Broker-Dealer Litigation - Greenberg Traurig LLP

c. Other
N.4.c
STMicroelectronics, N.V. v. Credit Suisse Securities (USA) LLC, 648 F.3d 68 (2d Cir. 2011).
The Firm moved to vacate arbitration award on the ground that one of the arbitrators
failed to disclose his prior experience as Claimant’s expert. The Firm based its argument on
Federal Arbitration Act (“FAA”), 9 U.S.C. section 10(a)(3), which states, in pertinent part, that
an award can be vacated for “other misbehavior by which the rights of any party have been
prejudiced.” The district court denied the Firm’s motion to vacate and, on appeal, the Second
Circuit affirmed the district court’s holding but vacated the arbitration award in part based on the
district court’s improper implementation of fees. In affirming the district court’s findings, the
Second Circuit noted the arbitrator’s disclosures that he worked as an expert for both customers
and brokerage firms, although he did not estimate the number of times he represented each side.
The Second Circuit held that FINRA rules do not require exhaustive arbitrator disclosures and
that, although an arbitrator may estimate the number of times he’s appeared as an expert, he is
not mandated to do so. Further, there was no indication that the arbitrator had any prior
knowledge or misconception about the facts of the case. The Second Circuit also noted that the
Firm did not cite to, nor was the court aware of, any cases which addressed insufficient
disclosure as the basis to satisfying the “other misbehavior” prong of the FAA. The Firm also
argued that the arbitrators manifestly disregarded the law. However, the Second Circuit found
that, since the panel did not specify under which claim the award rested, the Firm had to
demonstrate manifest disregard of the law under all the claims because an arbitration award that
is conceivable under any alleged claim should not be vacated. Lastly, the Second Circuit agreed
with the Firm that the award should have been reduced based on the amount of money
Stmicroelectronics received from its sale of the securities at issue with a corresponding reduction
in interest due.
Rai v. Barclays Capital, Inc., 2011 U.S. App. LEXIS 22365 (2d Cir., Nov. 2, 2011).
N.4.c
Pro se plaintiff, Rai, appealed the Southern District Court of New York’s denial of his
motion to vacate the arbitration award. Rai argued the arbitration award should be vacated
because of the arbitrator’s misconduct in excluding one of Rai’s witnesses. The misconduct
alleged was a failure to adjourn the hearing when Rai’s witness could not appear on the
scheduled day and that the panel would not accept an affidavit by Rai’s witness in lieu of his
appearance at the hearing. The Second Circuit affirmed the denial of the motion to vacate where
the plaintiff failed to request an adjournment and found that (1) refusal to postpone a hearing to
permit witness testimony and (2) refusal to receive a witness’ affidavit in place of live testimony
do not rise to the level of unfairness required to vacate an arbitration award under the Federal
Arbitration Act, 9 U.S.C. section 10(a)(1).
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