Bass, Berry & Sims attorney Chris Lazarini commented on a case in which the Plaintiff attempted to vacate an arbitration award, claiming ineffective assistance from counsel. The Court confirmed the award, declining to equate Plaintiff's counsel's potential malpractice as "fraud" and affirming the acceptable grounds for vacating an arbitration award outlined in the Federal Arbitration Act.
Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.
Kelly vs. Morgan Stanley Smith Barney, LLC, No. 3:15-cv-1110 (M.D. Tenn., 2/25/16)
The recognized grounds for vacating an arbitration Award are limited, and the losing party may not rely on ineffective assistance from counsel, incompetent counsel, or attorney malpractice in support of his efforts to overturn an adverse Award.
This case concerns Plaintiff's efforts to vacate an arbitration Award issued against him in a promissory note case (FINRA ID #14-00415 (Nashville, 6/9/15)). On the day of the arbitration hearing, Plaintiff was not in attendance. The arbitration Panel gave his attorney, who was present, time to contact Plaintiff and offered to allow Plaintiff to testify telephonically or appear in person later in the day or on the following day. Ultimately, Plaintiff's attorney told the Panel that Plaintiff was not available and had declined to attend the hearing. Plaintiff's attorney requested a postponement, which was denied, after Morgan Stanley asserted that the hearing had been postponed once before, and the adverse Award subsequently issued.
Plaintiff argues that the Award was procured by "fraud and undue means," because his lawyer did not inform him of the arbitration hearing date, did not inform him of Morgan Stanley's discovery requests (to which no responses were provided), and did not inform him of the adverse Award. Plaintiff supported his motion with emails from his lawyer's law firm advising Plaintiff that his lawyer was incapacitated from practicing law because of a mental health issue, acknowledging that the lawyer failed to inform him of the Award, and advising him to take immediate action in light of the limited time allowed to seek vacatur and the potential consequences of failing to timely pay the Award. Plaintiff also provided the Court with an order from the Tennessee Supreme Court temporarily suspending his lawyer's law license.
Morgan Stanley requested confirmation of the arbitration Award and moved for judgment on the pleadings, arguing that misconduct by Plaintiff's lawyer is not grounds for vacatur. The Court agrees with Morgan Stanley, and confirms the Award. Rather than punishing Morgan Stanley, which had no role in the alleged "fraud or undue means," the Court notes the limited circumstances set out in the Federal Arbitration Act ("FAA") for vacatur and concludes that allowing Plaintiff to proceed would invent an entirely new ground for vacatur not present in the FAA.