Bogar v. Ameriprise Financial Services, Inc.
Filing
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MEMORANDUM OPINION AND ORDER: For the reasons stated above, Mr. Bogar's petition to vacate the arbitration award is DENIED and Ameriprise's petition to confirm the award is GRANTED. The Clerk of Court is requested to enter judgment in favor of Ameriprise and to close this case. SO ORDERED. (Signed by Judge Gregory H. Woods on 5/4/2017) (anc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
:
Lawrence Keith Bogar,
:
Petitioner, :
:
-against:
:
Ameriprise Financial Services, Inc.,
:
:
Respondent. :
:
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 5/4/17
1:16-cv-7199-GHW
MEMORANDUM
OPINION AND ORDER
GREGORY H. WOODS, District Judge:
Petitioner Larry Bogar worked as a registered representative at Respondent Ameriprise
Financial Services, Inc., a broker-dealer. When Mr. Bogar’s employment ended in 2015, Ameriprise
demanded payment of the outstanding balance on a loan it had made to him approximately two
years earlier. Mr. Bogar did not repay the outstanding debt as demanded, and the matter proceeded
to arbitration before the Financial Industry Regulatory Authority, which rendered an award in favor
of Ameriprise. Mr. Bogar now moves to vacate the award under the Federal Arbitration Act on the
basis that the arbitrator exceeded his powers. Ameriprise opposes Mr. Bogar’s petition and moves
to confirm the award. For the reasons stated below, Mr. Bogar’s petition to vacate the award is
DENIED and Ameriprise’s motion to confirm the award is GRANTED.
I.
INTRODUCTION
Petitioner Larry Bogar signed a promissory note in favor of his employer, Ameriprise
Financial Services, Inc. (“Respondent” or “Ameriprise”), on August 1, 2013. See Verified Petition to
Vacate Arbitration Award (Dkt. No. 1), Ex. A (the “Promissory Note”). The principal amount of
the Promissory Note was $143,199, which Mr. Bogar agreed to repay at interest of 1.47% per
annum, in monthly installments for nine years. Id. ¶ 1. The Promissory Note provided that, if Mr.
Bogar’s employment with Ameriprise ended for any reason, the “unpaid principal balance of the
principal sum, plus accrued interest, shall be due and payable as of the date of the termination.” Id.
¶ 2. It is undisputed that Mr. Bogar’s employment with Ameriprise ended on December 7, 2015,
and that the outstanding balance due and owing under the Promissory Note at that time was
$107,819.56.
Ameriprise demanded payment of the outstanding balance due and owing under the
Promissory Note several times—on December 14, 21 and 30, 2015. See Declaration of Michael S.
Taaffe (Dkt. No. 12-1), Ex. B. Mr. Bogar did not pay the amount demanded by Ameriprise and,
following an exchange of correspondence with Mr. Bogar and his counsel, on February 23, 2016,
Ameriprise commenced an arbitration before the Financial Industry Regulatory Authority
(“FINRA”). See id. Ameriprise’s FINRA Statement of Claim asserted four “counts”: (1) “Breach of
Promissory Note Dated August 1, 2013,” (2) “Unjust Enrichment,” (3) “Conversion of Loan
Funds,” and (4) “Attorneys’ Fees and Costs.” Petition, Ex. A. As pleaded, all of the asserted
“counts” sought recovery for Mr. Bogar’s alleged failure to repay the amount due on the Promissory
Note. Id. at 4-6. The Statement of Claim’s request for relief sought an award of the “principal owed
as of December 7, 2015” in the amount of $107,819.56, together with fees and costs associated with
the action. Id. at 6. The Statement of Claim did not request different or additional relief for each of
its three substantive “counts.”
Mr. Bogar did not appear in the FINRA arbitration. On September 28, 2016, FINRA
arbitrator Neal D. Baker issued an award in favor of Ameriprise comprising $107,819.56 in
compensatory damages, plus interest at the rate of 1.47% per annum from December 7, 2015 until
the award is paid in full, and attorneys’ fees and costs of $2,429.83. See Taaffe Decl, Ex. A (the
“Award”).
Mr. Bogar filed a petition to vacate the Award on September 16, 2016. Dkt. No. 1 (the
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“Petition”). Ameriprise opposed the Petition on October 27, 2016, Dkt. No. 12, and Mr. Bogar
replied on November 29, 2016, Dkt. No. 15. Ameriprise also filed a petition to confirm the Award
on November 29, 2016, Dkt. No. 16, which Mr. Bogar opposed on December 9, 2016, Dkt. No. 17.
In brief, the Petition argues that the arbitrator exceeded his powers in rendering the Award, and that
the Award must therefore be vacated pursuant to 9 U.S.C. § 10(a)(4). The Court concludes that Mr.
Bogar’s asserted basis for vacatur do not support the relief requested, and the Petition must be
denied. Moreover, inasmuch as denying a petition to vacate an arbitration award is tantamount to
confirming it, Ameriprise’s petition to confirm is granted.
II.
