John D. Williams v. Kenneth L. and Deborah A. Tucker

• Court: West Virginia Supreme Court
• Decided: June 13, 2017
• Docket: 16-0657
• Status: Separate

Opinion

No. 16-0657 - Williams v. Tucker FILED June 13, 2017 LOUGHRY, C. J., concurring, joined by WORKMAN, J.: released at 3:00 p.m. RORY L. PERRY, II CLERK

SUPREME COURT OF APPEALS

OF WEST VIRGINIA

I concur in the majority’s reversal of the circuit court’s patently erroneous

refusal to grant an injunction to the petitioner and order the respondents to withdraw their

arbitration. However, in lieu of the majority’s determination to decide the matter by wading

into the swamp of “arbitrability” and waiver, I believe the issue is far more straightforward.

As argued primarily by the petitioner, the respondents’ latest arbitration filing is an improper

collateral attack on the prior arbitration ruling of the Financial Industry Regulatory Authority

(“FINRA”), as well as the subsequent circuit court order confirming that ruling. While

collateral attack, waiver, estoppel, and the like are fairly considered different facets of the

issues raised herein, there is little utility in over-complicating what is plainly an

impermissible attempt to re-litigate a matter that has been affirmatively decided and put to

rest.

A more pointed examination of the facts aids in highlighting the

inappropriateness of the respondents’ most recent arbitration demand and the simplicity of

this matter. It appears the respondents opened an investment advisory account with the

petitioner two days before the market’s high point and then closed the account shortly after

the market low was reached. The respondents’ account declined twenty-nine and one-half

percent, which is represented to be consistent with or less than other balanced mutual funds.

The respondents filed an arbitration demand with FINRA, alleging the petitioner had made

unsuitable investments. Before the petitioner could respond, the respondents voluntarily

withdrew their arbitration demand and personally apologized to the petitioner for having

instituted the arbitration.

Notwithstanding the respondents’ withdrawal of their arbitration demand, their

unresolved claims remained a part of the petitioner’s record on the Central Registration

Depository, which is the central licensing and registration system for the United States

securities industry. Accordingly, the petitioner instituted a FINRA arbitration seeking to

expunge that record. The respondents, represented by counsel, consented to FINRA

jurisdiction, but declined to participate and agreed in writing not to oppose the expungement.

Thereafter, a three-member arbitration panel held a full evidentiary hearing on

the matter. The respondents did not participate in that hearing. The FINRA panel concluded,

on the merits of the action, that “[t]he claim, allegation, or information is factually impossible

or clearly erroneous” and awarded expungement. As directed by FINRA, and to give legal

effect to the expungement, the petitioner instituted a civil action in the Circuit Court of

Kanawha County seeking confirmation and validation of the FINRA expungement. The

respondents accepted service of the civil action, but filed no responsive pleading. Instead,

the respondents, by counsel, executed an Agreed Order confirming the expungement, which

was entered by the circuit court. For obvious reasons, no appeal of that order was pursued.

Nearly four years later, having retained different counsel, the respondents have

filed another arbitration demand that raises the same allegations previously found to be

“factually impossible or clearly erroneous” by the FINRA panel. In response, the petitioner

filed the instant action, seeking injunctive relief against the respondents’ collateral attack on

the FINRA arbitration award, as confirmed by order of the Circuit Court of Kanawha County.

Courts have long refused to allow subsequent civil suits attacking arbitration

awards. See Corey v. N.Y. Stock Exch., 691 F.2d 1205, 1211-12 (6th Cir. 1982) (finding

subsequent federal suit alleging irregularity in prior arbitration decision “is no more, in

substance, than an impermissible collateral attack on the award itself”); Sander v.

Weyerhaeuser Co., 966 F.2d 501, 503 (9th Cir. 1992) (rejecting attempt to file federal action

subsequent to arbitration, noting court’s “unwilling[ness] to upset the streamlined nature of

arbitration by permitting the launching of collateral attacks[.]”). This refusal to permit

collateral attacks has been found equally applicable when the subsequent collateral attack

also occurs in an arbitration forum: “[I]t is logical to extend . . . [refusal to permit

subsequent attack in federal court to] claims presented in a second arbitration.” Decker v.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 205 F.3d 906, 911 (6th Cir. 2000). Subsequent

collateral attacks are inappropriate “whether a party attempts to attack the award through

judicial proceedings or through a separate second arbitration.” Id.; see also Prudential Sec.

Inc. v. Hornsby, 865 F. Supp. 447, 451, 453 (N.D. Ill. 1994) (finding second arbitration filing

“attempt to augment and modify the first arbitration award” and, therefore, “an impermissible

collateral attack on his previous arbitration award.”).

The majority’s unnecessarily complex assessment of waiver belies the

simplicity of this case. Collateral attacks through subsequent proceedings subvert finality

and are widely held to be impermissible. Accordingly, I respectfully concur.