Court Affirms FINRA Arbitration Award to Charles Schwab, Finding No Evident Partiality or Other Arbitrator Misconduct

Carlton Fields
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Carlton Fields

Thomas Sanduski petitioned to vacate a Financial Industry Regulatory Authority arbitration award of $418,518 to Charles Schwab, claiming that one of the arbitrators was partial to Charles Schwab and that the panel was guilty of misconduct and potentially exceeded its authority for refusing Sanduski’s request to postpone the hearing.

Sanduski alleged one of the arbitrators was biased because one of Charles Schwab’s experts said “see you next week” to the arbitrator as the parties filed out of the hearing room after the proceedings had concluded. The arbitrator did not respond to or acknowledge the statement, and the parties agreed that it was probably a reference to the fact that the same arbitrator was due to participate on another arbitration panel involving Charles Schwab the following week. In addition, after the hearing the same arbitrator shared a taxi to the airport with a different Charles Schwab expert. The arbitrator and expert talked exclusively about living in Phoenix, making sure to avoid discussion of the arbitration.

The court found these grounds to be the “type of ‘attenuated’ and ‘insubstantial connections between a party and an arbitrator’ that the Ninth Circuit rejects as ground for vacatur.” Although the communications were “perhaps inappropriate,” the court stated that the “Ninth Circuit consistently denies vacatur in alleged-partiality cases where arbitrators and parties have far more substantial contacts.”

Sanduski also argued the panel exceeded its powers when it agreed to permit one of the arbitrators to appear telephonically and refused his request to postpone the hearing. Sanduski had originally agreed to permit the arbitrator to attend the second day of the hearing telephonically, and only objected when that day arrived. The court found that the panel’s decision to continue with the hearing was based on a reasonable interpretation and application of the rules and was “far from arbitrary.” Noting that “courts will not intervene in an arbitrator’s decision not to postpone a hearing if any reasonable basis for it exists,” the court denied Sanduski’s petition to vacate the award.

Sanduski v. Charles Schwab & Co, Inc., Case No. 2:19-cv-01340-JAD-BNW (D. Nev. August 20, 2020).

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