LEGAL STANDARD
“[T]o avoid undermining the twin goals of arbitration, namely, settling disputes efficiently
and avoiding long and expensive litigation, arbitral awards are subject to very limited review.” Zurich
Am. Ins. Co. v. Team Tankers A.S., 811 F.3d 584, 588 (2d Cir. 2016) (quoting Folkway Music Publishers.,
Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993) (internal quotation marks omitted)). Section 10(a) of
the Federal Arbitration Act (“FAA”) “sets forth specific grounds for vacating” an arbitration award.
Jock v. Sterling Jewelers Inc., 646 F.3d 113, 121 (2d Cir. 2011). Under that provision, an award may be
vacated only under one of the following four circumstances:
(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; 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). “Because the FAA supports a ‘strong presumption in favor of enforcing arbitration
awards . . . the policy of the FAA requires that the award be enforced unless one of those grounds is
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affirmatively shown to exist.’” Jock, 646 F.3d at 121 (quoting Wall Street Assocs., L.P. v. Becker Paribas
Inc., 27 F.3d 845, 848 (2d Cir. 1994)). In addition to the grounds for vacatur specified in § 10(a),
there is an additional, “judicially-created ground, namely that an arbitral decision may be vacated
when an arbitrator has exhibited a manifest disregard of law.” Id. (citation and internal quotation
marks omitted).
Section 10(a)(4) of the FAA allows a court to vacate an award “where the arbitrators
exceeded their powers.” ReliaStar Life Ins. Co. of N.Y. v. EMC Nat’l Life Co., 564 F.3d 81, 85 (2d Cir.
2009) (quoting 10 U.S.C. § 10(a)(4)). The Second Circuit has, however, “‘consistently accorded the
narrowest of readings’ to this provision.” Id. (quoting Banco de Seguros del Estado v. Mut. Marine Office,
Inc., 344 F.3d 255, 262 (2d Cir. 2003)). A court’s inquiry under § 10(a)(4) focuses on “whether the
arbitrators had the power, based on the parties’ submissions or the arbitration agreement, to reach a
certain issue, not whether the arbitrators correctly decided that issue.” Jock, 646 F.3d at 122 (emphasis in
original) (citation omitted).
In reviewing arbitration awards under § 10(a)(4) of the FAA, a court “will uphold an award
so long as the arbitrator ‘offers a barely colorable justification for the outcome reached.’” Id.
(quoting ReliaStar, 564 F.3d at 86). As the Supreme Court has made clear, “[i]t is not enough . . . to
show that the panel committed an error—or even a serious error. It is only when an arbitrator
strays from interpretation and application of the agreement and effectively dispenses his own brand
of industrial justice that his decision may be unenforceable.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l
Corp., 559 U.S. 662, 671 (2010) (internal citations and quotation marks omitted). “In other words, as
long as the arbitrator is even arguably construing or applying the contract and acting within the
scope of his authority, a court’s conviction that the arbitrator has committed serious error in
resolving the disputed issue does not suffice to overturn his decision.” Jock, 646 F.3d at 122
(quoting ReliaStar, 564 F.3d at 86).
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III.
DISCUSSION
A. Mr. Bogar’s Petition to Vacate the Award
Mr. Bogar seeks vacatur of the Award under 9 U.S.C. § 10(a)(4) on two grounds. First, Mr.
Bogar argues that the arbitrator exceeded his authority because he considered Respondent’s claims
of unjust enrichment and conversion in addition to its direct claim for breach of contract.
Memorandum of Law in Support of Verified Petition to Vacate Arbitration Award (Dkt. No. 5)
(“Pet. Mem.”) at 3. Second, he argues that Respondent failed to submit to the arbitrator what he
views as the requisite proof of non-payment on the Promissory Note required to justify relief under
New York law. Id. at 4-5. Because neither of Mr. Bogar’s asserted bases come close to clearing the
“high hurdle” necessary to justify vacatur of the Award, see Stolt-Nielsen, 559 U.S. at 671, the Petition
is denied.
1. Alleged Violation of FINRA Rule
Mr. Bogar’s first argument in support of vacatur is that in the FINRA arbitration, which
proceeded under FINRA Rule 13806, the arbitrator was permitted to consider only Ameriprise’s
claim that he “failed to pay money owed on a promissory note.” Pet. Mem. at 3. The arbitrator was
not permitted, Mr. Bogar argues, to also consider what he terms Ameriprise’s “additional claims” of
“Unjust Enrichment and Conversion of Loan Funds.” Id. The provision of Rule 13806 upon which
Mr. Bogar relies to support this argument provides:
This rule applies to arbitrations solely involving a member’s claim that an
associated person failed to pay money owed on a promissory note. To proceed
under this rule, a claim may not include any additional allegations. Except as
otherwise provided in this rule, all provisions of the Code apply to such
arbitrations.
FINRA Rule 13806(a).
