Carroll v. Wells Fargo Clearing Services, LLC

Filing 24

OPINION AND ORDER: re: 4 FIRST MOTION to Vacate Arbitration. filed by Kevin Joseph Carroll, 15 CROSS MOTION to Confirm Arbitration and Opposition to Petition to Vacate filed by Wells Fargo Clearing Services, LLC. Petitioner Carroll's mo tion to vacate the award (Doc 4) is DENIED. Respondent Wells Fargo's cross-motion to confirm the award (Doc 15) is GRANTED. The Clerk shall enter final judgment for Respondent Wells Fargo in the amount $715,654.41 plus attorneys' fees and costs in the amount of $17,019. SO ORDERED. (Signed by Judge P. Kevin Castel on 2/17/2021) (ama) Transmission to Orders and Judgments Clerk for processing.

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 1 of 11

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------x
KEVIN JOSEPH CARROLL
20-cv-4918 (PKC)
Plaintiff,
OPINION AND
ORDER
-againstWELLS FARGO CLEARING SERVICES,
LLC,
Defendants.
------------------------------------------------------x
CASTEL, U.S.D.J.
Kevin Joseph Carroll petitions to vacate an arbitration award rendered against him
and in favor of his former employer, respondent Wells Fargo Clearing Services, LLC (“Wells
Fargo”). In the arbitration, Wells Fargo was awarded inter alia the unpaid balance on a
promissory note that Carroll failed to pay.
Wells Fargo opposes the petition and moves to confirm the award. It also seeks
attorneys’ fees incurred as a result of its efforts to enforce the award. Because Carroll has failed
meet the “very high” burden to demonstrate that vacatur was appropriate, see D.H. Blair & Co.,
Inc. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006), his petition will be denied. Wells Fargo’s
cross-petition to confirm the award and its application for attorneys’ fees will be granted.
BACKGROUND
Wells Fargo is a registered broker-dealer and member of the Financial Industry
Regulatory Authority (“FINRA”). (Cross-Pet. ¶ 2; (Doc 15)). Carroll was a former registered
representative for Wells Fargo. (Cross-Pet. ¶ 1). On October 30, 2014, Carroll executed a
promissory note with Wells Fargo for the principal amount of $1,100,000. (Mitchell Decl. Ex.

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 2 of 11

B; (Doc 16)).1 Under the terms of the note, a termination of Carroll’s employment with Wells
Fargo for any reason constituted an Event of Default. (Note ¶ 1). Upon the occurrence of an
Event of Default, Wells Fargo “may, at is option, declare the entire unpaid principal balance of
this Note immediately due and payable, regardless of any prior forbearance, and exercise any and
all rights and remedies available to it under applicable law with respect to the enforcement and
collection of this Note.” (Note ¶ 2). The promissory note also contained an arbitration clause
providing that any controversy arising out of the validity, enforcement or construction of the note
be resolved through FINRA arbitration. (Note ¶ 7).
On February 15, 2019, Carroll resigned from his position at Wells Fargo. (CrossPet. ¶ 12). Thereafter, Wells Fargo initiated a FINRA arbitration against Carroll on November
20, 2019. (Cross-Pet. ¶ 18). The statement of claim alleged that Carroll’s termination of his
employment with Wells Fargo constituted an Event of Default. (Claim ¶ 12). Wells Fargo
alleged that Carroll owed $706,900.41 in principal on the note and that it had made multiple
attempts to collect the unpaid principal balance. (Claim ¶¶ 13, 15–18). Wells Fargo asserted
that Carroll breached the terms of the promissory note by failing to pay the outstanding principal
balance after he resigned. (Claim ¶¶ 23–29).
FINRA provided Carroll a claim service packet dated November 21, 2019 that
included the statement of claim, information on the arbitration proceeding and how to respond,
and stated that he was required to file a statement of answer on or before January 10, 2020.
(Cross-Pet. ¶¶ 19–20; Mitchell Decl. Ex. D). Carroll failed to file a statement of answer or

1
Exhibit B of the Mitchell Declaration is a copy of the Statement Claim filed by Wells Fargo in the underlying
arbitration, Wells Fargo Clearing Services, LLC v. Kevin Joseph Carroll, FINRA Dispute Resolution No. 19-03473.
(Mitchell Decl. ¶ 5). The exhibits to the statement of claim included the executed promissory note and a calculation
of the amount alleged to be due and payable under the note. The Court’s Order will cite to the promissory note as
(“Note”) and the Statement of Claim as (“Claim”).

