Sargent v. Paine Webber Jackson & Curtis, Inc., 88-7133

• Decision Date: 15 August 1989
• Docket Number: No. 88-7133,88-7133
• Citation: 280 U.S.App.D.C. 7,882 F.2d 529
• Parties: , Fed. Sec. L. Rep. P 94,566 Ernest E. SARGENT, et al. v. PAINE WEBBER JACKSON & CURTIS, INC., ndba as PaineWebber Incorporated, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 529

882 F.2d 529

280 U.S.App.D.C. 7, Fed. Sec. L. Rep. P 94,566

Ernest E. SARGENT, et al. v. PAINE WEBBER JACKSON & CURTIS, INC., ndba as PaineWebber Incorporated, et al., Appellants.

No. 88-7133.

United States Court of Appeals District of Columbia Circuit.

Argued April 18, 1989.

Decided Aug. 15, 1989.

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 84-02911).

Harvey A. Levin, with whom Michael I. Smith, Washington, D.C., was on the brief, for appellants.

Stephen G. Milliken, Washington, D.C., for appellee.

Before ROBINSON, BUCKLEY, and WILLIAMS, Circuit Judges.

Opinion for the court filed by Circuit Judge STEPHEN F. WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

In August 1983 Ernest E. Sargent and his daughter Cynthia L. Sargent opened an account with PaineWebber. To it they transferred 400 shares of Coleco Industries stock, some put and call options on Coleco, and some other (unspecified) securities. Ernest Sargent maintains that this portfolio embodied his life's savings.

The price of Coleco stock had been sinking since the Sargents' original purchase, and it continued to do so after the transfer. Soon after moving the account, Ernest Sargent sought to address the problem by directing Kevin Greenan, a PaineWebber account executive, to implement a "cost averaging plan." This consisted of

purchas[ing] additional shares of Coleco stock at the decreased market price to reduce his average cost basis in all of his Coleco stock. When the average cost basis of the Coleco stock was equal or close to the market value, Sargent planned to sell all of that stock thereby eliminating or reducing any financial loss.

Arbitration Complaint p 12. The obvious flaw of such a scheme is that if the stock does not rise as hoped, it will amount to throwing good money after bad.

In any event, the Sargents' claim is that PaineWebber and Greenan were negligent in not rigorously pursuing the plan. They initially brought suit in district court, seeking $245,000 in compensatory damages (later amended to $256,000) and $500,000 in punitives. On PaineWebber's motion to stay the case pending arbitration, as provided in the customer agreements between the Sargents and PaineWebber, the court dismissed the action without prejudice. The arbitrators conducted a three-day hearing and announced a decision awarding the Sargents $46,000. They stated only that

having heard and considered the proofs of the parties, [a majority of the arbitrators] have decided and determined that in full and final settlement of the above-referenced matter, respondent Painewebber shall pay to the claimants the sum of $43,000.00 and respondent Kevin Greenan shall pay to the claimants the sum of $3,000.00.

The arbitrators did not explain how they reached this figure. The parties agree that the New York Stock Exchange rules require no explanation; it appears to be standard practice for arbitrators under those rules to give none.

The Sargents filed a new complaint, asking the district court to vacate the award, while PaineWebber cross-moved for an order of confirmation. Instead the court remanded the matter to the arbitration panel "for a full explanation of the manner in which damages were computed so as to permit effective judicial review." It viewed such an explanation as necessary if judicial review was to be "meaningful." 674 F.Supp. 920.

PaineWebber and Kevin Greenan appeal. They argue that the Federal Arbitration Act, 9 U.S.C. Secs. 1-14 (1982), does not authorize a remand for explanation under the circumstances. We agree. Before addressing the point, however, we must dispose of the plaintiffs' challenge to our jurisdiction and the defendants' claim that the Sargents' motion to vacate was served too late.

Appellate jurisdiction rests on 28 U.S.C. Sec. 1292(b) (1982). This allows an interlocutory appeal (with the consent of the court of appeals, which in this case has been granted through a motions panel of this court), where a district judge states, in an otherwise unappealable order, that he is

of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation....

