Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-05-07017/USCOURTS-caDC-05-07017-0/pdf.json

Parties Involved:
David S. Kurke
Appellee
Oscar Gruss and Son, Inc.
Appellant
Philip Wagenheim
Appellee

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 18, 2005 Decided July 18, 2006

No. 05-7017

DAVID S. KURKE,

APPELLEE

v.

OSCAR GRUSS AND SON, INC.,

APPELLANT

Consolidated with

05-7018, 05-7021

Appeals from the United States District Court

for the District of Columbia

(No. 04cv00870)

Robert S. Churchill argued the cause for appellant/crossappellee Oscar Gruss and Son, Inc. With him on the briefs was

Lisa Freiman Fishberg. Barry Coburn entered an appearance.

Daniel M. Press argued the cause and filed the brief for

appellee/cross-appellant Philip Wagenheim.

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Richard A. Stephens argued the cause and filed the brief for

appellee David S. Kurke.

Before: GINSBURG, Chief Judge, and GARLAND and

BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: Oscar Gruss & Son, Inc., a

securities firm, and Philip Wagenheim, an executive at the firm,

appeal the district court’s confirmation of an arbitration award.

The arbitrators required the appellants to pay compensatory

damages to David S. Kurke, a former Oscar Gruss customer, for

subjecting his account to unauthorized trading and churning.

The appellants maintain that the arbitrators awarded Kurke

damages in manifest disregard of the law. We disagree. 

I

David Kurke opened a securities account with Oscar Gruss

in 1997. Upon opening the account, Kurke signed a margin

agreement providing that “statements of my account shall be

conclusive if not objected to in writing” within a specified

period after transmittal. J.A. 396. Kurke invested a total of

$520,000 in the account, and he received monthly statements.

Kurke’s account was profitable for the first two and a half years

of its existence. Indeed, the statement for the month ending

December 31, 1999, revealed a balance of approximately

$1,007,000. By the time Kurke closed the account on April 30,

2000, however, the balance had dwindled to $39,000. 

In January 2003, Kurke filed a National Association of

Securities Dealers, Inc. (NASD) arbitration claim against the

Oscar Gruss firm and Philip Wagenheim, alleging the following

causes of actions: “unauthorized trading, churning, breach of

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fiduciary duty, fraud, breach of contract, NASD Conduct Rule

violations, negligence, negligent supervision, respondeat

superior, and Securities Exchange Act violations.” In re

Arbitration Between David S. Kurke and Oscar Gruss & Sons,

Inc., No. 03-00749, 2004 WL 1207231, at *1 (NASD May 21,

2004) (italicization omitted). Kurke sought $1,600,000 in

compensatory damages and $2,000,000 in punitive damages.

Oscar Gruss denied Kurke’s allegations and asserted, inter alia,

the affirmative defenses of ratification and failure to mitigate

damages. Wagenheim also denied the allegations, and further

contended that he could not be held liable for the conduct of

Kurke’s broker on a respondeat superior theory because he

neither supervised the broker nor owned the company.

The arbitration panel heard testimony in April and May of

2004. Kurke testified that he and his wife were co-owners of a

small executive search firm. Although he had fifteen years of

investing experience, Kurke testified that he did not fully

comprehend the account statements that came from Oscar Gruss.

Some of the options trading information on Kurke’s statements,

he stated, “was way beyond what [he] could understand.”

Arbitration Hr’g Tr. at 702 (April 28, 2004). Kurke could,

however, decipher the monthly statements well enough to notice

that they revealed a high volume of unauthorized transactions

during the fall of 1999; Kurke’s broker had never sought, and

Kurke had never granted, permission for discretionary trading.

Kurke began calling the broker, Christopher Fong, to

complain about the unauthorized trades. Kurke testified that,

during their conversation, Fong said “he absolutely could not

rescind trades.” Id. at 692. Kurke also testified that Fong told

him:

[H]e couldn’t undo buys because they were already

there, and “there’s nothing [he could] do with them

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1

“Churning occurs when an account has been excessively traded

to generate commissions in contravention to the investor’s expressed

investment goals.” Caiola v. Citibank, N.A., New York, 295 F.3d 312,

324 (2d Cir. 2002) (internal quotation marks omitted).

except sell them at the right time.” And he assured me

they’d make money. . . . [H]e couldn’t undo sales

because they were no longer in the possession of the

company. He couldn’t put them back in my account.