2

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 3 of 11

otherwise respond prior to January 10. On January 13, 2020, FINRA sent Carroll a notice that
his answer was overdue and informing him that the claim would now be adjudicated without a
hearing:
This office has not received Kevin Joseph Carroll’s Statement of Answer.
Accordingly, pursuant to Code of Arbitration Procedure Rule 13806, no hearing
will be held. This case will be decided based on the pleadings and other materials
submitted by the parties. Should Kevin Joseph Carroll file a Statement of Answer,
this office will contact the parties to schedule a hearing. We have attached for the
Respondent’s review a copy of the statement of claim filed in this matter.
(Cross-Pet. ¶ 23; Mitchell Decl. Ex. E). Between January 13, 2020, when the overdue notice was
sent, and February 24, 2020, FINRA provided additional correspondence regarding the
appointment of the arbitrator and the arbitrator issued an order concerning Wells Fargo’s claim
for attorney’s fees. (Mitchell Decl. Ex. E–Ex. J).
On February 25, 2020, Carroll filed a letter that stated in full, “I need more time
on this case to respond. There are several personal reasons for this. I need to obtain different
counsel as well. I take this matter seriously and want to properly prepare.” (Pet. Ex. B; (Doc.
1)). Carroll states that between the time Wells Fargo filed its statement of claim and his letter of
February 25, 2020, that he “had no communications from or with the Arbitrator or Respondent.”
(Pet. ¶ 13). On March 6, 2020, Wells Fargo responded and did not object to Carroll’s request on
condition that Carroll only be provided ten days to answer from the date of the arbitrator’s order.
(Pet. Ex. C). The arbitrator denied Carroll’s request for an extension on March 13, 2020. (Pet.
Ex. D).
On March 30, 2020, more than two weeks after the denial of the extension, the
arbitrator decided the matter on the pleadings and other materials pursuant to FINRA Rule 13806
covering “Promissory Note Proceedings.” (Pet. Ex. A). Carroll did not participate or make any
substantive submissions. (Pet. ¶ 21). The arbitrator determined that Carroll was liable for the
3

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 4 of 11

outstanding balance due on the promissory note and also awarded Wells Fargo pre- and postjudgment interest and attorneys’ fees. (Id.) The arbitration award identified that Carroll failed to
file an answer. It further determined that Carroll “was served with the Claim Notification letter
dated November 21, 2019 by regular mail, and the Overdue Notice (including the Statement of
Claim) dated January 13, 2020 by regular and certified mail as evidenced by the signed signature
card on file.” (Id.)
On June 26, 2020, Carroll filed his petition, seeking vacatur of the award pursuant
to section 10 of the Federal Arbitration Act (“FAA”). On October 5, 2020, Wells Fargo crossmoved for confirmation of the award and attorney’s fees. The Court granted Carroll two
extensions of time to respond to Wells Fargo’s Cross-petition, but he ultimately failed to make a
submission to this Court beyond his initial petition. (Docs 19 and 21). A district court should
treat an unanswered petition to confirm or vacate an arbitration award “as an unopposed motion
for summary judgement.” D.H. Blair, 462 F.3d at 110. Summary judgment is appropriate when
the record shows that there is no genuine dispute of material fact and that the moving party is
entitled to judgment as a matter of law. Rule 56(a), Fed. R. Civ. P. The Court’s decision is
based on the record before it, specifically, Carroll’s petition to vacate, Wells Fargo’s crosspetition to confirm, the exhibits attached to those petitions and the parties’ supporting
declarations. See D.H. Blair, 462 F.3d at 110.
DISCUSSION
I. Carroll’s petition to vacate the arbitration award is denied and Wells Fargo’s crosspetition to confirm is granted.
“The role of a district court in reviewing an arbitration award is ‘narrowly
limited’ and ‘arbitration panel determinations are generally accorded great deference under the
[FAA].’” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99,
4

