Personal Injury Law

The Death of Arbitration ? the 4th Circuit?s Time Machine

By Rod Heggy

In Raymond James Financial v Bishop, the United States Court of Appeals for the 4th Circuit affirmed a district court judgment vacating an arbitration award. While the 4th Circuit opinion depicted the arbitration award as ?incoherent,? the 4th Circuit?s opinion was little better. However, that the 4th Circuit was willing to act as it did seems to be yet another harbinger of death for arbitration.

This particular arbitration award was issued by a FINRA arbitration panel in 2006 and Raymond James moved to vacate it in 2007. Thus, because this was a case involving only industry members and associated persons, at that time we should be right that the panel was an industry panel. The 4th Circuit, however, does not address it. That would matter because that would likely mean there was no lawyer on the panel, or only a lawyer that had never practiced. Without a lawyer to guide them, an industry panel would not likely be able to draft anything satisfying to a federal court.

The composition of the panel would be important to know because the trial court, the federal district court, remanded the arbitration award to the FINRA arbitration panel for clarification. The 4th Circuit opinion is unclear whether the award was a standard award or whether it contained any reasons for decision. But, it seems almost certain the award did not contain any findings of fact or conclusions of law. Thus, a remand for clarification was not likely to garner clarity. The 4th Circuit opinion does not address whether the panel was asked by anyone to enter formal findings of fact and law or whether the panel refused.

While the 4th Circuit noted that the arbitration panel did not have a duty to clarify the award, most arbitration panels would not refuse to respond to a remand from a federal court. An industry panel might not realize that the better response would have been a polite refusal to clarify a standard award, because a standard award does not contain findings of fact or conclusions of law. Indeed, two letters of clarification later, the federal court was still depicting the arbitration award as ?inscrutable.? The federal trial court did not seem to like the arbitration panel?s description of the legal basis for the award. The federal trial court also did not find any articulation of the causal link between the liability finding and the damages awarded. How could the federal expect to find either in the brief comments of an industry panel that likely did not include a lawyer and in the absence of formal findings of fact and law?

It should also be noted that the authorities relied upon by the 4th Circuit were often from the era of Wilco v Swan, and not from the era beginning with Shearson/American Express, Inc. v McMahon. In other words, much of this opinion comes from the era when courts expressed disdain for arbitration.

The 4th Circuit, however, by holding a standard FINRA award to a review standard that a jury verdict form could never meet, clearly expressed its hostility to arbitration, a court emotion that was supposed to be obsolete.

Full post as published by Terra Extraneus on February 24, 2010 (boomark / email).