Bass, Berry & Sims attorney Chris Lazarini provided insight about the timing of vacatur requests under the Federal Arbitration Act (FAA). In this case, citing the FAA, the court denied defendant’s vacatur arguments for failure to move for vacatur, and modification or correction within three months from the date the Award was filed or delivered. Because defendant failed to timely file a vacatur motion, he forfeited his right to judicial review and the court confirmed the award against him.

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.

Waddell and Reed, Inc. vs. McGaffey, No. 17-10728 (E.D. Mich., 1/23/18) 

*A party who fails to timely move to vacate an arbitration Award forfeits his right to a judicial review of the Award. 

**Unless there has been a vacatur, modification or correction, a court must grant a petition seeking confirmation of the Award. 

***While a court may set aside a default judgment, starting confirmation proceedings anew, the three-month time limit for vacatur motions continues to relate back to the date of the Award. 

In August 2016, a FINRA panel issued an Award for Plaintiff on its breach of contract claim, ordering Defendant to pay $243,986 in compensatory damages plus 10% interest per year until the award was paid (FINRA ID #15-01086 (Detroit, 8/23/16)). In March 2017, Plaintiff filed a Petition to Confirm with the Court. When Defendant did not timely respond, a default was entered. Defendant later appeared pro se, and the Court set aside the default without objection. Plaintiff then moved for judgment on the pleadings. In his response, Defendant attacked the Award for various reasons and asked the Court to vacate it.

The Court refuses to consider Defendant’s vacatur arguments. Citing FAA §12, it finds that Defendant failed to move for vacatur, modification or correction within three months from the date the Award was filed or delivered. Because Defendant failed to timely file a vacatur motion, the Court states, he forfeited his right to judicial review, and under FAA §9, the Court must enter an order confirming the Award. 

According to Defendant’s BrokerCheck Report, following entry of the adverse Award, Defendant (who had earlier been suspended by FINRA and ordered to pay restitution after obtaining an impermissible loan from a customer) sought relief from FINRA, claiming a bona fide inability to pay the award. His request was denied and he was suspended from associating with any member firm until the award was paid, a settlement was reached or the debt was discharged in bankruptcy.