Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-04-01413/USCOURTS-ca10-04-01413-0/pdf.json

Parties Involved:
Quick & Reilly, Inc.
Appellee
Joseph A. Vento
Appellant

Document Text:

FILED 

United States Court of Appeals 

Tenth Circuit 

UNITED ST ATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

APR 20 2005 

PATRICK FISHER 

Clerk 

JOSEPH A. VENTO, 

Plain ti ff-Appellant, 

V. 

QUICK & REILLY, INC., a New York 

corporation, 

Defendant-Appellee. 

No. 04-1413 

(D.C. No. 04-F-290 (BNB)) 

(D. Colo.) 

ORDER AND JUDGMENT* 

Before SEYMOUR, Circuit Judge, BARRETT, Senior Circuit Judge, and 

McCONNELL, Circuit Judge. 

After examining the briefs and appellate record, this panel has determined 

unanimously that oral argument would not materially assist the determination of 

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1 (G). The case is 

therefore ordered submitted without oral argument. 

* This order and judgment is not binding precedent, except under the 

doctrines of law of the case, res judicata, and collateral estoppel. The court 

generaIIy disfavors the citation of orders and judgments; nevertheless, an order 

and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. 

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Plaintiff Joseph A. Vento appeals from a district court order denying his 

motion to vacate an unfavorable decision issued by an arbitration panel for the 

National Association of Securities Dealers, Inc. (NASD). Although Mr. Vento 

raised several subsections of the statute governing judicial review of arbitration, 

see 9 U.S.C. § l0(a)(l)-(4), his objections related primarily to the arbitration 

panel's refusal to hold a hearing and dismissal of his action on the pleadings. The 

district court granted summary judgment for Defendant Quick & Reilly, Inc. 

(Q&R). We review the district court's legal determination de novo, Bowen v. 

Amoco Pipeline Co., 254 F.3d 925, 931 (10th Cir. 2001 ), and affirm. 

Mr. Vento had a securities account with Q&R that became the subject of 

garnishment proceedings relating to a state court judgment obtained against him 

in Colorado. Q&R responded to a writ of garnishment by affirming that it held 

for Mr. Vento $108,074.42 in a money market fund and $1,300,000 in treasury 

bills. R. doc. 9, tab 1, ex. 1, at 2. Thereafter, Q&R received an order directing it 

to pay $93,847.25 to the court clerk, who was to turn the sum over to the party 

collecting the judgment against Mr. Vento. Id., ex. 3. After Q&R complied, Mr. 

Vento filed a claim with the NASD arbitration panel contending Q&R violated 

various legal duties when it revealed his assets and turned them over to the state 

court clerk. 

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Mr. Vento claimed that Q&R improperly complied with procedure 

appropriate in cases where "the garnishee is indebted to the judgment debtor," 

Colo. R. Civ. P. 103, Sec. 2(g)(l ), whereas the proper procedure, he asserted, was 

for the court to "order the garnishee to deliver such property to the sheriff to be 

sold as upon execution," with the proceeds applied to the judgment debt and any 

surplus returned to Mr Vento, because Q&R "possess[ ed] or control[led] 

intangible personal property or personal property capable of manual delivery 

owned by the judgment debtor." Id., Sec. 2(g)(3). Q&R moved to dismiss the 

arbitration action, asserting that it had followed a facially valid order and that 

"[i]f, in fact, there were procedural irregularities in the processing of the 

garnishment, Mr. Vento should have brought them to the attention of the court." 

R. doc. 9, tab 6, at 2. In response, Mr. Vento reasserted his position that the 

order Q&R followed was invalid under Rule 103, but did not claim Q&R had any 

duty to challenge the garnishment on this basis on his behalf. Id., tab 7. He also 

contended "[t]here is no provision in the Code of Arbitration Procedure for a 

motion to dismiss comparable to the one filed by Q&R." R. doc. 9, tab 7, at 2. 

After the motion to dismiss was set for hearing, Mr. Vento submitted an 

"Advisement" stating he would not attend the hearing but would "continue[] to 

advocate and rely upon" his previously filed response to the motion. Id., tab 8. 

