Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-56650/USCOURTS-ca9-14-56650-0/pdf.json

Nature of Suit Code: 896
Nature of Suit: Other Statutes - Arbitration
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MOVE, INC.,

Plaintiff-Appellant,

v.

CITIGROUP GLOBAL

MARKETS, INC.,

Defendant-Appellee.

No. 14-56650

D.C. No.

2:14-cv-04418-JFW-E

OPINION

Appeal from the United States District Court

for the Central District of California

John F. Walter, District Judge, Presiding

Argued and Submitted October 4, 2016

Pasadena, California

Filed November 4, 2016

Before: Dorothy W. Nelson and Richard A. Paez, Circuit

Judges, and Elaine E. Bucklo,* Senior District Judge.

Opinion by Judge D.W. Nelson

*The Honorable ElaineE.Bucklo, Senior United States District Judge

for the Northern District of Illinois, sitting by designation.

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2 MOVE V. CITIGROUP GLOBAL MARKETS

SUMMARY**

Arbitration

The panel reversed in part the district court’s judgment

dismissing an action and denying a motion to vacate an

arbitration award pursuant to the Federal Arbitration Act.

The plaintiff sought to vacate an arbitration award by a

Financial IndustryRegulatoryAuthority (FINRA) panel. The

court of appeals panel held that the plaintiff’s motion was not

untimely because the Federal Arbitration Act is subject to

equitable tolling. The panel also held that the plaintiff’s right

to a fundamentally fair hearing was prejudiced by the

fraudulent misrepresentations of the arbitration panel’s

chairperson, resulting in proceedings led by an arbitrator who

should have been disqualified from the dispute under the

rules and regulations of FINRA.

The panel reversed the district court’s judgment in part

and remanded for entry of judgment in favor of the plaintiff.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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MOVE V. CITIGROUP GLOBAL MARKETS 3

COUNSEL

Susan J. Williams (argued), Hennelly & Grossfeld LLP,

Marina del Rey, California, for Plaintiff-Appellant.

Fred Anthony Rowley, Jr. (argued) and Marc T.G. Dworsky,

Munger Tolles & Olson LLP, Los Angeles, California;

Achyut J. Phadke, Munger Tolles & Olson LLP, San

Francisco, California; for Defendant-Appellee.

OPINION

D.W. NELSON, Senior Circuit Judge:

Move, Inc. (Move) appeals the district court’s order

dismissing its action and denying its motion to vacate an

arbitration award pursuant to the Federal Arbitration Act

(FAA), 9 U.S.C. § 1 et seq. We have jurisdiction pursuant to

9 U.S.C. § 16(a)(3) and 28 U.S.C. § 1291. We hold that

Move’s motion was not untimely because the FAA is subject

to equitable tolling. We also hold that Move’s right to a

fundamentally fair hearing was prejudiced by the fraudulent

misrepresentations of the arbitration panel’s chairperson,

resulting in proceedings led by an arbitrator who should have

been disqualified from the dispute under the rules and

regulations of the Financial Industry Regulatory Authority

(FINRA). Accordingly, we REVERSE the district court’s

judgment in part and REMAND the case for entry of

judgment in favor of Move.

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4 MOVE V. CITIGROUP GLOBAL MARKETS

BACKGROUND

Move maintained an investment account with Citigroup

Global Markets, Inc. (Citigroup). In connection with its

investments, Move entered into a “Client Agreement” with

Citigroup stating, in relevant part, that “all claims or

controversies . . . shall be determined by arbitration before,

and only before, any self-regulatory organization or exchange

of which [Citigroup] is a member.”

On September 16, 2008, Move commenced arbitration

proceedings before a three-member FINRA panel, alleging

that Citigroup mismanaged $131 million of Move’s funds by

investing in speculative auction rate securities. Before

initiating the proceedings, FINRA required Move and

Citigroup to sign a “Uniform Submission Agreement,” which

stated that the dispute was submitted to arbitration “in

accordance with the Constitution, By-Laws, Rules,

Regulations, and/or Code of Arbitration Procedure of

[FINRA].” FINRA’s Code of Arbitration Procedure for

Customer Disputes, found in FINRA Rules 12000–12905,

includes Rule 12401(c), which required Move’s claims to be

arbitrated by a panel of three arbitrators.

