Evans v. E*Trade Securities LLC

Filing 17

OPINION AND ORDER: GRANTING 11 MOTION to Rule on Petition to Vacate and 16 MOTION (Renewed) to Rule on Petition to Vacate; DENYING 1 Petition To Vacate Or Set Aside FINRA Arbitration Award Under Title 9 U.S. Code Section 10 against E*Trade Secu rities LLC, filed by Jamar James Evans, and GRANTING 9 Cross-Petition to Confirm Arbitration Award and for Final Judgment against Jamar James Evans, filed by E*Trade Securities LLC. The Court will confirm the award. Signed by Chief Judge Theresa L Springmann on 12/13/2017. (Copy mailed to pro se party)(lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
JAMAR JAMES EVANS,
Plaintiff,
v.
E*TRADE SECURITIES LLC,
Defendant.

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CAUSE NO.: 1:17-CV-387-TLS

OPINION AND ORDER
Plaintiff Jamar James Evans, proceeding pro se, filed a Petition to Vacate or Set Aside a
Financial Industry Regulatory Authority (FINRA) Arbitration Award [ECF No. 1] on September
7, 2017. On October 30, 2017, Defendant E*TRADE Securities LLC filed a Memorandum in
Opposition [ECF No. 10] to the Petition as well as a Cross-Petition [ECF No. 9], asking the
Court to confirm said arbitration award. The Plaintiff responded on November 20, 2017 [ECF
No. 12], and the Defendant filed a Reply [ECF No. 15] on November 28, 2017. This issue is now
fully briefed and ripe for review.

BACKGROUND
The Defendant is an electronic, online discount brokerage that offers order execution
services for low commission prices as compared to traditional broker-dealers. Most of the
Defendant’s customers conduct business through its website and never speak directly to a broker
or customer service representative. Customers may also conduct business through the
Defendant’s mobile application. The Plaintiff has used the Defendant’s services since March
2010, and he conducts most of his business via the mobile application.

When the Plaintiff opened his account, he was required to agree to the Defendant’s
Securities End-User License Agreement (“the User Agreement”), which provided in relevant
part:
5. E*TRADE SECURITIES BROKERAGE SERVICES
I ACKNOWLEDGE THAT I ALONE AM RESPONSIBLE FOR
DETERMINING THE SUITABILITY OF MY INVESTMENT CHOICES IN
LIGHT OF MY PARTICULAR CIRCUMSTANCES. I UNDERSTAND THAT
E*TRADE SECURITIES ASSUMES NO RESPONSIBILITY FOR SUCH
DETERMINATION. As a self-directed investor, I assume full responsibility for
each and every transactions in or for my Account and for my own investment
strategies and decisions. I understand and agree that E*TRADE Securities
and its affiliates will have no liability whatsoever for the results of my
investment strategies, transactions and decisions.
(a) No Advice
Unless otherwise specified in writing, E*TRADE Securities does not and will not
provide me with any legal, tax, estate planning or accounting advice or advice
regarding the suitability, profitability or appropriateness for me of any security,
investment, financial product, investment strategy or other matter. . . . I also
acknowledge that E*TRADE Securities neither assumes responsibility for nor
guarantees the accuracy, currency, completeness or usefulness of information,
commentary, recommendations, advice, investment ideas or other materials that
may be accessed by me through the Service. . . . If I choose to rely on such
information, I do so solely at my own risk.
...
6. TRADING PROVISIONS
(a) Responsibility for Orders
All orders for the purchase and sale of Securities and/or Other Property given for
my Account will be authorized by me and executed in reliance on my promise that
an actual purchase or sale is intended. . . .

