John D. Williams v. Kenneth L. and Deborah A. Tucker

No. 16-0657 - Williams v. Tucker FILED
June 13, 2017
LOUGHRY, C. J., concurring, joined by WORKMAN, J.: released at 3:00 p.m.
RORY L. PERRY, II CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
I concur in the majority’s reversal of the circuit court’s patently erroneous
refusal to grant an injunction to the petitioner and order the respondents to withdraw their
arbitration. However, in lieu of the majority’s determination to decide the matter by wading
into the swamp of “arbitrability” and waiver, I believe the issue is far more straightforward.
As argued primarily by the petitioner, the respondents’ latest arbitration filing is an improper
collateral attack on the prior arbitration ruling of the Financial Industry Regulatory Authority
(“FINRA”), as well as the subsequent circuit court order confirming that ruling. While
collateral attack, waiver, estoppel, and the like are fairly considered different facets of the
issues raised herein, there is little utility in over-complicating what is plainly an
impermissible attempt to re-litigate a matter that has been affirmatively decided and put to
rest.
A more pointed examination of the facts aids in highlighting the
inappropriateness of the respondents’ most recent arbitration demand and the simplicity of
this matter. It appears the respondents opened an investment advisory account with the
petitioner two days before the market’s high point and then closed the account shortly after
the market low was reached. The respondents’ account declined twenty-nine and one-half
percent, which is represented to be consistent with or less than other balanced mutual funds.
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The respondents filed an arbitration demand with FINRA, alleging the petitioner had made
unsuitable investments. Before the petitioner could respond, the respondents voluntarily
withdrew their arbitration demand and personally apologized to the petitioner for having
instituted the arbitration.
Notwithstanding the respondents’ withdrawal of their arbitration demand, their
unresolved claims remained a part of the petitioner’s record on the Central Registration
Depository, which is the central licensing and registration system for the United States
securities industry. Accordingly, the petitioner instituted a FINRA arbitration seeking to
expunge that record. The respondents, represented by counsel, consented to FINRA
jurisdiction, but declined to participate and agreed in writing not to oppose the expungement.
Thereafter, a three-member arbitration panel held a full evidentiary hearing on
the matter. The respondents did not participate in that hearing. The FINRA panel concluded,
on the merits of the action, that “[t]he claim, allegation, or information is factually impossible
or clearly erroneous” and awarded expungement. As directed by FINRA, and to give legal
effect to the expungement, the petitioner instituted a civil action in the Circuit Court of
Kanawha County seeking confirmation and validation of the FINRA expungement. The
respondents accepted service of the civil action, but filed no responsive pleading. Instead,
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the respondents, by counsel, executed an Agreed Order confirming the expungement, which
was entered by the circuit court. For obvious reasons, no appeal of that order was pursued.
Nearly four years later, having retained different counsel, the respondents have
filed another arbitration demand that raises the same allegations previously found to be
“factually impossible or clearly erroneous” by the FINRA panel. In response, the petitioner
filed the instant action, seeking injunctive relief against the respondents’ collateral attack on
the FINRA arbitration award, as confirmed by order of the Circuit Court of Kanawha County.
Courts have long refused to allow subsequent civil suits attacking arbitration
awards. See Corey v. N.Y. Stock Exch., 691 F.2d 1205, 1211-12 (6th Cir. 1982) (finding
subsequent federal suit alleging irregularity in prior arbitration decision “is no more, in
substance, than an impermissible collateral attack on the award itself”); Sander v.
Weyerhaeuser Co., 966 F.2d 501, 503 (9th Cir. 1992) (rejecting attempt to file federal action
subsequent to arbitration, noting court’s “unwilling[ness] to upset the streamlined nature of
arbitration by permitting the launching of collateral attacks[.]”). This refusal to permit
collateral attacks has been found equally applicable when the subsequent collateral attack
also occurs in an arbitration forum: “[I]t is logical to extend . . . [refusal to permit
subsequent attack in federal court to] claims presented in a second arbitration.” Decker v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 205 F.3d 906, 911 (6th Cir. 2000). Subsequent
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collateral attacks are inappropriate “whether a party attempts to attack the award through
judicial proceedings or through a separate second arbitration.” Id.; see also Prudential Sec.
Inc. v. Hornsby, 865 F. Supp. 447, 451, 453 (N.D. Ill. 1994) (finding second arbitration filing
“attempt to augment and modify the first arbitration award” and, therefore, “an impermissible
collateral attack on his previous arbitration award.”).
The majority’s unnecessarily complex assessment of waiver belies the
simplicity of this case. Collateral attacks through subsequent proceedings subvert finality
and are widely held to be impermissible. Accordingly, I respectfully concur.
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