Pursuant to Rule 12403, FINRA provided the parties with

a list of thirty proposed arbitrators and their employment

histories, including ten proposed arbitrators from FINRA’s

chairperson roster. Because the dispute involved a complex

securities issue, it was important to Move that the person

selected as chairperson be an experienced attorney. Move

ranked “James H. Frank” first who, according to the FINRA

Arbitrator Disclosure Report (ADR), received a law degree

from Southwestern University in 1975 and was licensed to

practice law in California, New York, and Florida. Pursuant

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MOVE V. CITIGROUP GLOBAL MARKETS 5

to FINRA rules and regulations, arbitrators must affirm that

their ADR is accurate and up to date. FINRA also informs

arbitrators that a failure to disclose material information in

the arbitrator profile mayresult in permanent disqualification.

Mr. Frank subsequently served as the chairperson of the

panel along with Arthur T. Berggren, a licensed attorney, and

Daniel R. Brush, a Certified Public Accountant and Certified

Financial Planner. On December 8, 2009, after conducting

six pre-hearing conferences and twenty hearing sessions, the

FINRA panel issued a unanimous award denying Move’s

claims.

Over four years later, on March 26, 2014, Move learned

from an article in The AmLaw Litigation Daily that Mr. Frank

had lied about being a licensed attorney. It is now undisputed

that Mr. Frank, who is “James Hamilton Hardy Frank,” was

impersonating retired California attorney “James Hamilton

Frank.” FINRA later confirmed that Mr. Frank lied about his

qualifications in his ADR and subsequently removed him

from all cases and from its roster.

Move filed a complaint on June 9, 2014, and a motion to

vacate the arbitration award on June 17, 2014. Move argued

that vacatur was warranted under 9 U.S.C. § 10(a)(3) and (4)

of the FAA because of Mr. Frank’s misrepresentations. 

Although 9 U.S.C. § 12 provides that notice of a motion to

vacate an arbitration award must be served within three

months after the award is delivered, Move argued the

deadline should be equitably tolled. Citigroup moved to

dismiss, arguing that equitable tolling is unavailable underthe

FAA and that, even if it were, Move failed to demonstrate

tolling was justified. Citigroup further argued that, even if

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6 MOVE V. CITIGROUP GLOBAL MARKETS

the limitations period were tolled, vacatur was unjustified on

the merits.

The district court denied Move’s motion to vacate and

granted Citigroup’s motion to dismiss. Noting that equitable

tolling under the FAA presented an “unsettled question of

law” in this circuit, the court ruled that equitable tolling is

available, but that Move failed to demonstrate an adequate

ground for vacatur under the FAA. Specifically, the court

explained that (1) Mr. Frank’s misbehavior did not prejudice

Move’s rights to a fundamentally fair hearing as required by

§ 10(a)(3); and (2) the panel did not exceed its powers in

violation of § 10(a)(4) because Mr. Frank’s deceit, if

cognizable at all under that section, did not violate Move’s

contractual rights under its Client Agreement with Citigroup. 

Move timely appealed.

STANDARD OF REVIEW

We review de novo a district court’s denial of a motion to

vacate an arbitration award. See, e.g., United States v. Park

Place Assocs., 563 F.3d 907, 918 (9th Cir. 2009). We also

review de novo a district court’s dismissal of a complaint for

failure to state a claim under Federal Rule of Civil Procedure

12(b)(6). See, e.g., N.M. State Inv. Council v. Ernst & Young

LLP, 641 F.3d 1089, 1094 (9th Cir. 2011).

ANALYSIS

The FAA requires that notice of a motion to vacate an

arbitration award must be served within three months after

the award is filed or delivered. 10 U.S.C. § 12. Because

Move’s motion to vacate was filed over four years after the

three month statutorywindow closed, we must first determine

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MOVE V. CITIGROUP GLOBAL MARKETS 7

whether the doctrine of equitable tolling applies to the FAA,

such that the motion is not time-barred. We hold that it does. 

We also hold that Move’s right to a fundamentally fair

hearing under § 10(a)(3) was prejudiced by the arbitral

misconduct of the panel’s chairperson, Mr. Frank. The

district court therefore erred in denying Move’s motion to

vacate the award.

