Trafelet v. Cipolla & Co. LLC.

District Court, S.D. New York·Decided September 26, 2023·No. 1:22-cv-04888·Unknown

Opinion

USDC SDNY UNITED STATES DISTRICT COURT DOCUMENT SOUTHERN DISTRICT OF NEW YORK ELECTRONICALLY FILED LARA S. TRAFELET, DOC# DATE FILED: _9/26/2023 Petitioner, -against- 22 Civ. 4888 (AT) CIPOLLA & CO., LLC, ORDER Respondent. ANALISA TORRES, District Judge: Petitioner, Lara S. Trafelet, moves, pursuant to §§ 10 and 11 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 10, 11, to vacate or modify the revised partial final arbitration award, dated May 5, 2022 (the “Merits Award’), and the revised final award, dated September 27, 2022 (the “Fee Award”) (collectively, the “Awards”), in the matter styled Cipolla & Co., LLC v. Lara S. Trafelet, Case No. 01-18-002-4828, before the American Arbitration Association (“AAA”). ECF No. 32; see Am. Pet., ECF No. 30; Pet’r Mem., ECF No. 33; Pet’r Opp., ECF No. 76. Respondent, Cipolla & Co., LLC (“CCO”), cross-moves for an order confirming the Awards and entering judgment in CCO’s favor. ECF No. 40; see Cross Pet., ECF No. 66; Resp’t Mem., ECF No. 68; Resp’t Reply, ECF No. 85. For the reasons set forth below, Trafelet’s motion is DENIED, and CCO’s cross-motion is GRANTED. BACKGROUND! L. Factual Background In September 2015, Trafelet initiated divorce proceedings against her then-husband. Am. Pet. § 23; Resp’t 56.1 § 6, ECF No. 67. Stuart Slotnick represented Trafelet in the divorce

! The facts in this section are taken from the parties’ petitions, Rule 56.1 statements and responses, and declarations. Disputed facts are so noted. Citations to a paragraph in a Rule 56.1 statement also include the opposing party’s response. Proceedings to vacate or modify an arbitration award are treated “akin to a motion for summary judgment.” D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 109 (2d Cir. 2006).

proceedings from November 2016 through early December 2017. Am. Pet. ¶ 13. In November 2016, Slotnick, on behalf of Trafelet, retained CCO to provide “forensic accounting services” to Trafelet under a Kovel retainer agreement.2 Resp’t 56.1 ¶ 7. Trafelet signed the retainer agreement and agreed to be solely responsible for payment. Id. ¶¶ 7–10. The retainer agreement

provides, inter alia, that Trafelet could submit written objections to CCO’s invoices within seven days of the invoice date. Id. ¶ 9(c). Through October 30, 2017, CCO billed over $3.6 million for its services. Id. ¶ 45. Slotnick reviewed all CCO invoices and did not raise any objections to the time entries on those invoices. Id. ¶¶ 28, 30. Trafelet did not intend to pay the invoices until she obtained funds through her divorce. Id. ¶ 35. In June 2017, the matrimonial court awarded Trafelet an interim fee award of $3.5 million to cover her professional fees, of which CCO received approximately $1.45 million. Am. Pet. ¶ 40; Resp’t 56.1 ¶ 38. On August 7, 2017, based on the size of Trafelet’s outstanding account balance and the fact that she had asked CCO to perform more work, CCO presented Trafelet with an amended engagement agreement. Resp’t 56.1 ¶ 39. The amended engagement

agreement called for Trafelet to confirm that she did not dispute the invoices she had already received; CCO also presented Trafelet with a confession of judgment in the amount of the outstanding balance. Id. The amended retainer agreement had several different payment provisions compared to the original retainer agreement, including that interest on the unpaid invoices would accrue at the rate of 15% per year. Id. ¶ 40. Trafelet signed the amended engagement agreement but did not sign the confession of judgment. Id. ¶¶ 41, 44. On December 7, 2017, Trafelet terminated Slotnick’s engagement and replaced him with Laurie McPherson. Id. ¶ 48. Around December 15, 2017, CCO resigned as Trafelet’s forensic

2 See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961). accountant and was replaced by David Gresen. Id. ¶ 49. Gresen billed Trafelet approximately $250,000 for his work. Id. ¶ 52. Trafelet refused to pay CCO’s remaining invoices. See Pet’r Mem. at 9. II. Procedural History

On June 26, 2018, CCO filed an action with the AAA seeking to recover $2.7 million in unpaid fees and interest through May 31, 2018. Resp’t 56.1 ¶ 53. In response, on August 8, 2018, Trafelet filed a petition in New York state court to stay the arbitration. Id. ¶ 55. In January 2019, the New York court denied Trafelet’s petition. Id. ¶ 58. After arbitration restarted, in February 2020, CCO amended its statement of claim to assert a defamation claim, seeking compensatory and punitive damages for allegedly defamatory statements made in Trafelet’s state court stay petition. Id. ¶ 62. Trafelet filed a statement of counterclaims with the AAA, asserting counterclaims for breach of contract, malpractice, breach of fiduciary duty, and fraud. Id. ¶ 63. The arbitration hearing began on October 13, 2020, and spanned twenty-three days. Id.

¶ 64. The final hearing date was April 28, 2021. Id. The arbitrator heard from seven fact witnesses and two expert witnesses and reviewed hundreds of exhibits. Cross Pet. ¶ 72. On March 22, 2022, the arbitrator issued a partial final award on liability and damages. Id.; Resp’t 56.1 ¶ 124. The award was later amended in two minor respects at Trafelet’s request, and the arbitrator issued the Merits Award on May 5, 2022. Cross Pet. ¶ 72; Resp’t 56.1 ¶ 125. In the Merits Award, the arbitrator found Trafelet liable to CCO in the amount of $2.53 million for unpaid forensic accounting fees, over $1.45 million in interest on those fees accrued through the date of the Merits Award, and 15% per annum interest thereafter. Resp’t 56.1 ¶ 126. The arbitrator also found Trafelet liable for defamation based on her statements in the New York court stay petition and awarded CCO $2 million in compensatory damages and $500,000 in punitive damages. Id. ¶ 127. On September 27, 2022, the arbitrator issued the Fee Award, in which she ordered Trafelet to reimburse CCO an additional $1.9 million in expert fees, $2.26 million in attorney’s

fees, interest on the Merits Award, contingent attorney’s fees on the interest, arbitration costs, and 15% per annum interest on the Fee Award. Id. ¶¶ 146–47. The arbitrator also granted a declaration that CCO “shall be entitled to recover attorney fees and costs in all future proceedings to defend and/or to enforce the award.” Id. ¶ 153 (emphasis omitted). Across the Awards, the arbitrator awarded CCO over $11 million in damages, interest, fees, and costs. DISCUSSION I. Legal Standard Under the FAA, when parties “have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, . . . any party to the arbitration may apply to the court [specified in their agreement] for an order confirming the award.” 9 U.S.C. § 9. The

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Trafelet v. Cipolla & Co. LLC., (S.D.N.Y. 2023).

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