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Henry v. Gregory Imbruce

Court of Appeals of Connecticut

December 26, 2017


          Argued September 18, 2017

          Richard S. Gora, for the appellants (defendants).

          Scott M. Harrington, with whom, on the brief, were Jonathan P. Whitcomb and Bridgitte E. Mott, for the appellees (plaintiffs).

          DiPentima, C. J., and Sheldon and Mullins, Js.


          DIPENTIMA, C. J.

         The defendants[1] appeal from the judgments of the trial court confirming an arbitration award in favor of the plaintiffs.[2] On appeal, the defendants claim that the court erred in denying their motion to vacate the award and in granting the plaintiffs' motion to confirm the award because the arbitrator failed to disclose a conflict of interest, failed to order production of certain evidence and exceeded her powers under the arbitration agreements. We disagree. Accordingly, we affirm the judgments of the trial court.

         The following facts, as set forth by the trial court in its April 11, 2016 memorandum of decision, and procedural history are relevant to this appeal. ‘‘These consolidated cases[3] arise out of the plaintiffs' investment in three limited partnerships: Giddings Oil & Gas, L.P. (Giddings, L.P.), Hunton Oil Partners, L.P. (Hunton, L.P.), and ASYM Energy Fund III, L.P. (ASYM, L.P.). The plaintiffs are investors and limited partners in each of these limited partnerships. Each of the limited partnerships had a general partner which is a limited liability company: Giddings Genpar, LLC (Giddings Genpar), Hunton Oil Genpar, LLC (Hunton Genpar), and ASYM [Capital] III, LLC (ASYM Genpar), respectively.

         ‘‘Each of the limited liability companies that served as a general partner of a limited partnership had a manager; the manager of Giddings Genpar was Giddings Investments, LLC, the manager of Hunton Genpar was Glenrose Holdings, LLC, and the manager of ASYM Genpar was ASYM Energy Investments, LLC. The plaintiffs in their complaint alleged that the individual defendant Gregory Imbruce . . . exercised complete control over the managers and therefore over the general partners and over the limited partnerships. The various companies which acted as general partners and/ or managers, as well as Imbruce individually, will be collectively referred to as the . . . defendants. The plaintiffs brought this action individually and derivatively on behalf of the three limited partnerships.

         ‘‘In their second amended complaint[4] (in docket number CV-12-6014987-S) the plaintiffs alleged various fact patterns pursuant to which they asserted that the . . . defendants have made misrepresentations in the marketing of the investments, that the . . . defendants have violated the provisions of the Connecticut Uniform Securities Act (CUSA), [General Statutes § 36b-2 et seq.], and that the . . . defendants have wrongfully diverted assets of the various limited partnerships to their own purposes or accounts. The second amended complaint sounds in [eleven] counts which seek both injunctive relief and monetary damages, alleging counts that sound in fraud, breach of fiduciary duty, conversion, civil theft, and violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42- 110b et seq., among other theories of relief. The prayer for relief in the second amended complaint seeks both equitable relief and monetary damages.

         ‘‘The case of Starboard Resources, Inc. v. Henry, Superior Court, judicial district of Stamford, Docket No. CV-12-6015112-S (Starboard case), is an interpleader action in which Starboard Resources, Inc. (Starboard), seeks, inter alia, an order of the court authorizing it to deposit the disputed shares in court and a judicial determination regarding the relative rights of the parties to those shares.

         ‘‘On July 11, 2014, the court granted the motion of the . . . defendants to stay these actions pending completion of arbitration proceedings, some of which had already begun. . . . Consistent with the court order staying this action, the parties proceeded to arbitration and by subsequent agreement broadened the arbitration beyond that which they had previously agreed to in their limited partnership agreements.[5] The parties proceeded with the arbitration before a single arbitrator.

         ‘‘On September 10, 2015, the arbitrator rendered an award in favor of the plaintiffs herein, who as respondents in the arbitration proceeding had filed a counterclaim, including allegations similar in nature to the allegations of the second amended complaint previously described. The award consisted of declaratory awards, monetary damages, awards of [attorney's] fees, interest, injunctive relief requiring an accounting, post-judgment interest, as well as awards of arbitration fees and costs.'' (Footnotes added and omitted.)

         On September 14, 2015, the plaintiffs filed a motion in the trial court to confirm the arbitration award. On October 13, 2015, the defendants filed an objection to the plaintiffs' motion to confirm the award and a cross motion to vacate the award accompanied by scores of exhibits. A flurry of procedural and substantive filings followed, until, on February 8, 2016, the court held a hearing on the parties' respective motions. The court, after further briefing, rendered judgments in accordance with the arbitrator's decision on April 11, 2016, confirming the arbitral award. This appeal followed. Additional facts and procedural history will be set forth as necessary.

         We begin with applicable legal principles. The court found, and the parties agree, that these cases, though brought in state court, are governed by the federal Arbitration Act, 9 U.S.C. §§ 1 through 16 (arbitration act), because the underlying contracts involve interstate commerce.[6] ‘‘Arbitration is essentially a creature of contract, a contract in which the parties themselves charter a private tribunal for the resolution of their disputes. . . . Arbitration agreements are contracts and their meaning is to be determined . . . under accepted rules of [state] contract law . . . .

