Olson, Lawrence W. v. Wexford Clearing ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-1223
LAWRENCE W. OLSON, Individually and
as Trustee of the Lawrence W. Olson
Charitable Remainder Trust Dated 11/01/92,
Plaintiff-Appellant,
v.
WEXFORD CLEARING SERVICES CORP.,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 02 C 7644—Suzanne B. Conlon, Judge.
____________
ARGUED APRIL 12, 2004—DECIDED FEBRUARY 3, 2005
____________
Before WOOD, EVANS, and WILLIAMS, Circuit Judges.
WOOD, Circuit Judge. Suspecting that something was
fishy with his brokerage accounts, Lawrence Olson initiated
arbitration proceedings before the National Association of
Securities Dealers (NASD) against a number of entities,
including Wexford Clearing Services Corporation, the firm
responsible for clearing the trades placed by Olson’s
brokerage firm. Approximately four months after the
arbitration panel dismissed Wexford from the proceedings,
Olson filed a petition in federal court seeking to vacate the
2 No. 03-1223
dismissal. The district court found that Olson was too late,
given the three-month limitations period found in the
Federal Arbitration Act (FAA), and dismissed his petition
as untimely. We affirm.
I
In July 1997, Olson transferred certain financial accounts
to the brokerage firm of R.D. Kushnir & Co. Kushnir in
turn had a clearinghouse agreement with Wexford, under
which Wexford performed the ministerial tasks of process-
ing, clearing, and reporting trades placed by Kushnir.
Suspecting fraud or other unauthorized activity in his
accounts, Olson filed a demand for arbitration before the
NASD on July 29, 1998, naming Kushnir and Wexford,
among others, in his Statement of Claim. On February 11,
1999, Wexford moved to dismiss Olson’s claim against it on
the ground that it was not involved in any of the alleged
wrongdoing. More than a year later, the NASD informed
the parties that a three-member panel had been appointed
to hear the arbitration. Olson promptly petitioned the panel
for permission to submit an Amended Statement of Claim.
It granted his request, and on July 14, 2000, Olson filed the
amended statement. Before that occurred, however,
Kushnir was placed in receivership, which had the effect of
terminating the arbitration with respect to it. On July 24,
2000, Wexford renewed its motion to dismiss the Amended
Statement of Claim. Seven months later, on February 18,
2001, the chair of the arbitration panel granted that motion
in a two-page decision announcing that Olson’s claim
against Wexford was dismissed in its entirety.
Unhappy with this result, Olson asked the panel to
reconsider its decision. His reason was largely technical: the
panel’s disposition was rendered by the chair alone, and not
the full three-member panel required by the NASD rules.
Wexford did not oppose Olson’s request, and the panel
No. 03-1223 3
decided to rehear arguments on Wexford’s motion to dismiss
on April 15, 2002, a key date in our resolution of this
appeal. On that day, the panel heard oral arguments on
Wexford’s motion and considered matters concerning the
other parties to the arbitration. At the conclusion of Olson’s
and Wexford’s arguments, the panel again found in favor of
Wexford and issued a “Prehearing Conference Order”
stating that Wexford “is hereby dismissed from this arbitra-
tion.” This order was signed by the chair on behalf of the
panel. A little over two months passed before Olson filed a
“Motion for Consent to File Second Amended Statement of
Claim,” which Wexford opposed. On July 29, 2002, the
arbitration panel issued a letter to Olson, stating that after
“careful review,” it was denying his request to amend his
Statement of Claim for the second time.
Olson then turned to the federal court. On October 24,
2002, Olson filed this action to vacate the arbitral decision
dismissing Wexford from the case. The district court
properly invoked its diversity jurisdiction to consider the
motion because Olson is a citizen of Illinois and Wexford is
incorporated in Delaware with its principal place of busi-
ness in New York. The amount in controversy exceeded
$75,000. Olson urged the district court to grant him relief
under the FAA, 9 U.S.C. § 10, on the theory that the
arbitrators “were guilty of misconduct in refusing . . . to
hear evidence pertinent and material to the controversy.”
Id. at § 10(a)(3). Olson was aware that the FAA has a three-
month limitations period within which challenges to
arbitration awards must be filed. See 9 U.S.C. § 12. In his
view, however, the clock began to tick on July 29, 2002, the
date on which the panel denied his request to file a second
amended Statement of Claim. If so, of course, his October
24 suit was timely.
Wexford countered that the relevant date for purposes
of the limitations analysis was April 15, 2002, when the
panel dismissed it as a party to the arbitration proceedings.
4 No. 03-1223
Under Wexford’s theory, Olson was too late because more
than three months had passed since the panel made its
final decision on April 15. Wexford moved for judgment on
the pleadings and, in the alternative, for dismissal for
failure to state a claim. The district court agreed with
Wexford’s analysis and dismissed Olson’s petition as
untimely.
