# U nit edSta tes C ou rt o f A pp eal s For t h e Firs t C ircu it

No. 09-1356 KASHNER DAVIDSON SECURITIES CORP., VICTOR L. KASHNER,

MATTHEW MEISTER, TIMOTHY VARCHETTO, Plaintiffs, Appellees,

v . STEVEN MSCISZ, MARK MSCISZ, LYNDA MSCISZ,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Mark L. Wolf, U.S. District Judge]

Before Lipez, Stahl, and Howard, Circuit Judges.

Joh n A . Stern, Greenberg Traurig LLP, with whom Jason C. Moreau was on brief, for appellants. Richard J. Babnick, Jr., Sichenzia Ross Friedman Ference LLP, with whom Marc J. Ross was on brief, for appellees.

April 1, 2010-2- LIPEZ, Circuit Judge . This matter is before us for the second time. In Kashner Davidson Securities Corp. v. Mscisz, 531 F.3d 68, 79 (1st Cir. 2008), we held that the arbitration award at issue in this case must be vacated because the arbitrators acted in manifest disregard of the l a w . W e did not specify what, if anyt h i n g , t h e d i s t r i c t c o u r t s h o u l dd o a f t e r v a c a t i n g t h e a w ard. On remand, the district court entered an order vacating the arbitration award and remanding the matter to the arbitral body for further proceedings. It then denied the appellants' motion under Federal Rule of Civil Procedure 60(b) for relief from the remand order. The appellants now challenge both the remand order and the order denying their Rule 60(b) motion, arguing that both contravene our mandate.

For the reasons that follow , w e affirm the decision of the dis t r i c t c o u rt to issue the remand order. However, we also direct the district court to clarify its position on whether the arbitration should proceed before the same panel of arbitrators or a newly constituted panel.
I.

The background facts are recounted in detail in our previous opinion. See Kashner Davidson, 531 F . 3 d a t 7 1-74. In 2004, the underlying dispute between appellants Steven Mscisz, Mark Mscisz, and Lynda Mscisz ("the Customers") and appellee Kashner Davidson Securities Corp. ("Kashner Davidson") was submit ted toOur judgment was phrased in materially identical 1 language. Kashner Davidson has suggested that our mandate left the money damages portion of the arbitration award untouched. That is not correct. We instructed the district court to vacate the entire award, which it did. -3- arbitration before the National Association of Securities Dealers ("NASD"). A panel of three arbitrators found the Customers jointly and severally liable to Kashn e r Davidson for $421,000 in compensatory damages, attorneys' fees, and costs. The panel also dismissed the Customers' counterclaims and third-party claims with prejudice as a sanction for the Customers' failure to comply with a discovery order.

The district court confirmed that award, and the Customers appealed to this court. We held that the arbitration panel improperly dismissed the Customers' counterclaims and third-party claims as a sanction of first resort rather than a sanction of last resort, noting that the NASD Code of Arbitration Procedure provides for dismissal of a claim or defense as a sanction only when "lesser sancti o n s have proven ineffective." Kashner Davidson, 531 F.3d at 76. We concluded that the dismissal reflected the arbitration panel's "intentional and willful disregard of the clear and unequivocal language" of the NASD rules, which under our circuit precedent was sufficient to justify vacatur

o f t h e award. Id. at 79. Consequently, we "reverse[d] the decision of the district court and remand[ed] the case for entry of an order vacating the arbitration award." Id. 1The Custome r s styled their motion as a "Motion for 2 Reconsideration" under Federal Rule of Civil Procedure 7(b) and District of Massachusetts Local Rule 7.1, which are general rules governing motion practice. In its opposition, Kashner Davidson construed the mot i o n a s o n e for relief from an order under Rule 60(b). The Customers adopted that characterization in their reply brief. N o t h i ng in this appeal turns on the precise grounding of the motion in the rules; for clarity, we will refer to it as a Rule 60(b) motion. -4-

After we filed our opinion, but b e fore the mandate issued, counsel for Kashner Davidson sent a letter to the district court judge. Referring to th e F inancial Industry Regulatory
Aut h o r i t y ("FINRA"), the successor organization to the NASD, counsel requested that "the Court remand the matter to FINRA and direct FINRA to reconstitute the original Arbitration Panel . . . for further proceedings consistent with the [Court of Appeals'] decision." There is no indication in the record that the district court took any immediate steps in response to the letter. Once our mandate had issued, the district court entered an order vacating the arbitration awar d a n dremanding the matter to FINRA "for further proceedings consistent w i t h the First Circuit's opinion." The district court's remand order did not address whether the original arbitration panel should be reconstituted.

The Customers then filed a brief moti o n in which they argued that a remand to FINRA was inappropriate because the judgment on appeal did not mention such a r e m a n d
. T reating the Customers' motion as one for relief from an order pursuant to Fed.
R. Civ. P. 60(b), Kashner Davidson argued that t h e C u stomers' 2-5-

perfunctory motion did not demonstrate an entitlement to relief under the exacting requirements of that rule. It requested that the district court "allow the parties to work towards reaching a final res o l u tion of this dispute before the original FINRA arbitrators by allowing FINRA t o hold further proceedings consistent with the First Circuit's Decision." In a reply brief, the Customers added that even if a remand to FINRA were appropriate, "established c a s e law mandates the composition of a new panel when, as here, the initial panel manifestly disregarded the law." The district court denied the Customers' m o t ion in a brief electronic order: "Essentially fo r t he reasons stated in [Kashn er Davidson's] Opposition, this motion is hereby DENIED." The Customers then initiated the present appeal, which challenges both the district court's remand order and its electroni c order denying the Customers' Rule 60(b) motion.
II. We have jurisdiction to review the di s trict court's

o r d e rs under section 16 of the Federal Arbitration Act. See 9 U.S.C. § 16(a)(1)(E); Bull HN Info. Sys. v. Hutson, 229 F.3d 321, 327-28 (1st Cir. 2000).