The contention implicit in Mr. Bogar’s argument for vacatur on this ground is that the
arbitrator’s violation of a FINRA rule means that the arbitrator “exceeded [his] powers” within the
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meaning of 9 U.S.C. § 10(a)(4). The Court need not consider whether and under what
circumstances an arbitrator’s violation of a FINRA rule could provide a basis for vacatur under
§ 10(a)(4) of the FAA, however, inasmuch as no such violation occurred here. Mr. Bogar does not
contend that the arbitrator lacked the authority to decide Ameriprise’s claim to the extent it was
nominally pleaded as one for breach of a promissory note. As the text of the rule reproduced above
indicates, Rule 13806 applies to arbitrations involving a member’s claim that an associated person
“failed to pay money owed on a promissory note.” And that is precisely the nature of the dispute on
which the Award is based. The Statement of Claim that Ameriprise submitted to FINRA stated that
the arbitration sought “to recover $107,819.56 due and owing on [a] loan[ ]” that Ameriprise had
made to Mr. Bogar, that the “loan was secured by a Promissory Note,” and that Mr. Bogar had
“failed and refuse to honor [his] obligations under the Note.” Statement of Claim at 1. Ameriprise’s
pleading of alternative nominal causes of action does not remove its claim for recovery of the debt
from the scope of Rule 13806; the basis for Ameriprise’s claim was plainly “that an associated
person failed to pay money owed on a promissory note.” FINRA Rule 13806.
In any event, even if the arbitrator could not consider the alternative “claims,” the Award
must be sustained because the breach of contract claim—uncontested by Plaintiff—on its own
provides a sufficient basis for the Award. An “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)
(citations and internal quotation marks omitted). Here, the Court can easily infer that the Award
was based on Ameriprise’s cause of action for breach of contract, and Mr. Bogar does not take issue
with the arbitrator’s power to reach that “count.” As a result, Mr. Bogar’s petition to vacate the
Award on this basis is denied.
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2. Alleged Insufficiency of Evidence at Arbitration
Mr. Bogar also argues that the Award must be vacated under FAA § 10(a)(4) because
Ameriprise “did not submit to the Arbitrator any proof, authenticated or otherwise, of Petitioner’s
failure to make payment on the note.” Pet. Mem. at 4. And “[i]n the absence of the requisite proof
of non-payment, Respondent failed to establish a prima facie case for breach of the promissory
note” under New York law. Id at 4-5. This argument is meritless. The arbitrator concluded, as a
factual matter, that Mr. Bogar did not repay Ameriprise the amount due and owing on the
Promissory Note. “An arbitrator’s factual findings are generally not open to judicial challenge, and
we accept the facts as the arbitrator found them.” Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304
F.3d 200, 213 (2d Cir. 2002) (citation omitted). And as noted above, an arbitration award must be
enforced unless a ground for vacatur “is affirmatively shown to exist.” Jock, 646 F.3d at 121
(citation and quotation marks omitted). Here, Mr. Bogar has not made any concrete showing that
the arbitrator lacked sufficient evidence to support a finding of non-payment; indeed, he studiously
avoids controverting the arbitrator’s finding of non-payment in the verified Petition, for example, by
affirming that he did in fact make the payment. 1 Mr. Bogar had the opportunity to appear at the
arbitration hearing to contest the evidence presented to the arbitrator; he cannot undermine the
arbitrator’s conclusions here based on unsupported speculation. The petition to vacate the Award
on this basis is also denied.
B. Ameriprise’s Petition to Confirm the Award
An arbitration award should be confirmed “unless the award is vacated, modified, or
corrected.” D.H. Blair & Co., 462 F.3d at 110 (quoting 9 U.S.C. § 9); accord DigiTelCom, Ltd. v. Tele2
Sverige AB, No. 12-cv-3082 (RJS), 2012 WL 3065345, at *6 (S.D.N.Y. July 25, 2012). As courts have
The Court observes that the Award reflects that Mr. Bogar did not enter an appearance at the arbitration, and that
FINRA Rule 13806, the rule under which the arbitration proceeded, provides: “If the associated person does not file an
answer, no initial prehearing conference or hearing will be held, and the arbitrator will render an award based on the
pleadings and other materials submitted by the parties.” Rule 13806(e)(1).
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recognized, “[d]ue to the parallel natures of a motion to vacate and a motion to confirm an
arbitration award, denying the former implies granting the latter.” L’Objet, LLC v. Limited, No. 11cv-3856 (LBS), 2011 WL 4528297, at *3 (S.D.N.Y. Sept. 29, 2011); see also Sanluis Dev., L.L.C. v. CCP
Sanluis, L.L.C., 556 F. Supp. 2d 329, 333 (S.D.N.Y. 2008) (a court should “treat a party’s opposition
to a motion to vacate as a request to confirm the award”). Accordingly, because the Court is
denying Mr. Bogar’s motion to vacate the arbitration award, Ameriprise’s motion to confirm the
award is granted.
IV.
CONCLUSION
For the reasons stated above, Mr. Bogar’s petition to vacate the arbitration award is
DENIED and Ameriprise’s petition to confirm the award is GRANTED.
The Clerk of Court is requested to enter judgment in favor of Ameriprise and to close this
case.
SO ORDERED.
Dated: May 4, 2017
New York, New York
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_____________________________________
GREG
GREGOR
GREGORY
GREGORY H. WOODS
United States District Judg
Judge
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