Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_14-cv-01566/USCOURTS-azd-4_14-cv-01566-0/pdf.json

Nature of Suit Code: 896
Nature of Suit: Other Statutes - Arbitration
Cause of Action: 09:1 U.S. Arbitration Act

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Marcos A. Madril,

Plaintiff, 

v. 

Wells Fargo Advisors, LLC, 

Defendant. 

No. CV-14-01566-TUC-RCC (EJM)

REPORT AND 

RECOMMENDATION 

Before the Court are Plaintiff Marcos A. Madril’s Motion to Vacate the 

Arbitrators Award or Modify the Decision (Doc. 21) and Defendant Wells Fargo 

Advisors, LLC’s (“Wells Fargo”) Petition to Confirm Arbitration Award and Enter 

Judgment Thereon (Doc. 22). 

The underlying dispute that resulted in arbitration stems from Mr. Madril’s failure 

to repay a promissory note. Pursuant to the parties’ agreement to arbitrate disputes, Wells 

Fargo filed an arbitration claim against Mr. Madril on January 23, 2013. Mr. Madril filed 

a counterclaim on March 25, 2013. An arbitration hearing was held before the Financial 

Industry Regulatory Authority (“FINRA”) from November 19, 2013 to November 21, 

2013. On January 7, 2014, the arbitrators issued an award in favor of Wells Fargo and 

against Mr. Madril in the total amount of $115,796.15. 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 1 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Mr. Madril subsequently filed a motion to vacate the arbitrators’ award, claiming 

(1) FINRA exceeded its powers and authority; (2) the arbitrators engaged in misconduct 

by failing to grant Mr. Madril’s motion to continue; and (3) the arbitrators engaged in 

misbehavior by being more concerned about their personal schedules than holding a fair 

hearing. (Doc. 21). Wells Fargo filed a memorandum in opposition to Mr. Madril’s 

motion to vacate, asserting that (1) Mr. Madril submitted to FINRA’s jurisdiction; (2) the 

arbitrators had several reasonable bases for denying Mr. Madril’s motion to continue and 

the arbitrator’s refusal to grant Mr. Madril a continuance did not prejudice Mr. Madril; 

and (3) the arbitrators’ concern about their personal schedules did not prejudice Mr. 

Madril. (Doc. 26). Wells Fargo also filed a petition to confirm the arbitration award and 

enter judgment thereon and requests attorney’s fees. (Doc. 22). 

The motions have been fully briefed and oral arguments on the motion and 

petition were held on April, 14, 2015. For the reasons stated below, the Magistrate Judge 

recommends that Plaintiff’s Motion to Vacate the Arbitrators’ Award or Modify the 

Decision be denied. The undersigned also recommends that Defendant’s Petition to 

Confirm Arbitration Award and Enter Judgment Thereon be granted. 

I. FACTUAL AND PROCEDURAL BACKGROUND 

The circumstances surrounding this dispute began in September 2008 when Mr. 

Madril was recruited and hired to be a financial advisor for Wachovia Securities, LLC 

(“Wachovia”) by Wachovia Vice-President, Shannon Smith. (Doc. 21 at 2). During the 

recruitment phase, Mr. Madril believed that he negotiated an employment agreement in 

which he would receive a $125,000 signing bonus, a guaranteed minimum 35% on 

financial commissions, and lucrative branch assignments with high level financial assets 

under his management in exchange for transferring his financial broker’s license to 

Wachovia. Id. Mr. Madril signed an Offer Summary contract with Wachovia on 

September 18, 2008 and resigned from his current job at Chase Bank. Id.; (Doc. 31-2, Ex. 

3 at 25). The Offer Summary contract included a section titled “Transitional Bonus,” 

explaining that Mr. Madril would receive a transitional bonus of $125,000 to be paid in 

88 monthly installments. (Doc. 31-2, Ex. 3 at 21-22). The contract further explained that 

- 2 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 2 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

the transitional bonus was subject to additional terms and conditions, namely that 

continued payment of the bonus was conditioned on Mr. Madril’s active employment 

with Wachovia and would terminate if Mr. Madril ended his employment with Wachovia. 

Id. at 23. The additional terms and conditions also stated that:

In the event you are in default under the terms of any 

promissory note or other obligations to Wachovia Securities 

at the time any Bonus payments become due hereunder, then 

Wachovia Securities shall automatically apply those Bonus 

payments to the payment of the amounts in which you are 

default under such note or other obligation. 

Id. 

 On September 25, 2008, Wachovia presented Mr. Madril with a Promissory Note, 

which he signed the same day. (Doc. 31-2, Ex. 4). The Promissory Note specified that 

Mr. Madril promised to pay Wachovia or its successors and assigns the principal sum of 

$125,000 with interest thereon at a rate of 4% per annum. (Doc. 31-2, Ex. 4 at 27). 

Nevertheless, Mr. Madril claims that the Promissory Note turned what he believed to be a 

signing bonus into a repayable loan.1 (Doc. 21 at 3). The Promissory Note further stated 

that if Mr. Madril terminated his employment with Wachovia it would constitute a default 

on the note. (Doc. 31-2, Ex. 4 at 27). 

 Mr. Madril resigned from Wells Fargo2

 on January 3, 2012 and refused to repay 

the promissory note. (Doc. 21 at 5). 

