Panzer v. Epstein

Background

Moshe Chaim Panzer and Joel Epstein were partners in Fabuwood Cabinetry Corp. Panzer alleged that Epstein attempted to take control of the company while Panzer was dealing with personal crises. After Epstein served a demand for arbitration, Panzer filed a petition in New York state court seeking to stay the arbitration.

Epstein removed the state-court proceeding to the Southern District of New York, asserting that the arbitration agreement fell under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Epstein pointed to Fabuwood’s relationships with companies in China and Vietnam and argued that the business relationship had a sufficient connection to foreign countries.

The court remanded the proceeding to state court on August 25, 2021. It concluded that the relevant relationship was the ownership and operation of a cabinetry company that assembled and sold cabinets in the United States. The court found no sufficient foreign connection because the shareholders agreement did not refer to foreign law or property abroad, did not require performance abroad, and the company’s importation of raw materials from Asia was not enough to bring the agreement within the Convention.

Fee Request

After the remand, Panzer sought attorneys’ fees and costs under 28 U.S.C. § 1447(c), which permits a court to award expenses caused by an improper removal. The governing standard focuses on whether the removal had an objectively reasonable basis when it occurred. Fees generally are not awarded when the removing party had a colorable argument that removal was proper, even if the argument ultimately fails.

Panzer argued that Epstein had relied on a conscious misrepresentation of precedent and had abused the removal statute by removing the case while Panzer’s request for emergency relief was pending in state court.

Court’s Analysis

The court rejected Panzer’s arguments. It determined that Epstein’s position was not foreclosed by Second Circuit precedent. The court had to consider a disagreement among courts about whether the relevant legal relationship should be evaluated by looking at the parties’ overall relationship or at the arbitration agreement itself. The court also considered Epstein’s arguments concerning the shareholders agreement and Fabuwood’s foreign sources of supply.

The court found Epstein’s citation to one case confusing but not intentionally misleading. It also rejected the assertion that Epstein had baselessly removed the proceeding. The court stated that both sides viewed the other’s conduct as improper advocacy, and it noted that the case remained in federal court for less than two weeks. Any delay caused by removal was not sufficiently significant to justify fees or costs.

Disposition

The court DENIES Panzer’s motion for attorneys’ fees and costs under 28 U.S.C. § 1447(c) and directed the Clerk of Court to terminate the motion at docket entry 17.