On October 6, 2016, the Plaintiff used the Defendant’s mobile trading system to enter a
number of orders relating to stock options. The Plaintiff claimed that there was an issue with the
Defendant’s mobile application that caused him to purchase options contracts with expiration
dates of October 7, 2016, when he intended to purchase options contracts with expiration dates

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of October 14, 2016 (“the Expiration Date Issue”). A customer service representative was able to
help him fix this error, but the error resulted in some monetary losses.
The Plaintiff also claimed that, until October 18, 2016, the Defendant’s website
incorrectly indicated that Amazon, Inc., would announce its third quarter earnings on October
21, 2016, when, in fact, Amazon’s earnings were not to be announced until 5:30 P.M. Eastern
Standard Time on October 27, 2016. He argued that he purchased numerous options contracts
with expiration dates of October 21, 2016, in reliance on the incorrectly posted date (“the Next
Earnings Date issue”). He claimed that, if he had known that Amazon’s third quarter earnings
would not be posted until October 27, 2016, he would have purchased options contracts with
expiration dates of October 28, 2016, and thereby avoided his monetary losses. The parties
disputed how much of the Plaintiff’s monetary losses were attributable to the actual purchase of
the options contracts and how much were unavoidable based on the Plaintiff’s choice to invest in
Amazon.
On August 29, 2017, the parties appeared before an arbitration panel. The Plaintiff
requested $60,500 in compensatory damages as well as $950,000 in punitive damages. The
Defendant argued that it was not liable for any of the Plaintiff’s losses based on the User
Agreement, but that, in the event the Arbitrators found that the Defendant was liable under the
User Agreement, the maximum losses the Plaintiff suffered were $2,358.77 due to the Expiration
Date Issue and $739.39 due to the Next Earnings Date Issue. On September 1, 2017, the panel
awarded compensatory damages to the Plaintiff:
After considering the pleadings, the testimony and evidence presented at the
hearing, the Panel has decided in full and final resolution of the issues submitted
for determination as follows:
1. Defendant is liable for and shall pay to Claimant the sum of $3,100.00 in
compensatory damages.
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2. Other than forum fees, which are specified below, the parties shall each bear their
own costs and expenses incurred in this matter.
3. Any and all claims for relief not specifically addressed herein, including punitive
damages, are denied.

(Arbitration Award 2, ECF No. 10-3.)
ANALYSIS
The Court’s role in reviewing a petition to vacate an arbitration award is “severely
limited.” Health Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1258 (7th Cir. 1992).
“[O]therwise, the ostensible purpose for resort to arbitration, i.e., avoidance of litigation, would
be frustrated.” Id. The Federal Arbitration Act (“FAA”) enumerates the grounds on which a
district court may vacate an arbitration award:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality 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; 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).
The Plaintiff argues that the Arbitrators failed to interpret the User Agreement, failed to
hear evidence pertinent and material to the controversy, and/or engaged in other misbehavior,
corruption, or fraud that prejudiced the Plaintiff’s rights.

A.

Interpretation of the Agreement
The Plaintiff first argues that the Arbitrators failed to interpret the User Agreement.

“[T]he question for decision by a federal court asked to set aside an arbitration award . . . is not
whether the arbitrator or arbitrators erred in interpreting the contract; it is not whether they
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grossly erred in interpreting the contract; it is whether they interpreted the contract.” Affymax,
Inc. v. Ortho-McNeil-Janssen Pharms., Inc., 660 F.3d 281, 285 (7th Cir. 2011); see also
Prostyakov v. Masco Corp., 513 F.3d 716, 723 (7th Cir. 2008) (stating that the court “will not set
aside an arbitral award so long as the arbitrator interpreted the parties’ agreement at all”
(emphasis in original)); Wise v. Wachovia Sec., 450 F.3d 265, 268, 269 (7th Cir. 2006) (finding
“the issue for the court is not whether the contract interpretation is incorrect or even wacky but
whether the arbitrators had failed to interpret the contract at all, for only then were they
exceeding the authority granted to them by the contract’s arbitration clause”) (internal citations
omitted).
The Plaintiff argues that the arbitration award specifically references the Expiration Date
Issue in the Case Summary but “does not mention any other arguments related to the plaintiff’s
causes of action,” which demonstrates that the Arbitrators did not consider his claim regarding
the Next Earnings Date Issue. (Pl. Rep. Br. 4.) However, the failure to specifically note the Next
Earnings Date Issue in the Case Summary is not fatal to the award, especially when it is clear
that both parties fully briefed and argued the Next Earnings Date Issue. 1 See, e.g., Rollins v.
Prudential Ins. Co. of N.A., 10 F. App’x 510, 512 (9th Cir. 2001) (concluding that a “failure to
list the [claim] specifically in the ‘Case Summary’ does not create a substantial ambiguity
concerning the deposition of submitted claims” where the issue was raised in the claimant’s
initial filing, briefed by the parties, and presented at a hearing); Remmey v. PaineWebber, Inc.,

