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.
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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Stern ruled that Harlap owed Schwartzman $66,000, a finding that was challenged in Israeli courts before the action was withdrawn and resubmitted to Stern.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.
This is a classic case of venue shopping. While he was probably naive to believe that a some rebbe in EY could be relied upon to provide a fair arbitration of disputes, that is what he agreed to and now he has to live with that outcome. In the future, these kinds of commercial disputes should be decided in civil courts where judges cannot have a business relationship with one of the parties to the case.
We shouldn’t be importing esrogim from EY when they can be grown in Florida and California where the courts would be fair to the distributor.
Why didn’t Charlop demand a bais din in Israel?
Why bring the case before a non-jewish court in US?
Trust this hechsher?
I’m embarrassed that a Rav would take a case of someone who literally pays his paycheck….It makes me loose trust in “the system”
I’ve done business with Yaakov and I’m assuming based on the article and out dealings that as a good vendor (that he is) he was trying to assure that his customers get a decent product…
But I shouldn’t assume..
I’m wondering (cause I didn’t see it in the article) what happened to the product?? was is sold? was it returned?
unbelievable that people think a civil court would be more fair than a bais din. besides rav stern is a well known posek in eretz yisrael, not some third rate guy. i don’t believe that just because he gives shwatzman a hechsher he would change his psak for him in a momoinis shayla.
Charlop is a great guy. Sounds like the esrog cartel has it out for him.
why do you think stern was wrong.its a kiddush hashem that the court upholds beis dins psak.the judges ffrom that side of the bench know that beis din is usually fair
The judge probably erred in his decision here from a lrgal standpoint. In his ruling he quotes Lucent Technology versus Tatent but there were huge differences in that case and in this case. In the Lucent case the arbitrator had a past relationship with the other party that had terminated five years earlier – in the Charlap case Rabbi Stern had and has a continual relationship. This may, in fact, quite likely constitute something called “Evident Partiality.” Secondly, in the Lucent case the arbitrator did provide a disclosure form documenting the relationship he had with the other party. The form was provided to the American Arbitration Association. It is just that they did not ask for all forms from AAA. In this case, it may be that Rabbi Stern did not disclose the relationship.
Charlap certainly has grounds for an appeal here. This is an extremely important case for all that are interested in how courts view Piskei Bais Din.
Mr. Hoffman,
I don’t think the judge erred here at all. If you read the decision carefully, you will see that the complaining party raised the issue of bias in the Israeli courts, withdrew the case and then went back to the Rav with clear knowledge of the relationship. His actions constitute a knowing waiver of the issue.
I am not taking sides here. I am merely voicing my opinion on Charlap’s chances on appeal
The US vendor was not aware that the dayan was also the Rav HaMacshir?
I find that very, very hard to believe.
I would therefore assume that he went to Rav Stern fully aware of Rav Stern’s ties to the other party and indicated to Rav Stern that he accepted him as a dayan with full knowledge of his relationship to the other party. There is no problem with Rav Stern taking the case under that circumstance.
I don’t know if Charlap knew about Rav Stern’s ties. Rav Stern knew about Rav Stern’s ties. How could he take the case?
The appearance of impropriety can often be as bad as impropriety itself.
Can any of you tell me that they can picture any of the gedolai yisroel they had personal contact with accepting to be a dayan when they had such negi’us?
It is a well known fact in Israel that Shwartzman used to sell his field to two people every year despite the fact that he had an exclusive agreement with one of them.
He always had the Belz Hechsher up until 2005 when Shwartzman & Charlap agreed to go to Rav Stern. In 2006 by the time Stern actually heard the case, Belz had removed the Hechsher to be replaced by Stern. Since it was mid-season, no one realized the change. Stern should have immediately removed himself from the case. In 2007 Shwartzman was forced to sell his business to someone else in Israel.
I guess he ran out of people to rip off !