A. Arbitration 

On January 23, 2013, pursuant to the arbitration clauses contained in the Offer 

Summary contract and the Promissory Note,

3 Wells Fargo filed an arbitration claim 

1 At oral arguments, Wells Fargo explained that the promissory note was a forgivable note: [Mr. Madril] receives a bonus each month for the same amount as what 

is required to pay off that loan. And that’s basically a forgivable note, and it’s forgiven by 

the payment of a bonus that pays off the note.” (Doc. 36 at 47). 

2

 Wachovia changed its name to Wells Fargo Advisors, LLC on May 1, 2009. 

3

 The Offer Summary contract states, in relevant part: 

You [referring to Mr. Madril] agree that any action 

instituted as a result of any controversy arising out of 

- 3 - 

 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 3 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

before FINRA.4 (Doc. 21, Ex. 1). Wells Fargo alleged that, upon Mr. Madril’s 

resignation from Wells Fargo, Mr. Madril was required to repay the balance of the 

Promissory Note and failed to do so. (Doc. 26 at 8). 

Mr. Madril filed an answer to Wells Fargo’s claim and a counterclaim on March 

25, 2013. (Doc. 21-1, Ex. 30 at 176 (CM/ECF 32)). Prior to filing his response and 

counterclaim, Mr. Madril signed FINRA’s Submission Agreement. (Doc. 31-3, Ex. 5). 

The agreement stated, in relevant part: 

1. The undersigned parties (parties’) hereby submit 

the present matter in controversy...to arbitration in 

accordance with the FINRA By-laws, Rules, and 

Code of Arbitration Procedure. 

2. The parties hereby state that they or their 

representative(s) have read the procedures and rules 

of FINRA relating to arbitration, and the parties 

agree to be bound by these procedures and rules. 

Id. at 2. 

On June 3, 2013, a telephonic pre-hearing conference was held to schedule the 

arbitration hearing. (Doc. 26 at 8). Although Mr. Madril was notified of the date and time 

this Offer Summary and/or the interpretation thereof, 

or your employment or termination of your 

employment, shall be brought before the arbitration 

facility of the National Association of Securities 

Dealers to the exclusion of all others, unless the rules 

and/or codes of the NASD provide 

otherwise....Judgment upon any award rendered by an 

arbitration panel may be entered in any state or federal 

court of competent jurisdiction. 

(Doc. 31-2, Ex. 3 at 25). 

The Promissory Note states that Wachovia (now Wells Fargo) and Mr. Madril “agree that any action instituted as a result of any controversy arising out of [the] 

Note...shall be brought before the National Association of Securities Dealers [NASD] to 

the exclusion of all others....Judgment upon any award rendered by an arbitration panel 

may be entered in any state or federal court of competent jurisdiction.” (Doc. 31-2, Ex. 4 

at 28). 

4 On July 30, 2007, NASD and the member regulation, enforcement and arbitration operations of the New York Stock Exchange (“NYSE”) were consolidated to create FINRA. (Doc. 31-2, Ex. 1 at 2). 

- 4 - 

 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 4 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

of the telephonic hearing and did not object, Mr. Madril did not participate in the 

telephonic conference. Id. On June 10, 2013, FINRA notified Mr. Madril and Wells 

Fargo that the arbitration hearing was scheduled for November 19, 2013 to November 21, 

2013. Id.

On June 7, 2013, Mr. Madril filed his first request for production of documents. 

(Doc. 21, Ex. 2).5 On August 1, 2013, Wells Fargo requested a two week extension to 

respond to Mr. Madril’s discovery request, which Mr. Madril did not oppose. (Doc. 21, 

Ex. 3). Wells Fargo served its responses to Mr. Madril’s discovery requests and a CD 

containing 479 pages of documents on August 26, 2013. (Doc. 31-3, Ex. 7 at 13).6

 

On October 2, 2013, Mr. Madril filed a motion to compel discovery and for 

sanctions, claiming he never received the requested discovery. (Doc. 36 at 8-9).7

 FINRA 

transmitted Mr. Madril’s motion to compel discovery and for sanctions to Wells Fargo on 

October 7, 2013. Id. at 36. On October 17, 2013, Wells Fargo filed its response to Mr. 

Madril’s motion to compel discovery and for sanctions, claiming that it was unclear what 

documents Mr. Madril sought that he had not already received. (Doc. 21-1, Ex. 33 at 212 

(CM/ECF 68)). That same day, Wells Fargo contacted Mr. Madril via email to notify Mr. 

Madril that it would be willing to meet and confer with Mr. Madril to discuss his 

discovery requests. (Doc. 31-3, Ex. 10 at 44). According to Wells Fargo, Mr. Madril 

never responded. (Doc. 36 at 37). 

On October 22, 2013, Mr. Madril filed a reply to Wells Fargo’s response to Mr. 

Madril’s motion, claiming he never received any documents. (Doc. 31-3, Ex. 11 at 47). 

5 Wells Fargo noted that, pursuant to FINRA rules, Mr. Madril could have requested disclosure as early as February 18, 2013, 45 days after the arbitration claim was 

served. (Doc. 26 at 8; Doc. 36 at 34). 

6 Wells Fargo’s responses consist of a cover letter and Wells Fargo’s objections to 

certain discovery requests. 

7 According to Wells Fargo, Mr. Madril later clarified that he received the package but it only contained the cover letter and response to Mr. Madril’s discovery requests— not the CD containing the 479 pages of documents. (Doc. 36 at 35). The cover letter 

stated that enclosed were Wells Fargo’s responses and bates-labeled documents. (Doc. 

