Arbitration Update

The U.S. District Court for the Southern District of New York upheld an arbitration award over cancellations by rapper of Lil Jon of concerts in Japan. Smith v. Positive Productions, 05 Civ. 3748 (MBM). Lil Jon didn't appear at the arbitration hearing, after which the arbitrator awarded concert promoter Positive Productions $184,000 in lost profits, $138,000 in concert-related expenses, $50,000 for loss of reputation and business, as well as $7,874 in legal fees. In his petition challenging the award, Lil Jon claimed that the arbitrator had acted in “manifest disregard” of New York law. But the district court noted: “A cynic would view the arbitrator's award of lost profits as a simple rubber-stamping of Positive's claim of $130,000 in lost profits from the March [2004] shows and $54,000 in losses from the replacement shows. However, the court's standard of review is far more forgiving, and where, as here, it happens that the arbitrator's decision has as at least a 'barely colorable justification' in the record, the award must be confirmed. … In awarding Positive $138,000 in expenses, there is little question that the arbitrator relied on Positive's balance sheet … [But] Smith does not cite a legal rule, let alone a clear and established one, barring the inclusion of fixed costs in an award of expenses.” And though damages to reputation usually can't be recovered under New York law for breach-of-contract claims, the court found that post-Lil Jon-cancellation correspondence from complaining third parties that had done business with Positive Productions was “proof of specific harm arising from the loss of reputation”.