Ploetz v. Morgan Stanley Smith Barney LLC, 0:17-cv-01112

Background

Petitioner Ann E. Ploetz, as trustee of the Laudine L. Ploetz Trust, arbitrated tort and contract claims against Morgan Stanley Smith Barney (MSSB) alleging unauthorized transfers from the Trust account.
A three-arbitrator FINRA panel heard the case; the original chair resigned days before the scheduled arbitration and Barry Goldman was selected as replacement following expedited selection procedures.
Goldman disclosed prior service as an arbitrator in multiple MSSB-related matters but did not disclose a 2012 mediation in Michigan involving MSSB that Ploetz’s counsel later discovered.
The arbitration panel unanimously rejected Ploetz’s claims after a two-day hearing; Ploetz then petitioned the district court to vacate the award based on Goldman’s nondisclosure.
MSSB argued service of the petition was improper; the court found MSSB was a Minnesota resident for service purposes and that the petition was properly served.
The district court evaluated vacatur under the Federal Arbitration Act (§ 10) focusing on evident partiality and arbitrator misconduct and denied the petition.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether service of the petition complied with § 12 of the FAA	Ploetz served MSSB by mail to its NY office and arbitration counsel per Rule 5	MSSB argued it is a nonresident requiring marshal service and that service was untimely	Court held MSSB is a Minnesota resident (has offices there); service via mail complied with Rule 5 and was proper
Whether the arbitration award must be vacated for "evident partiality" due to Goldman's nondisclosure of a prior MSSB mediation	Ploetz: FINRA disclosure rules and Commonwealth Coatings require vacatur for nondisclosure; failure to disclose equals evident partiality	MSSB: prior MSSB contacts were disclosed; mere nondisclosure of a mediation, without proof of bias or influence, is insufficient	Court held nondisclosure alone did not show evident partiality; Ploetz failed to meet the heavy burden to show objective facts of bias
Whether arbitrator misconduct under FAA § 10(a)(3) occurred	Ploetz: Goldman’s nondisclosure constitutes misbehavior depriving her of a fair hearing	MSSB: No showing that Ploetz was prevented from presenting evidence or argument; proceedings were fair	Court held Ploetz did not show she was deprived of a fair hearing or denied the opportunity to present evidence; § 10(a)(3) not satisfied
Whether Commonwealth Coatings mandates per se vacatur for nondisclosure	Ploetz: Commonwealth Coatings creates a bright-line rule requiring vacatur for nondisclosure	MSSB: Subsequent appellate authority rejects a per se rule; modern cases require a showing of actual partiality	Court held later circuit authority controls; Commonwealth Coatings is not read as creating automatic vacatur absent proof of bias

Key Cases Cited

Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968) (Supreme Court plurality addressing arbitrator nondisclosure and bias)
Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008) (FAA enumerates exclusive statutory grounds for vacatur)
Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (courts may vacate awards only in very unusual circumstances)
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (standards for judicial review of arbitration decisions)
Williams v. Nat’l Football League, 582 F.3d 863 (8th Cir. 2009) (party seeking vacatur for evident partiality bears heavy burden)