A. Equitable Tolling

Although this Court has not yet decided whether equitable

tolling applies to the FAA, the district court held that it does. 

We agree.

The closest we have come to deciding this issue was in

Lafarge Conseils et Etudes, S.A. v. Kaiser Cement &Gypsum

Corp., 791 F.2d 1334 (9th Cir. 1986). There, we were

presented with the narrow question of whether Kaiser could

revive an unsuccessful motion to vacate an arbitration award

“by way of a Rule 60(b) motion with a claim of newly

discovered evidence.” Id. at 1338. In affirming the denial of

Kaiser’s motion, we observed that “the three-month notice

requirement of section 12 . . . would be meaningless if a party

to the arbitration proceeding could bring an independent

action asserting such claims outside of the statutory time

period provided in section 12.” Id. (emphasis added)

(internal citations, brackets, and quotation marks omitted). 

However, equitable tolling was neither raised nor specifically

addressed in that case. Accordingly, Lafarge does not govern

the outcome of the case now before us.

Furthermore, as the district court noted, the case law from

other circuits is conflicting and most circuits—including this

circuit—have declined to definitively rule on whether

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8 MOVE V. CITIGROUP GLOBAL MARKETS

equitable tolling applies to the FAA. See Garrett v. Merrill

Lynch, Pierce, Fenner &Smith, Inc., 7 F.3d 882, 883 n.1 (9th

Cir. 1993) (“[Petitioner] asks that we permit his late petition

under the doctrine of equitable tolling. Because we find that

the district court correctly dismissed the petition on a

jurisdictional basis, we need not reach this issue.”); see also

Fradella v. Petricca, 183 F.3d 17, 21 (1st Cir. 1999); Taylor

v. Nelson, 788 F.2d 220, 225–26 (4th Cir. 1986); Piccolo v.

Dain, Kalman & Quail, Inc., 641 F.2d 598, 601 (8th Cir.

1981) (declining to decide if equitable tolling applies to the

FAA); Pfannenstiel v. Merrill Lynch, Pierce, Fenner &

Smith, 477 F.3d 1155, 1158 (10th Cir. 2007) (stating that

equitable tolling suspends the running of a statute, unless

Congress provides to the contrary, but finding equitable

tolling inapplicable under the facts of the case); but see Cigna

Ins. Co. v. Huddleston, No. 92-1252, 1993 WL 58742, at *11

(5th Cir. Feb. 16, 1993) (per curiam) (unpublished) (holding

that equitable tolling does not apply to the FAA). Deciding

this question as a matter of first impression in this circuit, we

now hold that the FAA is subject to equitable tolling.

“It is hornbook law that limitations periods are

customarily subject to equitable tolling . . . unless tolling

would be inconsistent with the text of the relevant statute.” 

Young v. United States, 535 U.S. 43, 49 (2002) (internal

citations and quotation marks omitted). Accordingly,

“Congress must be presumed to draft limitations periods in

light of this background principle,” id. at 49–50, and the

rebuttable presumption that limitations periods are subject to

equitable tolling must be overcome by the text or purpose of

a statute, see, e.g., Irwin v. Dep’t of Veterans Affairs,

498 U.S. 89, 95–96 (1990); John R. Sand & Gravel Co. v.

United States, 552 U.S. 130, 138 (2008). We agree with the

district court and conclude that neither the text, nor the

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MOVE V. CITIGROUP GLOBAL MARKETS 9

structure, nor the purpose of the FAA is inconsistent with

equitable tolling.

First, the Supreme Court has instructed lower courts to

consider several textual factors to determine whether

Congress intended for tolling not to apply to a given statute. 

This includes whether a limitations period is set forth in

“unusually emphatic form,” is “unusually generous,” or uses

“highly detailed” and “technical” language, and whether the

statute “reiterat[ed] the limitations period several times in

several different ways.” Holland v. Florida, 560 U.S. 631,

646–47 (2010) (internal quotation marks omitted). None of

these factors weigh in favor of foreclosing equitable tolling

under the FAA.

