Questar Capital Corp. v. Gorter

• Decision Date: 14 November 2012
• Docket Number: CIVIL ACTION NO. 3:12-MC-00004
• Parties: QUESTAR CAPITAL CORPORATION Petitioner v. THOMAS J. GORTER Respondent
• Court: U.S. District Court — Western District of Kentucky

QUESTAR CAPITAL CORPORATION Petitioner v. THOMAS J. GORTER Respondent

CIVIL ACTION NO. 3:12-MC-00004

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION

Dated: November 14, 2012

MEMORANDUM OPINION

This matter is before the Court upon Petitioner Questar Capital Corporation's "Petition to Vacate Arbitration Award," (Docket No. 1); Respondent Thomas J. Goiter's "Combined Motion to Dismiss and/or for Summary Judgment on Questar Capital Corporation's Petition to Vacate and Motion to Confirm Arbitration Award," (Docket No. 11); Respondent Gorter's "Motion to Dismiss Questar Capital Corporation's Improper 'Petition' to Vacate Arbitration Award," (Docket No. 12); and Petitioner Questar's "Motion to Vacate," (Docket No. 23). Because the several motions in this case present varying arguments but are necessarily interrelated, the Court will address the parties' respective arguments collectively in the Opinion that follows.

TABLE OF CONTENTS

BACKGROUND ................................................................................................................ 3

STANDARD .......................................................................................................................6

DISCUSSION .....................................................................................................................8

I. Respondent Gorter's "Motion to Dismiss Questar Capital Corporation's Improper 'Petition' to Vacate Arbitration Award," (Docket No. 12) ......................................... 8

A. Seeking Vacatur of the Arbitration Award by Petition.................................9

1. The Sixth Circuit and Its Lower Courts Have Used the Titles "Petition" and "Motion" Interchangeably in This Context Without Concern for the Precise Nomenclature or Styling of an Application for Vacatur.................................................................................................. 9

2. Courts in Other Circuits Have Construed Filings Not Titled "Motion" as Motions to Vacate for Purposes of the FAA...................................12

3. Other Courts' Reasoning For Requiring That a Filing Be Styled as a "Motion" Is Distinguishable From the Circumstances This Case......14

4. In Its Discretion, the Court Will Treat Questar's Petition as a Motion to Vacate for Purposes of the FAA..........................................................17

B. Timeliness of Questar's Petition to Vacate................................................18

C. Local Rule 7.1(a) ......................................................................................23

II. Respondent Gorter's "Combined Motion to Dismiss and/or For Summary Judgment on Questar Capital Corporation's Petition to Vacate and Motion to Confirm Arbitration Award" .................................................................................265

III. Motions to Confirm and Vacate ............................................................................27

A. Evident Partiality ......................................................................................29

1. Questar waived its objection to Chairman Stanton's partiality by failing to raise this objection at the arbitration hearing......................30

2. Even if Questar did not waive its objection to Chairman Stanton, the facts do not support a finding of evident partiality.............................37

B. Refusing to Hear Evidence Pertinent and Material to the Controversy ....39

1. Questar was not denied a fundamentally fair hearing in relation to the testimony of Jason Hargadon..............................................................42

2. Questar was not denied a fundamentally fair hearing in regard to its request that the Panel subpoena more than 50 of Gorter's former clients..................................................................................................48

C. Arbitrators Exceeding or So Imperfectly Executing Their Powers...........50

D. Manifest Disregard for the Law .................................................................57

CONCLUSION..................................................................................................................60

BACKGROUND

The present action began in this Court upon Questar Capital Corporation's (Questar) Petition to Vacate Arbitration Award. (Docket No. 1.) On January 13, 2012, a Financial Industry Regulatory Authority (FINRA) arbitration panel (Panel) issued an award in favor of Thomas J. Gorter (Gorter) following arbitration proceedings that began on August 16, 2011. After some 31 hearing sessions, the arbitration proceedings closed on December 13, 2011. Questar filed its Petition to Vacate on February 10, 2012, (Docket No. 1), to which Gorter responded with his Combined Motion to Dismiss and/or for Summary Judgment and Motion to Confirm Arbitration Award, (Docket No. 11), and his Motion to Dismiss Questar's Improper "Petition" to Vacate Arbitration Award, (Docket No. 12), both on March 5, 2012. Questar responded to both on March 29, (Docket Nos. 22; 23), and Gorter replied on April 13, (Docket Nos. 26; 27). Questar also filed its Motion to Vacate with accompanying Memorandum of Law on March 29, 2012. (Docket No. 23.) Gorter responded in opposition to Questar's Motion to Vacate, (Docket No. 28), and Questar replied, (Docket No. 45). The Court then granted Gorter leave to file a Sur-Reply, which he did on May 29, (Docket No. 52), and also granted Quester leave to file a Response to Sur-Reply, which it did on June 8, 2012, (Docket No. 58).

