Court Sustains Petition to Vacate Part of Arbitration Award That “Punted” Determination of Certain Issues To A Corporation’s Board of Trustees

On May 31, 2024, Justice Melissa A. Crane declined to dismiss part of a petition to vacate an arbitration award where that award “punted” certain disputes between the parties to a corporate board of trustees. In Naftali Rotenstreich, Chabad of Gramercy Park v. Shaya Lesches, YJP Foundation, Inc., Index No. 655503/2023, the Court granted a motion to dismiss only to the extent the petition challenged the arbitral panel’s rulings on the merits of the dispute. However, the Court found that the part of the award that referred “[a]ll disputed issues regarding salaries, conflicts of interest(s), involving the employees and creditors of [the corporate respondent]” had “defeated most of the reason for the arbitration in the first place.” The Court explained:

The award leaves open the possibility for subsequent decisions from the arbitral panel. Accordingly, the court remands to the arbitral panel all issues concerning [the individual respondent’s] alleged: (1) misappropriation of Chabad’s funds and resources to run a rival business, while simultaneously taking a salary from Chabad; (2) misappropriation of Chabad’s funds to purchase a townhouse for his family; and (3) solicitation of YJP personnel to work for his rival business (EDOC 66). Moreover, the panel should consider Lesches’ counterclaims, including that Petitioner created a new company to compete with YJP.

The attorneys at Schlam Stone & Dolan frequently counsel clients concerning enforcement or vacating of awards in arbitration. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.