On the hearing date, the arbitration panel "f[ ound] itself in need of additional 

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information, and request[ ed] an additional brief from each of the parties," on such 

matters as Q&R's legal duty upon receipt of the garnishment order to investigate 

its validity, and whether Mr. Vento did anything to challenge the garnishment 

order himself. Id., tab 9, at 1. The panel noted Mr. Vento's decision to forego 

attendance at the hearing on the motion to dismiss and "strongly recommend[ ed] 

that [he] secure the advice and services of an attorney experienced in matters 

involving NASD arbitration." Id., tab 9, at 2. Mr. Vento filed a prose brief in 

response to the order. 

The arbitration panel saw the dispute framed by the parties as purely legal, 

concerning the respective duties of a broker-dealer and its client when faced with 

a garnishment order: "Q&R did not dispute the basic facts alleged by Vento and 

offered no opinion as to whether the [garnishment] writ was valid or invalid," but 

defended solely on the ground "that it was Vento's responsibility to dispute the 

validity of any writ in the underlying court that issued it." Appendix to the Briefs 

(App.) at 18. The panel agreed with Q&R's position: 

Vento should have disputed the writ by filing a motion to 

quash with the judge of the same District Court that had allowed its 

Court Clerks to issue writs of garnishment. If that motion was 

denied, he could and should have filed a writ of mandamus with the 

Appeals Court, and, eventually, brought the matter to the attention of 

the Colorado Supreme Court. ... [I]t is the duty of the person 

garnished to file a motion to quash a writ issuing improperly out of a 

court, or one of its functionaries (ie: the Clerk), if that person feels 

that the writ or order was issued under improper circumstances. 

Accordingly we express no opinion as to whether the writ was 

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invalid, as alleged by Vento, leaving that determination to its proper 

place in the court system of the State of Colorado. 

The duty to timely file a motion to quash and subsequent 

appellate procedures, relating to an improper garnishment order, 

properly falls on the shoulders of the person garnished .... It 

appears, however, that Vento was essentially demanding that Q&R 

either willfully violate what appeared to be a valid garnishment by 

simply not complying, or to expend attorney's fees and costs to 

oppose the garnishment by filing a motion on his behalf. That is not 

within the scope of a broker-dealer's fiduciary duty to its customer. 

Id. at 18-19. The panel held it was "compelled to find in favor ofQ&R as a 

matter of law," id. at 19, and dismissed the case with prejudice pursuant to NASD 

Code of Arbitration Rule 10305, 1 id. at 21-23. 

"[A] court may grant a motion to vacate an arbitration award only in the 

limited circumstances provided in [9 U.S.C. § l0(a)(l)-(4)], or in accordance with 

a few judicially created exceptions." Bowen, 254 F .3d at 932. Mr. Vento invoked 

NASD Code of Arbitration Rule 10305 provides: 

(a) At any time during the course of an arbitration, the arbitrators 

may either upon their own initiative or at the request of a party, 

dismiss the proceeding and refer the parties to their judicial 

remedies, or to any dispute resolution forum agreed to by the parties, 

without prejudice to any claims or defenses available to any party. 

(b) The arbitrators may dismiss a claim, defense, or proceeding with 

prejudice as a sanction for willful and intentional material failure to 

comply with an order of the arbitrator(s) if lesser sanctions have 

proven ineffective. 

( c) The arbitrators shall at the joint request of all parties dismiss the 

proceedings. 

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several grounds: the arbitration panel "w[as] guilty of misconduct,"§ 10(a)(3), 

and "exceeded [its] powers," § 10( a)( 4 ), in cancelling a final adjudicatory hearing 

and dismissing his case with prejudice on the pleadings when such a disposition is 

not authorized by Rule 10305; the panel exhibited "evident partiality" (against his 

prose status), § 1 O(a)(2), when it recommended that he consult an experienced 

attorney; and the panel's decision was in "manifest disregard of the law," Bowen, 

