Olson v. Wexford Clearing Services Corp., 03-1223.

• Citation: 397 F.3d 488
• Decision Date: 03 February 2005
• Docket Number: No. 03-1223.,03-1223.
• Parties: Lawrence W. OLSON, Individually and as Trustee of the Lawrence W. Olson Charitable Remainder Trust Dated 11/01/92, Plaintiff-Appellant, v. WEXFORD CLEARING SERVICES CORP., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 488

397 F.3d 488

Lawrence W. OLSON, Individually and as Trustee of the Lawrence W. Olson Charitable Remainder Trust Dated 11/01/92, Plaintiff-Appellant, v. WEXFORD CLEARING SERVICES CORP., Defendant-Appellee.

No. 03-1223.

United States Court of Appeals, Seventh Circuit.

Argued April 12, 2004.

Decided February 3, 2005.

Peter B. Shaeffer (argued), Chicago, IL, for Plaintiff-Appellant.

Robert P. Bramnik (argued), Duane Morris, Chicago, IL, for Defendant-Appellee.

Before WOOD, EVANS, and WILLIAMS, Circuit Judges.

WOOD, Circuit Judge.

Suspecting that something was fishy with his brokerage accounts, Lawrence Olson initiated arbitration proceedings before the National Association of Securities Dealers (NASD) against a number of entities, including Wexford Clearing Services Corporation, the firm responsible for clearing the trades placed by Olson's brokerage firm. Approximately four months after the arbitration panel dismissed Wexford from the proceedings, Olson filed a petition in federal court seeking to vacate the dismissal. The district court found that Olson was too late, given the three-month limitations period found in the Federal Arbitration Act (FAA), and dismissed his petition as untimely. We affirm.

I

In July 1997, Olson transferred certain financial accounts to the brokerage firm of R.D. Kushnir & Co. Kushnir in turn had a clearinghouse agreement with Wexford, under which Wexford performed the ministerial tasks of processing, clearing, and reporting trades placed by Kushnir. Suspecting fraud or other unauthorized activity in his accounts, Olson filed a demand for arbitration before the NASD on July 29, 1998, naming Kushnir and Wexford, among others, in his Statement of Claim. On February 11, 1999, Wexford moved to dismiss Olson's claim against it on the ground that it was not involved in any of the alleged wrongdoing. More than a year later, the NASD informed the parties that a three-member panel had been appointed to hear the arbitration. Olson promptly petitioned the panel for permission to submit an Amended Statement of Claim. It granted his request, and on July 14, 2000, Olson filed the amended statement. Before that occurred, however, Kushnir was placed in receivership, which had the effect of terminating the arbitration with respect to it. On July 24, 2000, Wexford renewed its motion to dismiss the Amended Statement of Claim. Seven months later, on February 18, 2001, the chair of the arbitration panel granted that motion in a two-page decision announcing that Olson's claim against Wexford was dismissed in its entirety.

Unhappy with this result, Olson asked the panel to reconsider its decision. His reason was largely technical: the panel's disposition was rendered by the chair alone, and not the full three-member panel required by the NASD rules. Wexford did not oppose Olson's request, and the panel decided to rehear arguments on Wexford's motion to dismiss on April 15, 2002, a key date in our resolution of this appeal. On that day, the panel heard oral arguments on Wexford's motion and considered matters concerning the other parties to the arbitration. At the conclusion of Olson's and Wexford's arguments, the panel again found in favor of Wexford and issued a "Prehearing Conference Order" stating that Wexford "is hereby dismissed from this arbitration." This order was signed by the chair on behalf of the panel. A little over two months passed before Olson filed a "Motion for Consent to File Second Amended Statement of Claim," which Wexford opposed. On July 29, 2002, the arbitration panel issued a letter to Olson, stating that after "careful review," it was denying his request to amend his Statement of Claim for the second time.

Olson then turned to the federal court. On October 24, 2002, Olson filed this action to vacate the arbitral decision dismissing Wexford from the case. The district court properly invoked its diversity jurisdiction to consider the motion because Olson is a citizen of Illinois and Wexford is incorporated in Delaware with its principal place of business in New York. The amount in controversy exceeded $75,000. Olson urged the district court to grant him relief under the FAA, 9 U.S.C. § 10, on the theory that the arbitrators "were guilty of misconduct in refusing ... to hear evidence pertinent and material to the controversy." Id. at § 10(a)(3). Olson was aware that the FAA has a three-month limitations period within which challenges to arbitration awards must be filed. See 9 U.S.C. § 12. In his view, however, the clock began to tick on July 29, 2002, the date on which the panel denied his request to file a second amended Statement of Claim. If so, of course, his October 24 suit was timely.

