Pfeffer v. FINRA's Arbitration Panel et al

Filing 32

OPINION AND ORDER re: 11 MOTION to Dismiss or, in the Alternative, for Summary Judgment, filed by Wells Fargo Advisors, LLC, Andre Mirkine. Plaintiff's motion to vacate the arbitration award is DENIED. Defendants' motion to confirm the award is GRANTED. The Court certifies pursuant to 28 U.S.C. § 1915(a)(3) that any appeal from this Order would not be taken in good faith, and therefore in forma pauperis status is denied for the purpose of an appeal. See Coppedge v. United States, 369 U.S. 438, 444-45 (1962). The Clerk is instructed to terminate the motion (Doc. #11) and close this case. So Ordered. (Signed by Judge Vincent L. Briccetti on 5/23/17) Copies Mailed By Chambers. (yv) Modified on 5/23/2017 (yv).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ALBA T. PFEFFER,
:
Plaintiff,
:
:
v.
:
:
WELLS FARGO ADVISORS, LLC, and
:
ANDRE MIRKINE,
:
Defendants.
:
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OPINION AND ORDER
16 CV 8321 (VB)

Briccetti, J.:
Plaintiff Alba T. Pfeffer, proceeding pro se, brings this action against defendants Wells
Fargo Advisors, LLC, and Andre Mirkine, to vacate an arbitration award issued by a Financial
Industry Regulatory Authority (“FINRA”) arbitration panel.
Before the Court is plaintiff’s complaint, which the Court construes as a motion to vacate
the arbitration award (Doc. #1), and defendants’ motion to dismiss the complaint and confirm the
arbitration award. (Doc. #11).
For the following reasons, plaintiff’s motion is DENIED and defendants’ motion is
GRANTED.
The Court has subject matter jurisdiction under 28 U.S.C. § 1332. 1

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Although the complaint states there is federal question jurisdiction, it appears to contain
only state law claims. The Federal Arbitration Act “does not confer independent federal
question jurisdiction under 28 U.S.C. § 1331.” Application of Prudential Sec. Inc., 795 F. Supp.
657, 659 (S.D.N.Y. 1992) (citing cases). Nevertheless, the Court has subject matter jurisdiction
by virtue of diversity of citizenship. (See Grannum Jan. 10, 2017, Aff. ¶ 6).
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BACKGROUND
The following factual background is drawn from the complaint and the parties’
submissions in support of and in opposition to the pending motions.
Plaintiff is the widow of Murray Pfeffer, who died in 2012.
According to plaintiff’s statement of claim submitted to FINRA, Mr. Pfeffer executed a
“power of attorney” in 2003 under which plaintiff “was authorized to act as Murray Pfeffer’s
authorized agent and attorney-in-fact to buy, sell and trade in any stocks and bonds, options,
other securities, commodities and contracts relating to them, on margin or otherwise.” (Betz Aff.
Ex. B ¶ 4). The power of attorney authorized plaintiff “to act for her husband . . . and on his
behalf . . . regarding ‘everything mentioned[’] in the power of attorney document and everything
necessary to conduct his account.” (Id. (quoting the power of attorney, Betz Aff. Ex. F at 14)).
The following year, on June 29, 2004, Mr. Pfeffer created two revocable trusts—“Trust A” and
“Trust B”—with A.G. Edwards, a company that in 2008 was acquired by Wachovia Corporation
and then by Wells Fargo. 2 (Id. ¶ 5). Plaintiff was the beneficiary of Trust A (“plaintiff’s trust”);
and Murray Pfeffer’s children from his first marriage were the beneficiaries of Trust B (“the
children’s trust”).
Defendant Andre Mirkine was at all relevant times a financial advisor and Mr. and Mrs.
Pfeffer’s contact at A.G. Edwards and later Wells Fargo. (Betz Aff. Ex. B. ¶ 2; Transcript of
proceedings before the FINRA arbitration panel (Grannum Jan. 10, 2017, Aff. Exs. A-E and
Grannum May 11, 2017, Aff. Exs. A-B, hereinafter “Tr.,” at 461)).

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2017).

See https://www.wellsfargoadvisors.com/about/agedwards.htm (last visited May 22,

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Beginning in October 2009, plaintiff and Murray Pfeffer allegedly became “concerned
with the way in which Mirkine was handling the accounts.” (Betz Aff. Ex. B ¶¶ 7-8).

