Scott v. Prudential Securities , 141 F.3d 1007 ( 1998 )


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  •                                                              PUBLISH
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT
    _______________
    No. 96-9106
    _______________
    D. C. Docket No. 1:95-CV-3284-JEC
    WILLIAM SUMNER SCOTT,
    Plaintiff-Appellant,
    versus
    PRUDENTIAL SECURITIES, INC.,
    Defendant-Appellee.
    ______________________________
    Appeal from the United States District Court
    for the Northern District of Georgia
    ______________________________
    (May 18, 1998)
    Before BIRCH, Circuit Judge, FAY,       Senior   Circuit   Judge,   and
    COHILL*, Senior District Judge.
    *
    Honorable Maurice B. Cohill, Senior U.S. District Judge for
    the Western District of Pennsylvania, sitting by designation.
    BIRCH, Circuit Judge:
    In this appeal, we decide whether the Member Arbitration Rules
    of the National Futures Trading Association (“NFA”) permit NFA
    arbitrators to decide whether a dispute is arbitrable. We must also
    address whether an individual consents to arbitrate disputes with
    other members of the NFA by becoming an associate member of the
    NFA. In addition, the petitioner-appellant asks us to vacate the
    arbitration award entered below pursuant to section 10 of the
    Federal Arbitration Act, 
    9 U.S.C. § 10
    , and on the non-statutory
    ground that the award was arbitrary and capricious.1 The district
    court held that the arbitrators did have the authority to determine
    issues of arbitrability but, upon conducting an independent review,
    the court made an alternative holding that the dispute was indeed
    subject to NFA arbitration. The district court also rejected Scott's
    attacks on the arbitrators' award and refused to vacate the award.
    1
    Although the petitioner-appellant raises a number of
    additional challenges both to the arbitration award and to the
    district court's rulings below, we conclude they are without merit
    and decline to discuss them further.
    2
    Finally, the district court granted the respondent-appellee's motion
    to confirm the award. Although we hold that the district court erred
    when it found that the arbitrators had the authority to decide issues
    of arbitrability, we agree with the district court's alternative holding
    and its decision to confirm the arbitration award. We AFFIRM.
    BACKGROUND
    William S. Scott (“Scott”), the petitioner-appellant, formed a
    Delaware corporation, Creative Strategies, Inc. (“CSI”), that acted as
    the general partner of a Pennsylvania limited partnership, the
    Creative Strategy Fund I, (the “Fund”).          Scott was the sole
    shareholder of CSI and the sole limited partner of the Fund. The
    Fund subsequently opened a number of accounts with the
    respondent-appellee, Prudential Securities, Inc. (“PSI”), for the
    purpose of engaging in futures trading. Scott executed all the
    documents required to open these accounts but structured the
    transactions with the intent of avoiding personal liability for any
    3
    deficits in the accounts.2 He specifically refused PSI's request that
    he execute a personal guarantee on the accounts.
    These accounts lost a significant amount of money due to what
    Scott alleges were PSI's mistakes in trading the accounts on a
    margin. Scott further alleges that instead of correcting the mistakes,
    PSI forged documents to support the transactions and demanded
    payment for the deficit in the accounts. PSI then issued a demand
    for arbitration before the NFA against Scott, the Fund, and CSI. In
    October, 1992, the Fund filed a complaint with the Commodity
    Futures Trading Commission (“CFTC”), alleging that PSI had
    committed a number of transgressions in connection with the
    accounts and claiming damages.          PSI responded by filing a
    counterclaim in the CFTC proceeding that demanded payment of the
    debit balances from Scott, the Fund, and CSI. The CFTC, however,
    refused to consider PSI's claims against Scott individually, and the
    2
    Since the details of these arrangements are both lengthy
    and complex, we confine our discussion to the details necessary to
    understand the issues on appeal.
    4
    NFA granted a stay of PSI's arbitration proceedings pending the
    outcome of the CFTC hearing.
    In 1994, an administrative law judge (the “ALJ”) for the CFTC
    decided that the allegations regarding PSI's conduct were without
    merit and entered an award of $101,087.53 plus interest in PSI's
    favor. In 1995, the CFTC heard an appeal of the ALJ's decision and
    affirmed it in all material respects.3 At PSI's request, the NFA then
    lifted the stay in the arbitration proceedings that PSI had initiated
    against Scott in his personal capacity and notified both parties that
    arbitration would commence on October 31, 1995.
    On October 18, 1995, Scott petitioned the NFA to delay the
    arbitration pending the outcome of a motion the Fund had filed in the
    United States District Court for the Southern District of Florida
    seeking a temporary restraining order (“TRO”) to enjoin the NFA
    proceedings. Scott also petitioned the NFA staff for the option of
    3
    The CFTC's confirmation of the ALJ's decision spawned a
    considerable amount of additional litigation. Suffice it to say
    that another panel of our court affirmed the award without opinion.
    See Prudential Securities, Inc. v. Creative Strategy, Inc., 
    107 F.3d 26
     (11th Cir. 1997).
    5
    participating in the arbitration by telephone. On October 25, 1995,
    the NFA denied Scott's request for a stay, and, on October 27, 1995,
    the arbitrators' denied Scott's request to participate by telephone.
    On October 30, 1995, the district court in Florida denied the Fund's
    request for a TRO to enjoin the NFA arbitration. The arbitrators
    subsequently commenced their hearing on October 31, 1995, in
    Scott's absence. That morning, the arbitrators also refused an
    attempted phone call from Scott, who sought either a delay in the
    hearing or the option of participating by telephone. The arbitrators
    did, however, accept and consider a fifty-six page affidavit detailing
    Scott's position on the dispute.
    On November 20, 1995, a three-person NFA arbitration panel
    found that the Fund and CSI were Scott's “alter-egos” and pierced
    the corporate veil to hold Scott liable for the debts of those entities.
    The arbitrators awarded PSI $106,087.54 plus interest against Scott
    personally. Scott brought a motion to vacate the arbitration award
    in the United States District Court for the Northern District of
    6
    Georgia; PSI brought a motion to confirm the arbitration award.
    After a resolving a number of procedural disputes,4 the district court
    granted PSI's motion to confirm the award and denied Scott's motion
    to vacate.
    DISCUSSION
    On appeal, Scott argues that the district court erroneously
    decided that the NFA's Member Arbitration Rules gave the NFA
    arbitrators the authority to resolve disputes about arbitrability (i.e.,
    whether a particular dispute is subject to arbitration). Scott also
    appeals the district court's alternative holding that, even if the NFA
    arbitrators did not have the power to decide issues of arbitrability,
    the alter-ego liability dispute between PSI and Scott was
    nonetheless subject to arbitration.       Finally, Scott attacks the
    4
    Scott raises a number of these procedural disputes on
    appeal and asks us to reverse the district court's rulings. Upon
    review, we find his contentions to be without merit.
    7
    arbitrators' award on a number of different grounds and asks us to
    vacate the award pursuant to section 10 of the FAA, because the
    award was arbitrary or capricious, and because the NFA's filing fees
    violated his rights under the Florida Constitution. PSI defends the
    district court's opinion and the NFA arbitrators' award on all grounds
    and asks us to affirm the district court's confirmation of the award.
    I.   Arbitrability of the Dispute
    Scott argues that the NFA arbitrators did not have the authority
    to enter a judgment in his dispute with PSI. It is well established that
    arbitration is a creature of contract and no party can be compelled
    to submit a dispute to arbitration without having given prior
    contractual consent to do so.            See AT&T Tech., Inc. v.
    Communications Workers, 
    475 U.S. 643
    , 649, 
    106 S. Ct. 1415
    ,
    1418, 
    89 L. Ed. 2d 648
     (1986). Although the United States Supreme
    Court has made it clear that, the courts, not arbitrators, ordinarily will
    decide whether or not a particular dispute is arbitrable, the parties
    may choose to have arbitrators resolve even the question of
    8
    arbitrability.   
    Id. at 649
    , 
    106 S. Ct. at 1418
     (unless the parties
    “clearly and unmistakably” provide otherwise “the question of
    arbitrability–whether . . . [an arbitration] agreement creates a duty for
    the parties to arbitrate the particular grievance–is undeniably an
    issue for judicial determination.”). The arbitrators in this case, by
    entering an award against Scott on the merits, implicitly decided that
    they had the power to decide questions of arbitrability and decided
    that the dispute was arbitrable. As we must defer to the arbitrators'
    conclusion that the dispute was arbitrable only if we agree that the
    parties clearly and unmistakably consented to have them decide
    issues of arbitrability, see First Options of Chicago, Inc. v. Kaplan,
    