Throughout their many filings in this matter, the parties continue to dispute the facts of this case and to challenge one another's characterizations of those facts. This is in no small part due to the fact that the Panel did not issue findings of fact, nor did itprovide an explained decision or opinion along with its award.¹ At this juncture, much of the contested factual matter is not particularly relevant or necessary given the standard of review for an arbitration award. Therefore, the following summary is intended for background purposes only and represents no findings of fact by this Court.

Questar is a brokerage firm currently based in Minneapolis, Minnesota, and is a fully owned subsidiary of Allianz Life. (Docket No. 11-1, at 1.) Questar is registered with the Securities and Exchange Commission and in 52 states and territories. (Docket No. 11-1, at 1.) Questar is also a member of FINRA. (Docket No. 11-1, at 1.) Gorter entered into a "Registered Representative's Agreement" (RRA) with Questar on May 21, 2001. (Docket No. 1-1.) Then in April 2006, Gorter also entered into an "Investment Advisor Representative Agreement" (IAR Agreement) with Questar Asset Management (QAM). (Docket No. 23-4.)

In September 2007, the Kentucky Department of Financial Institutions (KDFI) conducted a routine inspection of the Questar branch office where Gorter worked. (Docket Nos. 11-1, at 2; 23-2, at 2.) As a result of that investigation, KDFI issued a Statement of Findings indicating that Gorter was acting as a "registered investment advisor" but was not registered as such in Kentucky. (See Docket Nos. 11-1, at 2; 23-2, at 2.) After the KDFI investigation, it became necessary to transfer Gorter's clients to his supervisor, a registered investment advisor at QAM. (See Docket Nos. 11-1, at 2-3; 23-2,at 2.) According to Questar, "[d]uring the transfer, Gorter altered paperwork on client files." (Docket No. 23-2, at 2.) Gorter avers that on January 24, 2008, he resigned from Questar via registered mail, which he argues became effective upon mailing. (Docket No. 11-1, at 4.) Questar, on the other hand, maintains that it terminated Gorter on January 25, 2008, the following day. (Docket No. 23-2, at 2.) Consistent with this position, Questar reported Gorter had been terminated and its reasons for terminating him on a Uniform Termination Notice for Securities Industry Registration, commonly known as a "Form U-5." (Docket Nos. 11-1, at 4; 23-2, at 2-3.)

Gorter filed a Statement of Claim against Questar with FINRA in September 2008, alleging breach of contract, negligence, defamation, and tortious interference, and seeking $2,000,000 in actual/compensatory damages and $1,000,000 in exemplary/ punitive damages. (Docket Nos. 1-3, at 2; 11-1, at 5; 22-17.) Questar subsequently filed a Statement of Answer and Counterclaim in January 2009, alleging breach of contract and seeking indemnification as well as $10,054,668.53 in actual/compensatory damages. (See Docket No. 1-3, at 1, 3.) Questar filed its Pre-Hearing Brief before the Panel in May 2011, and Gorter his in June 2011. (Docket No. 1-3, at 2.) The parties thereafter filed a series of Bench Briefs of Relevant Law as well as various motions, including motions in limine, to strike, to compel, and for sanctions, during October and November 2011. (See Docket No. 1-3, at 2.) The Panel held 31 hearings over 15 days beginning in August and concluding in December 2011. (See Docket No. 1-3, at 6.) The Panel heard testimony from some 18 witnesses, several of which were expert witnesses, and the parties submitted hundreds of exhibits for the Panel's consideration. (See Docket No. 11-1, at 5.)

The three-arbitrator Panel issues its unanimous award in favor of Gorter in January 2012, exactly one month after the close of the arbitration proceedings. (Docket Nos. 1-3, at 4, 7.) In that award, the Panel awarded Gorter $3,251,907 in compensatory damages, with interest beginning December 14, 2011, and $49,241 in costs. (Docket No. 10-3, at 4-5.) The Panel additionally denied Gorter's request for expungement, Questar's Counterclaim, and any other relief sought by either party, which included punitive damages, attorneys' fees, and sanctions. (Docket No. 1-3, at 5.) Then on February 10, 2012, the instant matter began before this Court upon Questar's Petition to Vacate.

STANDARD

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, expresses the federal policy favoring enforcement of...