Id. According to Kurke, Fong “kept promising me he’d fix it, to

trust him, that he could . . . turn this around.” Id. at 766. 

Kurke further testified that he “tried calling [Fong’s]

manager,” but that “nobody seemed to want to deal with it at

all.” Id. In April 2000, Kurke finally spoke with Wagenheim,

who represented that he was Fong’s superior and an owner of

Oscar Gruss. See id. at 771-72. Like Fong, Wagenheim told

Kurke “that none of the transactions could be undone.” Id. at

769. Wagenheim also “kept reiterating, ‘You really should not

. . . liquidate this stuff right now because it’s going to come

back,’” and “‘I can see this account . . . tripling in no time.’” Id.

at 782.

Geraldine Genco, an expert on securities industry standards,

also appeared before the arbitration panel. She testified that,

during October and November of 1999, Kurke’s account had a

turnover rate of over 65 -- more than 10 times the industry

standard for unlawful churning of an account. See id. at 1156-

57 (April 30, 2004); see also Genco Aff. ¶ 3 (June 30, 2004).1

Genco stated that this was “one of the highest excessive trading

cases” she had ever seen. Genco Aff. ¶ 3. She further opined

that there was unauthorized trading and that “the lack of

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2

The arbitration panel also heard from four other witnesses who

testified that Fong had defrauded them.

supervision over Mr. Kurke’s account was ‘intentional’ and

‘reckless.’” Id. ¶ 4.2

 

On May 21, 2004, the arbitration panel awarded Kurke

compensatory damages from both Oscar Gruss and Wagenheim.

See Arbitration, 2004 WL 1207231, at *2. The panel ordered

Oscar Gruss to pay Kurke $648,000, plus five percent interest

from May 1, 2000, until the amount was paid in full. The

arbitrators ordered Wagenheim to pay Kurke $58,000 at the

same rate of interest. Kurke’s claims for punitive damages and

attorneys’ fees, however, were denied.

On May 28, 2004, Kurke petitioned the district court for

enforcement of the arbitration award; the defendants

subsequently filed cross-motions to vacate it. On January 19,

2005, the district court granted Kurke’s petition and entered

judgment against the defendants for the full amount of the

award. See Kurke v. Oscar Gruss & Son, Inc., No. 04-0870,

Mem. Op. at 11 (D.D.C. Jan. 19, 2005). This appeal followed.

 II

As we have repeatedly recognized, “‘judicial review of

arbitral awards is extremely limited,’” and we “‘do not sit to

hear claims of factual or legal error by an arbitrator as [we

would] in reviewing decisions of lower courts.’” Teamsters

Local Union No. 61 v. United Parcel Serv., Inc., 272 F.3d 600,

604 (D.C. Cir. 2001) (quoting Kanuth v. Prescott, Ball &

Turben, Inc., 949 F.2d 1175, 1178 (D.C. Cir. 1991)). The

Federal Arbitration Act (FAA), 9 U.S.C. § 10(a), lists only four

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The four grounds are as follows:

(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(a).

4

Arbitration awards can also be vacated “if they are contrary to

some explicit public policy that is well defined and dominant and

ascertained by reference to the laws or legal precedents.” LaPrade,

246 F.3d at 706 (internal quotation marks omitted). Neither appellant

urges application of that standard here.

grounds upon which an arbitration award may be vacated.3

Neither Oscar Gruss nor Wagenheim contends that any of those

grounds is applicable here. 

In addition to the statutory grounds, “arbitration awards can

be vacated . . . if they are in manifest disregard of the law.”

LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 706

(D.C. Cir. 2001) (internal quotation marks omitted). This is the

ground upon which the appellants urge us to vacate Kurke’s

award. See Appellant Oscar Gruss Br. 3; Appellant Wagenheim

Br. 5.4

 “Manifest disregard,” however, is an extremely narrow

standard of review. It “means much more than failure to apply

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The next sentence in Kanuth reads: “‘Manifest disregard’ may

be found, for example, if the panel understood and correctly stated the

law but then proceeded to ignore it.” 949 F.2d at 1182 (emphasis

added). During the course of this appeal, the parties have disputed

whether the official version of the Kanuth opinion contains the aboveitalicized phrase, “for example, if,” or instead contains the words

“only if.” The parties’ confusion is understandable because the

Westlaw and Lexis databases have different versions of the opinion.