    514 U.S. 938
    , 943, 
    115 S. Ct. 1920
    , 1923, 
    131 L. Ed. 2d 985
     (1995),
    we will address that question first.
    A.    Competence de la Competence
    In this case, section 2 of NFA Member Arbitration Rules, which
    requires all members and associates to arbitrate disputes, provides
    9
    the only possible justification for the arbitrator's implicit conclusion
    that they had the authority to resolve questions of arbitrability.5
    Scott, however, argues that the language in the NFA rules is not
    broad enough to permit the arbitrators to decide the issue of
    arbitrability.
    The Supreme Court has explained that courts should not
    assume that parties have agreed to arbitrate arbitrability unless
    there is clear and unmistakable evidence to that effect. See First
    Options, 
    514 U.S. at 944
    , 
    115 S. Ct. at 1924
     (quoting AT&T Tech.,
    
    475 U.S. at 649
    , 
    106 S. Ct. at 1418-19
    )). To determine whether the
    parties agreed to submit the question of arbitrability to the
    arbitrators, we must refer to “ordinary state-law principles that
    govern the formation of contracts.” First Options, 
    514 U.S. at 944
    ,
    
    115 S. Ct. at 1924
    .
    5
    Scott's arguments that he was not bound by the NFA's
    arbitration rules go to the issue of whether the arbitrators erred
    by finding that he had agreed to arbitrate the merits of the
    dispute rather than the issue of who should have decided that
    question. Accordingly, we leave Scott's argument on that point for
    subsequent discussion in part I(B).
    10
    Regrettably, neither the parties nor the district court have dwelt
    on the question of which state's principles of contract law govern this
    question. Scott apparently executed a Form 8-R, the document that
    registered him with the NFA, in Florida and sent it to the NFA in
    Illinois. Given that none of the relevant documents appears to
    contain a choice of law provision, it would appear that either Florida
    or Illinois law applies.6 We, however, need not resolve this choice
    of law problem because the relevant law in both states is essentially
    in harmony. Both Florida and Illinois require courts to interpret a
    contract so as to give effect to the intent of the parties. See e.g.,
    6
    It is axiomatic that a federal district court, sitting in
    diversity, applies the choice of law rules of the state in which it
    sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 
    313 U.S. 487
    , 
    61 S. Ct. 1020
    , 
    85 L. Ed. 1477
     (1941). Since the parties brought this
    case in the Northern District of Georgia, we observe that, in cases
    of contract construction, Georgia applies the law of the state
    where the parties made their agreement or where it is to be
    performed. See Allstate Ins. Co. v. Duncan, 
    218 Ga. App. 552
    , 553,
    
