Berkowitz v. Gould Paper Corp.

Background

David Berkowitz worked for Gould Paper Corp. and became its president and chief executive officer in 2015. His employment agreement required binding arbitration for disputes and stated that the losing party would reimburse the prevailing party’s reasonable attorneys’ fees and costs. Berkowitz alleged that Gould did not renew his employment after the initial term and that he was replaced by a significantly younger employee. He began arbitration alleging age discrimination.

After a four-day hearing, the arbitrator found for Berkowitz on his age-discrimination claim and awarded him $250,000. The arbitrator found for Gould on its unjust-enrichment counterclaim and awarded Gould $204,466.51. After netting the awards, the arbitrator ordered Gould to pay Berkowitz $45,533.49. The award rejected the other relief requested by both sides, including attorneys’ fees and costs.

Berkowitz petitioned under the Federal Arbitration Act to confirm the favorable parts of the award and modify or vacate the parts denying him attorneys’ fees and costs, liquidated damages, and emotional-distress damages. Gould moved to dismiss, arguing that the petition was untimely and that Berkowitz had not shown a valid basis for modifying the award. The court treated Gould’s motion as a motion to confirm the award and as opposition to Berkowitz’s request to modify or vacate it.

Timeliness

The Federal Arbitration Act generally requires a motion to modify or vacate an arbitration award to be filed within three months after the award is filed or delivered. Gould argued that the period began when the arbitrator issued the final award or, at the latest, when Berkowitz received the amended award by email. Berkowitz argued that email delivery did not comply with the arbitration rules and that the award was not delivered until he served it on Gould during the litigation.

The court noted that the law in the circuit was unsettled about when an award is considered filed or delivered. Because Berkowitz’s petition failed on the merits even assuming it was timely, the court assumed without deciding that the petition was timely.

Modification of the Award

The court held that the Federal Arbitration Act permits modification only on the limited grounds in 9 U.S.C. § 11. Berkowitz relied on the provision allowing modification when an award is imperfect in form without affecting the merits. Courts narrowly apply that provision to correct errors or oversights that prevent the arbitrator’s clear intent from being expressed, such as a clerical error.

The court held that Berkowitz was not identifying a clerical or formal error. He was asking the court to add new categories of damages that the arbitrator had intentionally declined to award. Because the arbitrator had made clear that additional damages were not intended, and because the court could not substitute its judgment for the arbitrator’s under the modification provision, the court denied the request to modify the award.

Vacatur of the Award

The court also considered Berkowitz’s arguments as a request to vacate the award. One possible basis for vacatur is that the arbitrator acted in “manifest disregard of the law,” meaning the arbitrator knew a clearly applicable legal rule but deliberately ignored it. Another basis is that the arbitrator exceeded the authority granted by the parties’ agreement.

The court rejected the manifest-disregard arguments. Although the Age Discrimination in Employment Act generally requires attorneys’ fees and costs for a successful claimant, Berkowitz had not specifically told the arbitrator that the fees were mandatory under that law. Berkowitz likewise had not argued during arbitration that Gould’s conduct was willful, which was required for liquidated damages; instead, he had acknowledged that the relevant company representative was unaware of United States age-discrimination laws. Berkowitz also had not identified the legal basis for emotional-distress damages during the arbitration. The court therefore held that he had not shown that the arbitrator knowingly ignored clearly applicable legal rules.

The court also rejected Berkowitz’s argument that the arbitrator exceeded his powers. The parties did not dispute that the arbitrator had authority to decide damages. Berkowitz’s objection was that the arbitrator made legal errors by denying the requested damages, not that the arbitrator decided matters outside the agreement or otherwise acted beyond the submitted issues. That was insufficient for vacatur under 9 U.S.C. § 10(a)(4).

Disposition

The court held that Berkowitz failed to show that the arbitration award should be modified or vacated. Berkowitz’s motion to confirm in part and modify in part, whether treated as a motion to modify or vacate, was DENIED. Gould’s motion to dismiss, construed as a motion to confirm the arbitration award, was GRANTED. The arbitration award was CONFIRMED, and the Clerk was directed to enter judgment for Berkowitz in the amount of $45,533.49 and close the case.