Opinion
03 Civ. 2056 (RWS)
November 7, 2003
SCOTT D. STECHMAN, ESQ., LEHMAN EILEN, Uniondale, NY, of Counsel for Petitioner
DAVID BOLTON, ESQ., DAVID BOLTON, P.C., Garden City, NY, of Counsel for Respondents Quest Capital, David Yu and Carolyne Yu
JOYCE LUBBERS, Phoenix, AZ, Respondent Pro Se
OPINION
Respondent Joyce Lubbers, pro se. has cross-moved to vacate an arbitration award and to modify the award granted in favor of petitioner Northeast Securities, Inc. ("Northeast") against respondent Quest Capital Strategies, Inc. ("Quest"), Richard Skinner ("Skinner"), David Chen Yu ("D. Yu"), and Carolyne Yu ("C. Yu") (collectively, "the Yus"). For the reasons set forth below, the cross-motion is denied and the action dismissed.
Prior Proceedings
Northeast commenced an NASD arbitration, NASD-DR Arbitration No. 98-0090, on January 8, 1998 against Quest, the Yus, Skinner and Lubbers for fraud, negligence, violation of NASD Rules of Fair Practice, contribution and indemnity (the "Arbitration"). Lubbers filed an answer and cross-claims on August 20, 1998 in which she denied the allegations of the claim against her and asserted cross claims for frivolous litigation, fraud, defamation, "Whistle Blower" liability, retaliatory termination, conspiracy to commit fraud, evidence tampering, and perjury.
In a January 1999 ruling the panel granted the motion of Quest and the Yus to dismiss Lubbers' cross complaints for failure to state a claim, stating:
Granted except for Cross-Complaints of Retaliatory Termination, Defamation and Whistleblower claims are done without prejudice to replead as separate claims.
Exhibit B, Stechman Affid.
The panel also denied Lubbers permission to assert claims against Northeast.
An award granting damages to Northeast against Skinner and Quest and dismissing the claims of the Yus among other determinations was rendered on March 10, 2003 (the "Award").
This action was filed by Northeast on March 24, 2003 to confirm the Award. By order and stipulation Quest was directed to serve its motion to vacate the Award and all motions were to be submitted by July 2. A schedule set Lubbers' cross-motion and the parties' motions to be heard on August 13, 2003.
On July 17, 2003, by stipulation, Northeast withdrew its motion and Quest its cross-motion. Lubbers requested and was granted additional time to submit her cross-motion to vacate and modify the Award which was marked submitted on September 17, 2003.
Facts
The underlying dispute between the parties according to Lubbers arose as a consequence of her communications in 1994 to the Securities and Exchange Commission ("SEC"), NASD, and various state attorneys general concerning improprieties at Quest while she was serving as its compliance officer. Her activities, she has alleged, resulted in actions by the SEC and the NASD and her termination by Quest after seven months, and the Arbitration described above.
Cross-Motion to Vacate the Award is Time-Barred
The panel in January 1999 dismissed Lubbers' cross-claims against Quest and the Yus from the Arbitration in which the Award was rendered, (Exhibit B, Stechman Affid.), and denied her permission to file claims against Northeast. That order, which finally and definitively disposed of all of Lubbers' claims in the Arbitration, operated as a "final" arbitration award within the meaning of the FAA. See, e.g.,Metallgesellschaft A.G. v. M/V Captain Constante, 790 F.2d 280, 283 (2d Cir. 1986) (holding that an interim arbitration ruling is sufficiently final if "it finally and definitely disposes of a separate independent claim . . . although it does not dispose of all the claims that were submitted to arbitration"). That being the case, it was incumbent upon Lubbers to move to vacate the January 1999 Order within ninety days of its issuance, as mandated by Section 12 of the FAA, 9 U.S.C. § 12.
The period provided for is a statute of limitations and the failure to bring a timely motion is an absolute bar to an application seeking vacatur or modification. Kruse v. Sands Bros. Co., Ltd., 226 F. Supp.2d 484, 487 (S.D.N.Y. 2002). Having failed timely to seek vacatur or modification of the January 1999 Order, Lubbers is time-barred from now challenging the Award.
Failure to Explain the Dismissal Does Not Provide Grounds for Vacating
Arbitrators are not required to provide an explanation for their arbitration award. E.g., Halligan v. Piper Jaffray, Inc., 148 F.3d 197, 204 (2d Cir. 1998), cert. denied, 526 U.S. 1034 (1999); Max Marx Color Chem. Co. Employees' Profit Sharing Plan v. Barnes, 37 F. Supp.2d 248, 254 (S.D.N.Y. 1999). Contrary to Lubbers' contention, the failure to state the reasons for an award cannot form the basis for vacatur if any ground for the arbitrators' decision can be gleaned from the factual record. Sobel v. Hertz, Warner Co., 469 F.2d 1211, 1216 (2d Cir. 1972).
Quest provided the grounds on which it relied for dismissal by letter to the panel of October 27, 1998 (Exhibit A, Bolton Affid.).
