A U.S. District Court previously ruled that they lacked jurisdiction to deal with a psak from Bais Din Maysharim of Lakewood which affirmed a $4 million Settlement Agreement owed by R' Leib Kelman of Monsey to Harav Benzion Rabinowitz of Jerusalem. The court ruled that Rav Rabinowitz could not seek to affirm the psak in federal court because the parties' settlement agreement and arbitration agreement stipulated that enforcement could only be done in state court (which would not be an option to Rav Rabinowitz as he is not a U.S. citizen).
The Circuit Court of Appeals subsequently reversed this ruling, finding that the settlement agreement and arbitration agreement were "permissive" in that they merely allowed litigation in state courts, rather than mandated that litigation is to occur only there; therefore ruling that Bais Din's psak can also be affirmed in federal court.
In a second round of appeal, R' Kelman argued that the 3-month time limit to file a motion to vacate the psak should not have begun until after Bais Din issued its second and "final" psak awarding attorney’s fees - and not after their "interim" psak confirming the settlement agreement. The Circuit Court of Appeals has just soundly rejected these arguments.
Between 2010 and 2014, Harav Benzion Rabinowitz of Jerusalem invested several million dollars with R' Leib Kelman of Monsey in a real estate deal involving a number of properties in New Jersey.
R' Kelman is CEO of Blue Onyx Cos., a Paterson, New Jersey company that renovates properties for housing.
A number of years ago the parties fell into a dispute regarding the business venture and they decided to part ways. On February 8, 2018, they entered into a Settlement Agreement whereby R' Kelman would pay Rav Rabinowitz $5.2 million over 2 years. The agreement stipulated that in the case of any dispute which may arise, the parties would adjudicate their claims either in Bais Din Maysharim in Lakewood or its counterpart in Bnei Brak, "without the right of appeal."
The agreement expressly stipulates that "any arbitration award of the Bais Din shall be final and binding... The Parties each hereby submit to the jurisdiction of the New Jersey State Courts located in Ocean County or the courts of Israel, as the case may be, for the enforcement of any arbitration award pursuant to this paragraph or for any equitable relief related to the rights and responsibilities contained in this Agreement."
Subsequently, a dispute arose and Rav Rabinowitz summoned R' Kelman to Bais Din Maysharim.
Prior to Bais Din hearing the case, the parties entered into an Arbitration Agreement which stipulated as follows:
"The decree of the Arbitrators shall be enforceable in the courts in the State of New Jersey and/or New York. . . . The Parties submit themselves to the personal jurisdiction of the courts of the State of New Jersey and/or New York for any action or proceeding to confirm or enforce a decree of the Arbitrators..."
Bais Din issued a written ruling that the agreement was still in effect, and therefore R' Kelman must pay the balance of the amount still owed, which was $4 million, "immediately."
The ruling additionally states:
As per the agreement, defendant must pay plaintiff reasonable attorney's wages, only according to the number of hours that he worked for him. In order to estimate and decide on this, plaintiff must submit a record that delineates his hours, and then the Bais Din will adjudicate on that. Bais Din retains the right to adjudicate regarding any matter that arises related to this litigation.
On April 12, 2021, Rav Rabinowitz, represented by New York attorney Efrem Schwalb of Koffsky Schwalb LLC filed legal action in the United States District Court for the Southern District of New York seeking to confirm the Arbitration Award and issue a $4 million judgment against Kelman, together with attorney fees and costs.
On May 3, 2021, R' Kelman, represented by Lakewood attorney Dominic J. Aprile of Bathgate, Wegener & Wolf, P.C., moved to dismiss the Petition for lack of subject matter jurisdiction or, in the alternative, to vacate the Arbitration Award.
First, Kelman asserted that the district court lacked subject matter jurisdiction based on the forum selection clauses in the Arbitration Agreement and the Settlement Agreement (i.e. he was arguing that the agreements stipulated that enforcement of the matter could only be done in State Court and not in Federal Court). Second, he argued that, even if the district court had subject matter jurisdiction, the Petition should be dismissed because the Arbitration Award was not final. Third, Kelman contended that, even if the district court had subject matter jurisdiction and the Arbitration Award was final, the Arbitration Award should be vacated under New York or New Jersey law because the Bais Din arbitrators exceeded the authority the parties bestowed on them.