    462 S.E.2d 638
    , 640 (1995). On the record in this case, therefore,
    either Florida or Illinois law applies. We note that, although the
    question of which state's law should govern this question is an
    important one, the courts have not focused upon this issue. See
    e.g., Paladino v. Avnet Computer Tech. Inc., 
    134 F.3d 1054
    , 1061
    n.1 (11th Cir. 1998) (Tjoflat, J. and Cox, J. concurring)(noting
    that the parties had not specified which state's law should apply
    in a similar situation); Merrill, Lynch, Pierce, Fenner & Smith,
    Inc. v. Cohen, 
    62 F.3d 381
     (11th Cir. 1995) (deciding that the
    parties had not clearly and unmistakably agreed to arbitrate
    arbitrability without a single reference to state law).
    11
    Mayflower Corp. v. Davis, 
    655 So. 2d 1134
    , 1137 (Fl. Dist. Ct. App.
    1994) (“The intention of the parties governs the construction of
    contracts.”); American States Ins. Co. v. Koloms, 
    687 N.E.2d 72
    , 75
    (Ill. 1997) (same). More specifically, courts in both states have
    concluded that even broad, elastic language in an arbitration clause
    cannot, without more, support the clear and unmistakable conclusion
    that the parties intended to submit issues of arbitrability to
    arbitrators. The Supreme Court of Illinois, for example, recently held
    that a contract providing that “any controversy between us arising
    out of . . . this agreement shall be submitted to arbitration” was “at
    best, silent on the question of who should decide questions of
    arbitrability.” Roubik v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
    No. 82752, (Ill. Feb. 20, 1998).        A Florida court interpreting
    substantially similar contract language also held that the parties had
    not evidenced an intent, as a matter of Florida contract law, to permit
    the arbitrators to decide issues of arbitrability:
    12
    The agreement in this case does not contain any
    language specifically authorizing the arbitration panel to
    decide arbitrability issues; nor does it contain any broad
    or all-inclusive language that implicitly authorizes the
    arbitration panel to decide such issues.
    Romano v. Goodlette Office Park, Ltd,, 
    700 So.2d 62
    , 64 (1997);
    accord North Augusta Assoc. Ltd. Partnership v. 1815 Exchange,
    Inc., 
    220 Ga. App. 790
    , 
    469 S.E.2d 759
     (1996) (same under Georgia
    law). But see Smith Barney Shearson, Inc. v. Sacharow, 
    91 N.Y.2d 39
    , 
    689 N.E.2d 884
    , 
    666 N.Y.S.2d 990
     (1997) (reaching the opposite
    conclusion under New York law).7
    Section 2 of the NFA's arbitration rules states that: “[e]xcept as
    provided in Sections 4 and 5 of these Rules . . . , disputes between
    and among Members and Associates shall be arbitrated under these
    Rules . . . .”8 R1-7, Ex. G at 4. The language at issue in this case,
    therefore, is substantially narrower than the arbitration clauses
    7
    But see also Paine Webber Inc. v. Bybyk, 
    81 F.3d 1193
    , 1199
    (2d Cir. 1996) (“The words 'any and all' are elastic enough to
    encompass disputes over whether . . . a claim is within the scope
    of arbitration.”).
    8
    Section 2 contains a number of additional exceptions, none
    of which are relevant to this appeal. See R1-7, Ex. G at 4.
    13
    discussed in the Illinois and Florida decisions above. Although we
    admit that the language of section 2 is susceptible to a reasonable
    construction in favor of permitting the arbitrators to determine
    arbitrability, we cannot conclude that section 2 evidences a “clear
    and unmistakable” commitment to that position under either Florida
    or Illinois principles of contract construction. Accordingly, we hold
    that the arbitrators did not have the power to rule on the question of
    whether Scott had consented to arbitrate.
    B.   The District Court's Determination of Arbitrability
    Given our decision that the parties did not consent to have the
    arbitrators determine whether their dispute was arbitrable, we now
    must make an independent determination of whether the parties'
    dispute was eligible for arbitration. See First Options, 
    514 U.S. at 943
    , 
    115 S. Ct. at 1924
    . In an alternative holding, the district court
    14
    expressly found that Scott had consented to arbitrate his dispute
    with PSI by virtue of his registration with the CFTC and his status as
    an associate member of the NFA. As we conduct our review of this
    alternative holding, we accept all findings of fact that are not clearly
    erroneous but decide questions of law de novo. 
    Id. at 947-48
    , 
    115 S. Ct. at 1926
    .9
    Scott argues that he never agreed to arbitrate disputes in front
    of the NFA. As we observed in United States Fidelity & Guar. Co.
    v. West Point Constr. Co., 
    837 F.2d 1507
    , 1508 (11th Cir. 1988) (per
    curiam), however, parties may bind themselves to arbitrate disputes
    by signing a contract that incorporates an arbitration agreement by
    reference. Moreover, in a case substantially similar to the one
    before us, another Court of Appeals has held that a petitioner who
    registered as an associate member of the NFA consented to
    arbitrate all disputes with other members or associates pursuant to
    9
    We note that the Supreme Court has rejected our circuit's
    previous practice of reviewing a district court's decision to
    confirm an arbitration award with the more lenient abuse of
    discretion standard. See First Options, 
    514 U.S. at 948
    , 
    115 S. Ct. at 1926
    .
    15
    the NFA Member Arbitration Rules that had been incorporated in his
    registration. See R.J. O'Brien & Assoc. v. Pipken, 
    64 F.3d 257
    , 260-
    261 (7th Cir. 1995).
    Following the Pipken court's reasoning, the district court found
