Can I Appeal an Arbitration Award if I Lose?
Recently we wrote about brokerage giant Raymond James taking on FINRA. An arbitration panel awarded an 87 year old man $1.7 million for mismanaging his brokerage account. Rather than pay the victim, Raymond James took the highly unusual step of challenging the award. A Dallas judge later ruled that the brokerage firm must pay. We will use that story to answer the larger question of whether claimants or brokers can appeal an adverse decision by a FINRA arbitration decision.
Hurshel Tyler and his wife Mildred claimed that their stockbroker had mismanaged their account. They claim that the broker had made unsuitable investment recommendations. They say that the variable annuities and variable life insurance policies with long payout periods were not suitable for elderly clients with a short life expectancy.
Raymond James refused to make the Tyler’s whole forcing them to file an arbitration complaint. Almost all disputes against stockbrokers are handled by arbitration before the Financial Industry Regulatory Authority or FINRA. The FINRA rules make it easier and quicker for victims to have their “day in court.” Unfortunately, Mildred didn’t live long enough to ever see any of her money returned.
One of the big advantages of FINRA arbitrations is that the average case resolves in about 14 months. Court cases (and subsequent appeals) can drag on for years.
After a hearing, the panel awarded Hurshel almost $2 million dollars. Except in very limited circumstances, there is little ability to appeal FINRA’s decision. Unfortunately, that didn’t stop Raymond James.
We worried that Hurshel might also pass away during the appeal. Luckily, a Dallas judge heard the case on an expedited basis and ruled against Raymond James. Although quite rarer, most appeals of arbitration decisions wind up with court refusing to disturb the arbitrator’s decision. The Raymond James was no exception. (We think they were hoping the Hurshels would die and not be able to pursue the appeal.)
Incredibly, rather than apologize, the firm thumbed its nose at regulators and the court and called the award a “miscarriage of justice.” Thankfully they paid, however. Hurshel lost his wife and was 87 years old when he received his money. Hopefully he still has some time left to enjoy his award.
Appealing a FINRA Arbitration Decision
There is no provision for appeals in the FINRA arbitration code.
According to FINRA,
“FINRA does not have an appeals process through which a party may challenge an award. This means that FINRA does not hear appeals on arbitration awards.
However, under federal and state laws, there are limited grounds on which a court may hear a party’s appeal on an award. Specifically, the law permits a district court to vacate or overturn an arbitration award if it finds that:
the award was procured by corruption, fraud, or undue means;
there was evident partiality or corruption in the arbitrators;
the arbitrators were guilty of misconduct in refusing to postpone the hearing, even in light of 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;
the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made;
the arbitrators disregarded a clearly defined law or legal principle applicable to the case before them (Manifest Disregard of the Law); or
there is no factual or reasonable basis for the award (Complete Irrationality).”
The “law” referenced by FINRA is the Federal Arbitration Act.
Appeals of arbitration decisions are extremely rare. And successful appeals are even rarer. Courts are very reluctant to disturb an arbitrator’s award absent fraud or extreme circumstances. That the judge would decide the case differently is not enough.
Win or lose, the system is designed to give quick closure to all parties. Not liking the result is not a valid ground for appeal. Victims generally like arbitration because the case doesn’t linger in the courts for years. Stockbrokers and broker firms like arbitration because they need not fear a “runaway” jury willing to award millions in punitive damages.
If you are the victim of investment fraud by a registered broker dealer or investment advisor, you probably don’t have a choice. Every firm that we have ever encountered requires disputes be arbitrated. Under the FINRA rules, you do have the right to request an arbitration panel made up of public members.
Are You the Victim of the Investment Fraud or Wrongdoing by a Stockbroker?
Because there are no meaningful appeals, picking the right lawyer is especially important in stockbroker fraud cases. You have one chance at making your best case. Because the arbitrators’ decision is final, the failure to present a strong case means your claims are gone forever.
An experienced FINRA stockbroker fraud lawyer can help you maximize the value of your case. Attorney Brian Mahany is the former general counsel of a brokerage firm and held a general securities principal’s license. Few lawyers have that experience.
We know how the industry operates and use that experience to help select the best arbitrators for your case, collect all the evidence needed to prosecute the case, find the right experts, create a strong case strategy, and present the right testimony and evidence at the hearing.
Cases accepted nationwide. We handle cases on a contingent fee basis meaning no fee unless there is a recovery. All inquiries kept strictly confidential.
Mahany Law – America’s Fraud Lawyers