Vos Iz Neias - May 04, 2009

Queens, NY - Judge: Local Esrog Distributor Bound by Israeli $66,000 Judgment Against Him

By VosIzNeias Editor

Queens, NY - A New York-based distributor of esrog, a fruit used by Jews during the observance of Sukkot, the ancient harvest festival holiday, must abide by an Israeli arbitrator's $66,000 judgment against him, a federal judge in New York has decided.

New York courts are generally prohibited from disturbing awards made by foreign arbitrators under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. But None of that are present in this dispute over the esrog, which is Hebrew for "citron," said Eastern District Judge Brian Cogan.

"Respondent cannot use this Court to obtain a second bite of the esrog," he wrote.

Yaakov Harlap of Queens, N.Y., ordered esrog from Israeli grower Betzalel Schwartzman. Harlap, also identified as Jacob Charlap, contended that the esrog was substandard and that he had not agreed to pay for part of the shipment under a 2005 contract with Schwartzman. He also maintained that Schwartzman violated a clause making Harlap the exclusive U.S. distributor of Schwartzman's esrog by selling fruit to another U.S. outlet.

Both sides agreed in a handwritten note on the contract that Rabbi Eliezer Stern of Western Bnei Brak, Israel, would arbitrate any disputes over the transaction.

Stern ruled that Harlap owed Schwartzman $66,000, a finding that was challenged in Israeli courts before the action was withdrawn and resubmitted to Stern. Rabbi Stern ultimately affirmed his initial determination against Harlap.

In addition to challenging the substance of Stern's decision, Harlap contends Stern was biased against him because Stern provided the hakosher, or kosher certification, on the esrog grown in Schwartzman's orchard.

Harlap argued that he did not know about the relationship between Stern and Schwartzman until after Stern made his first arbitral determination.

Judge Cogan wrote that it is a "fundamental aspect" of U.S. policies on arbitration that arbitrators must disclose any relationships that could compromise their impartiality. But the judge added that the 2nd U.S. Circuit Court of Appeals has avoided "dogmatic rigidity" when interpreting the impartiality of arbitrators and has rejected efforts to avoid recognition of arbitrators' rulings when a complaining party knew or should have known about a relationship involving an arbitrator and a party.

"The motivating concern of these cases is that an arbitral litigant should not be allowed to sit back, hope for a successful outcome, and then raise the alleged non-disclosure only if he is unhappy with the result," Judge Cogan wrote.

The contract provided for Stern or the Belz rabbinical group to declare the esrog kosher, which added significantly to their value when distributed in the United States. Harlap should have known that Stern would receive a fee from Schwartzman for doing so, Judge Cogan held.

"Respondent's argument boils down to his contention that at the time he signed the agreement, he knew it was possible, and allowable, for Rabbi Stern to give the kosher certification, but he did not know, at the time of the arbitration, that it had actually happened," Judge Cogan wrote. "That does not matter."

The judge noted that Harlap raised the same non-disclosure argument in the Israeli court that he advanced before Judge Cogan.

"He then withdrew that objection and agreed to resubmit the matter to the very same Rabbi Stern about whom he is now complaining," Judge Cogan wrote. "There is no doubt that even if respondent originally had a valid complaint of non-disclosure, which I hold he did not, he waived that right by resubmitting the dispute back to Rabbi Stern with full knowledge that Rabbi Stern had been engaged to give the kosher certification."

Harlap is seeking to appeal Judge Cogan's ruling. The businessman contends that the judge, who ruled from submissions in the case, did not have accurate information about the court proceeding or arbitration in Israel.

Harlap, who appeared pro se, argued that he did not adequately get to tell the judge his side of the story.

"We were not given the opportunity to represent ourselves," he said in an interview.

Darren Oved of Oved & Oved praised Judge Cogan for weighing and rejecting Harlap's claims without allowing the Eastern District court to be used to "raise all the same issues over and over again" that were settled by arbitration in Israel.

"His decision was detailed, it was thorough," Oved said in an interview. "[The judge] went through the law properly."

Judge Cogan rejected Schwartzman's request that Harlap pay attorney's fees. Harlap's "mild opposition" to paying the $66,000 "does not nearly constitute the kind of bad-faith conduct" to merit the award of attorney's fees, the judge said.

 

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