The correct version is that which appears in the first sentence of this

footnote.

the correct law.” Kanuth, 949 F.2d at 1182.5 Rather, to vacate

an award under that standard, we “‘must find that (1) the

arbitrators knew of a governing legal principle yet refused to

apply it or ignored it altogether[,] and (2) the law ignored by the

arbitrators was well defined, explicit, and clearly applicable to

the case.’” LaPrade, 246 F.3d at 706 (quoting DiRussa v. Dean

Witter Reynolds, Inc., 121 F.3d 818, 821 (2d Cir. 1997)). 

Moreover, when the arbitrators give no explanation for their

decision, as commonly occurs in arbitration and as occurred in

this case, we must confirm the award “if any justification can be

gleaned from the record.” GMS Group, LLC v. Benderson, 326

F.3d 75, 78 (2d Cir. 2003) (internal quotation marks omitted).

“Even where explanation for an award is deficient or

non-existent, we will confirm it if a justifiable ground for the

decision can be inferred from the facts of the case.” Duferco

Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383,

390 (2d Cir. 2003). In light of this “severely limited” standard

of review, it should come as no surprise that “obtaining judicial

relief for arbitrators’ manifest disregard of the law is rare.” Id.

at 389 (internal quotation marks omitted). 

We review a district court’s confirmation of an arbitration

award for clear error with respect to questions of fact and de

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novo with respect to questions of law. See LaPrade, 246 F.3d

at 706; see also First Options of Chi., Inc. v. Kaplan, 514 U.S.

938, 947-48 (1995). As the parties seeking to vacate the award,

Oscar Gruss and Wagenheim “bear[] the burden of

demonstrating that the arbitration panel acted in manifest

disregard of the law.” LaPrade, 246 F.3d at 706. We consider

Oscar Gruss’ arguments in Part III and Wagenheim’s in Part IV.

III

For purposes of this appeal, Oscar Gruss does not dispute

that Kurke’s account “was churned,” that “unauthorized trades

occurred” in the account, or that Oscar Gruss and its employees

“acted wrongfully.” Appellant Oscar Gruss Br. 4. It

nonetheless contends that Kurke is barred from recovering the

arbitrators’ award “as a matter of law.” Id.

Oscar Gruss proffers two arguments in support of its claim

that the arbitration panel’s award to Kurke was made in manifest

disregard of the law. First, the company contends that, under the

terms of his margin agreement, Kurke’s failure to object to the

unauthorized trades in writing within the stipulated time frame

effectively ratified those trades. Second, Oscar Gruss asserts

that Kurke’s failure to mitigate his damages after he became

aware of the unauthorized trading relieves the company of some

or all of its liability for Kurke’s losses. 

A

Kurke’s margin agreement with Oscar Gruss provided as

follows: “Reports of the execution of orders and statements of

my account shall be conclusive if not objected to in writing

addressed to the branch manager of the office servicing such

account(s) within five days and ten days, respectively, after

transmittal to me by mail or otherwise.” J.A. 396. Kurke

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concedes that he realized there was unauthorized trading in his

account by the fall of 1999 and that he did not object in writing.

Oscar Gruss contends that, by this failure to object, Kurke

ratified the transactions in his account.

There is, to be sure, substantial authority supporting Oscar

Gruss’ ratification theory. As the Second Circuit explained in

Modern Settings, Inc. v. Prudential-Bache Securities, Inc., a

case repeatedly cited by Oscar Gruss, “[t]he purpose” of a

written notification clause like that at issue here “is to require

the customer to memorialize his or her complaint soon after

receipt of the account statement rather than waiting to see if the

trade is profitable.” 936 F.2d 640, 645-46 (2d Cir. 1991). “The

writing requirement” also “insures that unauthorized trading

disputes are not relegated to ‘swearing contests’ between broker

and customer.” Id. at 646. “For these reasons, broker-customer

agreements requiring written notice of objection within a limited

amount of time after the customer receives confirmation of the

transaction generally have been enforced by courts.” Id.

