Broker-Dealer Litigation - Greenberg Traurig LLP

R.
Cortina v. Citigroup Global Markets, Inc., 2011 WL 3654496 (S.D. Cal. Aug. 19, 2011)
A financial advisor sought an arbitration award for discrimination and harassment against
his former employer, who filed a counterclaim to enforce a promissory note. The arbitral panel
dismissed the financial advisor’s claim and entered an award in favor of his former employer.
The financial advisor filed a petition to vacate the award in state court. The former employer
removed the matter to federal court and cross-moved to confirm the award. The district court
granted the former employer’s motion and confirmed the award. As an initial matter, the court
had to decide whether the Federal Arbitration Act (“FAA”) applied because the FAA contained
different standards for vacatur than state law. The arbitration agreement contained a choice of
law provision electing to proceed under New York – not California, the forum state – law.
Ultimately, instead of undergoing an analysis between New York and California law, the court
applied the FAA because the promissory note incorporated the rules and regulations of the
NASD and NYSE, which bears on interstate commerce and precedent held that choice of law
provisions cannot trump the application of the FAA. The financial advisor argued that the award
should be vacated because the arbitration panel did not clearly articulate its decision and he was
entitled to a reasoned decision because statutory employment claims are subject to a more
rigorous review. The court distinguished the precedent that the financial advisor relied upon,
because the cases did not apply the FAA and, even if it did, those cases involved mandatory
arbitration, whereas the financial advisor voluntarily submitted to arbitration in this matter. The
court added that, regardless of the applicability of the case law, the arbitral award complied with
it by revealing the essential findings and conclusions underlying the award. The financial
advisor also argued that the award should be vacated because the panel denied his request for a
continuance to obtain outstanding discovery responses. The court again disagreed with the
financial advisor and found that the arbitral panel properly found that there was not sufficient
cause nor a reasonable basis for a postponement, especially in light of the previous continuances
the panel granted to the financial advisor. Next, the court dismissed the financial advisor’s
argument that the award should be vacated because one of the arbitrators was not a specialist in
employment law, because this is not a valid ground upon which to challenge an arbitral award.
The court also dismissed the financial advisor’s claim that the arbitrator was biased because he
had an ongoing relationship with banks, which the arbitrator disclosed before the arbitration.
The financial advisor’s claim that the arbitrator was racially biased was unsupported by the
record. Finally, the court disagreed with the financial advisor’s argument that the award should
be vacated based on clear errors of law because the FAA does not provide vacatur of arbitration
awards based on clear errors of law. Because there was no basis to vacate it, the court affirmed
the arbitration award.
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