Agreement. The latter contained a broad arbitration clause covering disputes arising from Aksman’s employment or engagement with Greenwich and incorporated the rules of Judicial Arbitration & Mediation Services (JAMS).

The fund did not raise the $250 million required under the Employment Agreement to trigger Aksman’s employment with the fund. Greenwich later accused Aksman of falsely claiming that he managed a successful $10 million equity account for Stefano Brocco at Wedbush Securities. When Greenwich investigated, Wedbush reported that no such account existed in its systems. Greenwich then demanded arbitration, asserting a fraud claim and initially seeking approximately $10 million.

Aksman did not participate in the arbitration. The arbitrator, Frank Maas, found that Greenwich had provided adequate notice through several methods, including email, mail, and attempted personal service. On June 26, 2020, Maas found Aksman liable for fraud and awarded Greenwich $4,030,982.58, consisting of compensatory and punitive damages, attorneys’ fees, and arbitration-related fees and expenses. Aksman petitioned to vacate, or set aside, the award. Greenwich cross-petitioned to confirm it as a court judgment.

Issues and governing standards

The court considered whether Aksman received adequate notice, whether Greenwich’s fraud claim was arbitrable, and whether the arbitrator’s liability and damages findings should be vacated. Under the Federal Arbitration Act, courts give substantial deference to arbitration awards. An award generally must be confirmed unless a narrow statutory ground for vacatur, such as arbitrator misconduct or exceeding the arbitrator’s authority, is shown. The court explained that even a serious legal or factual error ordinarily is not enough; there must at least be no colorable justification for the result.

Notice of the arbitration

The court rejected Aksman’s challenge to service. It relied on the arbitrator’s findings that Aksman had received notice through multiple methods, including email and attempted personal service. Aksman did not dispute that the email address used belonged to him or that he actually received the emailed notifications. The court stated that even if email had been the only method used, a failure to follow formal service procedures would not justify vacating the award where the person had actual notice. The court therefore concluded that the notice provided was consistent with fundamental fairness.

Arbitrability and delegation

Aksman did not dispute that the Restrictive Covenants Agreement contained an agreement to arbitrate or that Greenwich’s fraud claim fell within its broad language. Instead, he argued that the arbitration provision was ineffective because the parties’ agreements conditioned their effectiveness on his commencing employment and the funding target was not met.

The court held that the parties had clearly and unmistakably delegated questions of arbitrability—the authority to decide whether a dispute may be arbitrated—to the arbitrator. The arbitration agreement incorporated JAMS rules, and the applicable JAMS rule assigned the arbitrator disputes concerning the formation, existence, validity, interpretation, or scope of the arbitration agreement. The court also applied the rule that a challenge to the underlying contract, rather than specifically to the arbitration clause, is ordinarily for the arbitrator to decide first.

The court further held that Aksman waived his right to challenge the arbitrator’s arbitrability decision. He had notice but did not participate in the arbitration or raise an arbitrability objection in response to the demand. The incorporated JAMS rules provided that such challenges were waived if not asserted promptly. Even apart from waiver, the court conducted limited review and found at least a colorable justification for the arbitrator’s conclusion that the arbitration agreement remained effective. The court identified the agreement’s severability provision and Greenwich’s argument that Aksman had worked for or been engaged by the firm before the funding issue arose as possible support for that conclusion.

Liability and damages

The court addressed Aksman’s challenge to the fraud findings and damages. Aksman conceded at argument that, if the court found he had notice, he had waived challenges to the substance of the award. The court so found. Independently, after reviewing the arbitration record and the detailed award, the court concluded that Greenwich had presented ample evidence supporting both Aksman’s fraud liability and the damages calculation. The court found at least a barely colorable justification for the award, which was sufficient under the highly deferential standard of review.

Disposition

The court denied Aksman’s petition to vacate the award and granted Greenwich’s cross-petition to confirm the award. The award was confirmed, the motions were terminated, and the case was closed.