31-3, Ex. 7 at 13). Wells Fargo also notes that Mr. Madril made no efforts to follow up or meet and confer regarding the alleged missing CD, but instead waited until October 2, 

2013 to file his motion to compel. (Doc. 36 at 35-36). 

- 5 - 

 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 5 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Upon reading the reply, Wells Fargo contacted Mr. Madril to confirm that Mr. Madril 

was claiming he never received the 479 pages of documents. (Doc. 36 at 37). The 

following day, October 23, 2013, Wells Fargo mailed another CD containing the 479 

pages of documents to Mr. Madril’s residence. (Doc. 21, Ex. 10 at 64 (CM/ECF 61)). Mr. 

Madril notified Wells Fargo that he was unable to open the CD and on October 24, 2013, 

Wells Fargo provided Mr. Madril with another CD containing the 479 pages of 

documents. (Doc. 36 at 9). 

On October 31, 2013, Wells Fargo again contacted Mr. Madril via email to notify 

Mr. Madril that it would be willing to discuss any additional discovery requests, (Doc. 

31-4, Ex. 12 at 2), but Mr. Madril never responded (Doc. 31-1, Ex. A at 9). That same 

day, Wells Fargo also submitted a declaration made by Erica Candela, the Legal 

Administrative Assistant for Wells Fargo’s prior managing counsel, Beverley Slaughter. 

(Doc. 31-3, Ex. 8). Ms. Candela declared, under the penalty of perjury, that she served 

Wells Fargo’s response to Mr. Madril’s First Request for Production and the 

accompanying documents via Federal Express on August 26, 2013. Id. at 30. In support 

of her declaration, Ms. Candela submitted a printout from the Federal Express website 

which shows that the package was left at the front door of Mr. Madril’s residence on 

August 27, 2013. Id. at 36. 

On November 1, 2013, the FINRA arbitration panel held a telephonic hearing on 

Mr. Madril’s motion to compel discovery and for sanctions. (Doc. 31-4, Ex. 13 at 6). At 

the November 1 hearing, Mr. Madril requested a continuance of the arbitration hearing 

scheduled for November 19, 2013 and Wells Fargo objected. (Doc. 36 at 27). The panel

denied the request for a continuance and ruled that Mr. Madril and Wells Fargo’s 

attorney, Kevin Woods, were to meet on November 4, 2013 to discuss and attempt to 

resolve all open discovery request issues. (Doc. 31-4, Ex. 13 at 6). The panel also ruled 

that the request for sanctions would be deferred until the evidentiary hearing. Id. 

At the November 4 meeting, Mr. Woods and Mr. Madril spent approximately one 

and a half hours going through the various discovery requests. (Doc. 36 at 38). Mr. 

Woods indicated that many of the documents Mr. Madril was requesting had already 

- 6 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 6 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

been produced. (Doc. 21, Ex. 13). Of the documents that had not been produced, which 

primarily included emails, policy manuals,

8 and guidelines or directives, Mr. Woods 

indicated that he would produce the documents in the next several days. Id. With respect 

to the other unproduced documents, Mr. Woods objected on the grounds that the requests 

were overly broad, unduly burdensome or irrelevant. Id. Mr. Woods also objected to 

many of the new requests Mr. Madril made on November 4 because the discovery 

deadline had passed. Id. 

On November 5, Wells Fargo ordered an outside vendor to pull emails for Dan 

Lind, Mahes Prasad, Rick Burrows, Shannon Smith and Patty Presley, all regional branch 

managers and assistant managers or managers of Mr. Madril during the period he was 

employed by Wells Fargo. (Doc. 36 at 38). Due to the large number of emails recovered, 

Mr. Madril and Wells Fargo agreed upon narrowing the documents based on a set of 

search terms. Id. Ultimately, Wells Fargo produced approximately 300 to 350 pages of 

emails on November 13 and November 14.9

 (Doc. 21, Ex. 14 and 17). 

In addition to the emails, Wells Fargo produced 300 to 350 pages of documents on 

a rolling basis from November 4 to November 19, 2013. (Doc. 36 at 39-40). These 

documents included 200 pages of policy manuals, guidelines and directives, and 100 to 

115 pages of Wachovia and Wells Fargo’s financial compensation plans. Id. at 40. Wells 

Fargo produced supervisory manual sections and financial compensation plans for 2008 

to 2011 on November 7. (Doc. 21, Ex. 14). 

On November 13, in addition to emails, Wells Fargo produced the Wachovia 

recruiting best practices document (Doc. 21, Ex. 17) and an article regarding key events 

in the financial crisis (Doc. 21, Ex. 19). On November 14, in addition to emails, Wells 

Fargo produced the 2008 Performance and Development Plan for Shannon Smith (Doc. 

8 Mr. Madril refused to go through the compliance manual indices to identify which portions were relevant to his discovery requests. Instead, Mr. Woods identified the 

relevant portions and produced them to Mr. Madril on November 5, 2013. (Doc. 36 at 

40). 

9 Wells Fargo noted that many pages were attachments to emails not relevant to this dispute. (Doc. 36 at 39). 

- 7 - 

 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 7 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

21, Ex. 21) and a list of the supervisors for Dan Lind, Mahes Prasad, Rick Burrows and 

Shannon Smith (Doc. 21, Ex. 22). The only document produced on November 19, the 

first day of the evidentiary hearing, was the three-page recruiting matrix. Id. at 49. 

