Wachovia Securities, LLC v. Frank Brand, II
671 F.3d 472
4th Cir.2012Background
- Wachovia initiated FINRA arbitration against four former A.G. Edwards employees after merger; Former Employees left Wachovia for a competitor,”
- Arbitration panel awarded $1,111,553.85 in attorneys’ fees under SC Frivolous Civil Proceedings Act (FCPA) after the hearing concluded
- Wachovia argued the panel violated FAA §10(a)(3) and manifest disregard by not providing 30-day response and a separate fee hearing
- The district court denied vacatur under §10(a)(4) and §10(a)(3), and rejected manifest disregard
- The Fourth Circuit reviews vacatur de novo with limited factual review; arbitration is generally not reviewed on merits
- Arbitrators set a brief deadline for fees briefing; Wachovia missed the deadline and did not request extra briefing
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the panel violated §10(a)(3) by not postponing the hearing or hearing evidence on fees | Wachovia | Wachovia did not request additional briefing; panel could proceed | No violation; no need for separate hearing under FAA standard |
| Whether the panel exceeded §10(a)(4) by applying the FCPA in arbitration | Wachovia | The panel could apply different procedures; not outside authority | No excess of powers; no vacatur under §10(a)(4) |
| Whether manifest disregard supports vacatur given Hall Street and Stolt-Nielsen | Wachovia | Manifest disregard is not satisfied here | Not satisfied under either independent ground or gloss; no vacatur |
| Whether the panel committed misconduct under §10(a)(3) by the fee procedure | Wachovia | Hearing process acceptable and controlled by arbitrators' discretion | Not misconduct; Wachovia’s own actions contributed to outcome |
Key Cases Cited
- Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576 (U.S. 2008) (FAA grounds for vacatur are exclusive; limits on judicial review)
- Wilko v. Swan, 346 U.S. 427 (U.S. 1953) (manifest disregard as separate vacatur ground pre-Hall Street)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (U.S. 2010) (clarifies role of manifest disregard post-Hall Street)
- Marrowbone Development Co. v. International Union, 232 F.3d 383 (4th Cir. 2000) (arbitrator discretion; not required to hear all evidence; behavior analyzed for bad faith)
- Long John Silver’s Rests., Inc. v. Cole, 514 F.3d 349 (4th Cir. 2008) (two-part test for manifest disregard: clearly defined principle and refusal to heed it)