(emphasis added). 

But as the Second Circuit’s use of the word “generally”

suggests, there are exceptions to the rule that ratification

agreements will be enforced. Modern Settings, itself, listed two.

First, “[t]here will be instances where a disparity in

sophistication between a brokerage firm and its customer will

warrant a flexible application of such written notice clauses.”

Id.; see Karlen v. Ray E. Friedman & Co. Commodities, 688

F.2d 1193, 1200 (8th Cir. 1982) (“When a customer lacks the

skill or experience to interpret confirmation slips, monthly

statements or other such documents, courts have generally

refused to find that they relieve a broker of liability for its

misconduct.”). Second, “a broker may be estopped from raising

a defense based on the written notice clause if the broker’s own

assurances or deceptive acts forestall the customer’s filing of the

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required written complaint.” Modern Settings, 936 F.2d at 646;

see Widell v. Wolf, 43 F.3d 1150, 1151 (7th Cir. 1994) (refusing

to overturn an arbitration award, despite the customer’s failure

to object to unauthorized trades promptly after receiving account

statements as required by his account agreement, because his

broker told him to disregard the statements); RESTATEMENT

(SECOND) OF AGENCY § 416 (1958) (stating that ratification is

not a defense when the principal “is caused to ratify by the

misrepresentation . . . of the agent”). 

This circuit has suggested a third exception, albeit in a case

in which it is unclear whether there was a written notice

agreement. In Merrill Lynch Pierce Fenner & Smith, Inc. v.

Cheng, we held that “[r]atification occurs only when the

customer, with full knowledge of the facts, manifests his

intention to adopt the unauthorized transaction.” 901 F.2d 1124,

1129 (D.C. Cir. 1990). Because the investors in Merrill Lynch

“were not advised of their right to reject the unauthorized

trades,” we concluded that “as a matter of law, there could not

have been ratification.” Id.

Evidence supporting all three of these exceptions was

before the arbitrators in this case. Although Kurke was not an

inexperienced investor, the arbitrators could have credited his

testimony that he did not comprehend the highly complicated

options trades contained in his monthly account statements. The

district court found that “many of Mr. Fong’s transactions were

‘way beyond what [Kurke] could understand,’” Kurke, Mem.

Op. at 2-3 (quoting Arbitration Hr’g Tr. at 702 (April 28,

2004)), and we cannot say that this finding was “clear error,”

LaPrade, 246 F.3d at 706.

The arbitrators could also have found “assurances or

deceptive acts” that “forestall[ed] the customer’s filing of the

required written complaint.” Modern Settings, 936 F.2d at 646.

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There is certainly evidence of such lulling, including Fong’s

“promis[es]” that “he’d fix it,” that Kurke should “trust him,”

and “that he could . . . turn this around.” Arbitration Hr’g Tr. at

766 (April 28, 2004). In addition, there is evidence, as there was

in Merrill Lynch, that Kurke was “not advised of [his] right to

reject the unauthorized trades.” 901 F.2d at 1129. Indeed,

Kurke testified that Fong told him that “he absolutely could not

rescind the trades.” Arbitration Hr’g Tr. at 692 (April 28, 2004).

He “couldn’t undo buys,” Fong told Kurke, “because they were

already there,” and “he couldn’t undo sales because they were

no longer in the possession of the company.” Id. Under these

circumstances, we can readily “discern [a] colorable justification

for the arbitrator[s’] judgment,” GMS Group, 326 F.3d at 78,

and cannot say that their award was made in manifest disregard

of the law regarding ratification. 

B

Oscar Gruss’ second argument is that Kurke failed to

mitigate or minimize his damages. According to Oscar Gruss,

once Kurke learned of Fong’s unauthorized trading and churning

in the fall of 1999, he should have immediately “minimize[d] his

alleged damages by liquidating the allegedly unauthorized or

improper purchase transactions.” Appellant Oscar Gruss Br. 28.

Kurke’s failure to liquidate his account until its value fell to

$39,000 should, the company argues, relieve it of some, if not

all, financial responsibility.

