Jon Sanchez v. Robert Elizondo
878 F.3d 1216
| 9th Cir. | 2018Background
- In 2008 Elizondo hired FINRA‑licensed broker Sanchez to manage his portfolio; Sanchez invested in leveraged inverse ETFs, prompting Elizondo’s malpractice claim.
- Elizondo filed a FINRA arbitration in 2014 seeking $100,000; under FINRA Rule 12401 a single arbitrator is used for claims $50,000–$100,000, while >$100,000 requires three arbitrators.
- Eleven days before hearing Elizondo’s pre‑hearing brief sought $125,500, but he did not amend the pleaded claim; Sanchez objected at the hearing to proceeding with one arbitrator.
- The arbitrator asked the parties, heard argument, and decided to proceed as a single arbitrator based on the original pleaded amount; the arbitrator awarded Elizondo $75,000.
- Sanchez petitioned in district court under 9 U.S.C. § 10 to vacate; the district court vacated and remanded for further proceedings, reasoning the arbitrator exceeded his powers by proceeding with one arbitrator in violation of FINRA Rule 12401(c).
- The Ninth Circuit reverses: it holds it has jurisdiction to hear an appeal from a vacatur that remands for new arbitration and concludes the arbitrator did not exceed his powers.
Issues
| Issue | Plaintiff's Argument (Elizondo) | Defendant's Argument (Sanchez) | Held |
|---|---|---|---|
| Whether the Ninth Circuit has appellate jurisdiction over a district court order that vacates an arbitration award and remands for a new arbitration | §16(a) permits appeal from orders vacating awards; vacatur+remand terminates the initial arbitration and thus is appealable | Vacatur+remand is not an appealable final decision under §16(a) | Court holds §16(a) authorizes appeals from vacatur orders that remand for new arbitration (joins several circuits) |
| Whether the arbitrator exceeded his powers by proceeding with a single arbitrator after Elizondo sought >$100,000 | Arbitrator’s decision to proceed was within the FINRA‑governed arbitration agreement; the operative claim amount was the pleaded amount, not a later brief | Arbitrator violated FINRA Rule 12401(c) and exceeded powers by hearing the case with one arbitrator over Sanchez’s objection | Court holds arbitrator did not exceed his powers; his interpretation of Rule 12401 was plausible and within the parties’ agreement |
| Whether the award was ‘‘completely irrational’’ or showed manifest disregard of law | Award derived from interpretation of FINRA rules and thus drew its essence from the agreement | Award was irrational or in manifest disregard because it contravened FINRA Rule 12401(c) | Court finds award not completely irrational and no manifest disregard; record shows arbitrator considered and applied the rule |
| Remedy and remand scope | Elizondo sought confirmation of award | Sanchez sought vacatur and remand | Court reverses vacatur and remands to district court to consider any other asserted grounds for vacatur, modification, or correction before ruling on confirmation |
Key Cases Cited
- Forsythe Int’l, S.A. v. Gibbs Oil Co. of Texas, 915 F.2d 1017 (5th Cir. 1990) (vacatur plus remand is appealable because it nullifies the arbitration decision)
- Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321 (1st Cir. 2000) (orders vacating and remanding arbitral awards are appealable)
- Jays Foods, L.L.C. v. Chem. & Allied Prod. Workers Union, Local 20, 208 F.3d 610 (7th Cir. 2000) (vacate-and-remand orders immediately appealable)
- V.I. Hous. Auth. v. Coastal Gen. Constr. Servs. Corp., 27 F.3d 911 (3d Cir. 1994) (remand that reopens arbitration makes the vacatur appealable)
- Landy Michaels Realty Corp. v. Local 32B‑32J, Serv. Emps. Int’l Union, 954 F.2d 794 (2d Cir. 1992) (distinguishes rehearing before new panel (appealable) from remand for clarification (not))
- Stolt‑Nielsen S.A. v. Animal‑Feeds Int’l Corp., 559 U.S. 662 (2010) (arbitration is based on party consent; courts review only for extreme departures)
- Lagstein v. Certain Underwriters at Lloyd’s, 607 F.3d 634 (9th Cir. 2010) (high vacatur standard; awards exceed powers only when completely irrational or manifest disregard)
- Kyocera Corp. v. Prudential‑Bache Trade Servs., Inc., 341 F.3d 987 (9th Cir. 2003) (clarifies ‘‘completely irrational’’ standard)