         ‘‘Judicial construction of an arbitration agreement, however, is not guided solely by the principles of relevant state contract law. The arbitration act; 9 U.S.C. §§ 1 through 16; governs written arbitration agreements that pertain to contracts involving interstate commerce. . . . The arbitration act creates a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [a]ct . . . . As federal substantive law . . . the arbitration act is to be applied by state courts as well as by federal courts. . . .

         ‘‘The purpose of the arbitration act is to ensure that private agreements to arbitrate are enforced according to their terms. . . . The arbitration act establishes a strong federal policy favoring arbitration. . . . [W]hen Congress passed the [a]rbitration [a]ct in 1925 . . . [i]t intended courts to enforce [arbitration] agreements into which parties had entered . . . and to place such agreements upon the same footing as other contracts . . . .'' (Citations omitted; footnote omitted; internal quotation marks omitted.) Hottle v. BDO Seidman, LLP, 268 Conn. 694, 701-703, 846 A.2d 862 (2004).

         Accordingly, the court's review of an arbitration award is ‘‘extremely limited.'' Burns International Security Services, Inc. v. International Union, United Plant Guard Workers of America (UPGWA) and its Local 537, 47 F.3d 14, 17 (2d Cir. 1995). Courts may vacate an arbitrator's decision ‘‘only in very unusual circumstances.'' First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). ‘‘Following issuance of an arbitration award, § 9 of the [arbitration act] provides that a party may apply to a [trial] court ‘for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.' '' STMicroelectronics, N.V. v. Credit Suisse Securities (USA), LLC, 648 F.3d 68, 74 (2d Cir. 2011). ‘‘Only a barely colorable justification for the outcome reached by the arbitrators is necessary to confirm the award.'' (Internal quotation marks omitted.) D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006). Accordingly, ‘‘[a] party petitioning a . . . court to vacate an arbitral award bears the heavy burden of showing that the award falls within a very narrow set of circumstances delineated by statute and case law.'' Duferco International Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003). Specifically, under the arbitration act, an arbitration award may be vacated only ‘‘(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.'' 9 U.S.C. § 10 (a) (2012).[7]

         Given these limitations on a court's review of the arbitration award, ‘‘[w]e review a [trial] court's decision to confirm or vacate an arbitration award de novo on questions of law and for clear error on findings of fact.'' National Football League Management Council v. National Football League Players Assn., 820 F.3d 527, 536 (2d Cir. 2016); see also Kellogg v. Middlesex Mutual Assurance Co., 326 Conn. 638, 645, 165 A.3d 1228 (2017) (reviewing trial court's vacatur de novo). We turn now to the defendants' claims.


         The defendants first claim that the court should have vacated the arbitration award because the arbitrator failed to disclose a conflict of interest. Specifically, the defendants argue that the arbitrator was required to disclose the fact that she had arbitrated the personal divorce of an attorney, Kenneth Votre, who represented Imbruce and Glenrose Holdings, LLC, in a separate but related malpractice action. We do not agree.

         An arbitration award may be vacated ‘‘where there was evident partiality or corruption in the arbitrators . . . .'' 9 U.S.C. § 10 (a) (2) (2012). ‘‘Evident partiality may be found only where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration. . . . Although a party seeking vacatur must prove evident partiality by showing something more than the mere appearance of bias . . . [p]roof of actual bias is not required. . . . Rather, partiality can be inferred from objective facts inconsistent with impartiality. . . . A showing of evident partiality must be direct and not speculative.'' (Citations omitted; internal quotation marks omitted.) Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 104 (2d Cir. 2013). The party seeking vacatur must prove evident partiality by ‘‘clear and convincing evidence.'' Id., 106. ‘‘[T]he evident-partiality standard [is] not satisfied because the undisclosed relationship at issue was too insubstantial to warrant vacating the award. . . . [W]here an undisclosed matter is not suggestive of bias, vacatur based upon that nondisclosure cannot be warranted under an evident-partiality theory.'' (Citations omitted; internal quotation marks omitted.) Scandinavian Reinsurance Co. Ltd. v. Saint Paul Fire&Marine Ins. Co., 668 F.3d 60, 72-73 (2d Cir. 2012). Indeed, ‘‘there is no duty to disclose if the relationship is trivial.'' Uhl v. Komatsu Forklift Co., Ltd., 512 F.3d 294, 307 (6th Cir. 2008). Nevertheless, ‘‘arbitrators must take steps to ensure that the parties are not misled into believing that no nontrivial conflict exists. It therefore follows that where an arbitrator has reason to believe that a nontrivial conflict of interest might exist, he must (1) investigate the conflict . . . or (2) disclose his reasons for believing there might be a conflict and his intention not to investigate. . . . [A] failure to either investigate or disclose an intention not to investigate is indicative of evident partiality.'' (Citations omitted.) Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132, 138 (2d Cir. 2007).

         The defendants argue that the purported conflict was nontrivial and that the arbitrator misled them into believing that no nontrivial conflict existed. Specifically, the defendants contend that they were misled because the arbitrator's initial disclosures at the start of the arbitration suggested that she considered any prior arbitral relationships to be per se nontrivial, but the arbitrator then failed to disclose her arbitral relationship with Attorney Votre. We are not persuaded. ...

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