Case Title: Shahi v. Ascend Financial Services, Inc.

Citation: 179 Vt. 434, 2006 VT 29, 898 A.2d 116

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2006-04-14T00:00:00Z

Document:
Shahi v. Ascend Financial Services, Inc. (2005-055); 179 Vt. 434; 898 A.2d 116

2006 VT 29

[Filed 14-Apr-2006]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2006 VT 29

                                No. 2005-055

  Kaveh S. Shahi and Leslie R. Shahi             Supreme Court

                                                 On Appeal from
       v.                                        Washington Superior Court


  Ascend Financial Services, Inc. and            November Term, 2005
  Securian Financial Services


  Matthew I. Katz, J.

  Kaveh S. Shahi of Cleary Shahi & Aicher, P.C., Rutland, for
    Plaintiffs-Appellants.

  Alan P. Biederman and L. Maxwell Taylor of Kenlan, Schwiebert & Facey,
    P.C., Rutland, for Defendants-Appellees.


  PRESENT:  Dooley, Johnson, Skoglund and Burgess, JJ., and 
            Allen, C.J. (Ret.),  Specially Assigned

        
       ¶  1.  JOHNSON, J.   Plaintiffs Kaveh S. Shahi and Leslie R. Shahi
  appeal a decision of the superior court refusing to modify or vacate an
  arbitration award received under an arbitration process administered by the
  National Association of Securities Dealers (NASD).  Defendants Ascend
  Financial Services, Inc., and its successor-in-interest, Securian Financial
  Services, Inc., are securities brokers who sold plaintiffs certain mutual
  funds.  Plaintiffs argue that the arbitration award is so small in light of
  their damages that it reflects an "evident miscalculation" of those damages
  or was the product of the arbitration panel's bias in favor of defendants
  and the securities industry in general.  We find no such errors in either
  the arbitration award or the court's denial of plaintiff's motion to modify
  or vacate the award.  Accordingly, we affirm the court's decision on the
  merits, but reverse the court's decision not to order redaction of
  documents filed with the court containing plaintiffs' social security
  numbers.
        
       ¶  2.  In March 2000, plaintiffs purchased certain mutual funds
  recommended by a registered agent of defendants.  In the following years,
  the mutual funds, which plaintiffs purchased as a college savings plan for
  their children, declined in value to less than half plaintiffs' initial
  investment.  At the end of 2003, plaintiffs' initial $100,000.00 investment
  had an actual value of $44,133.00.  On March 17, 2003, plaintiffs submitted
  a claim for arbitration with the NASD, arguing that the mutual funds
  selected by defendants were not suitable for a college savings plan.  On
  April 27, 2004, the arbitration was held before a three-member panel.  On
  May 20, 2004, the panel ruled in plaintiffs' favor and awarded them
  $7,761.10 in compensatory damages.

       ¶  3.  Plaintiffs then filed a motion to modify or, in the
  alternative, vacate the arbitration award, arguing that the panel either
  miscalculated the damages or acted with bias in an effort to protect the
  securities industry.  The court upheld the arbitration award and dismissed
  the motion. (FN1)  Plaintiffs filed a motion for reconsideration, restating
  their objections to the award and arguing that defendants improperly
  disclosed confidential personal and financial information in its opposition
  memorandum.  The court denied plaintiffs' motion on both grounds.
   
       ¶  4.  Plaintiffs appeal the court's refusal to modify or vacate the
  arbitration award under the Vermont Arbitration Act (VAA), 12 V.S.A. §§
  5651-5681.  They first argue that the award should be modified because the
  arbitration panel either miscalculated the damages or exhibited gross
  disregard for the law of compensatory damages.  In the alternative,
  plaintiffs contend that the award should be vacated because members of the
  panel were biased in favor of the securities industry and exceeded their
  authority by issuing an award aimed at deterring future claims instead of
  resolving the present one. 

       ¶  5.  Defendants argue that any decision to modify or vacate the
  arbitration award is governed by the Federal Arbitration Act (FAA), 9
  U.S.C. §§ 1-16, which applies to any "contract evidencing a transaction
  involving commerce."  Id. § 2.  Defendants further contend that plaintiffs'
  failure to invoke the superior court's jurisdiction under the FAA renders
  that jurisdiction invalid.  The United States Supreme Court has stated that
  "the federal courts' jurisdiction to enforce the Arbitration Act is
  concurrent with that of the state courts."  Moses H. Cone Mem'l Hosp. v.
  Mercury Constr. Corp.,