Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Berry

92 F. App'x 243
CourtCourt of Appeals for the Sixth Circuit
DecidedFebruary 26, 2004
DocketNo. 02-4282
StatusPublished
Cited by5 cases

This text of 92 F. App'x 243 (Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Berry) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Berry, 92 F. App'x 243 (6th Cir. 2004).

Opinions

PER CURIAM.

Defendants-Appellants Robert Berry and Diane Spencer appeal from the district court’s denial, on statute of limitations grounds, of their motion to vacate an arbitration panel’s award. We affirm the decision of the district court.

I

Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”) brought this action against Defendants, who had previously worked for Merrill Lynch as stockbrokers. Merrill Lynch claimed breach of non-solicitation and non-competition agreements, and related torts. Defendants brought several counterclaims, including age discrimination and retaliatory discharge. The district court stayed proceedings pending binding arbitration by an NASD panel. On March 4, 2002, the arbitration panel granted Merrill Lynch’s claims and granted Defendants’ claim for defamation only, and awarded Merrill Lynch injunctive and net financial relief.

Over four months later, on July 19, 2002. Defendants allegedly became aware of a possible conflict of interest on the part of Daniel G. Zeiser (“Zeiser”), the chairman of the arbitration panel. Defendants received a copy of a disclosure statement created by Zeiser in his role as an NYSE arbitrator, which states that Zeiser had once been named as a defendant in a discrimination charge (the “Discrimination Charge”). Zeiser’s disclosure statement gave no other details, except that the matter was settled favorably to him. Defendants do not know when Zeiser first disclosed this matter to NYSE arbitration users.

Defendants began research to uncover the facts of the Discrimination Charge. They uncovered no further details about it, but their search for Zeiser’s name on the website of the Cuyahoga County Court of Common Pleas (Zeiser’s home county) revealed a second possible conflict. Zeiser had been a plaintiff in a lawsuit (the “Common Pleas Lawsuit”) in which one defendant had been represented by an attorney [245]*245in the firm of Ulmer & Berne LLP. Different Ulmer & Berne attorneys are local counsel for Defendants in the case before us. The Common Pleas Lawsuit was settled and dismissed at just about the date that Zeiser was appointed to the arbitration panel.

Zeiser had disclosed neither of these possible conflicts of interest to Defendants. Zeiser had, however, disclosed other matters. Notably, he disclosed that he had worked with (not against) yet another Ulmer & Berne attorney on various matters for Zeiser’s former employer First Union before the arbitration.

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., an arbitration award may be vacated upon motion if “there was evident partiality or corruption in the arbitrators, or either of them.” 9 U.S.C. § 10(a)(2). Evident partiality is found “only where a reasonable person would have to conclude that an arbitrator was partial to one party in the arbitration.” Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308, 328-29 (6th Cir.1998) (quotation omitted). Bias must be “direct, definite, and capable of demonstration, and the party asserting it must establish specific facts that indicate improper motives on the part of the arbitrator.” Id. at 329 (quotation omitted). The motion to vacate must be filed within three months of the panel’s decision. 9 U.S.C. § 12.

Defendants concede that mere failure to disclose, in and of itself, is not grounds to vacate the award. ANR Coal Co. v. Cogentrix of N.C. Inc., 173 F.3d 493, 499 (4th Cir.1999). Nevertheless, based on Zeiser’s allegedly suspicious pattern of partial disclosure. Defendants moved in the district court to vacate the award. The motion was filed on October 2, 2002, almost seven months after the arbitration award was rendered. The district court denied the motion as untimely, and Defendants appeal.

II

Defendants sought to have the FAA limitations period equitably tolled. The district court held that equitable tolling cannot be based on non-party fraud. Because this holding was a matter of law, our review is de novo. Dunlap v. United States, 250 F.3d 1001, 1008 n. 5 (6th Cir.2001).

The district court relied entirely on Geromette v. General Motors Corp., 609 F.2d 1200, 1203 (6th Cir.1979), cert. denied, 446 U.S. 985, 100 S.Ct. 2967, 64 L.Ed.2d 841 (1980), which found equitable tolling inappropriate inasmuch as the plaintiff had not alleged fraud by the defendant. The plaintiff had not, however, alleged non-party fraud either. Since equitable tolling is most often based on adverse-party fraud, it is natural that Geromette highlighted the absence of this circumstance, but our opinion did not hold that adverse-party fraud is the only possible equitable reason to toll a limitation period. “[CJourts have not hesitated to at least consider and in some circumstances apply equitable tolling in contexts in which the [non-movant] employer’s conduct has not caused the [movant] employer to delay.” Andrews v. Orr, 851 F.2d 146, 151 (6th Cir.1988) (quoting Fox v. Eaton Corp., 615 F.2d 716, 718 (6th Cir.1980)). Indeed, the Andrews court tolled the statutory period because the lower court had issued a confusing order — a problem caused by the adjudicator, not by the adverse party. Ibid. We generally consider several nonexclusive factors to decide whether to toll: 1) the movant’s lack of actual or constructive notice of the filing requirement; 2) the movant’s diligence in pursuing his rights; 3) an absence of prejudice to the nonmovant; and 4) the movant’s reasonableness in remaining ignorant of the filing [246]*246requirement. Ibid. All factors need not be present, but the third factor alone cannot justify tolling. Vroman v. Brigano, 346 F.3d 598, 601 (6th Cir.2003).

Merrill Lynch urges that the deference given to an arbitrator’s decision forecloses equitable tolling. Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175-77 (2d Cir.1984) (in dictum, “role of arbitration as a mechanism for speedy dispute resolution disfavors delayed challenges to the validity of an award”); accord Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.1986) (dictum); see also Piccolo v. Dain, Kalman & Quail, Inc., 641 F.2d 598, 601 (8th Cir.1981) (due diligence exception to limitations period “doubtful”). Defendants, on the other hand, remind us that courts “should, if anything be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review.” Commonwealth Coatings Corp.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
92 F. App'x 243, Counsel Stack Legal Research, https://law.counselstack.com/opinion/merrill-lynch-pierce-fenner-smith-inc-v-berry-ca6-2004.