Warfield v. Icon Advisers, Inc.

• Decision Date: 24 February 2022
• Docket Number: No. 20-1690,20-1690
• Citation: 26 F.4th 666
• Parties: James WARFIELD, Plaintiff – Appellant, v. ICON ADVISERS, INC; Icon Distributors, Inc., Defendants – Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

26 F.4th 666

James WARFIELD, Plaintiff – Appellant,

v.ICON ADVISERS, INC; Icon Distributors, Inc., Defendants – Appellees.

No. 20-1690

United States Court of Appeals, Fourth Circuit.

Argued: January 26, 2022

Decided: February 24, 2022

ARGUED: Christopher S. Edwards, WARD & SMITH, PA, Wilmington, North Carolina, for Appellant. Jonathan Woodward Yarbrough, CONSTANGY, BROOKS, SMITH & PROPHETE LLP, Asheville, North Carolina, for Appellee. ON BRIEF: Gary J. Rickner, WARD & SMITH, PA, Raleigh, North Carolina, for Appellant.

Before MOTZ, THACKER, and QUATTLEBAUM, Circuit Judges.

Reversed by published opinion. Judge Motz wrote the opinion, in which Judge Thacker and Judge Quattlebaum joined.

DIANA GRIBBON MOTZ, Circuit Judge:

James Warfield, a securities broker, contended before an arbitration panel that his former employer, ICON Advisers, Inc., and a related corporation, ICON Distributors, Inc., (together, "ICON") wrongfully terminated him without just cause. The panel awarded him $1,186,975. Warfield moved to enforce the award in the Western District of North Carolina. ICON cross-moved to vacate the award. The district court refused to enforce the award, holding that North Carolina is an "at-will" employment state that does not recognize a cause of action for wrongful termination without just cause. The court determined that the arbitrators manifestly disregarded the law in finding to the contrary and vacated the award on that basis. Warfield appeals, and because ICON has not made the exceedingly difficult showing necessary to demonstrate that the arbitrators acted with manifest disregard of the law, we must reverse the district court's order.

I.

In April 2017, ICON hired Warfield as a securities wholesaler. By the end of the year, it had fired him. The parties dispute exactly why ICON terminated Warfield's employment. They agree, however, that because Warfield's employment fell within the ambit of the Financial Industry Regulatory Authority (FINRA), arbitrators would resolve the dispute. See FINRA Rule 13200(a).

In April 2019, Warfield filed a statement of claim before the arbitrators asserting a claim against ICON for "wrongful termination without just cause."¹ Warfield argued that the mere fact that disputes over his employment relationship had to be resolved by arbitration implied that he could only be fired for cause. He cited two opinions from our sister circuits for this proposition: PaineWebber, Inc. v. Agron , 49 F.3d 347 (8th Cir. 1995) and Shearson Hayden Stone, Inc. v. Liang , 653 F.2d 310 (7th Cir. 1981). For its part, ICON argued that because North Carolina is an employment at-will state, Warfield could not recover for "wrongful termination" without just cause.²

The arbitrators agreed with Warfield. They concluded: "Respondents [ICON] are jointly and severally liable for and shall pay to Claimant [Warfield] the amount of $1,186,975.00 in compensatory damages for wrongful termination without just cause." The arbitrators' decision contains no other explanation as to the basis for the award.

Pursuant to the Federal Arbitration Act, Warfield moved in the district court to enforce the award. See 9 U.S.C. § 9. ICON cross-moved to vacate the award. The court denied Warfield's motion and granted ICON's. The court held that "the clear, well-established law in North Carolina and the Fourth Circuit" precluded Warfield's wrongful termination without just cause claim, and that "the [arbitration] Panel chose to disregard ... that law." The court concluded that the "[a]ward therefore demonstrates manifest disregard [of the law] and must be vacated." Warfield now appeals.

We review a district court's decision to vacate an arbitration award de novo. Interactive Brokers LLC v. Saroop , 969 F.3d 438, 442 (4th Cir. 2020).

II.

Convincing a federal court to vacate an arbitral award is a herculean task. "Indeed, the scope of review of an arbitrator's ... decision is among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all — the quick resolution of disputes and the avoidance of the expense and delay associated with litigation." Apex Plumbing Supply v. U.S. Supply Co. , 142 F.3d 188, 193 (4th Cir. 1998). When "reviewing such an award, ‘a district or appellate court is limited to determin[ing] whether the arbitrators did the job they were told to do — not whether they did it well, or correctly, or reasonably, but simply whether they did it.’ " Three S Del., Inc. v. DataQuick Info. Sys. , 492 F.3d 520, 527 (4th Cir. 2007) (quoting Remmey v. PaineWebber, Inc. , 32 F.3d 143, 146 (4th Cir. 1994) ).

