Robbins v. Day

Citation954 F.2d 679
Decision Date27 February 1992
Docket NumberNo. 91-7332,91-7332
Parties, Fed. Sec. L. Rep. P 96,523 Irene ROBBINS and Bert Shepherd, a/k/a Trustees of the Davis Robbins Family Trust, a/k/a Trustees of the Davis Robbins Marital Trust, Plaintiffs-Appellees, v. John DAY, PaineWebber Incorporated, Jerry Payne, Defendants-Appellants. PAINEWEBBER INCORPORATED, Plaintiff-Appellant, v. Irene ROBBINS and Bert Shepherd a/k/a Trustees of the Davis Robbins Family Trust, a/k/a Trustees of the Davis Robbins Marital Trust, Defendants-Appellees. Irene ROBBINS and Bert Shepherd a/k/a Trustees of the Davis Robbins Family Trust, a/k/a Trustees of the Davis Robbins Marital Trust, Plaintiffs-Appellees, v. David L. ARNOLD, W. David East, Defendants-Appellants, Owen Vickers, Harvey Gotleib, Alabama Grease Products Company, Birmingham Hide and Tallow Company, Defendants. William E. Richardson, et al., Unknown.
CourtU.S. Court of Appeals — Eleventh Circuit

N. Lee Cooper, A. Inge Selden, III, Luther Dorr, Jr., Maynard, Cooper, Frierson & Gale, Birmingham, Ala., for PaineWebber.

Robert R. Baugh, F. Timothy McAbee, Sirote & Permutt, Birmingham, Ala., for Day.

J. Mark White, White, Dunn & Booker, Birmingham, Ala., for Jerry Payne.

John P. Scott, Balch & Bingham, Birmingham, Ala., for Arnold.

Lee H. Zell, Berkowitz, Lefkovits, Isom & Kushner, Birmingham, Ala., for East.

Paul A. Liles, Richard F. Ogle, Schoel, Ogle, Benton, Gentle & Centeno, Birmingham, Ala., for Vickers, et al.

Robert B. Eubank, Birmingham, Ala., for Irene Robbins and Bert Shepherd.

Appeals from the United States District Court for the Northern District of Alabama.

Before COX and DUBINA, Circuit Judges, and BROWN *, Senior District Judge.

DUBINA, Circuit Judge:

Appellants PaineWebber Incorporated ("PaineWebber"), John Day, Jerry Payne, David Arnold, David East, et. al. (individually referred to by name or collectively as the "Brokers"), appeal the district court's order vacating an arbitration award and restoring the case on the district court's docket, 761 F.Supp. 773. For the reasons which follow, we reverse.

I. PROCEDURAL BACKGROUND

In November and December, 1987, Irene Robbins and Bert Shepard (the "Trustees") trustees of the Davis Robbins Family Trust and the Davis Robbins Marital Trust (the "Trusts"), established brokerage accounts (the "Accounts") with PaineWebber for the benefit of the Trusts. The Accounts were established at PaineWebber after John Day, who had managed the Trusts' brokerage accounts for three years at another firm, became employed by PaineWebber.

Subsequently, the Trustees filed suit against the Brokers in the 30th Judicial Circuit of Alabama, alleging, inter alia, that the Brokers damaged the Trusts' Accounts by engaging in the unauthorized trading of options, by excessive trading which constituted churning the Accounts, and by preferentially allocating funds. The Trustees alleged that the above activity began when the Accounts were first established at PaineWebber and continued until March, 1988.

The action was properly removed by the Brokers to the United States District Court for the Northern District of Alabama. Pursuant to the arbitration clauses contained in the documents that established the Accounts, in the same day the action was removed, the Brokers filed a separate action to stay the removed lawsuit and to compel arbitration of all asserted claims. After discovery was completed, the district court stayed the action and referred all claims to the National Association of Securities Dealers, Inc. ("NASD") for arbitration.

After twelve days of arbitration hearings, the NASD panel awarded the Trustees $325,000.00 and dismissed the claims against two of the Brokers. 1 The arbitrators' decision did not explain their rationale for determining liability or their methodology for imposing damages.

The NASD Award "Case Summary" stated that the Brokers answered the Trustees' allegations by claiming that (1) the Trustees were aware of all trading activities; (2) the Accounts were handled in accordance with the Trustees' expressed instructions; (3) prior to the initiation of the lawsuit the Trustees never expressed any dissatisfaction with the Brokers' handling of the Accounts; and (4) the losses in the Accounts were due to the market break of October 19, 1987, when the equity investments in both accounts declined substantially.

