Opinion
No. 3:01-CV-2578-L
April 25, 2002
CONCLUSIONS AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Petitioner, Don J. Yen, brings a petition to vacate an arbitration award pursuant to the Federal Arbitration Act, 9 U.S.C. § 10. Respondent, John A. Brown, filed a response to the petition and a cross-petition to affirm the arbitration award pursuant to 9 U.S.C. § 9. This proceeding was referred to the United States Magistrate Judge pursuant to 28 U.S.C. § 636 and an order of the Court. The conclusions, and recommendations of the United States Magistrate Judge follow:
Factual Background
This proceeding arises from a dispute that was submitted to arbitration in accordance with the Rules of the National Association of Securities Dealers ("NASD"). The style of the dispute was Claimant John A. Brown ("Brown") vs. Mark Maqueda ("Maqueda"), Robert DeMarsico ("DeMarsico"), Don J. Yen ("Yen"), William Thedford ("Thedford"), all of whom were associated persons with TYM Securities, Inc. ("TYM"), a member firm of the NASD, and TYM. Brown claimed damages resulting from fraudulent misrepresentations and unauthorized trades by TYM and its agents, the named respondents, with respect to securities transactions. In the arbitration, Yen filed a Motion to Dismiss, claiming he should be dismissed for Brown's failure to state a claim against him. After considering the pleadings, the testimony and the evidence presented at an arbitration hearing, the panel, in full and final resolution of the issues submitted for determination, denied Yen's Motion to Dismiss and awarded Brown damages of $200,000 against TYM, Yen, Maqueda, and DeMarsico, finding the respondents jointly and severally liable for the fraudulent stock transactions and unauthorized trades.
Standard of Review
Judicial review of an arbitration award is extraordinarily narrow, and courts should defer to the arbitrators' decision when possible. See, e.g., Wilko v. Swan, 346 U.S. 427, 436 (1953), overruled on other grounds, Rodriguez de Quijas, et al, v. Shearson/American Express, Inc., 490 U.S. 477 (1989). The court's review is restricted to determining whether the procedure was fundamentally unfair. See Teamsters, Local Union 657 v. Stanley Structures, Inc., 735 F.2d 903, 906 (5th Cir. 1984). The terms of 9 U.S.C. § 10 (a) provide that a district court may vacate an arbitration award:
(1) Where the award was procured by corruption, fraud or undue means.
(2) Where there was evident partiality or corruption in the arbitrators....
(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing . . . or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
(4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter was not made.9 U.S.C. § 10 (a).
Analysis and Conclusions
Yen contends that although he was Vice President of TYM at the time of the dispute that involves Brown's purchases and trading of stock in TYM's New York office, the statement of claim failed to state a claim against him or show that he was personally involved in any of the fraudulent transactions. Yen requests that the Court vacate the award against him on the ground that when the arbitrators made an error that is "obvious and capable of being readily perceived by the average person qualified to be an arbitrator," the award must be vacated as being in "manifest disregard of the law." Yen also claims the award should be vacated on the grounds it is "completely irrational." Yen relies upon case law from other circuits.
Courts in other jurisdictions have vacated arbitration awards for reasons independent of the grounds specified in § 10 of the Arbitration Act; for example, courts have vacated awards made in "manifest disregard of the law," or awards that are "completely irrational" or "unfounded in reason and fact." See, respectively, Merrill, Lynch, Pierce, Fenner Smith Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986); French v. Merrill, Lynch, Pierce, Fenner Smith Inc., 784 F.2d 902, 906 (9th Cir. 1986); Bettencourt v. Boston Edison Co., 560 F.2d 1045, 1050 (1st Cir. 1977). However, in this circuit, the only grounds upon which a reviewing court may vacate an arbitration award are those stated in § 10 of the Arbitration Act. McIlroy v. Paine Webber, Inc. 989 F.2d 817, 820 (5th Cir. 1993); R.M. Perez Associates, Inc. v. Welch, 960 F.2d 534 (5th Cir. 1992); accord Robbins v. Day, 954 F.2d 679 (11th Cir. 1992).
Yen does not seek vacation of the arbitration award on any of the grounds listed in § 10 of the Arbitration Act, and he has failed to demonstrate that the arbitration procedure was fundamentally unfair. In the arbitration, Yen filed a joint statement of answer with TYM, and TYM and Yen each signed a Uniform Submission Agreement. Yen raised the same claims he raises here in a Motion to Dismiss filed in the arbitration. The arbitration panel considered and rejected the claims Yen made in his dismissal motion. The arbitration panel did not explain the rationale behind its award, but it was not required to do so. Antwine v. Prudential-Bache Securities, Inc., 899 F.2d 410, 412 (5th Cir. 1990). The award was clear and concise without any hint of ambiguity. Yen's petition to vacate the award should be denied and Brown's cross-petition seeking affirmation of the award should be granted.
RECOMMENDATION
Petitioner's Motion to Vacate the arbitration award in NASD Case No. 00-030 14 should be DENIED, and Respondent's Cross-Motion and Petition to Confirm the Arbitration Award should be GRANTED.
INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO APPEAL/OBJECT
The United States District Clerk shall serve a true copy of these findings, conclusions and recommendation on the parties. Pursuant to Title 28, United States Code, Section 636(b)(1), any party who desires to object to these findings, conclusions and recommendation must serve and file written objections within ten days after being served with a copy. A party filing objections must specifically identify those findings, conclusions or recommendation to which objections are being made. The District Court need not consider frivolous, conclusory or general objections. A party's failure to file such written objections to these proposed findings, conclusions and recommendation shall bar that party from a de novo determination by the District Court. See Thomas v. Arn, 474 U.S. 140, 150, 106 S.Ct. 466, 472 (1985). Additionally, any failure to file written objections to the proposed findings, conclusions and recommendation within ten days after being served with a copy shall bar the aggrieved party from appealing the factual findings and legal conclusions of the Magistrate Judge that are accepted by the District Court, except upon grounds of plain error. See Douglass v. United Services Auto. Ass'n, 79 F.3d 1415,