Shearson Hayden Stone, Inc. v. Liang, No. 80-2416

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBAUER
Citation653 F.2d 310
Docket NumberNo. 80-2416
Decision Date10 July 1981
PartiesSHEARSON HAYDEN STONE, INC., a Delaware Corporation, Plaintiff-Appellant, v. Paul LIANG, Defendant-Appellee.

Page 310

653 F.2d 310
SHEARSON HAYDEN STONE, INC., a Delaware Corporation,
Plaintiff-Appellant,
v.
Paul LIANG, Defendant-Appellee.
No. 80-2416.
United States Court of Appeals,
Seventh Circuit.
Argued Jan. 23, 1981.
Decided July 10, 1981.

Thomas E. Knepper, Chicago, Ill., for counterdefendant-appellant.

Rick Allan White, Chicago, Ill., for counterplaintiff-appellee.

Page 311

Before SWYGERT, * Circuit Judge, KUNZIG, Judge, ** and BAUER, Circuit Judge.

BAUER, Circuit Judge.

The district court refused to set aside an arbitrator's award of $50,000 to defendant-appellee Paul Liang. Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104 (N.D.Ill.1980). Plaintiff-appellant Shearson Hayden Stone, Inc. asserts that no evidence supports the award and that the award was obtained by fraud. We affirm.

I

Defendant-appellee Paul Liang was a registered securities broker with plaintiff-appellant Shearson Hayden Stone, Inc. ("Shearson") until May 3, 1978. When he was hired in January 1976, Liang filled out a questionnaire stating that he was employed also as a part-time movie projectionist at the Festival Theatre. The New York Stock Exchange approved this outside employment pursuant to its Rule 346. 1 Not indicated on the form was that the Festival Theatre showed only X-rated movies.

In late April 1978, Liang's supervisor, William Cohen, learned that Liang intended to acquire a fifty percent interest in the theatre. Liang sought approval for this outside activity, as required by the Exchange Rules.

Soon thereafter, Cohen informed Liang that Shearson's Compliance Department had rejected his application for approval. Liang asked Cohen to seek reconsideration of the rejection. In a meeting on May 1, Cohen again told Liang that the application had been rejected. On May 3rd, Liang met with Cohen and Donald Law, a Shearson Compliance Officer. Liang was told that he had to disaffiliate himself from either the Festival Theatre or Shearson. Liang responded that he would not give up his outside activity. When he refused to resign, he was fired.

Immediately after Liang's termination, Shearson sent a letter to each of Liang's customers saying that Liang was no longer employed by Shearson. Liang, meanwhile, sought employment at Bache Halsey & Stuart and Dean Witter, two brokerage firms with reputations and facilities comparable to Shearson. Each firm was told by Liang the reason for his separation from Shearson. Each firm, after contacting Cohen at Shearson, declined to employ Liang.

Liang sought arbitration of his termination pursuant to his employment contract. 2 Liang submitted an earnings history from his securities business and claimed about $84,000 in damages. After a hearing, a panel of five arbitrators awarded Liang $50,000, without opinion.

After the arbitration, Shearson discovered that Liang had incorporated Liang Insurance Agency and Investments, Inc., an Illinois corporation, in October 1977. Liang had not disclosed this other outside affiliation to Shearson, although there was no evidence that the corporation was active.

Shearson filed this complaint to vacate the arbitrators' award. The district court granted Liang's motion for summary judgment, and Shearson appeals.

Page 312

Shearson urges first, that there was no evidence to support the arbitrators' award; second, that Liang's nondisclosure of his other company is fraud sufficient to vacate the award; and third, that the district court erred in treating Liang's motion to dismiss as one for summary judgment because Shearson's exhibits created a genuine issue of material fact.

II

We can set aside an arbitration award only on the grounds set forth in section 10 of the Federal Arbitration Act, 9 U.S.C. § 10. Tamari v. Bache Halsey Stuart Inc., 619 F.2d 1196, 1198 n.2 (7th Cir.), cert. denied, --- U.S. ----, 101 S.Ct. 213, 66 L.Ed.2d 93 (1980). Lack of evidence to support the award is not among those grounds, 3 although some courts have suggested that an arbitral award may be set aside if it is "completely irrational." See, e. g., Storer Broadcasting Co. v. American Federation of Television and Radio Artists, 600 F.2d 45, 47 (6th Cir. 1979); Swift Industries, Inc. v. Botany Industries, Inc., 466 F.2d 1125 (3d Cir. 1972). This Circuit has not decided the issue, see National R.R. Passenger Corp. v. Chesapeake & Ohio Rwy., 551 F.2d 136, 142 (7th Cir. 1977), and we need not decide it now, for the evidence adduced here amply supports the arbitrators' award.

