This case arises out of plaintiff John B. Napoleone’s failure to repay a sign-on bonus of $100,000 to his former employer, defendant S2K Financial LLC, under the terms of his employment agreement. S2K commenced an arbitration to recover the sign-on bonus by filing a statement of claim with FINRA. FINRA informed the parties that the case would be decided by a single arbitrator, unless all parties agreed in writing to three arbitrators, pursuant to FINRA’s Code of Arbitration Procedure for Industry Disputes. S2K filed a motion to expand the panel to three arbitrators, to which Napoleone opposed, arguing that S2K participated in selecting the single arbitrator and, therefore, waived its right to amend the number of arbitrators. In two instances thereafter, Napoleone advanced his position that the arbitration panel should not be expanded. The sole arbitrator issued an award finding that Napoleone was liable for breach of contract and granted S2K $100,000 in compensatory damages plus interest.

Thereafter, Napoleone filed a petition to vacate the arbitration award arguing that the arbitrator exceeded his power and acted in manifest disregard for the law by rendering an award without amending the panel to three arbitrators. S2K moved to confirm the arbitration award arguing that Napoleone was judicially estopped from asserting this basis for vacatur.

The court denied Napoleone’s petition to vacate the arbitration award and granted S2K’s petition to affirm the arbitration award. The court explained that “judicial estoppel protects the sanctity of the oath and integrity of the judicial process by preventing a party from asserting a factual position in a legal proceeding that is contrary to a position previously taken by that party in a prior legal proceeding.” A party invoking judicial estoppel must show that: “(1) the party against whom the estoppel is asserted took an inconsistent position in a prior proceeding and (2) that position was adopted by the first tribunal in some manner, such as by rendering a favorable judgment.” The court reasoned that Napoleone opposed a three-member arbitration panel in three separate instances in the underlying arbitration. This inconsistent position was adopted by the arbitrator twice. As such, the court ruled that Napoleone was judicially estopped from asserting this basis for vacatur, and denied his petition to vacate the arbitration award.

Napoleone v. S2K Financial, LLC, No. 1:18-cv-03124 (S.D.N.Y. Dec. 6, 2019).