On November 12, 2013, Mr. Madril again filed a request for sanctions, claiming 

Wells Fargo had been uncooperative in providing discovery. (Doc. 21, Ex. 16 at 137 

(CM/EFC 135)). Wells Fargo filed its opposition to Mr. Madril’s request on November 

19, 2013, the first day of the evidentiary hearing. (Doc. 31-4, Ex. 22 at 71). That same 

day, prior to the commencement of the evidentiary hearing, the panel held oral arguments 

on Mr. Madril’s renewed request for sanctions. (Doc. 21-1, Ex. 33 at 198 (CM/ECF 54)). 

At the close of Mr. Madril’s arguments, Mr. Madril requested “a continuance and 

opportunity to start fresh with...with some of the disclosure [he] now [had].” Id. at 209 

(CM/ECF 65). In response, Wells Fargo provided the panel with a detailed rendition of 

the timing of the disclosure and the efforts Wells Fargo made to contact Mr. Madril. Id. at 

210-219 (CM/ECF 66-75). One of the arbitrators stated: 

“Mr. Madril, you have again requested a 

continuance. Now, that is frustrating to me. You 

previously requested a continuance and the panel 

was clear that no continuance would be granted. 

What would be the purpose in granting a 

continuance? The ideal situation is to get this matter 

resolved....” 

Id. at 220 (CM/ECF 76). 

As to Mr. Madril’s renewed request for sanctions, the panel deferred their decision 

until after it heard the evidence presented during the evidentiary hearing so that it could 

determine if and how Mr. Madril had been prejudiced by Wells Fargo’s failure to provide 

discovery. Id. at 221 (CM/ECF 77). The panel ultimately denied Mr. Madril’s renewed 

request for sanctions. (Doc. 21-1, Ex. 30 at 178 (CM/ECF 34)). 

On November 19, 2013, after addressing the discovery issues but prior to the 

commencement of the evidentiary hearing, the panel addressed Mr. Madril’s request for 

subpoenas for 12 individuals. (Doc. 21-1, Ex. 33 at 221 (CM/ECF 77)). The chairman of 

the panel expressed two issues with the subpoenas: (1) the subpoenas were requested the 

- 8 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 8 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Friday before the hearing and (2) the subpoenas referred to the reaches of persons. Id. Mr. 

Woods indicated that he would do his best to make many of the people Mr. Madril 

requested to be subpoenaed available.10 Id. In response, the Chairman indicated that he 

would not issue any subpoenas unless it became apparent that somebody was reluctant to 

appear. Id. at 224 (CM/ECF 80). 

During the arbitration hearing, Mr. Madril spent two and a half days presenting his 

case, and Wells Fargo spent the remaining half day presenting its case. (Doc. 26 at 18). 

The evidentiary hearing concluded on November 21, 2013. (Doc. 31-3, Ex. 6 at 5). On 

January 7, 2014, the panel issued an award in favor of Wells Fargo and against Madril in 

the total amount of $115,796.15, including $83,968.65 in compensatory damages and 

$31,827.50 in attorney’s fees. (Doc. 21-1, Ex. 30 at 178 (CM/ECF 34)). The panel also 

denied Mr. Madril’s counterclaim in its entirety. Id.

B. Present Case

On October 5, 2014, Mr. Madril filed a motion to vacate the arbitrators’ award, 

claiming (1) FINRA exceeded its powers and authority; (2) the arbitrators engaged in 

misconduct by failing to grant Mr. Madril’s motion to continue; and (3) the arbitrators 

engaged in misbehavior by being more concerned about their personal schedules than 

holding a fair hearing. (Doc. 21). Wells Fargo filed a memorandum in opposition to Mr. 

Madril’s motion to vacate. (Doc. 26). Wells Fargo claims that (1) Mr. Madril submitted 

to FINRA’s jurisdiction; (2) the arbitrators had several reasonable bases for denying Mr. 

Madril’s motion to continue and the arbitrator’s refusal to grant Mr. Madril a continuance 

did not prejudice Mr. Madril; and (3) the arbitrator’s concern about their personal 

schedules did not prejudice Mr. Madril. Id. Wells Fargo also filed a petition to confirm 

the arbitration award and enter judgment thereon and requests attorney’s fees. (Doc. 22). 

II. LEGAL STANDARD

Unless an arbitration award is vacated, modified or corrected pursuant to the 

10 Wells Fargo did contact Shannon Smith, Dan Lind and Brenda Bell and persuaded them to appear and testify on behalf of Mr. Madril. (Doc. 36 at 43-44). Wells 

Fargo also stated it had other witnesses lined up to testify for Mr. Madril but that he 

decided not to call them. Id. at 44. 

- 9 - 

 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 9 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Federal Arbitration Act, a court must confirm an arbitration award if: (1) the parties, in 

their agreement, have agreed that a judgment of the court can be entered upon the 

arbitration award; (2) the parties have specified the court that may enter judgment 

thereon; and (3) one of the parties applies for an order confirming the award within one 

year after the award is made. 9 U.S.C. §9; Schoenduve Corp. v. Lucent Technologies. 

Inc., 442 F.3d 727, 731 (9th Cir. 2006); see also Kyocera Corp. v. Prudential–Bache 

Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003).

Upon the application of any party to the arbitration, the district court may enter an 

order vacating the arbitration 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 subject matter submitted was 

not made.

9 U.S.C. § 10. 

The Court’s “review of the arbitration panel’s decision is greatly limited” as 

“arbitration is an encouraged method of dispute resolution.” U.S. Life Ins. Co. v. 