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The Court notes that although the Plaintiff points out multiple times that the Next Earnings Date Issue
was the “paramount” or central issue in dispute, in his pre-hearing briefing the Plaintiff immediately
followed that statement with a recitation of the Expiration Date Issue. All of the parties’ pre-hearing
submissions of record demonstrate that each fully argued both issues. Thus, the Plaintiff’s argument that
the Arbitrators’ award reflected a decision on an issue that was not truly before panel is without merit.

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32 F.3d 143, 150 (4th Cir. 1994) (finding “[t]hat the arbitrators’ accompanying “Case Summary”
did not mention all of [the claimant’s] claims is of no moment” where award stated that “[a]ll
Claims of the Claimant” were “dismissed in all respects”); First Riverside Investors, L.P. v.
Oppenheimer & Co., Inc., No. 99 CIV. 9313, 1999 WL 1225260, at *1 (S.D.N.Y. Dec. 22, 1999)
(finding that failure to reference a claim in the “Case Summary” was “akin to a typographical or
clerical error” because “the claim was repeatedly brought to the panel’s attention, so they could
hardly have overlooked it, and . . . the award itself expressly state[d] that it [was] ‘in full and
final settlement of all claims between the parties’”). Therefore, there is no reason for the Court to
believe that the Arbitrators disregarded the Next Earnings Date Issue.
The Plaintiff also argues that, because the Arbitrators made no specific finding as to
whether the Defendant was liable on the Next Earnings Date Issue, the Arbitrators did not
interpret the User Agreement, or at least the indefiniteness of the Award makes it impossible to
determine whether the Arbitrators interpreted the User Agreement. Rather, he asserts that “[a]
denial of a specific claim in the award should be on the face of the award.” (Pl. Rep. Br. 4.)
However, arbitrators are not required to make separate findings as to each issue before them. See,
e.g., Robots of Mars, Inc. v. Imax Corp., No. CV 11-3226, 2011 WL 13220323, at *2 (C.D. Cal.
July 13, 2011) (“there is nothing indefinite about a single award encompassing the entire dispute
between the parties. Nor was the issuance of a single award evidence that the arbitrator
disregarded the contracts.”); Colletti v. Mesh, 23 A.D.2d 245, 247 (N.Y. Sup. Ct. 1965) (finding
that because “[o]n its face, the award specifically states that it was ‘in full settlement of all
claims and counterclaims submitted to arbitration,’” “[i]t was unnecessary for the arbitrators in
their award specifically to mention the particular issues they had decided”); Int’l Union, United
Auto., Aerospace & Agr. Implement Workers of Am., Local 133 U.S.W., A.F.L.C.I.O. v. Fafnir
Bearing Co., 201 A.2d 656, 657–58 (Conn. 1964) (upholding arbitration award where arbitrator
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answered only one of two issues explicitly and generally denied the remainder of the grievance).
Thus, the Arbitrators’ failure to include specific findings as to each of the Plaintiff’s claims does
not demonstrate that the Award is indefinite or that the Arbitrators failed to interpret the User
Agreement.
Rather, “[t]he arbitrator’s rationale for an award need not be explained, and the award
should be confirmed if a ground for the arbitrator’s decision can be inferred from the facts of the
case.” D.H. Blair & Co., v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006) (internal quotations
omitted); see also Shearson Hayden Stone, Inc. v. Liang, 653 F.2d 310, 312 (7th Cir. 1981)
(“The arbitrators gave no reasons for their award, but they are not required to do so.”) (citing
United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598 (1960));
Sullivan v. Lemoncello, 36 F.3d 676, 683 (7th Cir. 1994) (“arbitrators have no obligation . . . to
give their reasons for an award.”) (quoting United Steelworkers, 363 U.S. at 598). Here, the
Arbitrators interpreted the User Agreement in a manner that imposed liability on the Defendant
despite the Defendant’s argument that the language in the User Agreement released it from any
liability whatsoever. The Seventh Circuit has stated that courts should “uphold an arbitral award
unless ‘there is no possible interpretive route to it so a non-contractual basis can be inferred.”
Prostyakov, 513 F.3d at 723 (quoting Cuna Mut. Ins. Soc’y v. Office & Prof’l Employees Int’l
Union, Local 39, 43 F.3d 556, 562 (7th Cir. 2006)). “Only a barely colorable justification for the
outcome reached by the arbitrators is necessary to confirm the award.” D.H. Blair & Co., 462
F.3d at 110 (internal quotations omitted).
In this case, the Court has no trouble discerning a “colorable justification” for the $3,100
arbitration award in favor of the Plaintiff. The Defendant submitted evidence that the Plaintiff
lost no more than $2,358.77 due to the Expiration Date Issue and that no more than $739.39 was
actually attributable to the Next Earnings Date Issue. If the Arbitrators found the Defendant’s
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evidence more compelling than the Plaintiff’s evidence regarding his losses, the ultimate award
of $3,100 could reflect an interpretation of the User Agreement that places liability on the
Defendant for both alleged losses. The Court will not reconstruct the Arbitrators’ reasoning,
findings of fact, or conclusions of law, nor will it reweigh evidence and make its own
determination regarding the merits of the Plaintiff’s case or damages. Federal courts “will neither
deprive parties of the benefits, nor shield them from the pitfalls, that arise when they agree to
settle their disputes outside of the courts’ purview.” Prostyakov, 513 F.3d at 723.