As a

result, Mr. Pfeffer told Mirkine to transfer all of the assets in the children’s trust into plaintiff’s
trust. (Id. ¶ 8). Mirkine refused to do so because he believed Mr. Pfeffer was not competent.
(Id.). Mirkine then “advised Murray Pfeffer to write him a letter requesting the transfer.” (Id. ¶
9). On January 11, 2010, Mr. Pfeffer sent a letter to Mirkine making the request. (Id. ¶ 10).
On January 13, 2010, plaintiff spoke with Mirkine on the phone. Mirkine told her that
Murray Pfeffer’s children from his first marriage “brought him two letters from physicians
declaring Murray Pfeffer mentally incapacitated.” (Betz Aff. Ex. B. ¶ 11). Mirkine also told
plaintiff that “the money within [the children’s trust] was now frozen.” (Id.).
Sometime in early 2010, Murray Pfeffer’s children commenced a guardianship
proceeding for their father in New York State Supreme Court, Westchester County. In August
2010, the court appointed plaintiff to be the guardian of Mr. Pfeffer’s “person,” and appointed an
independent guardian of Mr. Pfeffer’s property. (Tr. at 387-88; Betz Aff. Ex. F at 18).
Mr. Pfeffer died on October 6, 2012. Thereafter, the guardian of the property distributed
the property to plaintiff and the children. (See Tr. at 387).
In February 2015, plaintiff, who was then represented by counsel, commenced the
arbitration by filing a statement of claim with FINRA. (See Betz Aff. Exs. B, C). Plaintiff
asserted causes of action for breach of fiduciary duty based on fraud, breach of contract,
negligent misrepresentation, and conversion. The essence of her claims was that Wells Fargo
and Mirkine had wrongfully refused to follow Mr. Pfeffer’s instructions to transfer assets from
the children’s trust into plaintiff’s trust.

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A three-person FINRA arbitration panel held a hearing over the course of seven sessions
in January, May, and September 2016, during which plaintiff, who at that point was proceeding
pro se, gave an opening statement, testified, was cross-examined, called witnesses to testify,
presented documentary evidence to the panel, and gave a closing argument. Defendants,
represented by counsel, were afforded the same opportunities during the arbitration hearing.
By arbitration award dated September 30, 2016, the FINRA panel “denied [plaintiff’s
claim] in its entirety.” (Betz Aff. Ex. A at 2).
DISCUSSION
I.

Legal Standard
The proper vehicle for a party seeking vacatur of an arbitral award is by motion, not by

filing a complaint. See Section 6 of the Federal Arbitration Act, codified at 9 U.S.C. § 1 et seq.
Here, considering plaintiff’s pro se status, the Court liberally construes plaintiff’s complaint and
opposition to defendants’ motion to dismiss as a motion to vacate the FINRA arbitration award
under Section 10 of the Federal Arbitration Act. See Lobaito v. Chase Bank, 2012 WL 3104926,
at *5 (S.D.N.Y. July 31, 2012), aff’d, 529 F. App’x 100 (2d Cir. 2013) (summary order). 3 This
is particularly appropriate here because plaintiff states in her complaint that she “would like the
Court to please vacate the Award” (Compl. ¶ V), and in her opposition to defendants’ motion,
she again “asks that the award be vacated,” and provides legal arguments for why, in her view,
vacatur is appropriate. 4 (Opp’n Br. at 4). Defendants have cross-moved for confirmation of the
award. (Defs.’s Br. at 11-12).
3

Plaintiff will be provided with copies of all unpublished opinions cited in this decision.
See Lebron v. Sanders, 557 F.3d 76, 79 (2d Cir. 2009).
4

Because the Court is construing plaintiff’s complaint as a motion to vacate the arbitration
award, it need not consider defendants’ remaining arguments in support of their motion to
dismiss the complaint. Nevertheless, the Court notes that defendants are also entitled to
4

“Federal court review of an arbitral judgment is highly deferential.” Pike v. Freeman,
266 F.3d 78, 86 (2d Cir. 2001). Indeed, “[a] court’s review of an arbitration award is . . .
‘severely limited,’ . . . so as not to frustrate the ‘twin goals of arbitration, namely, settling
disputes efficiently and avoiding long and expensive litigation.’” Scandinavian Reinsurance Co.
v. Saint Paul Fire & Marine Ins. Co., 668 F.3d 60, 71–72 (2d Cir. 2012) (quoting ReliaStar Life
Ins. Co. of N.Y. v. EMC Nat. Life Co., 564 F.3d 81, 85 (2d Cir. 2009) and Rich v. Spartis, 516
F.3d 75, 81 (2d Cir. 2008)).
“The confirmation of an arbitration award under FAA [Section] 9 is thus generally ‘a
summary proceeding that merely makes what is already a final arbitration award a judgment of
the court.’” Kerr v. John Thomas Fin., 2015 WL 4393191, at *3 (S.D.N.Y. July 16, 2015)
(quoting D.H. Blair & Co. v. Gottdienier, 462 F.3d 95, 110 (2d Cir. 2006)).
“An arbitration award may be vacated if: (i) the award was procured by ‘corruption, fraud
or undue means’; (ii) the arbitrators exhibited ‘evident partiality’ or ‘corruption’; (iii) the
arbitrators were guilty of ‘misconduct’ or ‘misbehavior’ that prejudiced the rights of any party;
or (iv) the arbitrators ‘exceeded their powers.’” Singh v. Raymond James Fin. Servs., Inc., 2014
WL 11370123, at *2 (S.D.N.Y. Mar. 28, 2014) (quoting 9 U.S.C. § 10(a)), aff’d, 633 F. App’x
548 (2d Cir. 2015) (summary order).
“[T]he 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.’” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL
dismissal of the complaint under the doctrine of res judicata because the underlying allegations
in plaintiff’s complaint are the same as those raised before the FINRA arbitration panel. See
Lobaito v. Chase Bank, 2012 WL 3104926, at *4 (“The Complaint must be dismissed to the
extent that [plaintiff] seeks to re-litigate the causes of action set forth in his FINRA statement of
claim.”).
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Irrevocable Tr., 729 F.3d 99, 103-04 (2d Cir. 2013) (quoting Rich v. Spartis, 516 F.3d 75, 81 (2d
Cir. 2008)).
II.