Application for an appeal under Sec. 1292(b) does not automatically stay proceedings in the district court, but that court or the court of appeals may order a stay. 28 U.S.C. Sec. 1292(b).

The Sargents' attack on our jurisdiction depends on the failure of the district court's order to track the language of Sec. 1292(b), and on its omission of any citation of that section. The order reads:

Upon consideration of the motion of defendants for a stay pending appeal of this Court's Orders of May 10, 1988 and December 8, 1987, and the opposition thereto, the Court finds (1) that defendants will possibly suffer harm in the lost [sic] of their right and expectation to a speedy and conclusive arbitration process, (2) that defendants have shown that serious questions of law exist, as to this Court's authority to order the arbitrators to file a memorandum with the Court giving a full explanation of the manner in which damages were computed, and (3) that plaintiffs' recovery will not be reduced and their right to recovery will not be diminished by a stay pending appeal.

Sargent v. Paine Webber Jackson & Curtis, Inc., No. 84-2911, Order (D.D.C. June 27, 1988). The order then provides that the remand be "stayed pending appeal, pursuant to Rule 62, Fed.R.Civ.P." Id. A motions panel of this court granted defendants' application for an appeal, citing Sec. 1292(b) and making findings in precisely its words. It added that the court was not deciding whether "in the absence of a section 1292(b) certification, there is an appealable order."

It is hard to view our earlier order except as reading the district court order as a certification under Sec. 1292(b). If there be any ambiguity in our initial decision, however, we have no difficulty in making that finding ourselves. Obviously dispute may be avoided if district courts couch their Sec. 1292(b) certifications in its terms and, to remove all doubt, cite it by section number. But the words of Sec. 1292(b) are not a magic incantation (or a computer command) that has no effect if not given exactly. The court's intentions are plain. Not only are the words fairly close to those of Sec. 1292(b), but there appears no explanation for the district court's stay other than as one that Sec. 1292(b) authorizes as an accompaniment to a Sec. 1292(b) certification. We have jurisdiction.

Defendants claim that the Sargents' claim was barred by the special three-months statute of limitations contained in 9 U.S.C. Sec. 12 (1982). It requires:

Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered.

9 U.S.C. Sec. 12 (1982) (emphasis added). The Sargents' complaint and motion were served November 26, 1986, ¹ more than three months after the arbitrators' decision but within three months of the Sargents' receipt of it on August 26, 1986.

Defendants argue that "delivered" in the phrase "filed or delivered" must mean "mailed, or otherwise sent." They suggest that since delivery must always follow a decision's filing, to read it as referring to the arrival at some destination would render "filed" meaningless. Certainly defendants have identified a curiosity in the statute, but their interpretation hardly solves it: they suggest no way in which mailing could precede filing any more than delivery. Perhaps the drafters contemplated the possibility of some technically defective filing, and wanted to be sure that in such a case the time limit would begin to run on delivery. We certainly see no reason to adopt a construction that hopelessly twists the ordinary meaning of the word "delivered" without in any way solving the problem of possible surplusage. Nor would we be justified in excising "delivered" from the statute.

Defendants' argument that delivery is not synonymous with receipt does no better. While one can imagine cases in which the distinction could play a role, this is not one. The Sargents acknowledge receipt of the decision on the day it was delivered to the relevant address, and their complaint and motion were served within the required three months thereafter.

Turning to the merits, we find no basis for a remand to the arbitrators. The district court's review proceeds under Sec. 10 of the Federal Arbitration Act, which authorizes it to vacate an arbitral award under any of the following conditions:

(a) Where the award was procured by corruption, fraud, or undue means.

(b) Where there was evident partiality or corruption in the arbitrators, or either of them.

(c) 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.

(d) 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.

(e) Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators.

9 U.S.C. Sec. 10 (1982). The district court here appears to have proceeded under the theory that in the absence of explanation it could not be sure that the arbitrators had not "exceeded their powers" under Sec. 10(d) or otherwise fallen into error so egregious as to require vacation of the award under Sec. 10. Remand for explanation would enable it to obtain that assurance and exclude the possibility of a fatal error.

We reject the idea...