Superior Nat. Ins. Co., 591 F.3d 1167, 1172 (9th Cir. 2010). Further, “in order to provide 

a relatively expeditious and inexpensive dispute resolution, arbitration is not governed by 

the federal courts’ strict procedural and evidentiary requirements.” Id. at 1173. The 

burden of establishing grounds for vacating an arbitration award is on the party seeking to 

vacate the award. Id. 

... 

... 

- 10 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 10 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

III. DISCUSSION 

A. MOTION TO VACATE 

1. FINRA’s Authority and Jurisdiction 

Mr. Madril contends that the arbitration award should be vacated pursuant to 9 

U.S.C. § 10(a)(3) because FINRA had neither the authority nor the jurisdiction to hear 

the matter. (Doc. 21 at 8). In support of his claim, Mr. Madril points out that the 

arbitration forum referenced in the arbitration clauses is NASD, not FINRA. (Doc. 21 at 

10). 

The Ninth Circuit has long recognized a rule that a party may not voluntarily 

participate in arbitration and then challenge the authority of the arbitrators. Fortune, 

Alsweet & Eldridge, Inc. v. Daniel, 724 F.2d 1355, 1357 (9th Cir. 1983); see also Nghiem 

v. NEC Electronic, Inc. 25 F. 3d. 1437 (9th Cir. 1994). In Daniel, the defendant sent a 

representative to arbitration who listened to the evidence, presented evidence himself and

requested a continuance. 724 F.2d at 1357. Two weeks after the hearing, the defendant 

challenged the authority of the arbitration forum. Id. The arbitrator issued a decision 

against the defendant and he appealed, claiming that the arbitrator did not have authority 

to issue the decision. Id. In confirming the arbitration award, the Ninth Circuit held that 

“a party may not submit a claim to arbitration and then challenge the authority of the 

arbitrator to act after receiving an unfavorable result.” Id.

In this case, like in Daniel, Mr. Madril voluntarily submitted to FINRA’s authority 

and jurisdiction. Mr. Madril expressly submitted to FINRA’s jurisdiction and authority 

when he signed FINRA’s Submission Agreement, which specifically states that “[t]he 

undersigned parties (parties’) hereby submit the present matter in controversy...to 

arbitration in accordance with the FINRA By-laws, Rules, and Code of Arbitration 

Procedure.” (Doc 31-3, Ex. 5 at 2). Additionally, Mr. Madril implicitly submitted to 

FINRA’s jurisdiction and authority when he filed his counterclaim and participated in 

arbitration by engaging in discovery and presenting evidence at the arbitration hearing. 

Moreover, Mr. Madril failed at any time during the arbitration proceeding to raise any 

objection to FINRA’s jurisdiction and authority. Rather, Mr. Madril freely accepted the 

- 11 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 11 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

arbitrators’ authority to decide the dispute and, indeed, submitted his own counterclaim 

for resolution. Only after the arbitrators’ decision displeased Mr. Madril did Mr. Madril 

claim that FINRA had neither jurisdiction nor authority to hear the matters. Thus, like in 

Daniel, Mr. Madril cannot suddenly change his mind and assert lack of jurisdiction and

authority. 

Furthermore, the fact that the arbitration clauses contained in the Offer Summary 

and Promissory Note do not specify FINRA as the arbitration forum is insignificant. See 

e.g. Lewis v. UBS Fin. Servs. Inc., 818 F. Supp. 2d 1161, 1165-66 (N.D. Cal 

2011)(holding that courts can compel arbitration before FINRA where an arbitration 

agreement specifies that arbitration will occur under the rules of NASD). In Lewis, the 

court compelled arbitration before FINRA even though the arbitration clause in the 

promissory note specified NASD and NYSE as the appropriate forums. Id. The court 

reasoned that when NASD and NYSE consolidated, FINRA merely became the successor 

entity, expanding NASD by taking over NYSE’s regulatory and enforcement functions. 

Id. Thus, the court concluded that the fact that FINRA was not expressly referenced in 

the arbitration clause in the promissory note was of little importance. Id. 

In sum, Mr. Madril cannot claim that FINRA had neither the authority nor the 

jurisdiction to hear the matter after he voluntarily participated in arbitration before 

FINRA. Additionally, even if Mr. Madril had objected to FINRA’s authority earlier, Mr. 

Madril would still be compelled to arbitrate before FIRNA because the mere fact that the 

arbitration clauses contained in the Offer Summary and Promissory Note specify NASD 

as the arbitration forum instead of FINRA is insignificant since NASD and NYSE 

consolidated to create FINRA. Accordingly, the undersigned recommends Mr. Madril’s 

claim that FINRA exceed its power and authority should be denied. 

2. Denial of Motion to Continue 

Mr. Madril also asserts that the arbitration award should be vacated under 9 U.S.C. 

§ 10(a)(3) because the arbitrators were guilty of misconduct in refusing to postpone the 

arbitration hearing. (Doc. 21 at 11). Mr. Madril argues that he requested the continuance 

because he needed additional time to review the hundreds of pages of disclosure provided 

- 12 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 12 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

to him in the two weeks leading up to the arbitration hearing and prepare subpoenas for 

witnesses. (Doc. 21 at 13). At oral arguments, Mr. Madril further clarified that had he 

been granted the continuance, he would have been able to better show that Wachovia 

(now Wells Fargo) misled him from the very beginning and he would have been able to 

glean additional information about areas he had not considered and request additional 

information based on what the documents revealed. (Doc. 36 at 21-24).