II
In considering a motion for judgment on the pleadings
under Rule 12(c) or a motion to dismiss for failure to state
a claim under Rule 12(b)(6), we apply the same de novo
standard of review. Forseth v. Vill. of Sussex, 199 F.3d 363,
368 n.6 (7th Cir. 2000). The FAA provides, in relevant part,
that a party to an arbitration may ask the federal district
court to vacate an award:
(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;
or
(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(a)(3) and (a)(4). As we stated above, Olson
relied on § 10(a)(3) in the district court, contending that the
arbitrators failed to consider relevant evidence.
Any motion to vacate an award under § 10 of the FAA
must be served “within three months after the award is
filed or delivered.” 9 U.S.C. § 12. See Lander Co., Inc. v.
MMP Invs., Inc., 107 F.3d 476, 478 (7th Cir. 1997); Int’l
Union of Operating Eng’rs, Local No. 841 v. Murphy, 82
No. 03-1223 5
F.3d 185, 188 (7th Cir. 1996); Chauffeurs, Teamsters,
Warehousemen and Helpers, Local Union No. 135 v. Jeffer-
son Trucking Co., Inc., 628 F.2d 1023, 1026 (7th Cir. 1980).
The plain language of § 12 does not provide for any excep-
tions to the three-month window and says nothing about
tolling. See Fradella v. Petricca, 183 F.3d 17, 20 & n.4 (1st
Cir. 1999) (applications to modify or clarify arbitral awards
do not toll the limitations period under FAA § 12 ). It is
undisputed that Olson did not serve notice of his motion to
vacate on Wexford within three months of the panel’s order
of April 15, 2002 dismissing Wexford.
The question, however, is whether the statute began
running on April 15, or whether it was triggered only when
the panel denied Olson’s request to file a second amended
complaint on July 29. Our starting point in answering
this question is NASD Rule 10330, which requires that
an arbitration award include “a summary of the issues, . . .
the damages and other relief requested, the damages
and other relief awarded, [and] a statement of any other
issues resolved. . . .” Rule 10330(e). The award is to be
in writing and “signed by a majority of the arbitrators
or in such manner as is required by applicable law.” Rule
10330(a). Such awards may be entered as a judgment in
any court of competent jurisdiction. Id. All awards issued by
arbitrators “shall be deemed final and not subject to review
or appeal.” Rule 10330(b).
Olson argues that the April 15 dismissal of Wexford did
not meet the NASD criteria for finality, because the follow-
ing sentence appeared at the bottom of the Prehearing
Conference Order: “This Order shall remain in effect unless
amended by the Panel.” This language, he asserts, supports
the inference that the arbitrators did not consider the
dismissal of Wexford to be their final award. The sentence
on which Olson is relying, however, must be viewed in
context. It is preceded by a section entitled “other rulings,”
which was addressed to the other parties remaining in the
6 No. 03-1223
arbitration. NASD Rule 10330(e) explicitly permits an
award to include “a statement of any other issues resolved.”
Taken as a whole, we read the sentence to which Olson
draws our attention as one addressed to the parts of the
case that were still alive. It is not clear whether the
presence of claims against other parties to the arbitration
affects the finality of Wexford’s dismissal, see IDS Life Ins.
Co. v. Royal Alliance Assoc., Inc., 266 F.3d 645, 650 (7th
Cir. 2001), but Olson has not relied on that theory to reject
the April 15 date (not surprisingly, because it would also
doom his attempt to characterize the July 29 order as
“final”). Under the circumstances, he has forfeited that
potential argument, which we reserve for another day.
In our view, the April 15 dismissal of Wexford complied
with the basic requirements of an “award” under NASD
Rule 10330(e). The arbitration panel stated that oral
arguments were heard on Wexford’s “fully briefed motion,”
that the panel found “in favor of Respondent Wexford,” and
that it was dismissing Wexford from the proceeding. It
is worth recalling that April 15 was the second time
Wexford’s motion to dismiss had been set for argument.
When the panel chair dismissed Wexford from the arbitra-
tion proceeding for the first time on February 18, 2001, he
issued a comprehensive and reasoned decision explaining
why Olson could not show that Wexford had engaged in any
of the alleged wrongdoing. Prior to hearing arguments for
the second time, the panel indicated to Olson that the
problems identified in the February 18 decision had not
adequately been addressed, and it invited him to with-
draw his opposition to Wexford’s motion. Olson declined
to do so and proceeded with oral argument. Under the
circumstances, it is not surprising that the panel did not
issue a second opinion to accompany its April 15 decision.
In determining the finality of an arbitration award, we
consider whether “the award itself, in the sense of judg-
ment, order, bottom line, is incomplete in the sense of
No. 03-1223 7
having left unresolved a portion of the parties’ dispute.” IDS
Life Ins., 266 F.3d at 651. There is nothing incomplete
about the order issued on April 15. The order unambigu-
ously states that Wexford is “hereby Dismissed” from the
arbitration proceeding and leaves nothing further for the
arbitration panel to adjudicate between Olson and Wexford.
