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Olson v. National Association of Sec. Dealers

United States Court of Appeals, Eighth Circuit
Jun 7, 1996
85 F.3d 381 (8th Cir. 1996)

Summary

holding that selection of arbitrators is covered by arbitral immunity

Summary of this case from Tex. Brine Co. v. Am. Arbitration Ass'n, Inc.

Opinion

No. 95-3579SD

Submitted April 11, 1996

Filed June 7, 1996

Appeal from the United States District Court for the District of South Dakota.

Counsel who presented argument on behalf of the appellant was John Burke of Sioux Falls, South Dakota.

Counsel who presented argument on behalf of the appellee was Terri L. Reichter of Washington, D.C..

Before McMILLIAN, JOHN R. GIBSON, and FAGG, Circuit Judges.


This is Ernest D. Olson's second federal appeal arising from contractually required arbitration of his age discrimination action against his former employer. After a panel of arbitrators sponsored by the National Association of Securities Dealers (NASD) decided in the employer's favor, Olson learned one of the arbitrators, Edward J. Hentges, had an ongoing business relationship with the employer. Olson asked the district court to vacate the arbitration decision, contending the arbitrator's failure to disclose the relationship showed "evident partiality." See 9 U.S.C. §(s) 10(a)(2) (1994). The district court denied Olson's motion, but we agreed with Olson and reversed. Olson v. Merrill Lynch, Pierce, Fenner Smith, Inc., 51 F.3d 157 (8th Cir. 1995). Before arbitrating his age discrimination claim again, however, Olson filed this separate lawsuit against the NASD for its appointment of Hentges. Olson alleges breach of contract, fraudulent misrepresentation, negligent processing of arbitration, gross negligence, breach of warranty, and intentional infliction of emotional distress. Olson also brought claims against Hentges. The district court dismissed Olson's complaint, holding the NASD was immune from liability and the court lacked personal jurisdiction over Hentges. Olson appeals the dismissal of his claims against the NASD, and we affirm.

Because an arbitrator's role is functionally equivalent to a judge's role, courts of appeals have uniformly extended judicial and quasi-judicial immunity to arbitrators. Austern v. Chicago Bd. Options Exch., Inc., 898 F.2d 882, 886 (2d Cir.), cert. denied, 498 U.S. 850 (1990); Wasyl, Inc. v. First Boston Corp., 813 F.2d 1579, 1582 (9th Cir. 1987); Ozark Air Lines, Inc. v. National Mediation Bd., 797 F.2d 557, 563-64 (8th Cir. 1986); Corey v. New York Stock Exch., 691 F.2d 1205, 1209 (6th Cir. 1982); Tamari v. Conrad, 552 F.2d 778, 780-81 (7th Cir. 1977); Shrader v. NASD, Inc., 855 F. Supp. 122, 123-24 (E.D.N.C. 1994), aff'd, 54 F.3d 774 (4th Cir. 1995) (unpublished per curiam). Like judicial and quasi-judicial immunity, arbitral immunity is necessary to protect decisionmakers from undue influence, and the decision-making process from attack by dissatisfied litigants. Austern, 898 F.2d at 886; Corey, 691 F.2d at 1211. The courts also agree that to give effect to these underlying policies, arbitral immunity extends beyond arbitrators themselves to organizations that sponsor arbitrations. Austern, 898 F.2d at 886-87; Corey, 691 F.2d at 1211; Shrader, 855 F. Supp. at 124; Cort v. American Arbitration Ass'n, 795 F. Supp. 970, 972-73 (N.D. Cal. 1992). Without this extension, arbitral immunity would be almost meaningless because liability would simply be shifted from individual arbitrators to the sponsoring organizations. Austern, 898 F.2d at 886; Corey, 691 F.2d at 1211. Arbitral immunity protects all acts within the scope of the arbitral process. Austern, 898 F.2d at 886.

