Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Pershing LLC v. Kiebach

United States District Court, E.D. Louisiana

May 22, 2017

PERSHING LLC
v.
THOMAS KIEBACH

         SECTION I

          ORDER AND REASONS

          LANCE M. AFRICK UNITED STATES DISTRICT JUDGE

         In this consolidated action, Pershing LLC seeks to confirm an arbitration panel's decision in its favor. The defendants, Thomas Kiebach, the “Louisiana Retirees, ” seek to vacate the arbitration panel's decision. Before the Court are cross motions[1] for summary judgment filed by each side. For the following reasons, the Court grants the motion filed by Pershing LLC and denies the motion filed by the Louisiana Retirees. The Court therefore confirms the arbitration award.

         I.

         The Louisiana Retirees are investors who suffered financial losses as a result of R. Allen Stanford's Ponzi scheme. Pershing is a limited liability company that provides financial services to brokerage firms. Pershing was a clearing broker for Stanford Group Company, a broker-dealer controlled by Allen Stanford which sold worthless securities to the Louisiana Retirees. The Louisiana Retirees believe that Pershing is liable to them for the $80 million in damages they allegedly sustained due to the Ponzi scheme. They claim that Pershing, as Stanford Group Company's clearing broker, failed to exercise due diligence in its business relationship with Stanford Group Company and failed to disclose adverse financial information which would have resulted in the Ponzi scheme being uncovered sooner than it was.[2]

         Because the contracts between Pershing and each of the Louisiana Retirees required disagreements to be arbitrated before the Financial Industry Regulatory Authority (“FINRA”), the Louisiana Retirees submitted their claims against Pershing to a FINRA panel. After a two week hearing at which the panel heard over 1, 600 pages of testimony from fifteen witnesses and considered over 900 separate exhibits, the panel ruled in Pershing's favor. After the ruling, the Louisiana Retirees and Pershing each filed actions to vacate and confirm the arbitration panel's decision, respectively. Those lawsuits were ultimately consolidated before this Court.

         While the Louisiana Retirees advance several arguments for vacating the panel's decision, their primary argument centers on whether the panel arbitrarily and improperly denied the Louisiana Retirees documents to which they were entitled.

         As explained in the next section, an arbitration panel's decision cannot be overturned simply because it was incorrect. Cooper v. WestEnd Capital Mgmt., L.L.C., 832 F.3d 534, 546 (5th Cir. 2016). But under the Federal Arbitration Act (FAA), an arbitration panel's refusal to hear evidence material and pertinent to the controversy can result in vacatur of the arbitration award when the refusal deprived a party of a fundamentally fair hearing. Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 300-01 (5th Cir. 2004).

         Although discovery in the context of a motion to confirm or vacate an arbitration award is extremely limited, see Legion Ins. Co. v. Ins. Gen. Agency, Inc., 822 F.2d 541, 542-544 (5th Cir. 1987), the district court may allow limited discovery at its discretion, see Karaha Bodas Co., 364 F.3d at 304-05. This Court allowed the Louisiana Retirees to engage in limited discovery in order to determine whether the documents denied the Louisiana Retirees during the arbitration proceeding fell within the scope of the privileges claimed by Pershing. After an in camera review of the documents by the U.S. Magistrate Judge, the Court ultimately ordered that Pershing produce to the Louisiana Retirees some of the documents which the Louisiana Retirees were denied by the arbitration panel. See R. Doc. No. 137. The Court found-under the specific facts of this case-that a review of those documents not produced in arbitration would best allow this Court to measure whether and, if so, the extent to which the Louisiana Retirees were prejudiced by the omission of such documents.

         That covers the proceedings thus far. Now the question is simply whether, considering the produced documents in conjunction with the record of the arbitration proceeding, the Louisiana Retirees have satisfied one of the recognized grounds for vacating an arbitration award. The Court sets forth the standard which governs that inquiry below.

         II.

         “In light of the strong federal policy favoring arbitration, judicial review of an arbitration award is extraordinarily narrow.” McKool Smith, P.C. v. Curtis Int'l, Ltd., 650 F. App'x 208, 211 (5th Cir. 2016) (internal quotation marks omitted). “Under this review, an award may not be set aside for a mere mistake of fact or law.” Id. (internal quotation marks omitted). “Instead, Section 10 of the FAA provides the only grounds upon which a reviewing court may vacate an arbitrative award.” Id. (internal quotation marks omitted). Section 10 of the FAA provides the following grounds for vacating an award:

1) where the award was procured by corruption, fraud, or undue means;
2) where there was evident partiality or corruption in the arbitrators, or either of them;
3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.