Here, the FAA’s instruction that notice of a motion to

vacate “must be served” within three months is neither

“unusually generous” nor “unusually emphatic.” See SocopGonzalez v. I.N.S., 272 F.3d 1176, 1191 (9th Cir. 2001)

(recognizing that 8 C.F.R. § 3.2(c)(2) requiring a motion to

reopen immigration proceedings “be filed no later than 90

days” after a rendered decision is not unusually generous or

emphatic); Kwai Fun Wong v. Beebe, 732 F.3d 1030, 1038

(9th Cir. 2013) (holding that the phrase “forever barred” is

not “unusually emphatic”); cf. United States v. Beggerly,

524 U.S. 38, 48–49 (1998) (holding that a twelve-year

limitations period is unusually generous).1

 Furthermore, the

1 Citigroup makes an inapposite comparison to Hall Street Associates

v. Mattel, Inc., where the Supreme Court explained that § 9 of the

FAA—which states that a court “must grant” a motion to confirm an

award within one year after the award is made—“carries no hint of

flexibility.” 552 U.S. 576, 587 (2008). However, the equitable tolling of

a limitations period was not at issue in that case. The Court only decided

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10 MOVE V. CITIGROUP GLOBAL MARKETS

FAA’s limitations period is neither detailed nor technical and

is not reiterated elsewhere in the statute. Accordingly, the

text of the statute does not preclude equitable tolling.

Second, the FAA’s structure is not incompatible with

equitable tolling. Citigroup argues that the “interlocking

structure” of the FAA precludes tolling, pointing to § 9 of the

FAA, which provides one year for a party to file a motion to

confirm an award. According to Citigroup, allowing vacatur

more than a year after an award is issued would upset the

statutory scheme by overturning a court’s decision to confirm

that award. However, as the district court emphasized, a

moving party would still need to meet the heavy burden of

establishing its entitlement to equitable tolling for a court to

vacate an award, and it would only be the rare case in which

the three-month deadline for a motion to vacate would not

apply. We therefore find that the structure of the FAA is

compatible with equitable tolling.

Finally, equitable tolling would not undermine the basic

purpose of the FAA, which was enacted to make “valid and

enforceable written provisions or agreements for arbitration

of disputes.” 68 Cong. Ch. 213, 43 Stat. 883 (1925). While

the FAA reflects the “national policyfavoring arbitration with

just the limited review” necessary to maintain finality in

arbitral proceedings, Hall Street, 552 U.S. at 581, “[t]he

general pro-arbitration policy relies on the assumption that

the forum is fair, and therefore cannot justify special

deference to arbitration outcomes in the face of a colorable

claim that the forum was unfair in a particular case.” Merrill

Lynch, Pierce, Fenner & Smith, Inc. v. Berry, 92 Fed. Appx.

whether a confirming court has the discretion to set aside an award for

grounds outside of those enumerated in § 10 or § 11.

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MOVE V. CITIGROUP GLOBAL MARKETS 11

243, 246 (6th Cir. 2004) (unpublished). Thus, although

Citigroup argues that equitable tolling would undermine the

FAA’s goal of finality, § 10’s limited grounds for review

were still “designed to preserve due process,” Kyocera Corp.

v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998

(9th Cir. 2003). Balancing the needs for both finality and due

process, the arbitral process will not be disrupted if parties are

permitted to satisfy the high bar of equitable tolling in limited

circumstances. More importantly, permitting equitable

tolling will enhance both the accuracy and fairness of arbitral

outcomes.

Accordingly, we hold that the FAA is subject to the

established doctrine of equitable tolling. Because neither

Move nor Citigroup addressed on appeal the separate

question of whether Move satisfied the substantive

requirements of equitable tolling, that issue has been waived. 

See, e.g., Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066

(9th Cir. 2004) (issue waived if not addressed in opening

briefs). Regardless, we agree with the district court’s

findings that (1) Move acted with due diligence in pursuing

its claim, as it justifiably relied on the information provided

by FINRA; and that (2) tolling would not prejudice Citigroup

under the circumstances. We therefore conclude that Move

is entitled to equitable tolling.

B. Vacatur Under the FAA

Because we find that Move’s motion is not time-barred,

we turn to the merits of Move’s vacatur claim. Under

§ 10(a)(3) of the FAA, courts may vacate an arbitration award

upon finding that “the arbitrators were guilty of . . . any . . .

misbehavior by which the rights of any party have been

prejudiced.” The district court held that Move failed to

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12 MOVE V. CITIGROUP GLOBAL MARKETS

demonstrate its rights were prejudiced as a result of Mr.