Olson argues the NASD's appointment of Hentges was not within the scope of the arbitral process because it occurred before the decision-making process began. The appointment of arbitrators is a necessary part of arbitration administration, however, and thus is protected by arbitral immunity. Austern, 898 F.2d at 884; Corey, 691 F.2d at 1208; Cort, 795 F. Supp. at 972. Olson also asserts arbitral immunity does not apply because the appointment of Hentges violated the NASD's own rules. We reject this contention as well. A sponsoring organization is immune from civil liability for improperly selecting an arbitration panel, even when the selection violates the organization's own rules. Austern, 898 F.2d at 884, 886; Corey, 691 F.2d at 1208, 1211; see Cort, 795 F. Supp. at 972-73.

Our decision does not leave Olson without redress for the NASD's appointment of a possibly biased arbitrator. Courts can vacate tainted arbitration decisions under 9 U.S.C. §(s) 10. See Corey, 691 F.2d at 1211; see also L H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372, 374, 377 (Minn. 1989) (involving analogous Minnesota law). Indeed, Olson has already sought vacation of the arbitration decision under Section(s) 10 and prevailed. Olson, 51 F.3d at 160. Thus, Olson will receive a new arbitration proceeding free from actual or perceived bias. L H Airco, 446 N.W.2d at 377.

Having reviewed the issue de novo, we conclude the NASD is immune from liability for sponsoring the tainted arbitration proceeding. We thus affirm the district court's dismissal of Olson's claims against the NASD.


Summaries of

Olson v. National Association of Sec. Dealers

United States Court of Appeals, Eighth Circuit
Jun 7, 1996
85 F.3d 381 (8th Cir. 1996)

holding that selection of arbitrators is covered by arbitral immunity

Summary of this case from Tex. Brine Co. v. Am. Arbitration Ass'n, Inc.

holding that "the appointment of arbitrators is a necessary part of arbitration administration...and thus is protected by arbitral immunity."

Summary of this case from Gryder v. HCL Am. Inc.

holding that a sponsoring organization is immune from civil liability for improperly selecting an arbitration panel, even when the selection violates the organization's own rules

Summary of this case from Alexander v. American Arbitration Ass.

affirming on the basis of arbitral immunity dismissal of claims against NASD

Summary of this case from Honn v. National Ass'n of Securities Dealers, Inc.

In Olson, the plaintiff sued an arbitration sponsoring organization for allegedly appointing a biased arbitrator. 85 F.3d at 382.

Summary of this case from Owens v. Am. Arbitration Ass'n, Inc.

noting that courts of appeals have uniformly extended judicial and quasi-judicial immunity to arbitrators; collecting cases

Summary of this case from Mathis v. Goldberg

stating that because the role of arbitrator is functionally equivalent to the role of judge, federal courts have uniformly extended judicial and quasi-judicial immunity to arbitrators

Summary of this case from Jason v. American Arbitration Association

noting that the doctrine is an extension of judicial and quasi-judicial immunity

Summary of this case from Universal Restoration Serv. v. Paul W. Davis Syst., Inc.

observing that arbitral immunity against claim for alleged appointment of possibly biased arbitrator did not leave the plaintiff without redress in light of remedy that arbitration decision could be vacated

Summary of this case from Droscha v. Shepherd

In Olson v. National Ass'n of Securities Dealers (8th Cir.1996) 85 F.3d 381 (Olson), the proposed arbitrator failed to disclose an ongoing business relationship with one of the parties.

Summary of this case from La Serena Properties v. Weisbach

In Olson, Olson sued an arbitrator and an arbitration association for the association's appointment of an arbitrator who had an ongoing business relationship with Olson's employer, and adversary.

Summary of this case from Blue Cross Blue Shield v. Juneau
Case details for

Olson v. National Association of Sec. Dealers

Case Details

Full title:Ernest D. Olson (Bud), Appellant, v. National Association of Securities…

Court:United States Court of Appeals, Eighth Circuit

Date published: Jun 7, 1996

Citations

85 F.3d 381 (8th Cir. 1996)

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