“A party to an arbitration proceeding is not entitled to a postponement merely by 

requesting one.” Fordjour v. Washington Mutual Bank. 2010 WL 2529093, *5 (N.D. Cal. 

June 18, 2010). Arbitrators are “provided with broad discretion and great deference in 

their determinations of procedural adjournment requests.” Id. at *2. However, an 

“arbitrary denial of a reasonable request for a postponement [] may serve as a ground for 

vacating the award.” Cypress Equipment Fund, Ltd. v. Royal Equipment, Inc., 1997 WL 

106137, * 12 (N.D. Cal. Jan. 13, 1997). Further, “if the failure of an arbitrator to grant a 

postponement or adjournment results in the foreclosure of the presentation of pertinent 

and material evidence, it is an abuse of discretion.” Naing Intern. Enterprises, Ltd. v. 

Ellsworth Associates, Inc., 961 F.Supp. 1, * 3 (D. Columbia 1997) (internal quotations 

and citations omitted). 

In evaluating an arbitrator’s decision to deny a postponement, 

courts consider whether there existed a reasonable basis for 

the arbitrator’s decision and whether the denial created a 

‘fundamentally unfair’ proceeding. Thus, if there exists a 

reasonable basis for the arbitrators’ considered decision not to 

grant a postponement, a court should be reluctant to interfere 

with the award. Stated another way, as long as there is at least 

a barely colorable justification for the arbitrators’ decision not 

to grant an adjournment, the arbitration award should be 

enforced. 

Congressional Securities, Inc., 2003 WL 21664678 at *2 (internal quotations and 

citations omitted). 

“To constitute misconduct requiring vacation of an award, an error in the 

arbitrator’s determination must be one that is not simply an error of law, but which so 

affects the rights of a party that it may be said that he was deprived of a fair hearing.” 

- 13 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 13 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Barinaga v. Cox, 2007 WL 184687, *6 (D. Oregon Jan. 12, 2007). Further, “a party 

moving to vacate an award for failure to postpone under § 10(a)(3) has the burden of 

showing it suffered prejudice from the arbitration panel’s refusal to delay proceedings, 

and that the panel’s refusal to postpone the hearing had no reasonable basis.” Oxford 

Health Plans, Inc. v. Sagebrush Solutions, LLC., 2009 WL 881903, *2 (N.D. Texas April 

1, 2009) (concluding that, absent an explanation from the defendant as to how it would 

have presented its case differently or how the continuance may have altered the outcome 

of the arbitration, the defendant was not deprived of a fair hearing). 

Here, the record supports several reasons as to why the arbitrators may have 

denied Mr. Madril’s requested continuance. First, despite Mr. Madril’s claim to the 

contrary, the arbitrators may have concluded that Mr. Madril received Wells Fargo’s 

initial disclosure based on Ms. Candela’s declaration and the Federal Express printout 

that Wells Fargo submitted. Second, the arbitrators may have concluded that delay was 

inappropriate given the considerable time, effort and money expended based on the set 

hearing dates. Specifically, in the two weeks prior to the hearing, Mr. Woods expended 

many billable hours to provide Mr. Madril the disclosure in time for the arbitration 

hearing. (Doc. 31-4, Ex. 15 at 20). Acknowledging the considerable time and money 

spent on dealing with the discovery dispute, one of the arbitrators explicitly stated that 

“the ideal situation [would be] to get this matter resolved....” (Doc 31-4, Ex. 15 at 21).

Third, each party presented their arguments at length regarding a continuance at the start 

of the arbitration hearing, and the panel may have concluded that, despite Mr. Madril’s 

claims to the contrary, Wells Fargo did not in fact dump a massive amount of documents 

on Mr. Madril at the last minute, but rather Wells Fargo provided disclosure on a rolling 

basis and worked with Mr. Madril to provide him the requested documents even though it 

was well beyond the discovery deadline. (See Doc. 21-1, Ex. 33 [Day 1 Hearing 

Transcript]). Further, while Mr. Madril claimed that he was inundated with thousands of 

pages of disclosure, Wells Fargo clarified that some of the documents that were produced 

were merely duplicates of documents that had already been disclosed previously, but 

were disclosed a second time in the three weeks prior to the hearing to correct the bates 

- 14 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 14 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

numbers or to add exhibit numbers. (Doc. 36 at 48-49). In sum, “[i]n reviewing an 

arbitrator’s refusal to delay a hearing, [the Court] must decide whether there was any 

reasonable basis for failing to postpone the hearing,” and the undersigned finds there are 

several reasonable bases in support of the arbitrators’ denial here. Laws v. Morgan 

Stanley Dean Witter, 452 F.3d 398, 400 (5th Cir. 2006) (quoting Scott v. Prudential Sec., 

141 F.3d 1007, 1016 (11th Cir.1998) ((internal quotation marks omitted)). 

At the oral arguments held on April 14, 2015, Mr. Madril’s attorney argued that 

the arbitration panel should have granted Mr. Madril’s request for a continuance because 

Wells Fargo inundated Mr. Madril with information in the two weeks prior to the 

evidentiary hearing and, given the timing of disclosure, there was no way Mr. Madril 

could have sifted through all the information to obtain what he needed. (Doc. 36 at 61).

However, the record reveals that Mr. Madril effectively brought this situation on himself

and the volume of the alleged belated document production has been exaggerated. For 

example, Wells Fargo notes that Mr. Madril could have requested disclosure as early as 

February 18, 2013, yet he did not submit his first disclosure request until June 7, 2013. 