The Brokers filed separate motions with the district court seeking confirmation of the arbitration award, while the Trustees moved to vacate the award. The district court ordered the parties to submit briefs and scheduled a hearing. After the briefs were submitted and the arbitration transcript was filed, the district court cancelled the hearing, entered its order vacating the arbitration award, terminated the stay, and reinstated the case on its trial docket. The Brokers then perfected this expedited interlocutory appeal.

II. STANDARD OF REVIEW

We will review de novo the district court's order to vacate the arbitration award. By reviewing the district court's order de novo we are establishing two standards of review for a district court's findings upon an arbitration award.

It is well established in this circuit that a district court's denial of a motion to vacate an arbitration award under the Federal Arbitration Statute, 9 U.S.C. § 1, et seq. (1970 & Supp.1991), is reviewed under an abuse of discretion standard. Schmidt v. Finberg, 942 F.2d 1571 (11th Cir.1991) (citing, Raiford v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 1410, 1412, n. 2 (11th Cir.1990)). However, for the same policy reasons that establish the narrower abuse of discretion standard as appropriate when reviewing a trial court's denial of a motion to vacate an arbitration award, we will review the granting of a motion to vacate de novo. 2

In Raiford, this court recognized a national policy favoring arbitration. See also Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 reh. den., 483 U.S. 1056, 108 S.Ct. 31, 97 L.Ed.2d 819 (1987) ("The Arbitration Act thus establishes a federal policy favoring arbitration, requiring that we rigorously enforce agreements to arbitrate."). Our circuit has also noted that "[t]he purpose of the Federal Arbitration Act was to relieve congestion in the courts and to provide parties with an alternative method for dispute resolution that would be speedier and less costly than litigation." Booth v. Hume Publishing, Inc., 902 F.2d 925 (11th Cir.1990) (quoting, O.R. Securities v. Professional Planning Assoc., 857 F.2d 742, 745-46 (11th Cir.1988)).

Accordingly, the Federal Arbitration Act presumes that reviewing courts will confirm arbitration awards and that the courts' review of the arbitration process will be severely limited. Hume Publishing, 902 F.2d at 932. By reversing a district court's denial of a motion to vacate an arbitration award only upon abuse of discretion, we further the presumption that the arbitration proceeding was proper. Similarly, when a district court goes against the presumption that it should affirm an arbitration award, we must review de novo to protect the integrity of the arbitration process.

By broadly reviewing the grant of a motion to vacate an arbitration award, while narrowly reviewing confirmation of an award, we emphasize the unique context of arbitration, which requires deferential judicial review to promote the primary advantages of arbitration--speed and finality. De novo review of the granting of a motion to vacate enables us to assess whether the district court accorded sufficient deference in the first instance, an assessment that a more restrictive appellate review would frustrate. See Forsythe International, 915 F.2d at 1020. When a district court denies a motion to vacate an arbitration award, deference is presumed and, therefore, in that context, review under an abuse of discretion is adequate. 3

III. DISCUSSION
A. Arbitration Awards are to be Reviewed Narrowly

When reviewing a district court's order vacating an arbitration award, we must apply the same legal standards that bound the district court. Stay, Inc. v. Cheney, 940 F.2d 1457 (11th Cir.1991) (when making a de novo review of a summary judgment, this court must apply the same legal standards that bound the district court). It is well established that judicial review of a commercial arbitration award is extremely limited and federal courts should defer to the arbitrator's resolution of the dispute whenever possible. Hume Publishing, 902 F.2d at 931. The Congressional policy of promoting contractually imposed arbitration requires that courts do not intrude unnecessarily into questions settled by arbitration, lest the efficiency of the arbitration process be lost. Anderman/Smith Operating Co., 918 F.2d at 1217.

The bases for the review of a commercial arbitration award are enumerated in 9 U.S.C. § 10 (Supp.1991); 4 Schmidt 942 F.2d at 1576; Raiford, 903 F.2d at 1411; O.R. Securities, Inc., 857 F.2d at 745; and Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378 (11th Cir.1988). The statute does not allow courts to "roam unbridled" in their oversight of arbitration awards, but carefully limits judicial intervention to instances where the arbitration has been tainted in specified ways. Raiford, 903 F.2d at 1410; Advest, Inc. v. McCarthy, 914 F.2d 6 (1st Cir.1990). The statute does not allow an arbitration award to be vacated solely on the basis of error of law or interpretation but requires something more, such as misconduct pertaining to the proceedings on the part of the arbitrators or the parties. O.R. Securities, Inc., 857 F.2d at 746.

Although the Supreme Court has limited the grounds for vacatur to the categories enumerated in 9 U.S.C. § 10, several federal courts have found other grounds, derived from the statutory list, for vacating arbitration awards in commercial cases. Specifically some courts have considered whether "manifest disregard...

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