Frank’s deceit. We disagree.

In determining whether an arbitrator’s misbehavior or

misconduct prejudiced the rights of the parties, we ask

whether the parties received a fundamentally fair hearing. 

See, e.g., U.S. Life Ins. Co. v. Superior Nat. Ins. Co., 591 F.3d

1167, 1177 (9th Cir. 2010) (“In short, perhaps [U.S. Life] did

not enjoy a perfect hearing; but it did receive a fair hearing. 

It had notice, it had the opportunity to be heard and to present

relevant and material evidence, and the decisionmakers were

not infected with bias.”) (internal quotation marks omitted). 

For example, vacatur may be proper under § 10(a)(3) where

an arbitrator’s ex parte receipt of evidence affected the

outcome of the proceedings, Totem Marine Tug &Barge, Inc.

v. N. Am. Towing, Inc., 607 F.2d 649, 653 (5th Cir. 1979), or

where an arbitrator’s post-hearing consultation with an

outside expert “tainted” the panel’s decision, M & A Elec.

Power Co-op. v. Local Union No. 702, Int’l Bhd. of Elec.

Workers, AFL-CIO, 977 F.2d 1235, 1237–38 (8th Cir. 1992). 

Although neither this Court nor our sister circuits have

addressed whether vacatur is proper where an arbitrator’s

purposeful and material deception resulted in his selection as

chairperson of a panel, we agree with Move that such

misbehavior constitutes grounds for vacatur under § 10(a)(3). 

Based on the facts of the case before us, we simply cannot

conclude that Move received a fundamentally fair hearing.

Upon submitting its claim to arbitration before a FINRA

panel, Move made clear throughout the panel selection

process that it was critical for an attorney to chair the

proceedings. Specifically, Move believed that arbitration of

a complex securities claim required a chairperson with the

requisite experience to understand and interpret sophisticated

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MOVE V. CITIGROUP GLOBAL MARKETS 13

legal concepts. As a result, Move struck FINRA candidates

from the proposed roster who were not experienced attorneys. 

Move then ranked Mr. Frank first on its chairperson list,

relying on the ADR in which Mr. Frank falsified his

credentials.

Citigroup argues that there is no evidence that Mr. Frank

influenced other members of the panel or that the outcome of

the arbitration was affected by his participation. But there is

simply no way to determine whether that was the case. Cf.

Stivers v. Pierce, 71 F.3d 732, 747 (9th Cir. 1995)

(“Particularly on a small board, . . . it is difficult if not

impossible to measure the impact that one member’s views

have on the process of collective deliberation. Each member

contributes not only his vote but also his voice to the

deliberative process.”) (citation omitted). In any event, Mr.

Frank’s participation was itself prejudicial to Move. Under

FINRA rules and regulations, such deceit would have

permanently disqualified Mr. Frank from serving as a FINRA

arbitrator. Indeed, once Mr. Frank’s lies were revealed,

FINRA immediately removed him from its roster. However,

because Mr. Frank’s fraudulent conduct was revealed only

after the arbitration panel issued its award in favor of

Citigroup, the parties received a hearing chaired by an

imposter. Because Move and Citigroup agreed to arbitrate

their multi-million dollar dispute before a panel of three

qualified arbitrators as provided by FINRA’s rules and

regulations, the parties’ rights to such a proceeding were

prejudiced by the inclusion of an arbitrator as chairperson

who should have been disqualified from arbitrating the

dispute in the first place.

Accordingly, under the unique set of facts of this case, we

hold that Move was deprived of a fundamentally fair hearing

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14 MOVE V. CITIGROUP GLOBAL MARKETS

and therefore was prejudiced by the fraudulent conduct of the

panel’s chairperson, Mr. Frank. Because Move is entitled to

vacatur under § 10(a)(3), we need not address the second

question of whether vacatur is also warranted under

§ 10(a)(4).

CONCLUSION

We REVERSE the district court’s judgment in part and

REMAND the case for entry of judgment in favor of Move.

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