(Doc. 36 at 34). Wells Fargo further noted that although Mr. Madril claimed he did not 

receive the CD on August 28, he made no efforts to follow up or meet and confer 

regarding the missing documents until he filed his motion to compel documents on 

October 2. Id. at 35-36. Mr. Madril also failed to respond to Wells Fargo’s numerous 

offers to meet and confer to discuss the discovery issues. Id. at 37-38, 41. When Wells 

Fargo met with Mr. Madril to inform him that the compliance manuals were available, 

Mr. Madril refused to go through them and instead Wells Fargo’s counsel identified 

which pages of the manuals might be relevant to Mr. Madril’s discovery requests and 

produced those pages the very next day. Id. at 40. Wells Fargo specifically noted that it 

did considerably more work than it was required to do in producing the documents 

because Mr. Madril was proceeding pro se, and that had Mr. Madril been represented by 

counsel, it would have been incumbent on Mr. Madril’s attorney to sift through the 

disclosure and identify what documents were missing. Id. at 41, 44-45. Further, as noted 

above, Wells Fargo clarified that many of the documents that were produced in the weeks 

- 15 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 15 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

prior to the arbitration had already been disclosed previously, but were disclosed a second 

time to correct the bates numbers or to add exhibit numbers. Id. at 48-49. 

 Moreover, Mr. Madril failed to establish how the arbitration panel’s failure to 

grant a continuance prejudiced him. In both his brief and at oral arguments, Mr. Madril 

was unable to identify what specific information contained in the later disclosure would 

have caused him to present his case differently. Instead, Mr. Madril vaguely asserted that 

had he been granted the continuance, he would have been able to better show that Wells 

Fargo mislead him from the very beginning and he would have been able to glean 

additional information about areas he had not considered. (Doc. 36 at 23). 

Given the disclosure produced in the weeks prior to the arbitration hearing, the 

Court asked Mr. Madril what documents he could point to that could have been used at 

the hearing which prejudiced his case. In response to the Court’s inquiry, Mr. Madril’s 

attorney, Richard Madril, could not identify a specific document. Rather, Richard Madril 

made a number of claims that Wells Fargo then refuted.11 For example, Richard Madril 

stated that Mr. Madril could have presented how the Wells Fargo recruiters “were 

actually receiving these bonuses and incentives for hiring financial advisors, which was 

their motive for lying.” (Doc. 36 at 22). Yet Wells Fargo’s counsel noted that during the 

arbitration hearing, Mr. Madril elicited testimony from both Dan Lind and Shannon

Smith about the recruiting bonuses. Id. at 45. 

 Second, Mr. Madril claimed he did not have his income information, (Doc. 36 at 

22), yet Wells Fargo stated Mr. Madril did receive his payroll information in the initial 

479 pages of documents that were produced. Id. at 45. 

 Third, Richard Madril stated that “Ms. Bell probably—we probably could have 

gotten more information out of her by reminding her of a lot of the things that occurred to 

her because she was going strictly by memory.” (Doc. 36 at 22). However, Wells Fargo 

noted that Ms. Bell “testified at length, and she testified about a number of things [and 

11 Mr. Madril presented these same arguments to the arbitration panel and Wells Fargo presented its same counterarguments during the arbitration hearing. (See Doc. 21- 1, Ex. 33 [Day 1 Hearing Transcript]). 

- 16 - 

 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 16 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

t]here were no time restraints on how much she could have testified.” Id. at 45. 

 Fourth, Mr. Madril claimed that he requested “the correspondence between 

himself and Mr. Smith, himself and Dan Lind. We never even got that correspondence.” 

(Doc. 36 at 22-23). In contrast, Wells Fargo claims that it did disclose this information, 

but that Mr. Madril did not use the emails during the hearing because, in Wells Fargo’s 

opinion, there were not any emails supportive of Mr. Madril’s claims. Id. at 28, 39. 

Further, Wells Fargo also persuaded both Dan Lind and Shannon Smith to testify on Mr. 

Madril’s behalf at the arbitration hearing. Id. at 44. 

 Fifth, Richard Madril claimed that “[w]e asked for information on the breakdown 

of how the races were involved in this. We never got any information on that.” (Doc. 36 

at 23). However, Mr. Woods indicated that Mr. Madril did not request this information 

until after the discovery deadline had passed. Id. at 46. Further, Mr. Madril did question 

Mr. Lind about the hiring of minority employees during the arbitration hearing. Id. 

Sixth, Richard Madril stated “I don’t think we even got information on the 

matrix,” (Doc. 36 at 23), yet Wells Fargo asserts it did disclose the recruiting matrix even 

though Mr. Madril had not signed the confidentiality agreement. Id. at 45, 49. 

Finally, Richard Madril indicated that “[a] lot of stuff we could have provided to 

the panel would have been facts and figures. We could have been able to provide the 

witnesses that would have verified Mr. Madril’s story.” (Doc. 36 at 24). However, 

Richard Madril did not identify any specific facts and figures that Mr. Madril either 

received late, or allegedly requested but did not receive, which would have potentially 

helped his case. 

