Claimant and Respondent are engaged in a series of disputes arising from interlocking agreements they entered into with the purpose of resolving the distribution between them of the assets of the "Manios Group", and particularly that portion of those assets comprising the estate of their late brother, Dimitri Manios. For present purposes, and assuming the Parties’ ample familiarity with their terms, the relevant agreements are referred to as the "London Agreement" and the "U.S. Agreement." The former contained a Greek forum selection clause covering disputes arising under its terms; the latter provided for arbitration in the United States of certain disputes arising under its provisions. The Parties have exchanged motions the common gravamen of which is to define the proper scope of this arbitration—which is brought pursuant to the U.S Agreement—and to resolve the manner in which it shall proceed.
The contractual provisions invoked by the Parties have been the subject of controversies before the state and federal courts in New York. The decisions of those courts interpreting the contractual provisions, and in some instances characterizing the nature of the disputes raised, constitute binding authority in this proceeding.
After studying the Parties’ extensive briefs and other submissions and their presentations at an extended hearing devoted to oral arguments, it has become apparent to the Tribunal that, however the technical issues are framed, the real problem before it is not so much interpreting the two governing agreements and respecting the judicial gloss on their provisions (all of which is reasonably straight-forward), as it is divining the exact character of the claims before it from the submissions of the Parties. In particular, the activities of one Spyros Contogouris complicate this issue. Contogouris is claimed to have been Respondent’s agent during the relevant period. It is also alleded that vast amounts of assets Subject to division between the Parties which have not been accounted for were either stolen by Contogouris or dissipated by him. Claimant alleges that these misappropriations were either done for the benefit of Respondent or are chargeable to him because of his claimed intimate familiarity with the conduct of the businesses from which the assets disappeared. Respondent asserts that the Claimant is trying to chase in this arbitration claims against third parties for conversion and mismanagement that the London Agreement assigns to the Greek forum.
This decision and order determines the contours of the arbitration before the Tribunal and establishes the procedural framework within which it shall proceed. In doing so, it does not adopt rigorously the categories used by the Parties in their respective motions, but, rather, draws on the broad authority vested in it to shape the proceedings to achieve a fair and reasonably expeditious determination on the merits that is consistent with the governing contract language and judicial decisions (see, e.g., AAA Comm. Rule 30 (a), (b)). Accordingly, the motions are collectively disposed of as hereafter described.
In the U.S. Agreement, the Parties agreed to a procedure by which they would "distribute equally" between them the assets covered by its terms that were still in existence, and determine what payments should be made inter sese "to ensure that [they] have shared equally in the income and other benefits of [those assets] from April 9, 1995 [the date of the death of Dimitri Manios] through the date of the London Agreement."(Section 9) The, initial step was to engage an accountant to prepare a report in the detail specified in Section 7 of the agreement that would provide the data necessary to permit the division of assets and prior benefits to be adjusted as the agreement commanded. The Parties were required to cooperate, as specified, in providing the information needed by the accountant to perform this function. If the accountant was unable to complete such a report through no fault of Claimant, or if after such a report had been issued, the Parties were unable to agree on the distributions its terms indicated, this arbitration was assigned the task of determining the appropriate distributions. (Section 10)
The accountant failed to render a report for lack of sufficient evidential support for the findings it was called upon by Section 7 to make. While no charge has yet been leveled by Respondent that such failure was "for any reason...attributable to an act or omission of Claimant" (Section 10) the Tribunal does not regard Respondent as having waived its right to do so. If so advised, it may do so by filing an amended pleading promptly after the issuance of this Order detailing with specificity any claimed act or omission of Claimant that, pursuant to Section 10, would bar the further prosecution of this proceeding. For the sake of convenience, however, and to inform the Parties of the Tribunal’s resolution of the issues that have in fact been submitted, this decision proceeds on the record as it presently appears.
It is common ground that certain of the distributions of assets contemplated by Section 9 are impossible because those assets no longer exist. The dispute thus devolves to one about the "Party Distribution", defined in Section 9 as being "the extent to which either [Respondent or Claimant] has received a disproportionate share of prior income or other distributions in respect of [the named American assets] from April 9, 2005 through the date of the London Agreement, and the amount of such excess benefit...."