Wexford countered that the relevant date for purposes of the limitations analysis was April 15, 2002, when the panel dismissed it as a party to the arbitration proceedings. Under Wexford's theory, Olson was too late because more than three months had passed since the panel made its final decision on April 15. Wexford moved for judgment on the pleadings and, in the alternative, for dismissal for failure to state a claim. The district court agreed with Wexford's analysis and dismissed Olson's petition as untimely.

II

In considering a motion for judgment on the pleadings under Rule 12(c) or a motion to dismiss for failure to state a claim under Rule 12(b)(6), we apply the same de novo standard of review. Forseth v. Vill. of Sussex, 199 F.3d 363, 368 n. 6 (7th Cir.2000). The FAA provides, in relevant part, that a party to an arbitration may ask the federal district court to vacate an award:

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, 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; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10(a)(3) and (a)(4). As we stated above, Olson relied on § 10(a)(3) in the district court, contending that the arbitrators failed to consider relevant evidence.

Any motion to vacate an award under § 10 of the FAA must be served "within three months after the award is filed or delivered." 9 U.S.C. § 12. See Lander Co., Inc. v. MMP Invs., Inc., 107 F.3d 476, 478 (7th Cir.1997); Int'l Union of Operating Eng'rs, Local No. 841 v. Murphy, 82 F.3d 185, 188 (7th Cir.1996); Chauffeurs, Teamsters, Warehousemen and Helpers, Local Union No. 135 v. Jefferson Trucking Co., Inc., 628 F.2d 1023, 1026 (7th Cir.1980). The plain language of § 12 does not provide for any exceptions to the three-month window and says nothing about tolling. See Fradella v. Petricca, 183 F.3d 17, 20 & n. 4 (1st Cir.1999) (applications to modify or clarify arbitral awards do not toll the limitations period under FAA § 12). It is undisputed that Olson did not serve notice of his motion to vacate on Wexford within three months of the panel's order of April 15, 2002 dismissing Wexford.

The question, however, is whether the statute began running on April 15, or whether it was triggered only when the panel denied Olson's request to file a second amended complaint on July 29. Our starting point in answering this question is NASD Rule 10330, which requires that an arbitration award include "a summary of the issues, ... the damages and other relief requested, the damages and other relief awarded, [and] a statement of any other issues resolved...." Rule 10330(e). The award is to be in writing and "signed by a majority of the arbitrators or in such manner as is required by applicable law." Rule 10330(a). Such awards may be entered as a judgment in any court of competent jurisdiction. Id. All awards issued by arbitrators "shall be deemed final and not subject to review or appeal." Rule 10330(b).

Olson argues that the April 15 dismissal of Wexford did not meet the NASD criteria for finality, because the following sentence appeared at the bottom of the Prehearing Conference Order: "This Order shall remain in effect unless amended by the Panel." This language, he asserts, supports the inference that the arbitrators did not consider the dismissal of Wexford to be their final award. The sentence on which Olson is relying, however, must be viewed in context. It is preceded by a section entitled "other rulings," which was addressed to the other parties remaining in the arbitration. NASD Rule 10330(e) explicitly permits an award to include "a statement of any other issues resolved." Taken as a whole, we read the sentence to which Olson draws our attention as one addressed to the parts of the case that were still alive. It is not clear whether the presence of claims against other parties to the arbitration affects the finality of Wexford's dismissal, see IDS Life Ins. Co. v. Royal Alliance Assoc., Inc., 266 F.3d 645, 650 (7th Cir.2001), but Olson has not relied on that theory to reject the April 15 date (not surprisingly, because it would also doom his attempt to characterize the July 29 order as "final"). Under the circumstances, he has forfeited that potential argument, which we reserve for another day.

In our view, the April 15 dismissal of Wexford complied with the basic requirements of an "award" under NASD Rule 10330(e). The arbitration panel stated that oral arguments were heard on Wexford's "fully briefed motion," that the panel found "in favor of Respondent Wexford," and that it was dismissing Wexford from the proceeding. It is worth recalling that April 15 was the second time Wexford's motion to dismiss had been set for argument. When the panel chair dismissed Wexford from the arbitration proceeding for the first time on February 18, 2001, he issued a comprehensive and reasoned decision explaining why Olson could not show that Wexford had engaged in any of the alleged wrongdoing....