On July 13, 2022, the district court dismissed the Petition for lack of subject matter jurisdiction, interpreting the Arbitration Agreement Forum Selection Clause to require that an action to confirm the Arbitration Award be brought in the state courts of New Jersey or New York. Accordingly, it granted R' Kelman's motion to dismiss without prejudice to Rav Rabinowitz's "right to recommence in the appropriate forum" (i.e. in State Court). The district court therefore left open the remaining questions, including whether (1) the Arbitration Award was final, (2) R' Kelman's motion to vacate was timely, or (3) the Arbitration Award should be vacated because the Bais Din arbitrators exceeded their authority. It also did not address Rav Rabinowitz's request for attorney fees and costs.
Rav Rabinowitz appealed this ruling to the U.S. Court of Appeals, Second Circuit.
In a written ruling released in August 2023, Circuit Judges Jacobs, Park, and Nardini reversed the lower court's decision.
"We do not interpret the parties' agreement to "submit to the jurisdiction of the New Jersey State Courts located in Ocean County or the courts of Israel" to clearly indicate that the parties must enforce a Bais Din award in only these courts," the judges wrote.
In the meantime, on April 27, 2023, Bais Din Maysharim issued an additional psak awarding Rav Rabinowitz's attorney’s fees and costs.
Armed with the Circuit Court’s ruling that the federal courts had jurisdiction over the arbitration award, Rav Rabinowitz filed an amended petition to the District Court seeking to confirm both the January 3, 2021 psak confirming the settlement agreement as well as the new psak awarding attorney’s fees and costs.
R' Kelman countered that the psak should be vacated because state - not federal - arbitral law should govern, his original motion to vacate was filed timely because the original psak wasn't "final," (therefore the timeline to file did not yet begin) and the Rabbinical Court exceeded its authority in retaining outside experts to assist in adjudicating the claims.
On April 19, 2024, District Judge Nelson S. Roman confirmed the psak and rejected all of Kelman's arguments.
"Petitioner [Rabinowitz] argues that the parties received the Rabbinical Court’s award on January 10, 2021, more than three months before Respondent filed his action in New Jersey state court on May 3, 2021. Respondent claims that the Rabbinical Court never issued a final award until April 27, 2023, when it adjudicated the issue of attorney’s fees. In support, Respondent points to the Rabbinical Court’s (1) determination that the “agreement between the parties is still in force” and (2) retention of jurisdiction “to adjudicate any matter that arises related to this litigation.” According to Respondent, neither party had released their underlying claims pursuant to the terms of the Settlement Agreement when the Rabbinical Court rendered its award.
"The Court sides with Petitioner.
"The verdict issued by the Rabbinical Court provided that: (1) the Settlement Agreement between the parties is still in force, so that Respondent had to immediately pay Petitioner $4,000,000; (2) pursuant to the Settlement Agreement, Respondent had to pay Petitioner reasonable attorney’s fees, which the Rabbinical Court would determine upon Petitioner submitting a record of his hours worked; and (3) the Rabbinical retained jurisdiction to adjudicate any matter that arises related to the litigation.
"Based on the verdict and both parties’ representations, the Rabbinical Court decided all substantive issues submitted to it, and the only remaining determination was to fix the amount of attorney’s fees and costs. Otherwise, Respondent has not shown that there were any other outstanding issues sufficient for this Court to hold that the Award was not final as of January 10, 2021. That the Rabbinical Court retained jurisdiction for any potential issues that might arise between the parties, but had not been submitted to it, is also insufficient."
Kelman appealed this ruling yet again to the U.S. Court of Appeals, Second Circuit.
In a written ruling just released, Circuit Judges Parker, Park, and Nathan just affirmed Judge Roman's ruling.
"Kelman’s motion to vacate the Arbitration Award was untimely. The FAA provides that “[n]otice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered.” Here, Kelman filed notice of his motion to vacate on May 3, 2021 - more than three months after his counsel was notified of the Arbitration Award on January 10, 2021. Kelman argues that this motion was timely because the Arbitration Award was not final until April 27, 2023, when the rabbinical court issued a separate award for attorney’s fees. We disagree. The Arbitration Award finally and definitely disposed of Rabinowitz’s breach-of-contract claims in ordering that Kelman “immediately pay” $4,000,000. The rabbinical court’s subsequent award of attorney’s fees has no bearing on finality for purposes of moving to vacate because an arbitration award need not “resolve every outstanding issue that might arise in later litigation between the parties," the Circuit panel wrote.
This story highlights how imperative it is to seek out professional help from experienced Toanim and Lawyers prior to entering into any agreements, especially when they involve arbitration and enforcement provisions.
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