Bass, Berry & Sims attorney Chris Lazarini examined a case in which the plaintiff sought to vacate an adverse arbitration award claiming the arbitration panel misbehaved and prejudiced his rights under the Federal Arbitration Act (FAA). The court denied plaintiff’s motion, finding the claims were nonsensical and plaintiff failed to show prejudice.
Chris provided the analysis for Securities Online Litigation Alert (SOLA). 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 SOLA, please visit the SOLA website to sign up for the newsletter.
Doscher vs. Sea Port Group Secs., LLC, No. 15-CV-384 (S.D. N.Y., 12/6/17)
* If a party in arbitration believes that his rights have been prejudiced by the Panel, he should tactfully note the reasons for his belief on the arbitration record, lest he be found to have waived the right to file a post-Award challenge.
** A party seeking vacatur on grounds of arbitrator misconduct in discovery and other procedural matters bears a heavy burden in attempting to show prejudice and denial of fundamental fairness.
In 2013, Plaintiff brought an arbitration proceeding against his former firm for $15 million, in which he sought extensive discovery and filed numerous discovery motions, requests for depositions and requests for non-party subpoenas. The Panel granted some of Plaintiff’s motions and requests and denied others. Following a nine-day hearing, the Panel awarded Plaintiff $2.3 million, plus a commission on a potential trade if it settled (FINRA ID #13-01857 (NYC, 10/22/14)). Plaintiff then filed this case to vacate the Award, claiming that the Panel’s handling of discovery was misbehavior that prejudiced his rights under FAA §10(a)(3) and was in manifest disregard of the law. Plaintiff also sought to modify that portion of the Award pertaining to a commission on a potential trade, pursuant to FAA §11(a).
The Court denies the Petition and confirms the Award. First, the Court finds that the Panel did not abuse its broad discretion to manage discovery and did not violate §10(a)(3). Here, the Panel’s handling of Plaintiff’s multiple discovery motions and requests suggests careful consideration. Further, Plaintiff received ample discovery, and the Panel accepted into evidence all documents offered by Plaintiff. The Court also points to Plaintiff’s counsel’s affirmation that Plaintiff received a full and fair opportunity to be heard, which affirmation followed a lengthy discovery argument before the record was closed, as equal to a waiver of the right to make a post-Award challenge. It likens Plaintiff’s arguments to remorse for his own strategic decisions, not legitimate gripes with the Panel’s discovery rulings. Plaintiff also failed to carry his “heavy burden” of showing prejudice in the Panel’s actions.
Second, the Court quickly disposes of Plaintiff’s manifest disregard of the law argument, describing it as a re-hash of his §10(a)(3) argument. It deems Plaintiff’s argument that the Panel violated FINRA Rule 13505 to be nonsensical, because the Rule imposes obligations on the parties, not the Panel, and because FINRA rules are not law. Finally, the Court disposes of Plaintiff’s modification request, finding it a merits-based argument, which is not a proper basis for modification under §11(a).
SLC has followed this case. The District Court initially found it could not exercise subject matter jurisdiction by “looking through” the petition to the underlying dispute (SLA 2015-31). That decision was reversed and remanded after the Second Circuit re-visited its stance on the “look through” approach following Vaden v. Discovery Bank, 556 U.S. 49 (2009) (SLA 2016-33), where we predicted the outcome on remand.