At the hearing, Liang and Cohen testified that Shearson knew Liang worked at an X-rated movie theatre when he was hired. Cohen also testified that neither he nor Liang's customers had any complaints about the way Liang handled his accounts.

There was evidence that Shearson did not automatically discharge an employee for violation of Rule 346, but that it depended on the nature of the outside affiliation. Liang testified that his...

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82 practice notes
  • Lettis v. U.S. Postal Service, No. CV 95-737 (ADS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • August 12, 1998
    ...Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 109 (N.D.Ill.1980) (testimony in arbitration proceeding was absolutely privileged), aff'd, 653 F.2d 310 (7th Cir.1981); Barnes v. Avis Rent A Car System, Inc., 466 F.Supp. 907, 910 (D.D.C.1979) (statements made at union arbitration proceeding ar......
  • Papapetropoulous v. Milwaukee Transport Services, Inc., No. 85-1950
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 2, 1986
    ...exception.) We are aware that an arbitration hearing is not governed by the Rules of Evidence. Shearson Hayden Stone, Inc. v. Liang, 653 F.2d 310, 311 (7th Cir.1981). The fact that the arbitrator relied on this exception to the hearsay rule establishes that the arbitrator did not rely exclu......
  • Mpj v. Aero Sky, L.L.C., Civil Action No. SA-09-CV-693-XR.
    • United States
    • United States District Courts. 5th Circuit. Western District of Texas
    • November 30, 2009
    ...Workers of Am., 911 F.Supp. 1116, 1124 (N.D.Ind.1995); Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 108 (N.D.Ill.1980), aff'd, 653 F.2d 310 (7th Cir.1981). Although "fraud" and "undue means" are not defined in section 10(a) of the FAA, courts interpret the terms together. See Shea......
  • Roodveldt v. Merrill Lynch, Pierce, Civ. A. No. 83-3412.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • February 6, 1984
    ...governed by the Arbitration Act. See Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 106 (N.D.Ill.1980) (citations omitted), aff'd, 653 F.2d 310 (7th Cir.1981). I agree, and find that Roodveldt's Trainee Agreement is an agreement involving interstate commerce, and falls within the sc......
  • Request a trial to view additional results
81 cases
  • Lettis v. U.S. Postal Service, No. CV 95-737 (ADS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • August 12, 1998
    ...Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 109 (N.D.Ill.1980) (testimony in arbitration proceeding was absolutely privileged), aff'd, 653 F.2d 310 (7th Cir.1981); Barnes v. Avis Rent A Car System, Inc., 466 F.Supp. 907, 910 (D.D.C.1979) (statements made at union arbitration proceeding ar......
  • Papapetropoulous v. Milwaukee Transport Services, Inc., No. 85-1950
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 2, 1986
    ...exception.) We are aware that an arbitration hearing is not governed by the Rules of Evidence. Shearson Hayden Stone, Inc. v. Liang, 653 F.2d 310, 311 (7th Cir.1981). The fact that the arbitrator relied on this exception to the hearsay rule establishes that the arbitrator did not rely exclu......
  • Mpj v. Aero Sky, L.L.C., Civil Action No. SA-09-CV-693-XR.
    • United States
    • United States District Courts. 5th Circuit. Western District of Texas
    • November 30, 2009
    ...Workers of Am., 911 F.Supp. 1116, 1124 (N.D.Ind.1995); Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 108 (N.D.Ill.1980), aff'd, 653 F.2d 310 (7th Cir.1981). Although "fraud" and "undue means" are not defined in section 10(a) of the FAA, courts interpret the terms together. See Shea......
  • Roodveldt v. Merrill Lynch, Pierce, Civ. A. No. 83-3412.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • February 6, 1984
    ...governed by the Arbitration Act. See Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 106 (N.D.Ill.1980) (citations omitted), aff'd, 653 F.2d 310 (7th Cir.1981). I agree, and find that Roodveldt's Trainee Agreement is an agreement involving interstate commerce, and falls within the sc......
  • Request a trial to view additional results

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