B.

Failure to Hear Pertinent Evidence
The Plaintiff appears to argue that the Arbitrators failed to hear all of the pertinent

evidence. “Arbitrators are accorded great deference in their evidentiary determinations, and need
not follow all the niceties observed by the federal courts.” Kolel Beth Yechiel Mechil of Tartikov,
Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 107 (2d Cir. 2013) (internal quotations omitted). “An
arbitrator’s refusal to receive relevant evidence, standing alone, does not warrant vacating an
arbitration award; rather, the arbitrators’ failure to consider pertinent evidence must have
deprived the [the party] of a fundamentally fair hearing.” Mical v. Glick, 851 F. App’x 568, 570
(7th Cir. 2014). “A fundamentally fair hearing ‘requires only notice, opportunity to be heard and
to present relevant and material evidence and argument before the decision makers, and that the
decision makers are not infected with bias.’” Hayne, Miller, & Farni, Inc. v. Flume, 888 F. Supp.
949, 952 (E.D. Wis. 1995) (quoting Bowles Financial Group v. Stifel, Nicolaus & Co., 22 F.3d
1010, 1013 (10th Cir. 1994)).
There is no indication that the Arbitrators limited the Plaintiff’s ability to present
evidence, much less that such limitation deprived him of a fundamentally fair hearing. See
Moseley, Hallgarten, Estabrook & Weeden, Inc. v. Ellis, 849 F.2d 264, 268 (7th Cir. 1988)
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(finding that because the Plaintiff “was never precluded from presenting whatever arguments and
evidence he wished to present,” he “received a fair arbitration proceeding”); Wise, 450 F.3d at
268 (refusing to vacate the award for failure to hear evidence where “the arbitrators did not limit
the [Plaintiffs’] presentation of evidence). The Plaintiff admits that he was given the opportunity
to “make an opening statement, cross-examine, and make a closing argument.” (Pl. Rep. Br. 1.)
More importantly, the Plaintiff does not point to any evidence that he was not permitted to offer.
The standard for vacatur “typically is met only when an arbitrator wrongly excludes the sole
evidence on a pivotal issue.” Mical, 581 F. App’x at 570. Rather, the Plaintiff’s argument seems
to be that the Arbitrators did not give due weight to the evidence he did present, review of which
is not within the purview of the Court. Therefore, the Plaintiff has not demonstrated that vacatur
is appropriate on this ground.

