October 20, 2017 Practice Points

Standard Set for Vacating an Award Procured by Fraud

By Michael S. Oberman

On July 21, 2017, in Odeon Capital Group LLC v. Ackerman, the Second Circuit addressed the standard for vacating an award on the ground that it was procured by fraud. Here is the standard as stated by the court:

We hold that to vacate an arbitration award on the ground that the award was fraudulently procured, the petitioner must demonstrate the fraud was material to the award. That is, there must be a nexus between the alleged fraud and the decision made by the arbitrators. The petitioner, however, need not demonstrate that the arbitrators would have reached a different result. In this case, Odeon failed to establish that Ackerman’s alleged perjury had any impact on the arbitration award. The district court therefore correctly denied the petition to vacate.

Separately, the court reversed the district court's denial of an award of attorney fees. The district court found that although the petition to vacate failed, it was not unjustified. The Second Circuit held that attorney's fees should have been award under New York's Labor Law because the case asserted a claim for unpaid wages.

Michael S. Oberman is counsel with Kramer, Levin Naftalis & Frankel LLP in New York, New York.

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