    that Scott was a CFTC-registered associated person.10        Indeed,
    Scott admitted as much in the documents he filed with the district
    court, and PSI confirmed his status as an associated person by filing
    the uncontested affidavit of a paralegal who checked Scott's status
    with the NFA registration hotline.11 In order to register with the
    CFTC as an “associated person,” Scott completed and signed a
    Form 8-R application on April 12, 1992. The Form 8-R expressly
    notes that it constitutes an application for “registration . . . as an
    10
    The Commodity Exchange Act (the “CEA”), 
    7 U.S.C. §§ 1-25
    ,
    regulates those who participate in transactions involving
    commodities futures.    Persons who actively participate in that
    industry, including futures commissions merchants, introducing
    brokers, and associated persons must register under the CEA. See
    7 U.S.C. §§ 6f(a) & 6k(1). For a more complete explanation of the
    regulatory system, including Congress's delegation of the
    registration function to the CFTC and NFA, see Pipkin, 
    64 F.3d at 259
    .
    11
    As an associated person Scott was, by definition, required
    to register as an associate member of the NFA. See Pipken, 
    64 F.3d at
    261 (citing the NFA Member Arbitration Rules).
    16
    Associated Person . . . and application for NFA Associate
    Membership.” R1-7, Exh. J at 2 (emphasis added). The Form 8-R
    also states that execution of the application constitutes “an express
    agreement by [the applicant] that, if registered as an Associate, [the
    applicant] shall become and remain bound by all NFA requirements
    as then and thereafter in effect.” Id. at 7 (emphasis added). Article
    XVIII(u) of the NFA's Articles of Incorporation and Rule 1-1(q) of the
    NFA's Compliance Rules both define the term “requirements” as
    “any duty, restriction, procedure, or standard imposed by a charter,
    bylaw, rule, regulation, resolution or similar provision.” Id., Ex. K at
    3, 5. The NFA added one such requirement on May 1, 1992, when
    it adopted its Member Arbitration Rules. Section 2 of those rules
    provides for mandatory arbitration of disputes “between and among
    Members and Associates.” Id., Exh. G. at 4.
    Although we have already held that this language was not
    broad enough to constitute a clear and unmistakable agreement to
    arbitrate issues of arbitrability, our independent review of the district
    17
    court's decision leads us to conclude that the district court correctly
    held that Scott had agreed, in his personal capacity, to arbitrate
    disputes with other members and associates of the NFA. PSI's
    status as a member of the NFA--not its trading relationship with the
    Fund--, therefore, gave it the right to demand arbitration of the
    dispute with Scott because PSI and Scott were both subject to the
    NFA's arbitration regime. See Pipken, 
    64 F.3d at 260-61
    .
    Scott emphasizes that his dealings with PSI had no nexus to
    his Form 8-R registration or his association with the NFA, but no
    such nexus is necessary to support our finding that Scott had agreed
    to arbitrate his dispute with PSI.12 Nothing in section 2 limits the
    availability of arbitration to disputes that are somehow connected to
    the parties' association with the NFA. Moreover, none of Scott's
    12
    In making this argument, Scott repeatedly asserts that he
    structured the Fund's accounts with PSI with the specific intent to
    avoid individual liability. Indeed, relying on this logic Scott
    essentially denies that he has any dispute with PSI at all.
    Scott's arguments about the structure of the accounts and his
    personal liability, however, have nothing to do with the issue at
    hand: whether Scott's personal status as an associate member of the
    NFA required him to arbitrate the merits of an alleged dispute with
    PSI.
    18
    attacks on the arbitrators' jurisdiction over his dispute with PSI go to
    the specific exceptions to NFA arbitration enumerated in section 2
    of the Member Arbitration Rules.        Finally, we must resolve any
    doubts about the scope of arbitrable issues in favor of arbitration.
    See First Options, 
    514 U.S. at 944-45
    , 
    115 S. Ct. at 1924
    .13
    Accordingly, we affirm the district court's alternative decision and
    hold that Scott was subject to NFA arbitration pursuant to the
    arbitration clause enumerated in section 2 of the NFA's Member
    Arbitration Rules, as incorporated as a requirement for his
    membership in the NFA.
    II.   Grounds for Vacating the Arbitration Award
    Scott also challenges the arbitrators' award on Section 10 of
    the FAA and on non-statutory grounds. Although Scott (having
    received the benefit of a generous reading of his district court filings)
    13
    As the First Options Court explained, this is precisely the
    reverse of the presumption that we applied to the question of
    whether the parties agreed upon who should decide the question of
    arbitrability. 
    Id. at 944-45
    , 
    115 S. Ct. at 1924-25
    .
    19
    has raised a number of legally cognizable attacks on the arbitration
    award, the overwhelming thrust of his argument is that the
    arbitrators misapplied the law to his case. It is settled law, however,
    that “[c]ourts are generally prohibited from vacating an arbitration on
    the basis of errors of law or interpretation.”14 O.R. Sec. Inc. v.
    Professional Planning Assoc., 
    857 F.2d 742
    , 746 (11th Cir. 1988)
    (citing Wilko v. Swan, 
    346 U.S. 427
    , 
    74 S. Ct. 182
    , 
    98 L. Ed. 168
    (1958), overruled on other grounds, Rodriguez de Quijas v.
    Shearson/American Express, Inc., 
    490 U.S. 477
    , 
    109 S. Ct. 1917
    ,
    
