956 F.3d 1182
10th Cir.2020Background
- Beverly Bien and David Wellman (investors) sued their broker Mid Atlantic in FINRA arbitration after heavy losses in Sonoma Ridge Partners and KBS REIT investments.
- The panel awarded the investors two damage categories ("initial investment loss" and "compensatory damages"), attorney’s fees, costs, 8% interest (stated to run "until paid in full"), and ordered reassignment of the investments to Mid Atlantic.
- Mid Atlantic moved in federal court under 9 U.S.C. § 11(a) to modify the award, arguing the panel double-counted damages (double recovery). The district court denied modification, finding any alleged double-counting was not evident on the award’s face.
- The district court entered an amended final judgment confirming the award, awarding prejudgment interest only on damages (not fees/costs), applying the federal postjudgment interest rate under 28 U.S.C. § 1961, and ordering reassignment that included any post-award distributions.
- Both sides appealed; the Tenth Circuit affirmed in all respects, holding § 11(a) permits modification only for miscalculations evident on the face of the award and rejecting the parties’ challenges to interest and reassignment rulings.
Issues
| Issue | Plaintiff's Argument (Bien & Wellman) | Defendant's Argument (Mid Atlantic) | Held |
|---|---|---|---|
| Whether 9 U.S.C. § 11(a) permits courts to look beyond the face of an arbitration award to correct an "evident material miscalculation of figures" | §11(a) requires a miscalculation be evident on the award’s face; courts may not probe the arbitration record | Courts may examine the arbitration record to determine materiality and correct double recoveries | §11(a) is read to include a face-of-the-award limitation; courts may not look beyond the award’s face for §11(a) relief |
| Whether the arbitration award here contains an "evident material miscalculation of figures" on its face (double recovery claim) | The award does not show any facial mathematical error or computations; any purported double-counting is not evident on the face | The panel awarded both net out-of-pocket and market-adjusted damages (double recovery), so modification is required | Mid Atlantic failed its burden; no evident material miscalculation appears on the award’s face, so modification was properly denied |
| Whether prejudgment/post-award interest should apply to attorney fees and costs as well as damages | FINRA rules and the arbitration clause require interest on the entire award (including fees/costs) | The arbitration award expressly awarded 8% interest only on damages and did not provide interest on fees/costs; unaddressed claims were denied | The panel’s award reasonably is read to impose interest only on damages; the district court correctly awarded interest on damages but not on fees/costs |
| Whether the federal postjudgment interest rate (28 U.S.C. §1961) applies after confirmation | The panel’s language "until paid in full" and FINRA rules demonstrate an 8% postjudgment rate was intended | Federal law governs postjudgment interest unless parties clearly and unambiguously contracted otherwise or the panel clearly awarded a different postjudgment rate | The panel did not clearly award a postjudgment rate and the parties did not clearly contract around §1961; the federal rate applies |
| Whether the district court erred by ordering reassignment of post-award distributions to Mid Atlantic | The award required only reassignment of "ownership" of the stock, not post-award distributions received later | Ownership of common stock includes rights to distributions; because investors retained distributions after the award, reassignment of those distributions enforces the panel’s order | The district court correctly enforced the award by requiring reassignment of distributions (and interest) as part of transferring ownership rights |
Key Cases Cited
- Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188 (4th Cir. 1998) (interprets §11(a) to require miscalculation be evident on the face of the award)
- Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250 (7th Cir. 1994) (district court relied on arbitration record to correct alleged double recovery; contrasted by Tenth Circuit)
- Transnitro, Inc. v. M/V Wave, 943 F.2d 471 (4th Cir. 1991) (discusses §11 equitable corrections where mistakes affect justice; distinguished by later authorities)
- Grain v. Trinity Health, 551 F.3d 374 (6th Cir. 2008) (endorses view that §11(a) miscalculations must be apparent on the award’s face)
- Hall Street Assocs. v. Mattel, 552 U.S. 576 (2008) (the FAA’s §§10 and 11 provide exclusive grounds for vacatur and modification)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (emphasizes narrow, deferential review of arbitral awards)
- Oxford Health Plans v. Sutter, 569 U.S. 564 (2013) (arbitrator’s contract interpretation is binding absent specific statutory grounds)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (statutory text controls; arbitration is a matter of contract)
- In re Riebesell, 586 F.3d 782 (10th Cir. 2009) (confirmed-arbitration awards merge into judgment; federal postjudgment interest applies)
- Tricon Energy Ltd. v. Vinmar Int’l, Ltd., 718 F.3d 448 (5th Cir. 2013) (arbitration panel may set postjudgment rate only if it clearly and unequivocally does so)