By Leslie King O’Neal
Court Vacates Award for Perjured Testimony & Withheld Documents
Vacating an arbitration award under the FAA is extremely difficult. It’s nearly impossible to vacate an arbitration award after a court confirms it in part. However, evidence of perjured testimony at arbitration and withheld documents led a federal judge to do just that.[i] The party moving to vacate persistently sought correspondence and emails showing the perjured testimony in an ancillary bankruptcy proceeding.[ii] The court applied equitable tolling, allowing late filing of the motion to vacate[iii] because Eletson attempted to conceal its wrongdoing, frustrating Levona’s effort to bring a timely claim.
The Eletson Holdings v. Levona Holdings Dispute
The Eletson Holdings case was a complicated and long-running dispute regarding ownership of a limited liability company specializing in the transport of liquefied petroleum gas.
The Agreements
Eletson entered into a Limited Liability Company Agreement (LLCA) regarding company management and control and the rights to its profits with Blackstone. Levona purchased Blackstone’s interest in the LLCA. The LLCA had a broad arbitration clause requiring arbitration of all disputes arising from or related to the Agreement before a single arbitrator.[iv] JAMS administered the arbitration under its Comprehensive Arbitration Rules and Procedures.
Eletson had significant financial problems[v], leading Levona and several Eletson-related companies to sign a Binding Offer Letter (BOL) with a Purchase Option. Under the BOL, Levona lent Eletson up to $10 million, in exchange for rights to two of Eletson’s vessels. Under the Purchase Option Eletson could regain control of the company if it performed specific obligations and gave written notice within a specified deadline. If the notice was not properly served, the option lapsed.
The Arbitration
A key issue in the arbitration was whether Eletson exercised the Purchase Option. It was undisputed Eletson did not send the required written notice. However, Eletson argued it notified Levona it was exercising the option at a board meeting. Based on witness testimony about the board meeting and its agenda, the arbitrator found Eletson provided the notice that way.
Perjured Testimony is Fraud
However, Eletson withheld documents—later produced in an ancillary bankruptcy case–that proved this testimony was false.[vi] In the motion to vacate hearing, the court found the evidence “clearly and convincingly” showed three Eletson witnesses committed perjury regarding the Purchase Option.”[vii] This testimony was material; the Purchase Option was a dispositive, critical issue in the arbitration. The court found the circumstantial evidence was “overwhelming and undisputed” that the false testimony was given to mislead the Arbitrator and constituted fraud.[viii]
Fraud as to Document Production
Levona also argued that Eletson committed fraud by withholding and concealing documents that would have allowed Levona to challenge Eletson’s witnesses at arbitration, depriving Levona of a full and fair arbitration. Under the JAMS Rules, the parties were to exchange relevant, nonprivileged evidence.[ix] The Arbitrator’s first order required the parties to cooperate in good faith to exchange all non-privileged documents. “Levona has established through circumstantial evidence that these discovery failures were intentional, and therefore fraudulent.”[x] Levona showed this was not a few documents that fell through the cracks, but rather dozens of documents.
Arbitration Discovery is Informal– But Not Meaningless
The Court rejected Eletson’s argument that their discovery deficiencies were due to the informality of the arbitration discovery process. “. . . [T]he informality of the arbitration process should not be confused with the license to willfully violate the disclosure obligations of the arbitration tribunal.”[xi] “The documents produced . . . clearly demonstrate the perjurious nature of the principals’ testimony at the arbitration.”[xii]
Court Holds Eletson Committed Fraud—Vacates Award
The court vacated the award, finding clear and convincing evidence that Eletson committed fraud in the arbitration and on the Arbitrator that was material to the result and that Levona could not have discovered even with due diligence. The fraud denied Levona a fair hearing.
Eletson’s Parallels with Other Cases
The Eletson Holdings case has quite a bit in common with NuVasive, Inc. v Absolute Medical[xiii]
In both cases, courts vacated arbitration awards for fraud regarding a material element in the proceedings. The evidence of fraud was uncovered in discovery in ancillary litigation. In both cases, the court applied equitable tolling to allow filing motions to vacate after the statutory three-month window because the guilty parties blocked attempts to gather the evidence.
Takeaways
- Discovery in arbitration is informal but this informality is not license to violate disclosure obligations. Withholding critical evidence can be considered fraud.
- If a party or counsel becomes aware of possible fraud in an arbitration proceeding, investigate immediately. Parties must show they used due diligence in investigating potential fraud.
- Request documents or witness testimony as part of the investigation. Document all efforts to obtain evidence and any resistance.
- If there is sufficient evidence of fraud, file a motion with the arbitration panel or a motion to vacate with the court as soon as possible.
[i] Eletson Holdings, Inc. etc. et. al, v. Levona Holdings, Ltd. (Case No: 23-cv-7331)(LJL) (DC SDNY Jan. 12, 2026) (hereafter “Eletson Opinion”)
[ii] “Eletson constructed extraordinary obstacles to prevent Levona from uncovering its fraud. Levona time and again asked for the documents that might show that Eletson had withheld material evidence from the arbitrator. And Eletson time and again engaged in efforts to frustrate Levona from obtaining that evidence. It initially argued that Levona was not entitled to the documents because it was not a party to the Bankruptcy Proceedings. When Levona submitted a claim in the Bankruptcy Proceeding and signed the Protective Order, which would enable it to receive the documents that had been produced in that matter, Eletson then raised an objection to Levona’s right to participate as a creditor. It objected to Levona viewing the documents and objected to the production of additional documents. It objected to Levona presenting the documents to this Court. Throughout the proceedings, it made threats that Levona was in breach of the Protective Order and that it would be in further breach of that order (and subject to sanctions) if it revealed the contents of the documents to this Court. See Dkt. No. 67-52; Dkt. No. 127-16 at 41. Throughout, it also made meritless and arguably frivolous arguments that the documents were not relevant to these proceedings.” Eletson Opinion p. 133.
[iii] FAA §12 requires motions to vacate be served within three months after the award is filed or delivered.
[iv] Arbitration was designated as the “exclusive and binding method” for resolving any such dispute between the parties. LLCA § 12.14(b)
[v] By early 2022, five Eletson Gas ships—over a third of its fleet—had been arrested by various creditors for non-payment of its liabilities. Multiple arrested ships were scheduled to be sold at auction to compensate creditors.
[vi] “It is now clear from the documents that were not produced but should have been produced during the arbitration and from the evidence produced in discovery here that Eletson’s story and the testimony it offered in support of that story was an invention.” Eletson Opinion at 78.
[vii] Eletson Opinion at 88.
[viii] The Court’s 138 opinion discusses false testimony by Eletson’s witnesses on other issues. Eletson Opinion at 106-110.
[ix] Rule 17(a) JAMS Comprehensive Arbitration Rules and Procedures.
[x] Eletson Opinion at 116.
[xi] Eletson Opinion at 119.
[xii] Eletson Opinion at 122.
[xiii] 71 F.4th 861 (11th Cir. 2023).