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Award affirmed despite multiple attacks by losing parties

Plaintiffs who did not prevail against a brokerage in an arbitration conducted by the Financial Industry Regulatory Authority Inc., or FINRA, attacked the award claiming fraud; that the arbitrators were impartial, committed misconduct, exceeded their powers or disregarded the law; and the award of attorneys’ fees was unreasonable.

Background

This consolidated action has been stayed since Nov. 30, 2016, when, on motion of defendant Interactive Brokers LLC, the court compelled arbitration. The plaintiffs and Interactive then submitted to arbitration.

On April 16, 2019, FINRA awarded damages, costs and fees in favor of Interactive and against the plaintiffs. The plaintiffs thereafter filed a motion to vacate or modify the award, and Interactive filed a cross motion to confirm the award.

Procedural matter

The court first turns to the procedural matter addressed at the Oct. 22, 2019. The court’s concern stemmed from the Second Circuit’s vacatur and remand of certain claims in Batchelar v. Interactive Brokers, LLC, 751 F’Appx. 55 (2d Cir. 2018). If  plaintiffs’ claims here were encompassed by the Batchelar putative class action based on the doctrine of relation back, then the subsequent arbitration of said claims could be perceived as improper under Interactive’s class action exception to mandatory arbitration.

In its brief in response to court order, plaintiffs contend the same. Plaintiffs argue Interactive should have been precluded from proceeding in arbitration against the Singhs and is certainly precluded from seeking to enforce the award. The court finds  plaintiffs’ position unpersuasive. Given the timeline of events in this case and the  Batchelar matter, plaintiffs effectively waived their right to assert such grounds for vacatur.

Plaintiffs’ motion

The court now turns to the plaintiffs’ motion to vacate, which asks the court to vacate the award issued by FINRA or, in the alternative, to modify the award by reducing the amount of Interactive’s compensatory damages and by eliminating or reducing the attorneys’ fees awarded to Interactive.

First, plaintiffs’ claim that the award should be vacated because Interactive procured the award by fraud or undue means is without factual basis. Second, plaintiffs’ claim that the arbitrators displayed evident partiality is, at best, vague and unsubstantiated, which is wholly insufficient to secure vacatur under 9 U.S.C. (a)(2). Third, plaintiffs have not shown that the arbitrators were guilty of misconduct by refusing to hear evidence material to the controversy. Fourth, plaintiffs have made no showing that the arbitrators exceeded their powers in awarding attorneys’ fees or that the grant of attorneys’ fees violated or exceeded the scope of the parties’ contract. Fifth, plaintiffs have not shown that the arbitrators displayed a manifest disregard of the law.

Lastly, plaintiffs ask the court to modify the damages awarded by the arbitrators if the court ultimately declines to vacate the award. Specifically, plaintiffs asks the court (1) to reduce the compensatory damages award by the commissions Interactive received on plaintiffs’ trades and (2) to reduce or eliminate the attorneys’ fees awarded as “unreasonable”

The Federal Arbitration Act permits modification of arbitration awards under very limited circumstances. Relevant here, plaintiffs would have to show “evident material miscalculation” or “evidence material mistake” in the damages and fees awards to secure such relief.

However, plaintiffs merely state, in conclusory fashion, that the award’s damages total is in excess of what is necessary “to make [Interactive] whole” and that the attorneys’ fees are unreasonable. Plaintiffs do not show or even allege that such awards  are legally impermissible or miscalculated. Therefore, their request for modification of the compensatory damages and fees awarded by the arbitrators must be denied.

Interactive’s cross-motion

The court now turns to Interactive’s cross-motion to confirm the award. The Federal Arbitration Act provides that, upon a party’s application, a court must enter an order confirming an arbitration award if: (1) the parties agreed in the arbitration agreement that judgment may be entered by the court; (2) the award has not been vacated, modified or corrected and (3) the moving party has requested the confirmation within one year of the award. Interactive’s  motion meets all of these requirements.

Plaintiffs’ motion to vacate or modify arbitration award denied; defendant’s motion to confirm arbitration award granted.

Singh v. Interactive Brokers LLC, Case No. 16-cv-276, Dec. 17, 2019. EDVA at Norfolk (Doumar). VLW 019-3-600. 16 pp.

VLW 019-3-600