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United Merchandise Wholesale, Inc. v. Direct Containers, Inc.

United States District Court, D. New Jersey

July 26, 2018

UNITED MERCHANDISE WHOLESALE INC. and MY IMPORTS USA LLC, Plaintiffs,
v.
DIRECT CONTAINERS INC, JIAN YANG ZHANG, MING YANG SOURCING INC, 75 ETHEL REALTY LLC, GLOBAL WIN LLC, XU JING WONG, JIAN MING ZHANG, and GUO SHENG ZHANG, Defendants.

          OPINION

          KEVIN McNULTY, UNITED STATES DISTRICT JUDGE

         This matter comes before the court after plaintiffs were awarded net damages in arbitration. Plaintiffs petition the court to affirm the arbitration award. Defendants seek to vacate the award, arguing that the arbitrator showed evident partiality and the punitive-damages award was unreasonable. For the reasons stated herein, the plaintiffs' motion to confirm the arbitration award is granted, and the defendants' motion to vacate the award is denied.

         I. BACKGROUND[1]

         Plaintiffs United Merchandise Wholesale, Inc. and MY Imports USA LLC arbitrated a dispute with defendants Direct Containers, Inc., Jian Yang Zhang, Ming Yang Sourcing, Inc., 75 Ethel Realty LLC, Global Win, LLC, Xu Jing Wong, Jian Ming Zhang, and Guo Sheng Zhang. The matter comes before this Court on dueling motions to confirm or vacate an arbitration award.

         The arbitrator, retired federal District Judge Joel A. Pisano, entered a mixed final award on December 24, 2017. Judge Pisano awarded plaintiffs damages in the amount of $6, 727, 532 and fees of $378, 527.75 (Pet. ¶ 4); he also awarded defendants offsetting damages in the amount of $1, 196, 449.20. (Pet. ¶ 4). As a result, plaintiffs received a net damages award of $5, 909, 610.55. On January 2, 2018, respondents filed a letter application to modify the award so as to "clarify" that it did not bind three of them: Kevin Zhang, Xu Jing (a/k/a Judy) Wong, and 75 Ethel Realty, LLC. By letter opinion dated January 11, 2018, Judge Pisano denied that application.

         On January 16, 2018, plaintiffs petitioned this court to confirm the arbitration award. (ECF No. 1). Defendants filed a timely motion to vacate the award, arguing that (1) Judge Pisano's partiality required his disqualification or recusal; (2) defendants did not knowingly waive their right to challenge Judge Pisano's partiality; and (3) the punitive damages award was unreasonable or unwarranted. (Def. Opp.). Plaintiffs respond that Judge Pisano was impartial, the defendants waived the right to object regarding partiality, the punitive damages were reasonable, and defendants are judicially estopped from challenging the arbitration because of contrary positions they took in New Jersey state-court proceedings. (ECF Nos. 11, 13).

         II. DISCUSSION

         A. Applicable Law

         The Federal Arbitration Act ("FAA") standard for vacating an arbitration decision governs this dispute. "It is well established that absent clear intent to apply a non-FAA standard [for vacating an award], the FAA standard is to be applied." CD & L Realty LLC v. Owens III, Inc., 535 Fed.Appx. 201, 204 (3d Cir. 2013) (citing Ario v. Underwriting Members of Syndicate 53 at Llyods, 618 F.3d 277, 295 (3d Cir. 2010)). There is no "clear intent" that the parties sought to substitute the FAA's standard of review for vacating an arbitration award with the New Jersey Uniform Arbitration Act's ("NJUAA") standard. Choosing a New Jersey forum, for example, is not deemed a sufficient implied expression of such an intent. See Ario, 618 F.3d at 293-95. Nor is there any explicit expression. The relevant contract in this dispute provides:

Governing Law. This Agreement and all performance hereunder or breach hereof, the Parties' relationship in connection herewith, together with any related claims of any type or nature whatsoever, shall be governed by and construed in accordance with the laws of New Jersey, irrespective of conflict of law principals [sic].

(ECF No. 1-3, p. 11). There is a separate section, labeled "Dispute Resolution" that provides for arbitration with JAMS. (Id.). It does not refer to the NJUAA or the FAA. (Id.).

         "[T]he parties here must show 'clear intent' to apply the [state] vacatu[r] standards in order to displace those of the FAA.... [I]t is not particularly difficult, for example, to provide that 'any controversy shall be settled by arbitration in accordance with the terms of the [state arbitration statute]." See Ario, 618 F.3d at 293. This agreement does not do that. True, it provides that New Jersey law applies to the contract and the parties' relationship. But there is no "clear intent" to substitute New Jersey's vacatur standard for the FAA's standard.

         At any rate, there is no relevant distinction between the FAA and NJUAA vacatur standards that would change the outcome. This Court and the New Jersey Supreme Court have both called the NJAA and FAA "nearly identical." See, e.g., Int'l Foodsource, LLC v. Grower Direct Nut Co., Inc., No. 16-cv-3140, 2016 WL 4150748, at *9 (D.N.J. Aug. 3, 2016); Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306, 311-12 (N.J. 2014). The NJUAA provides for vacating an award when "the court finds evident partiality by an arbitrator." N.J. Stat. Ann. § 2A:23B-23. This language follows the FAA's language, which provides that an arbitration award may be vacated "where there was evident partiality." 9 U.S.C. § lO(a)(2).

         B. Federal Arbitration Act Vacatur Standard

         The validity of an arbitration award is subject to attack on the grounds enumerated in the FAA only-or if enforcement of the award is contrary to public policy. Brentwood Med. Assocs. v. United Mine Workers of Am., 396 F.3d 237, 241 (3d Cir. 2005) (citing W.J?. Grace & Co. v. Local Union 759, 461 U.S. 757, 766 (1983); Exxon Shipping Co. v. Exxon Seamen's Union, 993 F.2d 357, 360 (3d Cir. 1993)). The FAA states, in pertinent part:

(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the ...

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