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 5 of 11

103 (2d Cir. 2013) (quoting Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 19 (2d Cir. 1997)).
“Consequently, the burden of proof necessary to avoid confirmation of an arbitration award is
very high, and a district court will enforce the award as long as ‘there is a barely colorable
justification for the outcome reached.’” Id. at 103–04 (quoting Rich v. Spartis, 516 F.3d 75, 81
(2d Cir. 2008)).
The FAA provides limited grounds for vacating an arbitration award. 9 U.S.C. §
10(a). Carroll challenges the award under sections 10(a)(3) and 10(a)(4) of the FAA, which
provide that the district court may vacate an award “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,” 9 U.S.C. § 10(a)(3); or “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)(4).
Carroll argues that the arbitrator’s denial of his February 25, 2020 extension
request constitutes arbitrator “misconduct” for a refusal “to postpone the hearing” within the
meaning of section 10(a)(3). Wells Fargo does not dispute Carroll’s framing of the issue but
urges that the arbitrator here was not “guilty of misconduct.” In a claim under Section 10(a)(3),
“[t]he granting or denying of an adjournment falls within the broad discretion of appointed
arbitrators.” Tempo Shain, 120 F.3d at 19 (quoting Storey v. Searle Blatt, Ltd., 685 F. Supp. 80,
82 (S.D.N.Y. 1988)). Thus, if there exists “‘a reasonable basis for the arbitrators’ considered
decision not to grant a postponement,’ a court should be reluctant to interfere with the award.”
Ottawa Office Integration, Inc. v. FTF Bus. Sys., Inc., 132 F. Supp. 2d 215, 220 (S.D.N.Y. 2001)
(quoting Roche v. Local 32B–32J Serv. Emps. Int’l Union, 755 F. Supp. 622, 625 (S.D.N.Y.

5

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 6 of 11

1991)). “Stated another way, as long as there is at least ‘a barely colorable justification’ for the
arbitrators’ decision not to grant an adjournment, the arbitration award should be enforced.”
Bisnoff v. King, 154 F. Supp. 2d 630, 637 (S.D.N.Y. 2001) (quoting Alexander Julian Inc. v.
Mimco, 00-cv-4131 (DC), 2001 WL 477010, at *2 (S.D.N.Y. May 4, 2001)).
Under section 10(a)(3), courts must also consider whether the arbitrators “violated
‘fundamental fairness’ in conducting the arbitration or whether [their] ultimate decision was
fundamentally unfair.” Kolel Beth, 729 F.3d at 107 (quoting Tempo Shain, 120 F.3d at 20); see
also Bisnoff, 154 F. Supp. 2d at 637. But an arbitrator “need not follow all the niceties observed
by the federal courts.” Roche, 755 F. Supp. at 624 (quoting Bell Aerospace Co. Div. of Textron,
Inc. v. Local 516, 500 F.2d 921, 923 (2d Cir. 1974)).
Here, there was a reasonable basis for the arbitrator to deny Carroll’s extension
request. Wells Fargo initiated the proceeding on November 20, 2019. FINRA’s claim service
packet stated that Carroll’s deadline to answer was January 10, 2020. (Mitchell Decl. Ex. D).
Carroll neither filed an answer nor sought an adjournment. After Carroll failed meet the January
10 deadline, the overdue notice mailed by FINRA on January 13, 2020 alerted Carroll that the
arbitration would be decided on the pleadings under the FINRA rules. (Mitchell Decl. Ex. E). In
this proceeding, Carroll does not challenge that service was inadequate or that he was not on
notice regarding the arbitration.
Instead of promptly seeking to remedy his default, Carroll waited until February
25, 2020, approximately six weeks after the overdue notice was sent to him and three months
after the statement of claim was filed. The extension request did not state why Carroll had failed
to timely answer, how long he would need to answer, provide any details on the “personal
reasons” cited in the request, or identify whether he had a meritorious defense. Since the

6

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 7 of 11

arbitrator did not deny his extension request until March 13, 2020, Carroll had an additional two
weeks to prepare an answer. On this record, there was a “reasonable basis” or “barely colorable
justification” for the arbitrator to deny Carroll’s vague request for an indefinite extension over
three months after the arbitration was commenced.
Additionally, the arbitrator’s decision to deny the extension was not
fundamentally unfair under section 10(a)(3). At the time of his extension request, Carroll had
notice of the arbitration for over three months and had ample opportunity to respond to Wells
Fargo’s statement of claim. See Mandell v. Reeve, 2011 WL 4585248, at *4 (S.D.N.Y. 2011)
(Sullivan, J.) (“Upon reviewing the record, the Court cannot conclude that it was fundamentally
unfair for the arbitrators to deny Mandell's requests to postpone the hearing. . . . Significantly,
[petitioner] was notified of the July 9, 2010 hearing date nearly three months prior to the
hearing.”). In both the underlying arbitration and the current application, Carroll fails to identify
any details regarding his reasons for delay or grounds for a potential defense. Cf. Tempo Shain,
120 F.3d at 20 (concluding decision to preclude evidence violated section 10(a)(3) where “there
was no reasonable basis for the panel to determine that [the] omitted testimony would be
cumulative”). Notably, on his petition to vacate filed with this Court, he does not explain how
long of an adjournment he needed, why he needed it or whether he had any colorable to defense
to the claim in arbitration.
Carroll urges that the arbitrator’s decision to deny the extension request
effectively prevented him from retaining an attorney. Carroll’s February 25 extension request
stated that he “needed to obtain different counsel as well.” (Pet. Ex. B). In Carroll’s
memorandum in support of his petition to vacate, he asserts that this was an “obvious error since
he did not actually have an attorney in the Arbitration” and that an attorney never entered an