C.

Corruption, Partiality, or Fraud
The Plaintiff has not pointed to any specific evidence that would substantiate his claims

regarding corruption, partiality, or fraud. The Plaintiff asserts that during the hearing, the
chairperson and the Defendant both began to “chastise” him about the examination of a witness
and that it was “clear at that moment that defendant counsel and the chairperson had bonded.”
(Pl. Rep. Br. 1–2.) However, agreeing with one party regarding another party’s behavior during
an adversarial proceeding does not evidence partiality. Nevertheless, the Plaintiff argues that,
due to this “bond,” the fact that the Arbitrators’ decision was handed down only two days after
the hearing, and that the arbitration award granted the Plaintiff only $3,100, which corresponds
with the Defendant’s position regarding damages, the Court should infer corruption and fraud. 2

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The Plaintiff also argues that, although he presented evidence that the language in the Agreement
protected him from the Defendant’s failure to post a correct earnings date, on cross examination, the only
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However, neither a quick disposition nor an unfavorable award demonstrates fraud or corruption.
See Azroui v. E*Trade Sec., LLC, 499 F. App’x 606, 607 (7th Cir. 2013) (finding “mere
appearance of bias” based on an adverse ruling is “not a valid ground for vacatur”).
Moreover, to show partiality, the Plaintiff must present evidence of a “relationship
between the arbitrator and the party’s principal [that is] so intimate—personally, socially,
professionally, or financially—as to cast serious doubt on the arbitrator’s impartiality.” Health
Servs. Mgmt., 975 F.2d at 1264; see also Tamari v. Bache Halsey Stuart Inc., 619 F.2d 1196,
1200 (7th Cir. 1980) (“The interest or bias of an arbitrator must be direct, definite, and capable or
demonstration rather than remote, uncertain, or speculative.” (internal quotation omitted));
Batarseh v. Wireless Vision, LLC, No. 2:07-CV-350, 2011 WL 854046, at *3 (N.D. Ind. Mar. 9,
2011) (“Although the Plaintiff points to a familiarity and argues it establishes partiality, he has
failed to present any evidence of social, professional, or other types of relationships between the
Defendant’s counsel and the arbitrator . . . .”). The Plaintiff has produced no evidence that the
Defendant and the Arbitrators had any prior relationship, much less one “so intimate” as to
warrant an inference of partiality.

D.

The Defendant’s Petition to Confirm the Award
Under Section 9 of the FAA, “at any time within one year after the award is made any

party to the arbitration may apply . . . for an order confirming the award . . . .” 9 U.S.C. § 9. In

response the Defendant’s Vice President of Operations gave regarding whether the Agreement’s language
protected the Plaintiff was “no.” (Pl. Br. 6, ECF No. 1.) Thus, the Plaintiff argues, the Court may “infer
that the arbitrators had had a corrupt motive or at least that they had exceeded the powers granted to them
by the arbitration clause.” Wise, 450 F.3d at 269. However, it seems clear that the Arbitrators did, in fact,
agree with the Plaintiff on this point; they merely did not agree with the amount of damages that the
Plaintiff asserted.
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such a case, the Court “must grant such an order unless the award is vacated, modified or
corrected as prescribed in sections 10 and 11” of the FAA. Id. Because the Court is not vacating,
modifying, or correcting the award, the Court will confirm the award.

CONCLUSION
For these reasons, the Court GRANTS the Defendant’s Motions to Rule on Petition to
Vacate [ECF Nos. 11, 16], DENIES the Plaintiff’s Petition to Vacate or Set Aside FINRA
Arbitration Award [ECF No. 1] and GRANTS the Defendant’s Cross-Petition to Confirm the
Arbitration Award and for Final Judgment [ECF No. 9].
SO ORDERED on December 13, 2017.
s/ Theresa L. Springmann
CHIEF JUDGE THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT

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