Application
Plaintiff argues her case “meets at least three of the criteria for vacating an arbitration

award.” (Opp’n Br. at 4). In particular, she argues (i) the award was procured by undue means,
(ii) there was evident partiality among the arbitrators, and (iii) the arbitrators were guilty of
misconduct.
The Court disagrees.
A.

Undue Means

Plaintiff alleges the arbitration award was procured by “undue means” because defense
counsel “yelled at the arbitrators on many occasions,” “tried to take control of the arbitration,”
and “the arbitrators were intimidated by him.” (Opp’n Br. at 5).
“To justify vacatur on the grounds of fraud or undue means, it must be ‘abundantly clear’
that the award was procured through improper means.” ACP Inv. Grp., LLC v. Blake, 2016 WL
5947290, at *4 (S.D.N.Y. Oct. 13, 2016) (quoting Kolel Beth Yechiel Mechil of Tartikov, Inc. v.
YLL Irrevocable Trust, 729 F.3d at 105)). “[M]isconduct occurs under this provision only where
there is a denial of ‘fundamental fairness.’” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL
Irrevocable Trust, 729 F.3d at 105 (quoting Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 20
(2d Cir. 1997)).
Here, contrary to plaintiff’s contention, a review of the transcript of the arbitration
proceedings shows the panel conducted a fair, professional, and proper hearing. Moreover, the
panel repeatedly allowed plaintiff leeway because of her pro se status, and frequently ruled
against defendants, including by denying their motion for a directed verdict.

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Accordingly, the Court finds the arbitration award was not obtained through undue
means.
B.

Partiality

Plaintiff argues there was “evident partiality in the arbitrators,” because “[t]he Board
members were intimidated by [defense] counsel and made rulings in his favor as a result.”
(Opp’n Br. at 5; see also id. at 2).
In determining whether there is partiality, the Second Circuit has found several factors
“helpful”: “(1) the extent and character of the personal interest, pecuniary or otherwise, of the
arbitrator in the proceedings; (2) the directness of the relationship between the arbitrator and the
party he is alleged to favor; (3) the connection of that relationship to the arbitrator; and (4) the
proximity in time between the relationship and the arbitration proceeding.” Scandinavian
Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co., 668 F.3d at 74 (quoting Three S Del., Inc.
v. DataQuick Info. Sys., Inc., 492 F.3d 520, 530 (4th Cir. 2007)).
Here, plaintiff makes no allegation that any of the arbitrators had a relationship with
defendants or their counsel, or otherwise had any personal interest in the outcome of the dispute.
Moreover, as noted above, the transcript shows no signs of intimidation on the part of the
panelists. Therefore, the Court rejects plaintiff’s allegation of partiality on the part of the
arbitration panel.
C.

Misconduct

Finally, plaintiff argues the arbitration panel was guilty of misconduct because it did not
allow her to fully present her case and did not consider her evidence. She alleges she was
“repeatedly cut off by the Board when she tried to testify,” and “was told that her statements
were repetitive,” and that her “documentary evidence was . . . disregarded by the Board.”

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(Opp’n Br. at 3). She alleges that the panel allowed defendant to use her exhibits against her,
they did not take her evidence with them to review between sessions, and they destroyed the
evidence at the end of the last hearing day. (Opp’n Br. at 3-4).
“Courts may also vacate an arbitration award when ‘the arbitrators were guilty of
misconduct . . . in refusing to hear evidence pertinent and material to the controversy.’” Kolel
Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d at 104 (quoting 9
U.S.C. § 10(a)(3)).
Here, the transcript of proceedings makes clear that contrary to plaintiff’s allegations, the
arbitration panel considered her evidence. Moreover, the panel showed a thorough
understanding of the issues in the case and the underlying documents throughout the
proceedings. As a result, the Court finds no misconduct on the part of the arbitration panel here.
Accordingly, the Court rejects plaintiffs’ arguments for vacatur of the arbitration award,
and confirms the award.

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CONCLUSION
Plaintiff’s motion to vacate the arbitration award is DENIED.
Defendants’ motion to confirm the award is GRANTED.
The Court certifies pursuant to 28 U.S.C. § 1915(a)(3) that any appeal from this Order
would not be taken in good faith, and therefore in forma pauperis status is denied for the purpose
of an appeal. See Coppedge v. United States, 369 U.S. 438, 444–45 (1962).
The Clerk is instructed to terminate the motion (Doc. #11) and close this case.
Dated: May 23, 2017
White Plains, NY
SO ORDERED:

____________________________
Vincent L. Briccetti
United States District Judge

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