7

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 8 of 11

appearance on his behalf. (Mem. at 4–5). For purposes of his petition, the Court assumes that
Carroll had not obtained counsel at the time of his February 25 extension request. See D.H.
Blair, 462 F.3d at 110. FINRA Rule 13208(b) provides that “all parties shall have the right be
represented by an attorney at law in good standing . . . unless state law prohibits such
representation.” However, Carroll’s petition fails to establish that the arbitrator’s decision
prevented him from retaining an attorney. Prior to making the extension request, Carroll had
over three months to retain an attorney and his petition fails to explain his failure to do so. See
Webb v. Citigroup Global Mkts., Inc., 2019 WL 4081893, at *9 (S.D.N.Y. Aug. 29, 2019)
(Engelmayer, J.) (“While Rule 13208(b) permits a party to be represented by an attorney,
nothing in the rules obliged the panel to agree to an eleventh-hour adjournment for a party to
seek an attorney.”).
Carroll also relies on section 10(a)(4) of the FAA. The Second Circuit has
“consistently accorded the narrowest of readings to section 10(a)(4) permitting vacatur where the
arbitrator has exceeded her powers.” Jock v. Sterling Jewelers Inc., 646 F.3d 113, 122 (2d Cir.
2011) (internal quotation marks omitted). “Accordingly, an arbitrator may exceed her authority
by, first, considering issues beyond those the parties have submitted for her consideration, or,
second, reaching issues clearly prohibited by law or by the terms of the parties’ agreement.” Id.
Carroll’s petition challenges the award under section 10(a)(4), but his memorandum does not cite
any legal or factual support for his claim. Based on this record, Carroll does not allege either of
the permitted grounds under section 10(a)(4).
“[A] court ‘must’ confirm an arbitration award ‘unless’ it is vacated, modified, or
corrected ‘as prescribed’ in §§ 10 and 11” of the FAA. Hall St. Assocs., L.L.C. v. Mattel, Inc.,
552 U.S. 576, 582 (2008) (quoting 9 U.S.C. § 9). Carroll “has identified no basis” sufficient to

8

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 9 of 11

vacate the award, Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co., 668 F.3d
60, 78–79 (2d Cir. 2012), and for reasons described above, there is at least “a barely colorable
justification for the outcome reached.” D.H. Blair, 462 F.3d at 110 (internal quotations omitted).
Accordingly, Carroll’s petition to vacate is denied, and Wells Fargo’s cross-petition to confirm
the award is granted.
II. Wells Fargo’s application for attorneys’ fees is granted.
Pursuant to the terms of the promissory note, Wells Fargo seeks $17,019 in
attorneys’ fees for work done after the entry of the arbitration award, including litigating this
action. Paragraph 4 of the promissory note provides:
[Carroll] agree[s] to pay all reasonable costs and expenses incurred by or on
behalf of [Wells Fargo] in connection with its exercise of any or all of its rights
and remedies relating to the validity, enforcement or construction of, this Note,
including, without limitation, all attorneys’ fees and expenses incurred by [Wells
Fargo] in any action to enforce the Note.
(Note ¶ 4).
Carroll did not file an opposition to the application for attorneys’ fees. In any
event, the district court has discretion to determine reasonable attorneys’ fees but “must abide by
the procedural requirements for calculating those fees.” Millea v. Metro-North R.R. Co., 658
F.3d 154, 167 (2d Cir. 2011). The Court determines the lodestar or “presumptively reasonable
fee” by multiplying a reasonable hourly rate by the reasonable number of hours expended on the
action. Id. at 167.
“The reasonable hourly rate is the rate a paying client would be willing to pay.”
Arbor Hill Concerned Citizens Neighborhood Ass’n v. Cty. of Albany & Albany Cty. Bd. of
Elections, 522 F.3d 182, 190 (2d Cir. 2008). The relevant rates “are the market rates prevailing
in the community for similar services by lawyers of reasonably comparable skill, experience, and

