4th Circuit upholds vacatur of FINRA arbitration award

The Fourth Circuit recently affirmed a rare vacatur of a FINRA arbitration award arising out of an employment dispute.   In Raymond James Financial Services Corp, Inc. v. Bishop, __ F.3d. __, 2010 WL 610614 (4th Cir. Feb. 22, 2010), three financial advisers claimed they were wrongfully discharged from the brokerage firm Raymond James even though they had an employment-at-will contract.   The panel found the firm liable on the grounds that they permitted a firm’s lawyer to represent the claimants in a related arbitration brought against them following complaints against their branch for improper conduct, and that lawyer had a conflict of interest.   The grounds for the award were, according to the Fourth Circuit “inscrutable” and “incoherent.”  After the district court remanded the case back to the panel for a clarification of the grounds for the award, the district court vacated the award. 

The Court of Appeals for the Fourth Circuit held that the district court properly vacated the award on the grounds that the panel “exceeded its authority” within the meaning of FAA section 10(a)(4) by deciding a dispute about representation by counsel when it had authority only to decide disputes between the parties arising out of their employment or termination of employment. 

Interestingly, the Fourth Circuit declined to decide whether the manifest disregard of the law standard of review survived Hall Street.  However, the opinion reads very much like the Court could not allow the award to stand because the arbitrators did in fact disregard the law regarding wrongful termination.  Through artful crafting, the Courth Circuit pinned the vacatur under the “exceeding authority” prong of section 10(a), and thus avoided having to decide whether “manifest disregard” is still a valid ground for review.


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