Thus, even upon further inquiry by the Court, Mr. Madril was unable to identify 

any specific information contained in the later disclosure that would have affected how 

he presented his case at the arbitration hearing. Instead, Mr. Madril’s argument shifted 

from receiving late disclosure to never receiving requested disclosure, (Doc. 36 at 61-63), 

yet he was unable to pinpoint any documents that were missing or how the missing or 

late-disclosed documents prejudiced his case before the arbitrators. Without more, it is 

not evident that the arbitrators’ failure to grant Mr. Madril’s request for a continuance

- 17 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 17 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

actually prejudiced Mr. Madril. Thus, the undersigned recommends Mr. Madril’s claim

pursuant to 9 U.S.C. § 10(a)(3) should be denied because the arbitration panel had a 

reasonable basis to deny the continuance and because Mr. Madril has failed to show 

prejudice from the denial of a continuance. 

3. Concern for Personal Schedules 

Mr. Madril additionally asserts that the arbitration award should be vacated 

because the arbitrators were allegedly more concerned about their personal schedules 

than administering a fair hearing. (Doc. 21 at 16). This argument is related to the issue 

regarding the denial of the continuance. 

An arbitration award may be vacated “where the arbitrators were guilty ... of any 

other misbehavior by which the rights of any party have been prejudiced.” 9 U.S.C. § 

10(a)(3). A showing of prejudice is a prerequisite for vacatur. See Employers Ins. v. Nat'l 

Union, 933 F.2d 1481 (9th Cir. 1991) (vacatur inappropriate where party failed to show 

prejudice from ex parte contacts). 

Mr. Madril claims that the arbitrators misbehaved because they were allegedly 

more concerned about their personal schedules. However, Mr. Madril has failed to prove 

how the arbitrators’ alleged overarching concern for their schedules prejudiced him. 

Nothing in the record indicates that the arbitrators rushed Mr. Madril during the 

presentation of his case. (Doc. 26 at 18). Rather, the arbitrators gave Mr. Madril ample 

time to make opening statements, present evidence and make closing arguments. The 

arbitration hearing was scheduled for three full days. Had Mr. Madril used all three days 

to present his case-in-chief and requested more time, Mr. Madril’s assertion regarding the 

arbitrators’ alleged concern may have been more compelling. However, Mr. Madril 

completed his case-in-chief prior to the lunch break on the third day, leaving half a day 

for Wells Fargo to present its rebuttal evidence and make closing arguments. If anyone 

was impacted by the arbitrators’ alleged concerns for their schedule it would have been 

Wells Fargo, not Mr. Madril. Because Mr. Madril has failed to demonstrate that the 

arbitrators’ alleged concerns for their schedules prejudiced him, the undersigned 

recommends that Mr. Madril’s claim on this issue should be denied. 

- 18 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 18 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

B. PETITION TO CONFIRM 

As previously noted, unless an arbitration award is vacated, a court must confirm 

the arbitration award if: (1) the parties, in their agreement, have agreed that a judgment of 

the court can be entered upon the arbitration award; (2) the parties have specified the 

court that may enter judgment thereon; and (3) one of the parties applies for an order 

confirming the award within one year after the award is made. 9 U.S.C. §9; Schoenduve 

Corp. v. Lucent Technologies. Inc., 442 F.3d 727, 731 (9th Cir. 2006); see also Kyocera 

Corp. v. Prudential–Bache Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003). 

Mr. Madril and Wells Fargo agreed in both the Offer Summary and the 

Promissory Note that a court of competent jurisdiction could enter judgment upon the 

arbitration award. On October 6, 2014, nine months after the arbitration award was 

issued, Wells Fargo timely petitioned to this Court to confirm the arbitration award. 

Moreover, as previously discussed, Mr. Madril has failed to establish that the arbitration 

award should be vacated pursuant to 9 U.S.C. § 10. Thus, the undersigned recommends 

that the Court grant Wells Fargo’s Petition to Confirm Arbitration Award and Enter 

Judgment Thereon. 

C. ATTORNEY’S FEES

Wells Fargo requests attorney’s fees pursuant to A.R.S. §12-341.01(A). “In any 

contested action arising out of a contract, express or implied, the court may award the 

successful party reasonable attorney’s fees.” A.R.S. §12-341.01(A). 

The undersigned recommends that if Wells Fargo is the prevailing party on the 

motion to vacate, it would likely be entitled to attorney’s fees. However, the issue of 

attorney’s fees is not properly before the Court at this time. Once the District Judge enters 

his order on this Report and Recommendation, and if Wells Fargo is the prevailing party, 

then Wells Fargo may file its motion for attorney’s fees. 

IV. RECOMMENDATION

In conclusion, the Magistrate Judge RECOMMENDS that the District Court 

DENY Plaintiff’s Motion to Vacate the Arbitrator’s Award or Modify the Decision (Doc. 

- 19 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 19 of 20
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

21) and GRANT Defendant’s Petition to Confirm Arbitration Award and Enter Judgment 

Thereon (Doc. 22). 

Pursuant to 28 U.S.C. §636(b), any party may serve and file written objections 

within fourteen days after being served with a copy of this Report and Recommendation. 

A party may respond to another party’s objections within fourteen days after being served 

with a copy thereof. Fed. R. Civ. P. 72(b). No reply to any response shall be filed. See id. 

If objections are not timely filed, then the parties’ rights to de novo review by the District 

Court may be deemed waived. See U.S. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 

2003). 

If objections are filed, the parties should use the following case number: CV 14-

01566-TUC-RCC. 

 Dated this 18th day of May, 2015. 

- 20 - 

Case 4:14-cv-01566-RCC-EJM Document 37 Filed 05/18/15 Page 20 of 20