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Kurke’s margin agreement stipulated that “[t]his contract shall

be governed by the laws of the State of New York,” J.A. 396, and the

Oscar Gruss branch that handled Kurke’s account was located in New

York. Although the parties’ briefs moot the choice of law issue, and

Oscar Gruss argues that New York law should apply, no party

suggests that the outcome of the case depends upon which

jurisdiction’s law applies.

Although “New York’s6 courts adhere to the universally

accepted principle that a harmed plaintiff must mitigate

damages,” Air Et Chaleur, S.A. v. Janeway, 757 F.2d 489, 494

(2d Cir. 1985), “the test applied to plaintiff’s conduct is whether

the action taken in response to the defendant’s breach was

reasonable,” Novelty Textile Mills, Inc. v. C.T. Eastern, Inc., 743

F. Supp. 212, 219 (S.D.N.Y. 1990); see Air Et Chaleur, 757

F.2d at 494; Appellant Oscar Gruss Br. 26-27 (citing New York

cases stating that a plaintiff’s efforts at mitigation are governed

by a reasonableness standard). “If the course of conduct chosen

by the plaintiff was reasonable, the plaintiff can recover despite

the existence of another reasonable course of action that would

have further lessened plaintiff’s damages.” Novelty Textile, 743

F. Supp. at 219 (citing Federal Ins. Co. v. Sabine Towing &

Transp. Co., 783 F.2d 347, 350 (2d Cir. 1986)). Moreover, “the

burden of showing that a plaintiff has unreasonably failed to

minimize damages rests with the wrongdoer,” in this case with

defendant Oscar Gruss. Id. at 218; see Air Et Chaleur, 757 F.2d

at 494; see also id. at 494-95 (upholding the district court’s

determination that the defendant failed to satisfy its burden

because it failed to show what costs the plaintiffs would have

incurred had they attempted to sell the controverted stock).

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Indeed, it is not even clear that they did reject the argument.

Kurke sought $1,600,000 in compensatory damages, but the panel

awarded him only $648,000. Although the panel did not explain how

it arrived at that figure, it is possible that the amount the panel

awarded -- which was substantially less than the reduction in value of

Kurke’s account from December 31, 1999 to April 30, 2000 --

reflected the panel’s judgment that Kurke had at least partially failed

to mitigate.

The arbitrators did not manifestly disregard the law by

rejecting Oscar Gruss’ mitigation argument.7

 When Kurke

became aware of Fong’s unauthorized trading, he repeatedly

called Fong to complain. Kurke testified that Fong told him he

could not rescind the trades and lulled him into believing that

the problem would be remedied. Fong told Kurke that there was

“‘nothing [he could] do with [the shares in the account] except

sell them at the right time,’” and he “assured [Kurke] they’d

make money.” Arbitration Hr’g Tr. at 692 (April 28, 2004).

Fong “kept promising [Kurke] he’d fix it, to trust him, that he

could . . . turn this around.” Id. at 766. Under these

circumstances, the arbitrators may well have concluded that it

was reasonable for Kurke to believe that the churning and

unauthorized trading would cease, and that the best way to

mitigate his losses was to leave the account in Fong’s hands so

that he could “turn this around.” Id. 

C

In reviewing the decision of an arbitration panel, we do not

decide whether we would have assessed either the facts or the

law in the same manner as the panel. See United Paperworkers

Int’l Union v. Misco, Inc., 484 U.S. 29, 38 (1987); Kanuth, 949

F.2d at 1178; GMS Group, 326 F.3d at 77-78. Our only task is

to determine whether the panel manifestly disregarded the law.

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8

See United States v. Gartmon, 146 F.3d 1015, 1029 (D.C. Cir.

1998) (“We may dispense with [appellant’s] contention without

further discussion because [appellant] waived it by failing to raise it

below.”); Grant v. United States Air Force, 197 F.3d 539, 542 (D.C.

Cir. 1999) (“‘Absent “exceptional circumstances,” the court of appeals

is not a forum in which a litigant can present legal theories that it

neglected to raise in a timely manner in proceedings below.’” (quoting

Tomasello v. Rubin, 167 F.3d 612, 618 n.6 (D.C. Cir. 1999))). 

For the foregoing reasons, we conclude that the panel did not do

so in rejecting Oscar Gruss’ ratification and mitigation defenses.