Claimant charges that many of the missing assets were diverted, and much of the revenue stream from them deployed, for the benefit of Respondent by the activity of Contogouris. She alleges that Respondent conspired with Contogouris to loot the assets and income derived from them during the relavant period, for his own benefit, and thus "received a disproportionate share" of such benefits. She contends that this allegation falls squarely within the authority-limited, though it may be—of this Tribunal, and that the proceedings should determine whether the charge is supported by the evidence and, if so, award what the New York court has called "compensatory damages." Zachariou v. Manios, 50 A.D 3d 257 (1st Dept. 2008). The Tribunal concurs. Claimant is entitled to show, if it can, by a preponderance of the credible evidence, that Respondent was the beneficiary of clandestine distributions from the covered American assets, and to require their equal division in the same manner as described by the U.S. Agreement for Party distributions that were openly made. The various provisions of the London and American Agreements do not stand for the proposition that Respondent can elude enforcement of his obligations under the U.S. Agreement by acting with stealth.
The burden of proof that such "Party Distributions" exist—clandestine or otherwise—is ultimately borne by Claimant. It can be sustained, of course, by a traditional mode of actually tracing the missing or diverted assets into Respondent’s pockets or into projects in which Respondent was a principal beneficiary. It could also be sustained by offering credible evidence that assets or proceeds had disappeared under specific circumstances that, if not explained or refuted by Respondent, would lead to a reasonable inference that they were obtained by him or used for his benefit.
Such a showing would shift the burden of going forward with explanatory or exculpatory evidence to Respondent, although the ultimate burden of proof would remain, at the end of the hearings, on Claimant.
Under this view of the matter, some predicate showing of the kind described above is needed to require Respondent to come forward with an account (in the non-technical sense of the word) of where missing assets and proceeds went. A showing that funds or assets disappeared while Respondent had knowledge and control of the business superior to Claimant, or that his agent might have been responsible for the disappearance does not suffice by itself to establish that which the U.S. Agreement identifies as the trigger of an Award here—that Respondent "received" a disproportionate share of income or distributions from the covered properties. All other theories of recovery are remitted by the London Agreement and the binding judicial decisions, to Greek fora.
The order of proof, therefore, will be that customary in art arbitration, with Claimant first advancing her proof consistent with the guidelines set out herein, Respondent next offering his defense, and Claimant having an opportunity to conclude with rebuttal.
One ancillary issue deserves mention in light of the peculiar circumstances of this case. One can anticipate that Claimant may seek to have adverse inferenced drawn from the possible failure or refusal of Respondent to produce documents on witnesses. There are conventional rules for drawing such inferences upon a proper showing, and they are not suspended in this case. The showing upon which the inference is sought in any particular situation, however, must be given particular scruitiny to avoid any later claim that the rule was used too liberally as a device for avoiding the limitations on the Tribunal’s authority that we find obligatory under the U.S. Agreement and the relevant cases.
Respondent has asserted a series of counterclaims. The Tribunal has reviewed them, and the arguments concerning them, thoroughly. To the extent that Respondent continues to assert them, they lie manifestly outside the scope of the arbitration allowed by the U.S Agreement, and they are, accordingly, dismissed. Denominating them as "offsets" to recovery to which Claimant might otherwise be entitled does not save them in this case with its very specific arbitration clause. Like other claims the Parties have lodged against each other during the long life of this dispute, such claims must be vindicated, if at all, in a different forum.
The motions are disposed of in accordance with this decision. The Parties are directed to meet and confer with a view to presenting to the Tribunal an agreed schedule of proceedings consistent with its terms. Such an agreed plan shall be delivered to the Tribunal by Friday, July 23, 2010 for its review and approval. In the event there are any points of disagreement between the Parties, the plan so far as agreed upon shall be presented by that date, accompanied by a short report from each Party specifying the areas of disagreement and the respective Party’s position thereon.
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