CFS 12 Funding LLC v. Wiesen

Background

CFS 12 Funding LLC entered into a litigation-funding agreement with Jeremy L. Wiesen dated October 4, 2016. The agreement covered funding for two civil actions and included a broad arbitration clause. Wiesen later demanded arbitration against CFS and AC Manager LLC, seeking $398,454 held in an escrow or trust account and alleging that CFS and AC had interfered with his control of the two funded civil matters. The parties were represented by counsel during the arbitration.

The arbitrator granted CFS and AC’s first summary-judgment motion concerning Wiesen’s claim to the trust-account funds. On a second summary-judgment motion, the arbitrator granted the motion in part and denied it in part, dismissing claims based on alleged violations of New York professional-conduct rules and alleged conspiracy to suborn perjury. A hearing then addressed Wiesen’s claim that CFS and AC breached the agreement by interfering with his civil litigation matters. The arbitrator found that Wiesen had not proved either a breach or damages.

The arbitrator issued a Partial Final Award on October 19, 2021, followed by a Final Award on November 9, 2021. The Final Award required Wiesen to pay $74,640.31 in fees and expenses, with interest at 6% per year. The awards were standard awards rather than reasoned awards because neither party had requested a reasoned award.

Jeremy Wiesen opposed CFS and AC’s petition to confirm the award and sought to have the awards vacated and the matter reheard. He asserted that the arbitrator was biased, failed to act diligently, limited his ability to question witnesses, made unfavorable evidentiary rulings, and improperly awarded fees and expenses. Jeremy Wiesen died on or about July 24, 2022. The court first allowed limited discovery to identify a proper substitute, denied the initial confirmation motion without prejudice to renewal after substitution, and later substituted Gavin Wiesen solely as the de facto representative of Jeremy Wiesen’s estate. Gavin Wiesen did not respond to the renewed confirmation motion.

Legal standard

Under the Federal Arbitration Act, a court must confirm an arbitration award unless it is vacated, modified, or corrected under the statute. Judicial review is narrow, and the party seeking vacatur bears a heavy burden. The grounds asserted here included serious misconduct or other misbehavior that prejudiced a party’s rights, and evident partiality or corruption by the arbitrator.

The court treated the petition to confirm or vacate the award similarly to a summary-judgment motion and considered the petition, its exhibits, the parties’ motion papers, and Jeremy Wiesen’s response papers.

Court’s analysis

The court held that the challenge to the fee award did not justify vacatur. The agreement gave the arbitrator discretion to allocate arbitration expenses and legal fees based on equitable considerations. Because the arbitrator ruled for CFS and AC on all issues, the fee award was a permissible exercise of authority under the agreement.

The court also held that Wiesen’s allegations of bias and misconduct were unsupported, conclusory, and vague. Unfavorable rulings did not by themselves establish partiality or lack of diligence. The arbitrator had been selected with input from both parties, and Wiesen identified no actual or apparent conflict or substantial relationship between the arbitrator and any party. The court further noted that the awards complied with the requirements for standard awards because no party had requested a reasoned award.

Disposition

The court concluded that Wiesen had not shown any statutory basis for vacating the awards. The court therefore granted petitioners’ motion to confirm the Award. The Clerk was directed to terminate the motion, and petitioners were ordered to file a proposed final judgment and an affidavit showing service on Gavin Wiesen within seven days.