    104 L. Ed. 2d 526
     (1989)). With this caveat firmly in mind, we
    examine Scott's arguments in support of vacating the arbitration
    award.
    Having determined that the arbitrators had jurisdiction to
    determine the merits of the dispute between PSI and Scott, our
    review of their decision is necessarily limited.      We must “give
    14
    For this reason, we will not address Scott's contention
    that the arbitrators' award ignores applicable principles of
    corporate law or Florida's statute of frauds.
    20
    considerable leeway to the arbitrator, setting aside his or her
    decision only in certain narrow circumstances.” First Options, 
    514 U.S. at 943
    , 
    115 S. Ct. at
    1924 (citing 
    9 U.S.C. § 10
    ). The FAA does
    not permit courts to “roam unbridled” in their oversight of arbitration
    awards. Marshall & Co. v. Duke, 
    941 F. Supp. 1207
    , 1210 (N.D. Ga.
    1995) (internal quotation omitted), aff'd, 
    114 F.3d 188
     (11th Cir.
    1997) (per curiam). Scott, as the moving party, bears the burden of
    setting forth sufficient grounds to vacate the arbitration award. See
    O.R. Sec., Inc., 
    857 F.2d at 746
    . Finally, as explained above, we
    accept the district court's findings of fact to the extent they are not
    clearly erroneous and review questions of law de novo.            See
    Marshall & Co., 
    114 F.3d at 188
    .
    A.   Statutory Grounds
    21
    Section 10 of the FAA provides a number of specific statutory
    bases for vacating an arbitration award.15 Scott urges us to vacate
    the NFA's arbitration award on the following three grounds: (1) the
    arbitration award was procured by fraud, see 
    9 U.S.C. § 10
    (a)(1); (2)
    the arbitrators exhibited evident partiality, 
    id.
     § 10(a)(2); and (3) the
    arbitrators were guilty of misconduct, id. § 10(a)(3). We find Scott's
    arguments concerning fraud before the arbitrators to be without
    merit,16 but address his remaining contentions in turn.
    15
    Section 10 of the FAA provides in pertinent part:
    (a) In any of the following cases the United States court
    in and for the district wherein the award was made may
    make an order vacating the award upon the application of
    any party to the arbitration–
    (1) Where the award was procured by corruption,
    fraud, or undue means.
    (2)   Where   there   was   evident  partiality   or
    corruption in the arbitrators, or either of them.
    (3) Where the arbitrators were guilty of misconduct
    in   refusing   to   postpone   the  hearing,   upon
    sufficient cause shown, or in refusing to hear
    evidence pertinent and material to the controversy;
    or of any other misbehavior by which the rights of
    any party have been prejudiced.
    (4) Where the arbitrators exceeded their powers, or
    so imperfectly executed them that a mutual, final,
    and definite award upon the subject matter
    submitted was not made. . . .
    