The arbitrators thought that they were through with the
case, see Smart v. Int’l Bhd. of Electric Workers, Local 702,
315 F.3d 721, 725-26 (7th Cir. 2002), and that their award
was final. Paganis v. Blonstein, 3 F.3d 1067, 1070-71 (7th
Cir. 1993) (a dismissal must only make clear that plaintiffs
are denied all relief; there are no other “magic words”
required). Since the panel’s handling of this matter com-
plied with the general requirements of NASD Rule
10330(e), we conclude that the April 15 dismissal of
Wexford was a final NASD award.
But, Olson argues, even if the April 15 award was
sufficiently final to end the case, it had another flaw serious
enough to affect the limitations period. NASD Rule 10330(a)
requires all awards to be “signed by a majority of the
arbitrators.” Thus, according to Olson, the April 15 award
could not have been a proper award under NASD rules
because it was signed by the chair on behalf of the panel.
While conceding that “ ‘superficial technicalities’ should not
control whether a decision in arbitration is final or not,”
Olson nonetheless urges us to find in his favor on this basis
because he believes that the signature requirement is
substantively important. In Publicis Communication v. True
North Communications, Inc., 206 F.3d 725 (7th Cir. 2000),
the parties to an arbitration disagreed over the interpreta-
tion of a rule requiring the chairman’s signature on proce-
dural matters. Noting that either party’s interpretation was
plausible, we focused on the more relevant issue: that the
finality of an arbitration agreement “should be judged by
substance and effect, not by superficial technicalities.” Id.
at 730. Following that general approach, we are unper-
8 No. 03-1223
suaded that the arguable violation of the NASD rule here
should have the drastic consequence of rendering the April
15 decision a nullity. As Wexford points out, the NASD
rules do not prohibit the chair from signing an order on
behalf of the panel. At the end of the day, this technicality
offers no reason to disregard the unambiguous dismissal of
Wexford on April 15.
Finally, we reject Olson’s argument that the June 29
denial of his motion to amend started the three-month
limitations clock for purposes of the FAA § 12. The FAA
speaks in terms of “awards,” and we have found no author-
ity suggesting that a letter denying one party’s motion to
amend is properly characterized as an award. This letter
did not comply with the requirements of an award under
NASD Rule 10330. The best analogy is to a motion in
federal court under Rule 60(b). The filing of a Rule 60(b)
motion to reconsider outside the ten-day window after the
judgment does not toll the time for filing an appeal, FED. R.
APP. P. 4(a)(4)(A); Bell v. Eastman Kodak Co., 214 F.3d 798,
800 (7th Cir. 2000). We see no reason why the same reason-
ing should not apply in the arbitration context, particularly
given the FAA’s underlying policy of expeditious dispute
resolution. “[T]he purpose of the short periods prescribed in
the federal and state arbitration statutes for moving courts
to vacate an award is to accord the arbitration award
finality in a timely fashion.” Jefferson Trucking Co., Inc.,
628 F.2d at 1027. This purpose would be severely under-
mined if the limitations period prescribed in the FAA § 12
were tolled every time a losing party filed the functional
equivalent of a motion for reconsideration. See Fradella,
183 F.3d at 20.
A party who is uncertain about the finality or appeal-
ability of an arbitration award should err on the side of
compliance with the FAA § 12, which is not onerous. The
FAA authorizes a party to petition the district court if
it believes that “a mutual, final, and definite award” was
No. 03-1223 9
not made. 9 U.S.C. § 10(a)(4). Given the fact that all
of Olson’s arguments on appeal challenge the finality of the
panel’s April 15 award, we find it puzzling that he did not
move the district court to vacate pursuant to § 10(a)(4). If
Olson had proceeded pursuant to § 10(a)(4) within three
months after he learned that Wexford was dismissed from
the proceeding, he could quickly have brought to the
attention of the district court his concern that the award in
favor of Wexford might not be final. See Smart, 315 F.3d at
723-24; IDS Life Ins., 266 F.3d at 650-51; cf. Employers Ins.
of Wausau v. El Banco De Seguros Del Estado, 357 F.3d
666, 670 (7th Cir.) (suggesting that no fixed deadline
applies only when a party files a motion to remand for
purposes of clarifying an ambiguous arbitration award),
cert. denied, 125 S. Ct. 62 (2004).
Olson’s decision to proceed under § 10(a)(3) did not alter
the requirement that he had to act within three months
after the award was “filed or delivered.” 9 U.S.C. § 12. Since
Olson has not alleged that the April 15 award was improp-
erly filed or delivered, and the record would not support
such an allegation, he had to file suit within three months
of the April 15 award to preserve his arguments about the
arbitrator’s alleged misconduct. Papapetropoulous v.
Milwaukee Transport Servs., Inc., 795 F.2d 591, 596 n.8 (7th
Cir. 1986) (although plaintiff’s complaint clearly alleged a
violation of the FAA § 10, “this complaint is barred as he
failed to file it within the three month statute of limitation
time period contained in 9 U.S.C. § 12”). Olson’s failure to
act within the limitations period bars his action.
10 No. 03-1223
III
For these reasons, we AFFIRM the judgment of the district
court.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-3-05