9

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 10 of 11

reputation.” Gierlinger v. Gleason, 160 F.3d 858, 882 (2d Cir. 1998) (internal quotation marks
and citation omitted). The Court should also consider “all of the case-specific variables that . . .
courts have identified as relevant to the reasonableness of attorney’s fees in setting a reasonable
hourly rate,” including the twelve factors enumerated in Johnson v. Ga. Highway Express, Inc.,
488 F.2d 714, 717–19 (5th Cir. 1974), abrogated on other grounds, Blanchard v. Bergeron, 489
U.S. 87 (1989).2 Arbor Hill, 522 F.3d at 190 (emphasis in original).
Bradley Mitchell, counsel for Wells Fargo from the law firm Stevens & Lee, P.C.,
has submitted a declaration in support of the application for attorneys’ fee. Mitchell attests that
three attorneys from Stevens & Lee have billed 95.9 total hours “to collect on the Arbitration
Award, including on the Petition to Confirm” from March 30, 2020 through September 30, 2020.
(Mitchell Decl. ¶ 19). Stevens & Lee billed Wells Fargo at the following rates: (1) Bradley L.
Mitchell, a shareholder with approximately 30 years of experience, billed 0.6 hours at $336 per
hour; (2) Megan M. Christensen, a shareholder with approximately 16 years of experience, billed
23.8 hours at $268 per hour; and (3) Yio Kyung Lee, an associate with approximately 3 years of
experience, billed 71.5 hours at $146 per hour. (Mitchell Decl. ¶¶ 21–23).3
The rates charged by Wells Fargo attorneys are reasonable as compared to the
rates approved by other courts in this district for confirmation and vacatur proceedings involving
FINRA arbitration. See Gelman v. Borruso, 19-cv-10649 (RA), 2021 WL 516881, at *2
(S.D.N.Y. Feb. 11, 2021) (rate of $500 per hour for partner was reasonable); Rubenstein v.

2

“The twelve Johnson factors are: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3)
the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due
to acceptance of the case; (5) the attorney’s customary hourly rate; (6) whether the fee is fixed or contingent; (7) the
time limitations imposed by the client or the circumstances; (8) the amount involved in the case and the results
obtained; (9) the experience, reputation, and ability of the attorneys; (10) the ‘undesirability’ of the case; (11) the
nature and length of the professional relationship with the client; and (12) awards in similar cases.” Arbor Hill, 522
F.3d at 186, n.3 (citing Johnson, 488 F.2d at 717-19).
3
The Mitchell Declaration provides the number of hours billed and the total dollar amount for each attorney. The
Court has calculated the hourly rate charged based on this information.

10

Case 1:20-cv-04918-PKC Document 24 Filed 02/17/21 Page 11 of 11

Advanced Equities, Inc., 13-cv-1502 (PGG), 2015 WL 585561, at *6–8 (S.D.N.Y. Feb. 10,
2015) (rates of $525 per hour for partners and $350 per hour for associates were reasonable).
The hourly rate for Ms. Lee, an associate with approximately three years of experience who
performed the majority of the work, is also consistent with prevailing rates in the community.
See, e.g., Santos YMY Mgmt. Corp., 20-cv-1992 (JPC), 2021 WL 431451, at *2 (S.D.N.Y. Feb.
8, 2021) (hourly rates of $275 to $300 for associates with three to five years of experience was
reasonable); Hernandez v. JRPAC Inc., 14-cv-417 (PAE), 2017 WL 66325, at *2 (S.D.N.Y. Jan
6, 2017) (hourly rate of $250 for associates with 3-4 years of experience was reasonable).
The Court concludes that the hourly rates requested by Wells Fargo and hours
expended are reasonable.
CONCLUSION
Petitioner Carroll’s motion to vacate the award (Doc 4) is DENIED. Respondent
Wells Fargo’s cross-motion to confirm the award (Doc 15) is GRANTED. The Clerk shall enter
final judgment for Respondent Wells Fargo in the amount $715,654.41 plus attorneys’ fees and
costs in the amount of $17,019.
SO ORDERED.

Dated: New York, New York
February 17, 2021

11