Failure of the panel to state the grounds for dismissing Lubbers does not require its dismissal be vacated. There is No Evidentiary Basis to Vacate the Dismissal
Lubbers has claimed that the panel refused to hear evidence relating to her conduct as a Quest compliance officer as it concerned her supervision of Skinner, a former Quest and Northeast registered representative who was alleged to have misappropriated hundreds of thousands of dollars of customer funds and Quest's handling of Skinner's Form U-5. (Lubbers' Response, pp. 28-31).
The Form U-5, the Uniform Termination Notice for Securities Industry Registration, is the form NASD member firms must file with the NASD to terminate the registration of an individual associated with that firm.
However, Lubbers fails to establish the relevance or materiality of that conduct with respect to her cross-claims against Quest and the Yus and any putative claim against Northeast.
Manifest Disregard Has Not Been Established
A review of an arbitration award under a manifest disregard of the law standard is "severely limited." DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 821 (2d Cir. 1997), cert. denied, 522 U.S. 1049 (1998). To warrant vacating an award based on manifest disregard of the law, movant must establish that both "(1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." Id.; see also Greenberg v. Bear, Stearns Co., 220 F.3d 22, 28 (2d Cir. 2000), cert. denied, 531 U.S. 1075 (2001) (citation omitted); Josephthal Co., Inc. v. Cruttenden Roth, Inc., 177 F. Supp.2d 232, 236 (S.D.N.Y. 2001).
Lubbers has not established that the panel intentionally ignored applicable and clearly governing law. Although not entirely clear, it appears Lubbers takes issue with the fact that the arbitrators did not apply the Federal Rules of Civil Procedure to the arbitration. (Lubbers' Response at 32-33). However, the arbitrators' decision not to follow the Federal Rules of Civil Procedure in its conducting of the Arbitration hearings cannot form the basis for a viable manifest disregard of the law claim. This is so because arbitrators are "not constrained by formal rules of evidence and procedure." E.g., Areca, Inc. v. Oppenheimer Co., Inc., 960 F. Supp. 52, 56 (S.D.N.Y. 1997). As stated by the Second Circuit Court of Appeals, "an arbitrator need not follow all the niceties observed by the federal courts." Bell Aerospace Co. Div. of Textron, Inc. v. Local 516, 500 F.2d 921, 923 (2d Cir. 1974).
Lubbers has not established the existence of a legitimate basis to vacate the Award pursuant to any of the legal grounds codified in Section 10 of the FAA, as interpreted by the federal courts, or pursuant to a manifest disregard of the law standard. This Court Has No Jurisdiction to Grant Alternative Relief
Lubbers has sought relief to sever her cross and counter claims against Quest and Northeast in order to assert them in another arbitration.
In or about March 1999, a NASD arbitration proceeding was commenced entitled Nicholas Zecchino Jr. and Donato Zecchino v. Quest Capital Strategies, Inc., et al., NASD-DR Arbitration No. 99-01364 (the "Zecchino Arbitration"). Virtually simultaneously, a NASD arbitration proceeding was commenced entitled Lupo, et al. v. Quest Capital Strategies, Inc., et al., NASD-DR Arbitration No. 99-01517 (the "Lupo Arbitration"). Subsequently, the Zecchino Arbitration and Lupo Arbitration were consolidated (collectively referred to herein as the "Consolidated Arbitration"). Lubbers has sought alternative relief to assert her claims in the Consolidated Arbitration (Lubbers' Response, p. 34).
By the terms of the January 1999 Order, Lubbers was free to assert claims against Northeast and Quest in a separate arbitration proceeding or presumably in the Consolidated Arbitration. In her response and cross-complaint in the Consolidated Arbitration, Lubbers did assert claims against Quest, D. Yu and C. Yu for, among other things, fraud, retaliatory termination and defamation which appear to be virtually identical to claims asserted by Lubbers against Quest, D. Yu and C. Yu in the Arbitration. As to Northeast, Lubbers could have asserted cross-claims against Northeast in her response in the Consolidated Arbitration, but did not do so. By order dated March 22, 2003 (Stechman Affid, Ex. F), the arbitration panel in the Consolidated Arbitration denied Lubbers' motion to amend her cross-claims against Quest, D. Yu and C. Yu on timeliness grounds.
There is no basis for this Court to grant relief with respect to an arbitration proceeding not before this Court.
Failure of Northeast to Pay Expenses Does Not Constitute Grounds for Vacating the Award
During the course of the June 23, 1999 hearing session, Lubbers has alleged that Northeast agreed to reimburse her travel and lodging expenses for the June 1999 hearing sessions, conditioned on presentation to Northeast of appropriate back-up documentation supporting her reimbursement request. However, according to Northeast, Lubbers has not provided Northeast with any documentation establishing the $2,340.00 in expenses allegedly incurred by her since the June 23, 1999 Arbitration hearing. In any event, the breach of an agreement to pay expenses is not one of the limited grounds specified in Sections 10 and 11 of the FAA, 9 U.S.C. § 10 and 11, warranting vacatur or modification of an arbitration award.
Furthermore, even assuming, contrary to the facts alleged, that the obligation exists, this Court has within this proceeding no authority, nor has any been cited, to award Lubbers the $2,340 she seeks.
Conclusion
The cross-motion to vacate or modify the Award is denied, and this action is dismissed without prejudice.
It is so ordered.