    9 U.S.C. § 10
    .
    16
    Scott's briefs on the fraud argument all but admit that the
    arbitrators had all the material information before them, a fact
    that precludes vacatur under § 10(a)(1). See Bonar v. Dean Witter
    Reynolds, Inc., 
    835 F.2d 1378
    , 1383 (11th Cir. 1988); accord A.G.
    Edwards & Sons, Inc. v. McCollough, 
    967 F.2d 1401
    , 1404 (9th Cir.
    1992) (per curiam) (“where the fraud or undue means is not only
    22
    First, Scott asserts that the district court should have vacated
    the arbitration award because the arbitrators were biased against
    him. Section 10 of the FAA permits vacatur “where there was
    evident partiality or corruption in the arbitrators.”     
    9 U.S.C. § 10
    (a)(2). To vacate an arbitration award for evident partiality, the
    moving party must present evidence that would support a
    “reasonable impression of partiality” on the arbitrator's behalf. See
    Lifecare Int'l, Inc. v. CD Med., Inc., 
    68 F.3d 429
    , 433 (11th Cir.
    1995), modified on other grounds, 
    85 F.3d 519
     (11th Cir. 1996). The
    assertion of partiality, however, must be “direct, definite and capable
    of demonstration rather than remote, uncertain and speculative.” 
    Id.
    (quoting Middlesex Mut. Ins. Co. v. Levine, 
    675 F.2d 1197
    , 1202
    (11th Cir. 1982)).
    discoverable, but discovered and brought to the attention of the
    arbitrators a disappointed party will not be given a second bite at
    the apple.”). We decline Scott's invitation to overrule Bonar and
    note that, even if we were so inclined (and we are not), the law in
    this circuit is emphatic that only the entire court sitting en banc
    can overrule a prior panel opinion in the absence of an intervening
    Supreme Court decision. See United States v. Woodard, 
    938 F.2d 1255
    , 1258 (11th Cir. 1991) (per curiam).
    23
    Scott's allegations of partiality arise out of the fact that each of
    the arbitrators in his case are in the business of collecting debit
    balances from customers.17 Scott, therefore, alleges that because
    he sought to avoid the collection of such a debit he could not receive
    a fair hearing before the arbitrators in question. As evidence in
    support of his contentions, Scott attacks the arbitration award
    against him and argues that it is so unsupported by the law that it
    could have only been the product of partiality.18
    17
    Scott arrives at this conclusion because each of the
    arbitrators assigned to hear his case have connections to Futures
    Commissions Merchants, who, he alleges, are the only entities
    entitled to collect debit balances from customers under the CEA.
    Scott also argues that, because persons with such ties to Future
    Commissions Merchants dominate the NFA, he could not receive a fair
    hearing.    Such an attack on the forum, however, is far too
    attenuated to satisfy the prerequisites for an attack under §
    10(a)(2). See Woods v. Saturn Distrib. Corp., 
    78 F.3d 424
    , 427-30
    (9th Cir. 1996) (rejecting a claim of bias based on the
    arbitrators' dependence on the makers of Saturn automobiles);
    Pompano-Windy City Partners v. Bear, Sterns & Co., 
    698 F. Supp. 504
    , 517 (S.D.N.Y. 1988) (similar ruling in the securities
    context).
    18
    Scott repeats this tactic throughout his briefs by
    injecting his disagreement with the arbitrators on the merits of
    the dispute into his discussions of the arbitrators' jurisdiction
    and his arguments for vacatur under section 10. We will address
    Scott's contention that the arbitrators disregarded the law below,
    but decline his invitation to conflate that dispute with the
    section 10 analysis.
    24
    Scott's claims amount to precisely the vague, remote, and
    speculative charges that we have held cannot support an order to
    vacate an arbitration award. Scott's allegations attack only the
    nature of experience that the arbitrators have in the commodities
    trading business and assume a bias against his position.            The
    courts have repeatedly explained, however, that an arbitrator's
    experience in an industry, far from requiring a finding of partiality, is
    one of the factors that can make arbitration a superior means of
    resolving disputes.      See, Commonwealth Coatings Corp. v.
    Continental Cas. Co., 
    393 U.S. 145
    , 150, 
    89 S. Ct. 337
    , 340, 
    21 L. Ed. 2d 301
     (White, J., concurring) (“It is often because they are men
    of affairs, not apart from but of the marketplace, that they are
    effective in their adjudicatory function.”).     Moreover, Scott has
    neither pointed us to any evidence of either actual bias on the part
    of the arbitrators nor identified any business connection to PSI that
    the arbitrators failed to disclose to the parties before undertaking the
    25
    dispute.19 Accordingly, we affirm the district court's decision not to
    vacate the arbitration award for evident partiality.
    Second, Scott argues that the NFA arbitrators, by refusing to
    postpone the arbitration hearing and refusing to allow Scott to
    participate by telephone, were guilty of misconduct.        The FAA
    permits a district court to vacate an arbitration award in the event
    that: (1) the arbitrators refused to postpone the hearing upon the
    showing of sufficient cause; (2) the arbitrators refused to hear
    pertinent and material evidence; or (3) the arbitrators were guilty of
    any other misbehavior that resulted in prejudice to the rights of any
    party. See 
    9 U.S.C. § 10
    (a)(3). As the district court correctly
    observed, however, a mere difference of opinion between the
    arbitrators and the moving party as to the correct resolution of a
    procedural problem will not support vacatur under section 10(a)(3).
    19
    Scott also alleges that NFA's Chairman of the Board is the
    president of a company that has a dispute with the Fund. Without
    any assertion that this particular individual played any role in
    his case, however, Scott's allegations remain too vague and
    attenuated to support a finding of evident partiality under our
    case law.
    26
    See generally Robbins v. Day, 
    954 F.2d 679
    , 685 (11th Cir. 1992)
    (“An arbitrator enjoys wide latitude in conducting an arbitration
    hearing.”), overruled on other grounds, First Options, 
    514 U.S. at 948
    , 
    115 S. Ct. at 1926
    . Moreover, we must recall the basic policy
    behind arbitration, which is to permit parties to resolve their disputes
    in an expeditious manner without all the formalities and procedures
    that might attend full fledged litigation. See Schmidt v. Finberg, 
    942 F.2d 1571
    , 1573 (11th Cir. 1991).
    We note that the express language of the statute requires the
    party seeking a postponement to advance a “sufficient cause” for the
    delay. 
    9 U.S.C. § 10
    (a)(3).    In reviewing an arbitrator's refusal to
    delay a hearing, we must decide whether there was “any reasonable
    basis” for failing to postpone the hearing to receive relevant
    evidence. Schmidt, 
    942 F.2d at 1574
    . In Schmidt, for example, we
    held that an arbitration panel's possible reliance on any one of a
    number of factors, including the desire for an expeditious resolution
    of the dispute, justified its refusal to postpone a hearing to
    27
    accommodate a party's competing scheduling obligations and,
    therefore, did not require the vacatur of an arbitration award. 
    Id. at 1574-74
    ; see also ARW Exploration Corp. v. Aguirre, 
    45 F.3d 1455
    ,
    1464 (10th Cir. 1995) (party's “flimsy” claim of unavailability due to
    overseas travel was insufficient to require delay of the arbitration);
    accord Hilliard v. J.C. Bradford & Co., 
    494 S.E.2d 38
    , 44 (Ga. App.
    1997) (a flare-up in a party's long-term, stress related illness the
    evening before a scheduled arbitration hearing did not require a
    postponement).
    In this case, the district court found that Scott had not advanced
    any compelling excuse for his absence before the arbitrators on
    October 31, 1995. Scott argued that he could not appear before the
    arbitrators in Atlanta because the demands of ongoing litigation in
    Miami required his presence there. The evidence is undisputed,
    however, that Scott was under no court imposed obligation to stay
    in Miami.20 Moreover, the district court in Miami rejected Scott's
    20
    Scott devotes a great deal of his brief to a letter
    prepared by PSI's counsel that states Scott faced no court imposed
    28
    application for a TRO to enjoin the arbitration on October, 30, 1995,
    the day before the arbitration was to begin. Scott's arguments
    amount to nothing more than the self-imposed scheduling obstacles
    that we have held do not require an arbitrator to postpone a hearing.
    Accordingly, we affirm the district court's decision on this point.
    Next, Scott argues that the arbitrators committed misconduct
    by refusing to allow him to participate in the arbitration hearing by
    telephone. Whether we consider this argument as a refusal to
    consider pertinent evidence or as “other misbehavior,” under section
    10(a)(3), we note that Scott must show that the arbitrators' refusal
    to permit him to participate by telephone caused him some
    prejudice. See Marshall & Co., 
    941 F. Supp. at 1212
    . An arbitrator
    need not consider all the evidence the parties seek to introduce but
    may reject evidence that is cumulative or irrelevant. See Robbins,
    
