Commercial Division Denies Cross-Petitions to Confirm and Vacate Appraisal Award Despite Strong Presumption in Favor of Summarily Confirming Such Awards
In Yakuel v. Gluck, Justice Joel M. Cohen of the New York County Commercial Division denied Petitioners’ application to confirm an appraisal award and denied Respondent Andrew Gluck’s (“Gluck”) cross-petition to vacate the same award in connection with the appraisal of Gluck’s ownership interest in Agency Within LLC (“Agency Within”), a digital marketing company. The opinion addressed the legal standard for confirming or vacating an appraisal award pursuant to CPLR § 7601, as well as a party’s right to present evidence to an appraiser over the objection of a counterparty.
Petitioner Joseph Yakuel (“Yakuel”) and Gluck founded and formed Agency Within pursuant to a Limited Liability Company Agreement dated February 20, 2015 (the “LLC Agreement”). Under the LLC Agreement, Yakuel is the managing member and owned a 65% interest in Agency Within, and Gluck owned the remaining 35% interest. The LLC Agreement was amended on March 23, 2018 (the “Amendment”) to give Agency Within, under the direction of Yakuel, the option to repurchase all of Gluck’s ownership interest for a fair market value price to be determined by a third-party appraisal firm. Less than two months after the Amendment became effective, Yakuel gave Gluck notice that Agency Within was going to exercise its option to repurchase Gluck’s ownership interest. The parties selected PricewaterhouseCoopers (“PwC”) as the third-party appraiser.
Following the selection of PwC, Yakuel and Gluck began to feud. Yakuel contended that Gluck’s bad faith and obstruction caused PwC to threaten to resign and forced Agency Within to exclude Gluck from the appraisal process. On the other hand, Gluck contended that the appraisal was “rigged” because Yakuel prohibited him from providing PwC with pertinent information even though PwC requested that Gluck be able to participate in the appraisal process. Gluck also contended that Yakuel submitted “false and misleading information” to PwC that resulted in an undervaluation of his ownership interest in the magnitude of tens of millions of dollars.
In July 2018, Gluck filed suit against Yakuel to rescind the Amendment on several grounds, including fraud, breach of contract, and breach of fiduciary duty. Gluck subsequently moved for an injunction to halt the appraisal process. Justice Sherwood—who was presiding over the matter at the time—denied that motion. Justice Sherwood found that Gluck could be satisfied by a money judgment and failed to show that he would suffer irreparable harm in the absence of an injunction.
After Gluck’s motion for injunctive relief was denied, the appraisal process continued and concluded. On August 21, 2019, Yakuel filed an action to confirm the appraisal under CPLR § 7601. Gluck responded to Yakuel’s petition and filed a cross-petition to vacate the same appraisal on the grounds that Yakuel blocked him from participating in the appraisal process.
Justice Cohen's Opinion
The Court began its analysis with a discussion of the legal standard for confirming or vacating an appraisal award. Under CPLR § 7601, a “special proceeding may be commenced to specifically enforce an agreement that a question of valuation, appraisal or other issue or controversy be determined by a person named or to be selected.” The statute also provides that the “court may enforce such an agreement as if it were an arbitration agreement.” The Court therefore analyzed the parties’ cross-petitions with reference to case law in which courts reviewed appraisal awards and arbitration awards.
The Court explained that under both federal and New York law, there is a “strong presumption in favor of confirming appraisal and arbitration awards,” and doing so in a summary proceeding that avoids the costs and delays that alternative dispute resolution is meant to minimize. Judicial review of an arbitration award is “extremely limited.” The Court noted that “an arbitrator’s award should not be vacated for errors of law and fact committed by the arbitrator,” nor should courts “assume the role of overseers to mold the award to conform to their sense of justice.”
Notwithstanding the limitations on judicial review of arbitration awards, the Court found that parties have a “fundamental procedural right” to present evidence to an arbitrator or appraiser. For example, under the Federal Arbitration Act, an arbitral award may be vacated when an arbitrator refuses “to hear evidence pertinent and material to the controversy.” The Court further found that New York courts have held that parties have a right to present evidence to an appraiser, and that denial of the opportunity to present evidence may warrant vacating an appraisal award.
The Court found that the case at hand “presents an unusual circumstance in which there is evidence to suggest that the appraiser/arbitrator (i.e. PwC) wanted to hear Gluck’s side of the story, and repeatedly asked for that opportunity, but may have been hindered by Yakuel.” Because the record was not sufficiently clear as to whether Gluck had a fair opportunity to present his case to PwC, the Court denied the parties’ cross-petitions pending further fact-finding.
In sum, the Court held that disputed issues of fact as to whether a party was prevented from presenting evidence to an appraiser precluded confirmation or vacatur of an appraisal award. The decision highlights a party’s right to participate in the appraisal process, and provides grounds upon which a party may oppose summary confirmation of an appraisal.
By Peter Y. Shakro and Muhammad U. Faridi
 Yakuel v. Gluck, No. 158184/2019, 2020 BL 176945 (N.Y. Sup. Ct. May 7, 2020).
 Id. at *1.
 Id. at *2.
 Id. at *3.
 Id. at *2.
 Id. at *3.
 Id. at *3 (quoting CPLR § 7601).
 Id. at *3-4 (quoting CPLR § 7601).
Yakuel, 2020 BL 176945, at *1.
 Yakuel, 2020 BL 176945, at *4.
 Id. (quoting Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471, 479-80 (2006)).
 Yakuel, 2020 BL 176945, at *5 (quoting Gervant v. New England Fire Ins. Co., 306 N.Y. 393, 399-400 (1954)).
 Yakuel, 2020 BL 176945, at *4 (quoting 9 U.S.C. § 10(a)(3)).
 Yakuel, 2020 BL 176945, at *5.