IV

Philip Wagenheim appeals the arbitration award against him

on three grounds. First, he adopts the Oscar Gruss arguments

that we have rejected above. Second, he argues that the

arbitrators applied the wrong interest rate to the arbitration

award, an argument that he did not make in the district court and

that we therefore decline to hear.8

 Finally, he maintains that the

arbitrators manifestly disregarded the law by holding him

vicariously liable for Fong’s unauthorized trading on Kurke’s

account. We address that contention here.

The premise of Wagenheim’s argument is that he cannot be

held liable for Fong’s misdeeds under a respondeat superior

theory because “there was no evidence sufficient to support a

finding that [he] was an owner of the investment firm or

supervisor of the broker involved.” Appellant Wagenheim Br.

1. That factual assertion is simply incorrect. It is certainly true

that Wagenheim testified that he was never a branch manager or

compliance officer, and that he had no ability to hire or fire

Oscar Gruss employees. See Arbitration Hr’g Tr. at 259-61,

429-30 (April 27, 2004). But Wagenheim’s was not the only

testimony before the arbitrators.

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Kurke testified that he spoke by telephone with

Wagenheim, who represented that he was Fong’s superior and

an owner of Oscar Gruss. See id. at 771 (April 28, 2004).

Kurke recounted Wagenheim as saying that he “owned the

company,” id., that “he made the hiring decisions,” id. at 772,

and that he had personally hired Fong despite knowing of a

“blemish” on his record, id. Wagenheim also told Kurke that,

if Kurke were to sue Fong, Wagenheim would “end up paying

for it.” Id. at 774. “It’s going to come out of my pocket,”

Wagenheim said. Id.

Wagenheim argues that Kurke’s testimony inaccurately

characterized the telephone conversation between them, and that

tape recordings of this and other calls -- which were played for

the arbitrators -- “do not support” Kurke’s testimony. Appellant

Wagenheim Br. 4. According to Wagenheim, “[w]hat the tape

recordings show is that Mr. Wagenheim was referring to his

branching off as of May 1, 2000, to set up his own company,”

and not to his status at Oscar Gruss. Id. 

Although the tape of an April 19, 2000, call does contain

some discussion of a future venture, it also records Wagenheim

telling Kurke: “I founded the Private Client Group of Oscar

Gruss, where your account is being managed.” Arbitration Hr’g

Tr at 274 (April 27, 2004). The tape of a call between the two

men on the previous day records Wagenheim as saying: “[Y]ou

know, I run the place.” Id. at 269. Referring to Oscar Gruss

employees, including the firm’s compliance officer, Wagenheim

said in that call: “These are all people that I employ. These are

people that I pay their paycheck -- or that Oscar Gruss pays their

paychecks -- but through funds that we give them.” Id. at 270.

And in a telephone call recorded the week before, Amy Cernitz,

the manager of the Oscar Gruss branch at which Kurke had his

account, described Wagenheim to Kurke as follows: “[H]e’s

one of the Senior Managing Partners here. . . . He’s Chris

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[Fong]’s boss. He’s fully aware of the situation with you and

Chris.” Id. at 265.

The principal case that Wagenheim cites to dispute the

arbitration panel’s finding of vicarious liability is In re Irvine

Sensors Corp., No. 02-159, 2003 U.S. Dist. LEXIS 18397 (C.D.

Cal. Sept. 22, 2003). There, the court held that, in order to

establish vicarious liability, a plaintiff must demonstrate: “(1)

a primary violation of securities law, and (2) the individual

exercised actual power or control over the primary violator.” Id.

at *8. Wagenheim does not dispute that the first criterion is

satisfied here. And Kurke’s testimony was certainly sufficient

to satisfy the second. In these circumstances, we cannot

conclude that the arbitrators’ finding of vicarious liability was

made in manifest disregard of the law.

V

The “manifest disregard of the law” standard for

overturning an arbitration award is manifestly difficult to satisfy.

At best, the appellants have suggested that the arbitrators relied

upon debatable points of law or disputable issues of fact.

Neither is sufficient to establish manifest disregard. See Kanuth,

949 F.2d at 1178. Accordingly, the judgment of the district

court is 

Affirmed.

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