254 F .3d at 932. See R. doc. 1, at 2-5. 

As the district court explained, the circumstances presented here did not 

warrant any interference with the arbitration panel's decision under the "highly 

deferential standard" that federal courts must employ in this area. Bowen, 254 

F .3d at 932 (noting standard governing judicial review of arbitration decisions is 

"among the narrowest known to law" (quotation omitted)). Mr. Vento's primary 

objection, regarding the lack of authorization for a dismissal on the pleadings 

under Rule 10305, was explicitly rejected by this court in Sheldon v. Vermont;i, 

269 F.3d 1202, 1206 (10th Cir. 2001): 

Although NASD's procedural rules do not specifica1ly address 

whether an arbitration panel has the authority to dismiss facia1ly 

deficient claims with prejudice based solely on the pleadings, there is 

no express prohibition against such a procedure. In addition, 

NASD's procedural rules expressly provide that "[t]he arbitrator(s) 

sha11 be empowered to award any relief that would be available in a 

court of law." NASD Manual, § 10214. Logically, this broad grant 

of authority should include the authority to dismiss facially deficient 

claims with prejudice, and we hold that a NASD arbitration panel has 

full authority to grant a pre-hearing motion to dismiss with prejudice 

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based solely on the parties' pleadings so long as the dismissal does 

not deny a party fundamental fairness. 

Like the plaintiff in Sheldon, Mr. Vento "was provided with a fundamentally fair 

arbitration proceeding in that he was provided with the opportunity to fully brief 

and argue the motion[] to dismiss." Id. at 1207. Given that his "claims [were] 

facially deficient and [he] therefore ha[ d] no relevant or material evidence to 

present at an evidentiary hearing, the arbitration panel ha[ d] full authority to 

dismiss the claims without ... holding an evidentiary hearing." Id. 

Mr. Vento 's attempts to avoid the rule of Sheldon are plainly meritless. He 

argues that Q&R's motion to dismiss "was not based on the parties' pleadings as 

required by [Sheldon]," because it rested on the assertion "that Q&R followed an 

order by a court clerk." Aplt. Br. at 7, 8. But the latter point was not beyond the 

scope of Mr. Vento's arbitration claims; it was essential to them. The alleged 

misconduct of Q&R consisted in its compliance with the garnishment writ and 

ensuing order. See R. doc. 9, tab 1 & exs. 1, 3. When the arbitration panel 

concluded that such compliance was proper as a matter oflaw, dismissal on the 

pleadings was precisely the appropriate procedural disposition. 

Mr. Vento contends the panel's decision was not on the pleadings as in 

Sheldon because the panel's rationale rested on a legal ground omitted from 

Q&R's motion to dismiss. See Aplt. Br. at 7-8. This argument is unavailing. 

Although Mr. Vento acknowledges the motion asserted Q&R acted properly in 

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complying with the garnishment order because Mr. Vento had not challenged it, 

see also R. doc. 9, tab 6, at 2, he insists the panel's rationale-that it was his, not 

Q&R's, duty to challenge the order-reflects a distinct legal proposition. But the 

latter is obviously inherent in (if not a mere paraphrase of) the defense advanced 

by Q&R in its motion and, in any event, the panel's decision clearly encompassed 

both: "The duty to timely file a motion to quash ... an improper garnishment 

order[] properly falls on the shoulders of the person garnished .... [E]xpending 

attorney's fees and costs to oppose the garnishment by filing a motion to quash on 

his behalf ... is not within the scope of a broker-dealer's fiduciary duty to its 

customer." App. at 18-19. The whole point of holding that Q&R was not 

duty-bound to oppose the garnishment order is to explain why it acted properly in 

complying with it. 

Mr. Vento' s accusation of bias on the part of the arbitration panel is equally 

meritless. The panel's recommendation that Mr. Vento consult with an attorney 

experienced in NASD arbitration was just prudent advice. There is nothing in the 

record to suggest any basis for questioning the panel's impartiality. 

Turning to the legal substance of the arbitration panel's determination, the 

general rule is that an arbitrator's "erroneous interpretations or applications of 

law are not reversible." Bowen, 254 F .3d at 932 ( quotation omitted). Federal 

courts review arbitration decisions solely for a "manifest disregard of the law," 

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i.e., for a "willful inattentiveness to the governing law." Id. ( quotation omitted). 