    954 F.2d at 685
    . Scott argues that, had he been permitted to
    participate by telephone, he would have been able to explain how
    barrier to appearing before the arbitrators on October 31, 1995.
    His arguments and allegations on this matter are without merit.
    29
    PSI had disregarded the limitations on the Fund's accounts. This
    evidence, however, was irrelevant to the question of alter-ego
    liability before the NFA arbitrators. Accordingly, the arbitrators did
    not refuse to consider pertinent evidence by refusing Scott's
    participation by telephone.
    Finally, the arbitrators did not engage in misconduct that denied
    Scott his right to a fair hearing. As we observed in Robbins, the FAA
    permits arbitration to proceed “with only a summary hearing and with
    restricted inquiry into factual issues. . . . [The arbitrator] need only
    give each party the opportunity to present its arguments and
    evidence.” 
    954 F.2d at 685
     (emphasis added) (citations omitted).
    Although the arbitrators refused Scott's participation by telephone,
    the arbitrators did conduct a hearing, of which Scott had notice and
    the opportunity to attend, and they considered Scott's fifty-six page
    affidavit setting out his arguments and evidence. Accordingly, we
    find no misconduct on the part of the arbitrators and affirm the
    30
    district court's decision not to vacate the arbitration award on the
    statutory grounds.
    B.   Non-Statutory Grounds
    In addition to the grounds for vacatur set out in the FAA, the
    courts have recognized a number of non-statutory grounds that
    permit a district court to vacate an arbitration award. In the Eleventh
    Circuit, a party may challenge an arbitration award without reliance
    on the FAA if the award is: (1) arbitrary and capricious; (2) in
    contravention of public policy; or (3) entered in “manifest disregard
    of the law.” See Montes v. Shearson Lehman Bros, Inc., 
    128 F.3d 1456
     (11th Cir. 1997) (describing the first two grounds and adopting
    the third).   On appeal, Scott has limited his argument to his
    contention that the arbitrators' award was arbitrary and capricious.21
    21
    We note that, before the Montes opinion, an attack based
    on the arbitrators' manifest disregard of the law was not an option
    in this circuit–a point not lost on either PSI or the district
    court. As Montes was not delivered until November 24, 1997–more
    than a month after oral argument in this case–the parties have not
    briefed the issue. Although we typically do not consider arguments
    not raised by the parties on appeal, we note that Scott's briefs
    make clear his charge that the NFA arbitrators (as well as the ALJ
    31
    An arbitration award will not be held to be arbitrary and
    capricious unless “a ground for the arbitrator's decision can[not] be
    inferred from the facts of the case.” Raiford v. Merrill Lynch, Pierce,
    Fenner & Smith, 
    903 F.2d 1410
    , 1413 (11th Cir. 1990) (internal
    quotation omitted).      In Raiford, for example, we held that the
    arbitrators' calculation of a damage award was not arbitrary and
    capricious because, although the arbitrators had not given any
    explanation of their award, “the arbitrators could have fashioned their
    award based on any number of valid reasons.” 
    Id.
     (emphasis
    added). Similarly, in this case, it is not difficult to discern a reason for
    the arbitrators' decision to hold Scott liable for the debts of the Fund.
    The facts of this case and the arbitrators' award suggest that the
    and CFTC arbitrators) have ignored the law.       We further note,
    however, that Scott's arguments do not approach the type of
    disregard for the law that we found in Montes. In that case, we
    found that one of the parties had expressly conceded that the law
    did not support his position and urged the arbitrators to ignore
    the law to find in his favor. See Montes, 
    128 F.3d at 1461
    . That
    particular fact led us to distinguish the case from our precedents
    refusing to vacate an award that the moving party claimed to be the
    product of legal error, and led us to vacate the award for manifest
    disregard of the law. 
    Id. at 1461-62
    ; see also 
    id. at 1464
     (Carnes
    J., concurring). The record in this case and Scott's arguments
    suggest nothing more than a disagreement over the application of
    the law not its manifest disregard.
    32
    arbitrators were convinced that Scott so dominated and controlled the
    Fund and CSI that he ought to be held liable for their debts on a
    theory of alter-ego liability.   Scott's attempts to argue that this
    conclusion was arbitrary and capricious amount to nothing more than
    a rehashing of his disagreements with that result.       As we have
    observed before, a mere error in the application of the law will not
    support the reversal of an arbitration award. See Montes, 
    128 F.3d at 1460
    . Accordingly, we hold that the district court correctly denied
    Scott's pleas to vacate the arbitration award.22
    CONCLUSION
    On appeal, Scott asks us to reverse the district court's ruling
    that the NFA's Member Arbitration Rules gave the arbitrators the
    22
    Scott's arguments that the NFA's excessive filing fees
    violate his right of access to the courts, guaranteed by Florida's
    Constitution, are without merit.     Even if Scott could somehow
    convince us that Florida's constitutional protections apply to an
    allegedly federal agency's conduct of an arbitration hearing in
    Georgia, his arguments find no support in Florida law.          See
    Terminix Int'l Co. v. Ponzio, 
    693 So. 2d 104
    , 109 (Fla. Dist. Ct.
    App. 1997) (“The short answer to these arguments [invoking
    Florida's constitutional protections] is that the plaintiffs waived
    these rights by consenting to arbitrate . . . .”). Scott's equal
    protection attack on the same NFA fee, in addition to having no
    merit, was raised for the first time on appeal.      See Irving v.
    Mazda Motor Corp., 
    136 F.3d 764
    , 769 (11th Cir. 1998) (declining to
    address an argument not raised in the district court).
    33
    power to resolve issues of arbitrability. He also asks that we reverse
    the district court's alternative, independent holding that his status as
    an associate member of the NFA required him to arbitrate this
    dispute with PSI. Finally, he urges us to vacate the arbitration award
    for a variety of statutory and non-statutory reasons. We hold that the
    district court erred when it found that the NFA Member Rules gave
    the arbitrators the authority to determine whether the dispute was
    subject to arbitration. We agree, however, with the district court's
    independent holding that Scott's association with the NFA required
    him to arbitrate the dispute with PSI. We also find no error in the
    district court's decision to deny Scott's motion to vacate the
    arbitration award or its decision to confirm that award in PSI's favor.
    Accordingly, we AFFIRM the decision of the district court.
    34
    

