that he believed "she has no actual conflict." See Squires
Aff., Ex. I at 11.
After an off-the-record discussion among the panel members,
both Greenberg and Wood declined to withdraw. See Squires Aff.,
Ex. I at 14.
On November 24, 1998, the arbitration panel entered an award in
Petitioners' favor, awarding Dr. Prasad $84,108.00 in
compensatory damages, and awarding the Prasad Retirement Trust
$271,244.00 in compensatory damages. Each Respondent is jointly
and severally liable for the entire award.*fn3 The panel denied
Petitioners' request for punitive damages and required each side
to bear its own costs and fees. See Squires Aff., Ex. B.
In the three months that followed, Respondents did not seek to
vacate the award. Petitioners timely commenced the present action
to confirm the award on June 1, 1999. See 9 U.S.C. § 9.*fn4 On
August 13, 1999, nearly nine months after the award was issued
and in response to Petitioners' application, Respondents filed
the instant motion to vacate.
Petitioners argue that Respondents' request to vacate the
arbitration award is untimely. They contend that the Federal
Arbitration Act, 9 U.S.C. § 1 et seq. (1994) (the "FAA" or the
"Act"), governs this proceeding.*fn5 The FAA applies to
arbitrations involving interstate commerce — such as the
securities transactions involved here. See 9 U.S.C. § 1. The
FAA imposes a three-month limitations period for challenging
arbitration awards. See 9 U.S.C. § 12.
The arbitration panel issued the award on November 24, 1998.
Respondents' motion to vacate was filed on August 13, 1999 — well
beyond the FAA's three-month time period. If Respondents' motion
is untimely, this Court may not consider Respondents' challenges
to the validity of the award. Absent a statutory basis for
vacating the award, the award is considered proper and the Court
must grant petitioners' motion and confirm the arbitration award.
See 9 U.S.C. § 9 (stating that upon proper application for
confirmation order, the court must grant the order unless the
award is vacated, modified, or corrected, in accordance with the
FAA); see also Lander Co. v. MMP Invs., Inc., 107 F.3d 476, 478
(7th Cir. 1997) ("Under the Act, if you fail to move to vacate an
arbitration award you forfeit the right to oppose confirmation
(enforcement) of the award if sought later by the other party.");
Florasynth, Inc. v. Pickholz, 750 F.2d 171, 177 (2d Cir. 1984)
("When the three month limitations period has run without
vacation of the arbitration award, the successful party has a
right to assume the award is valid and untainted, and to obtain
its confirmation in a summary proceeding.").
The Act does not permit the assertion of challenges to an
arbitration award in opposition to a motion to confirm the award
after the three-month limitations
period has expired. See Service Employees Int'l Union, Local No.
36 v. Office Ctr. Servs., Inc., 670 F.2d 404, 409 (3d Cir. 1982)
(noting that federal law forbids assertion of defenses that could
have been raised in motion to vacate in confirmation proceedings
occurring more than three months after award's issuance); see
also Florasynth, 750 F.2d at 175 (same); Cullen v. Paine,
Webber, Jackson & Curtis, Inc., 863 F.2d 851, 854 (11th Cir.
1989) (same). Thus, if the FAA applies, Respondents' challenges
are untimely and Petitioners' motion must be granted.
Respondents assert, however, that by designating New York in
the agreement's choice-of-law clause, the parties agreed that the
time period for challenging the arbitration award is governed by
New York law, not the FAA. Similar to the FAA, New York law
limits motions to vacate arbitration awards to a 90-day period
following the entry of the award. See N.Y.C.P.L.R. § 7511(a).
But, in contrast to the FAA, New York's courts have interpreted
the rule to permit a challenge to an arbitration award to be
raised in opposition to a motion to confirm the award — even if
no challenge was raised in the first 90 days. See Brentnall v.
Nationwide Mut. Ins. Co., 194 A.D.2d 537, 598 N.Y.S.2d 315, 316
(1993). Consequently, Respondents argue, under New York law,
their challenge to the validity of the arbitration award is
timely since it was raised in opposition to Petitioners' motion
The FAA was enacted to foster the public policy favoring
arbitration and to give effect to parties' contractual agreements
to arbitrate. In Volt Info. Sciences, Inc. v. Board of Trustees
of Leland Stanford Jr. Univ., 489 U.S. 468, 109 S.Ct. 1248, 103
L.Ed.2d 488 (1989), the Supreme Court of the United States
considered the policies behind the Act and held that it did not
preempt state arbitration rules. There, the parties' arbitration
agreement's choice-of-law clause designated California as the
governing law, which the lower courts had construed to
incorporate California's rules of arbitration. See id. at 472,
109 S.Ct. 1248. California permits an arbitration to be stayed
pending resolution of related litigation. See id. at 471, 109
S.Ct. 1248. The Supreme Court held that, notwithstanding the FAA,
the agreement to abide by those state rules was not inconsistent
with federal policy.
There is no federal policy favoring arbitration under
a certain set of procedural rules; the federal policy
is simply to ensure the enforceability, according to
their terms, of private agreements to arbitrate.
Interpreting a choice-of-law clause to make
applicable state rules governing the conduct of
arbitration — rules which are manifestly designed to
encourage resort to the arbitral process — simply
does not offend the rule of liberal construction [in
favor of arbitration] nor does it offend any other
policy embodied in the FAA.
Id. at 476, 109 S.Ct. 1248. If, however, the state rules
conflicted with Congressional objectives — by, for example,
mandating that certain disputes be resolved in a judicial forum —
the FAA would preempt them. See id. at 477, 109 S.Ct. 1248.