The plaintiff commenced an arbitration proceeding with the Financial Industry Regulatory Authority (FINRA) against two of his former investment brokers and their former employers — Concorde and Westminster. The plaintiff claimed that the brokers falsely inflated his account balance, ultimately causing him to unknowingly deplete his entire retirement account. After a four-day hearing, the panel issued an award against the brokers, but it denied the plaintiff’s claims against the former employers, finding that they were not liable under a respondeat superior theory.

The plaintiff moved in district court to confirm the award against the brokers, which was confirmed. The plaintiff also moved to vacate the award in favor of the former employers, arguing that it was based on a manifest disregard of the law. The court denied the motion to vacate in both respects but found the question to be more complex as to Concorde, which is where the brokers worked for a significant portion of the relevant events. While concluding that the panel’s decision not to hold Concorde vicariously liable constituted “plain error,” the court held that the plaintiff failed to meet the “extremely high” burden of proving manifest disregard of the law. The court explained that such a finding would require a showing that the award was “based on reasoning so palpably faulty that no judge … ever could conceivably have made such a ruling.” Noting that the First Circuit has cautioned district courts not to correct even “painfully clear” arbitrator error, and that the panel here appeared to have acted more so out of a failure to appreciate the significance of the issue — it not being made a focal point of the hearing — the court found no evidence that the panel consciously ignored applicable law regarding Concorde’s vicarious liability.

Separately, the court refused to vacate the award against one of the individual brokers who did not participate in the arbitration hearing or even learn about the award until after it was issued. Instead, the court granted the plaintiff’s motion to confirm the award as against her, finding that she was properly served with the statement of claim and received adequate notice of the hearing.

Ebbe v. Concorde Inv. Servs., LLC, No. 1:19-cv-10289 (D. Mass. July 18, 2019).