Document Info

Docket Number: 96-9106

Citation Numbers: 141 F.3d 1007

Filed Date: 5/18/1998

Precedential Status: Precedential

Modified Date: 2/19/2020

Authorities (31)

R.J. O'Brien & Assoc., Inc. v. Thomas D. Pipkin , 64 F.3d 257 ( 1995 )

fed-sec-l-rep-p-98856-merrill-lynch-pierce-fenner-smith-inc , 62 F.3d 381 ( 1995 )

Middlesex Mutual Insurance Company v. Stuart Levine , 675 F.2d 1197 ( 1982 )

Klaxon Co. v. Stentor Electric Manufacturing Co. , 61 S. Ct. 1020 ( 1941 )

Darwin L. Schmidt v. Ian Lee Finberg, Richard B. Bartlett, ... , 942 F.2d 1571 ( 1991 )

Painewebber Incorporated v. Michael J. Bybyk and Joyce O. ... , 81 F.3d 1193 ( 1996 )

Marshall & Co., Inc. v. Duke , 941 F. Supp. 1207 ( 1995 )

Timothy L. WOODS, Plaintiff-Appellant, v. SATURN ... , 78 F.3d 424 ( 1996 )

Montes v. Shearson Lehman Brothers , 128 F.3d 1456 ( 1997 )

Marshall & Co., Inc. v. Duke , 114 F.3d 188 ( 1997 )

Terminix Intern. Co., LP v. Ponzio , 693 So. 2d 104 ( 1997 )

Hilliard v. J. C. Bradford & Co. , 229 Ga. App. 336 ( 1997 )

76-fair-emplpraccas-bna-1315-72-empl-prac-dec-p-45222-11-fla-l , 134 F.3d 1054 ( 1998 )

Pompano-Windy City Partners, Ltd. v. Bear, Stearns & Co. , 698 F. Supp. 504 ( 1988 )

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