Thus, in order to justify judicial interference based on the merits of the arbitration 

decision under review, "the record [must] show the arbitrators knew the law and 

explicitly disregarded it." Id. No showing of this kind is evident here. 

As for Mr. Vento' s challenge to the validity of the garnishment order under 

specific provisions of state procedural law, the arbitration panel accepted that 

premise for purposes of its analysis and therefore cannot be said to have 

disregarded that law. As for the legal point that was ultimately dispositive of the 

case, regarding a broker-dealer's duty to challenge garnishment process on behalf 

of a client, the panel asked Mr. Vento to cite the legal precedent supporting his 

claim, see R. doc. 9, tab 9, at 1, to which he responded only that he "ha[ d] 

researched ... whether the broker dealer is obligated to investigate the validity of 

that court order or may it merely accept the order as written, and [had] found no 

legal precedents about the matter," id., tab 10, at 1. His appellate briefing is 

likewise deficient. 

The only authority cited in connection with Mr. Vento's manifestdisregard-of-law argument are three cases offered for the general proposition that 

a failure to follow prescribed procedures "is fatal" and invalidates the writ. Id. 

Again, that relates only to the point accepted by the arbitration panel. Although 

two of the cases reflect efforts by a garnishee opposing garnishment, in both cases 

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garnishment was opposed on the ground that the garnishee owed nothing to the 

judgment debtor. See Worchester v. State Farm Mut. Auto. Ins. Co., 473 P.2d 

711, 712 (Colo. 1970) (insurance company answered garnishment by denying 

coverage for judgment debtor's obligation); State v. Elkins, 270 P. 875, 875-76 

(Colo. 1928) (state employer answered garnishment by denying that any earnings 

were owed to judgment debtor). That a garnishee may defend its own interests by 

denying an obligation to the judgment debtor implies nothing about whether the 

garnishee may, much less must, defend the interests of the debtor by challenging 

the propriety of the garnishment itself. Nor is any such implication suggested by 

Rule 103, which sets out procedures for the debtor to raise objections regarding 

the garnishment, see Colo. R. Civ. P. 103, Sec. 2(f), & Sec. 6, but provides the 

garnishee with procedures only to admit or deny an obligation to the debtor, see 

Colo. R. Civ. P. Sec. 2(g)( 1) & (3) and Sec. 7. 

Finally, Mr. Vento 's argument that the district court erred by proceeding 

under Fed. R. Civ. P. 12 and 56 is specious. The civil rules apply in arbitration 

cases "to the extent that matters of procedure are not provided for in [ the federal 

arbitration] statutes." Fed. R. Civ. P. 8l(a)(3). Because the arbitration statutes 

do not provide procedures to displace Rules 12 and 56, and Mr. Vento offers no 

"reason why normal procedures should be subverted," the district court properly 

adhered to these rules. Afilwaukee T_vpographical Union No. 23 v. Newspapers, 

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Inc., 639 F.2d 386,390 (7th Cir. 1981); see Champion Boxed Beef Co. v. Local 

No. 7 United Food & Commercial Workers Int 'l Union, 24 F .3d 86, 87 (10th Cir. 

1994) (noting "we review the grant of summary judgment" in arbitration cases 

under traditional de novo standard). 

Sanctions 

Q&R has moved for sanctions against Mr. Vento. Upon consideration of 

the motion and Mr. Vento's response (Reply Br. at 1-2), we conclude an award of 

reasonable attorney fees and costs is warranted under Fed. R. App. P. 38. We 

agree with Q&R that this appeal is frivolous for the reasons we have discussed. 

Because deciding on an appropriate amount of fees and costs requires assessment 

of facts, we remand the matter to the district court for determination. 

The judgment of the district court is AFFIRMED. Q&R's motion for 

sanctions is GRANTED, and the matter is REMANDED for the determination of a 

proper amount. 

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Entered for the Court 

Stephanie K. Seymour 

Circuit Judge 

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