New Jersey District Court Rejects Challenge to Arbitration Award on the Basis of Public Policy

Carlton Fields
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Carlton Fields

The petitioner challenged an arbitration award on the basis that it conflicted with public policy. “[T]he Third Circuit has explained that this exception does not … sanction a broad judicial power to set aside arbitration awards as against public policy.” Thus, the limited public policy exception applies only when “the arbitration decision and award create an explicit conflict with an explicit public policy.” For example, the court referenced numerous situations in which arbitration awards were vacated on public policy grounds where the safety of the general public is implicated, such as vacating an arbitration award that reinstated a pilot who flew while intoxicated or overruling an award that reinstated an employee who violated a public safety regulation at a nuclear power plant. Here, citing various labor laws, the petitioner argued that his employment contract’s forfeiture provision deprived him of wages that he earned based on his performance at Wells Fargo Advisors, and he was prevented from working off his loan obligations because he was discharged without cause. The court found that the petitioner’s dispute was a private contractual relationship between him and Wells Fargo Advisors and did not implicate public policy or public harm.

The petitioner also argued that the panel manifestly disregarded the law, as Wells Fargo Advisors encouraged the panel to resolve the dispute based on “industry practice” instead of the applicable law and that “representations that Wells Fargo Advisors advanced during the proceedings, in conjunction with the [a]ward which it received, raise an inference that the law was ignored.” The court’s review of the record indicated that the panel “was neither encouraged nor directed to disregard the law in resolving the parties’ dispute” and that support for the award can be derived from the terms and provisions of the petitioner’s employment contract.

Lastly, the petitioner argued that the panel excluded certain evidence during the hearings, which would have established that he was discharged from Wells Fargo Advisors without cause. The court found such evidence would have been irrelevant, as the petitioner’s letter offer stated that he was hired on an at-will basis, providing Wells Fargo Advisors a right to terminate the petitioner’s employment at any time, with or without advance notice and with or without cause.

The arbitration award was confirmed.

Caputo v. Wells Fargo Advisors, LLC, No. 3:19-cv-17204 (D.N.J. May 29, 2020).

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