In addition to the very narrow statutory grounds for vacating an arbitral award found in 9 U.S.C. § 10(a), we have recognized, either "as an independent ground for review or as a judicial gloss on the [narrow] enumerated grounds for vacatur set forth" in § 10(a), that a district court may vacate an arbitral award that rests upon a "manifest disregard" of the law. Wachovia Secs., LLC v. Brand , 671 F.3d 472, 483 (4th Cir. 2012).³ To establish manifest disregard, a party must demonstrate: "(1) the disputed legal principle is clearly defined and is not subject to reasonable debate; and (2) the arbitrator refused to apply that legal principle." Jones v. Dancel , 792 F.3d 395, 402 (4th Cir. 2015). We consider each prong in turn.

III.

To demonstrate that "the disputed legal principle is clearly defined and is not subject to reasonable debate," ICON had to present to the arbitrators "binding precedent requiring a contrary result." Jones , 792 F.3d at 402–03. ICON asserts that it did so, pointing to two sources of precedent that it contends foreclose Warfield's wrongful termination without just cause claim: North Carolina state law and our decision in Raymond James Financial Services, Inc. v. Bishop , 596 F.3d 183 (4th Cir. 2010).

A.

First, ICON asserts that because North Carolina is an at-will employment state, a state court would necessarily reject Warfield's asserted wrongful termination without just cause claim. ICON cites a series of cases that do, indeed, say that North Carolina has a strong presumption of at-will employment. See, e.g., Kurtzman v. Applied Analytical Indus., Inc. , 347 N.C. 329, 493 S.E.2d 420 (1997) ; Pierce v. Atl. Grp., Inc. , 219 N.C.App. 19, 724 S.E.2d 568 (2012) ; Brackett v. SGL Corp. , 158 N.C.App. 252, 580 S.E.2d 757 (2003).

The problem for ICON is that Warfield has cited cases holding that the presence of an arbitrability clause governing an employment dispute implies for-cause termination protections, notwithstanding a state law at-will doctrine to the contrary. Thus, the Eighth Circuit has held:

Even accepting that Kansas is an employment-at-will state ... PaineWebber's relationship with Agron under the oversight of the NASD [FINRA's predecessor] contemplated the use of the arbitration procedure as a means of settling employment-related disputes. This process necessarily alters the employment relationship from at-will to something else .... Accordingly, the arbitration panel had the power to determine whether the firing was justified.

Agron , 49 F.3d at 352 (emphasis added); see also Liang , 653 F.2d at 312 ("Shearson's further reply that Liang's employment was terminable at will is without merit. It has been held repeatedly that an agreement to arbitrate disputes about employee discharges implies a requirement that discharges be only for ‘just cause.’ ").

We express no opinion on the persuasiveness of Agron and Liang ; the point is that they exist, and Warfield presented them to the arbitrators. ICON has not cited, either to the arbitrators or to us, any North Carolina case rejecting the specific proposition that the arbitrability of an employment relationship implies for-cause protections. We have previously explained that in the absence of clearly on-point and controlling precedent, the fact that courts disagree on a particular legal question weighs against second-guessing an arbitrator's award. See Richmond, Fredericksburg & Potomac R. Co. v. Transp. Comms. Int'l Union , 973 F.2d 276, 282 (4th Cir. 1992) ("To be sure, the courts have failed to reach a consensus on this issue.... We decline to enter the fray, and conclude that the arbitrator was entitled to rely on what he thought was the law. It simply is not our place to determine which side of the conflict the arbitrator should have come down on.").

In the manifest disregard context, it is not our role to predict whether North Carolina courts would reject the theory embraced in Agron and Liang that arbitrability implies for-cause protection. The fact is that to date, they have not. And therefore, North Carolina's at-will doctrine cannot provide the "binding precedent requiring a contrary result" necessary to demonstrate that the arbitrators manifestly disregarded the law. Jones , 792 F.3d at 403.

B.

ICON also asserts that our decision in Raymond James affirmatively rejected Agron and Liang , such that the arbitrators disregarded clearly established controlling law.

As an initial matter, it is unclear that a federal court could ever establish "binding precedent requiring a contrary result" on a question of state law, at least from an arbitrator's perspective. Jones , 792 F.3d at 403. But even assuming that a federal court could theoretically establish controlling precedent on state law for purposes of the manifest disregard inquiry, Raymond James was not such a holding.

First and foremost, the holding in Raymond James was not based on a finding of wrongful termination. Although ICON is correct that the plaintiffs in Raymond James styled their claim as one for wrongful termination, we explained that "the award in this case cannot be understood as based on anything other than the arbitrators' finding that Raymond James committed a breach of its ‘fiduciary and legal duties’ when its in-house lawyer ... provided legal representation to the Appellants in third-party arbitration proceedings." 596...