Opinion
11-P-959
03-01-2012
AUGUSTO H. ANDRADE, JR., & another v. MICHAEL EWANOUSKI & another.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28, issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Augusto and Maria Andrade (plaintiffs) appeal from a Superior Court judgment that confirmed an arbitration award in favor of Michael Ewanouski and Wachovia Securities, LLC (collectively, defendants). They allege that (1) the trial judge erred in failing to strike findings in the award on claims that were not eligible for arbitration, or in the alternative, not vacating the award; and (2) their arbitration-ineligible claims should be permitted to be pursued in court. For the reasons stated below, the judgment is affirmed.
Appellate review of a judge's decision to confirm an arbitration award is de novo. Cybulski v. Vaiani, 75 Mass. App. Ct. 382, 384 (2009).
Background. We rehearse the relevant facts. In 2000, the plaintiffs opened an investment account with Ewanouski, a registered representative and branch manager at what is now known as Wachovia Securities, LLC. The plaintiffs' profile contained several critical errors, including the type of investment sought. The plaintiffs' funds were placed in investments with an above average degree of risk. The relationship between the plaintiffs and defendants deteriorated as a result of the investments' poor performance and loss of money. On June 1, 2007, the plaintiffs submitted a statement of claims in arbitration against the defendants to the Financial Industry Regulatory Authority (FINRA). The arbitration panel rendered its decision on April 13, 2010, dismissing all but two of the plaintiffs' claims.
The plaintiffs prevailed on those claims.
Discussion. 'Once in the arena of arbitration, the powers of the arbitrator concerning the issue are wide and the scope of judicial review of the arbitration proceedings is narrow.' Grobet File Co. of Am., Inc. v. RTC Sys., 26 Mass. App. Ct. 132, 135 (1988). Absent fraud, courts are strictly bound by arbitrators' findings and legal conclusions. Lynn v. Thompson, 435 Mass. 54, 61 (2001). See Grobet File Co. of Am., Inc., supra.
The plaintiffs make no argument that the arbitration decision was tainted by fraud or other procedural irregularity. Rather, the plaintiffs contend that the panel exceeded its authority by recording findings on ineligible matters, i.e., they overstepped its authority in its interpretation of FINRA Code of Arbitration rule 12206(a) & (b). Compare Scott v. Commerce Ins. Co., 62 Mass. App. Ct. 416, 419-420 (2004).
See Sheriff of Suffolk County v. AFSCME Council 93, Local 419, 67 Mass. App. Ct. 702, 705-706 (2006), quoting from School Dist. of Beverly v. Geller, 435 Mass. 223, 228 (2001) (''The courts are not authorized to reconsider the merits of an award even though' it is wrong on the facts and the law, no matter if it is a wise or foolish decision').
During arbitration, the panel found that many of the plaintiffs' claims were barred for lack of jurisdiction. While the panel expounded in the award on matters that were not eligible for arbitration, the arbitrators did not exceed the scope of their authority. The plaintiffs brought the ineligible claims, thereby giving the panel the power to discuss its dismissal of those matters. See and compare Local 589, Amalgamated Transit Union v. Massachusetts Bay Transp. Authy., 392 Mass. 407, 412 (1984) (whether an arbitrator exceeded his authority 'depends upon what matters were properly before him for consideration'). Indeed, the panel's statement explains why the statute of limitations could not be tolled, as it found that the defendants did not engage in the requisite conduct for tolling to apply. The plaintiffs challenge the panel's assertion that 'the Panel does not find that [the defendants] engaged in fraudulent activity or acted in bad faith.' However, the panel's determinations in this regard 'are impregnable 'short of fraud, arbitrary conduct, or significant procedural irregularity." Dadak v. Commerce Ins. Co., 53 Mass. App. Ct. 302, 306 (2001), quoting from Grobet File Co. of Am., Inc., 26 Mass. App. Ct. at 135. The remarks made offered no relief. The panel responded to the plaintiffs' arguments, as required by FINRA Code of Arbitration rule 12904(e).
In accordance with FINRA Code of Arbitration rule 12206(a), the panel was precluded from evaluating claims beyond six years, which in this case were activities prior to June 1, 2001.
In their response to the defendants' motion to dismiss, the plaintiffs specifically requested that the arbitrators rule on all matters and argued that the statute of limitations was tolled due to the defendant's fraudulent behavior.
Securities arbitrators will generally be deemed to be acting within their powers when they interpret their own statutes and regulations. See Weston Sec. Corp. v. Aykanian, 46 Mass. App. Ct. 72, 78-79 (1998).
Therefore, the trial judge appropriately denied the plaintiffs' claims that the panel improperly made findings on ineligible matters. As previously noted, a judge's ability to disturb an arbitration award is narrow. Under the Massachusetts Uniform Arbitration Act, G. L. c. 251, § 13(a), amended by St. 1972, c. 200, § 2, a court may only modify or correct an award if '(2) the arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted.' Those exceptions do not apply here.
While the arbitration award will stand, the plaintiffs cannot be compelled to arbitrate on matters deemed ineligible. See Hague v. Piva, 61 Mass. App. Ct. 223, 229 n.7 (2004) ('[A] court should not compel arbitration of all claims by an arbitrator . . . who cannot or will not consider all claims'). See and compare Chief Administrative Justice of the Trial Ct. v. Service Employees Intl. Union, 383 Mass. 791, 794 (1981) (the court must not decide the merits of a dispute when the claims are arbitrable). FINRA Code of Arbitration rule 12206(b) specifically states that 'dismissal of [claims] . . . does not prohibit a party from pursuing the claim in court.' In this case, the panel clearly stated that the claims were not arbitrable, thus, the plaintiffs can file suit in the Superior Court. However, we will not disturb the arbitration award at this juncture.
Judgment affirmed.
By the Court (Graham, Brown & Meade, JJ.),