Before turning to the Customers' arguments, we address an issue raised in the appellees' brief. Kashner Davidson argues that a recent Supreme Court decision, Hall Stree t Assocs. v. Mattel,-6-

Inc., 552 U.S. 576 (2008), undermines our earlier mandate in this case. In Hall Street, the Supreme Court held that the grounds for prompt vacatur or modification of an arbitral award enumerated in the Federal Arbitration Act, 9 U.S.C. §§ 10-11, are exclusive and may not be supplemented by contract. 552 U.S. at 584. Kashner Davidson contends that our holding in the first appeal -- that the award must be vacated because the arbitrators manifestly disregarded the law -- is in conflict with Hall Str e e t because manifest disregard of the law is not explicitly listed as a ground for vacatur in section 10 of the FAA.

The continued vitality of the manifest disregard doctrine in FAA proceedings is a difficult and important issue that the courts have only begun to resolve. See, e.g., Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir. 2009) (manifest disregard of the law is no longer an "independent, nonst a t utory ground" for setting aside an arbitration award); Comedy Club, Inc. v. Improv West Assocs., 553 F.3d 1277, 1281 (9th Cir. 2009) (manifest disregard of the law "remains a valid ground for vacatur of an arbitration award under § 10(a)(4) of the Federal Arbitration Act"); Stolt-Nielsen SA v. AnimalFe e d s I nt'l Corp., 548 F.3d 85, 94-96 (2d Cir. 2008) (manifest disregard doctrine is "a j u d i c i al gloss on the specific grounds for vacatur enumerated in section 10 of the FAA" ) , c e r t . granted on other grounds, 129 S. Ct. 2793 (2009). We have referred to the issue in dicta, see Ramos-SantiagoWe not e that the recall of a mandate is ordinarily 3 requested b y m o t i on. See 20A James Wm. Moore et al., Moore's Federal Practice § 341.11 (3d ed. 2009). Contrary to the usual practice, Kashner Davidson raised the issue for the first (and only) time in its brief on appeal. We do not intend our discussion to suggest approval of the manner in which the argument was raised.

Compare United States v. Fraser, 407 F.3d 9, 10-11 (1st 4 Cir. 2005) (per curiam) (declining to recall ma n d a t e ); Conley v. United States, 323 F.3d 7, 14 (1st Cir. 2003) (sam e ) ; Boston & Maine Corp. v. Town of Hampton, 7 F.3d 281, 283 (1st Cir. 1993) (same); Powers v. Bethlehem Steel Corp., 483 F.2d 963, 964-65 (1st Cir. 1973) (same); Legate v. Maloney, 348 F.2d 164, 166 (1st Cir. 1965) (same); Haverhill Gazette Co. v. Union Leader Corp., 333 F.2d 808, 809-10 (1st Cir. 1964) (same), with Alsamhou r i v . Gonzales, 471 F.3d 209, 209-10 (1st Cir. 2006) (recalling mandate where an asylum seeker subject to removal raised a "serious" jurisdictional argument, and the Supreme Court had no t y et acted on a pending petition for writ of certiorari); In re: U n i ó n Nacional de Trabajadores , 527 F.2d 602, 604 (1st Cir. 1975) (per curiam) (recalling writ of mandamus where the original decision requiring the district court to hold an "unprecedented" j u ry trial was "demonstrably w r o n g and created manifest injustice"). We have occasionally recalled a m andate for the purpose of correcting a clerical error or matter of form. See, e.g., Estate of Abraham v. -7- v. United Parcel Serv., 524 F.3d 120, 124 n.3 (1st Cir. 2008), but have not squarely deter m i n ed whether our manifest disregard case law can be reconciled with Hall Street.

In an effort to have us decide that issue now, Kashner Davids o n h a s a s k e d u s t o t a k e t h e u n u s u a l s t e p o f r e c a l l i ng our earlier mandate. We will not oblige. The power to recall a 3

man d a t e i s "one of last resort, to be held in reserve against grave, unforeseen contingencies." Calderon v. Thompson, 523 U.S. 538, 550 (1998). We have exercised that power sparingly over the course of many y e ars, recalling mandates in only the most extraordinary circumstances. 4Comm'r, 429 F.3d 294 (1st Cir. 2005). That is not the situation

presented here.

Th e S u p r e m e C o u r t d e c i d e d H a l l S t r e e t o n M a r c h 25, 5 2008 -- after we heard oral argument in the first appeal but before we issued our decision. Kashner Davidson could have submitted a letter bringing Hall Street to our attention while the first appeal was pending. See Fed. R. App. P. 28(j). Once the a p p e a l was decided, it could have requested panel rehearing and/or rehearing en banc. See Fed. R. App. P. 35, 40. It could have petitioned the Supreme Court for a writ of ce r t i o r a r i. See Sup. Ct. R. 12, 13. On remand, it could have attempte d to show that "exceptional circumstances" justified deviation from our mandate. United States v. Wallace, 573 F.3d 82, 89 (1st Cir. 2009). -8- Kashner Davidson's current predicament is hardly extraordinary. The com p a n y failed to take advantage of numerous earlier opportunities to raise the Hall Street argument through ordinary procedures. Most immediately, it could have cross- 5 appealed in this proceeding from the district court's remand order and urged us to revisit our previous decision under ordinary law of the case principles. See Nkihtaqmikon Nkihtaqmikon v. Impson, 585 F.3d 495, 498 (1st Cir. 200 9 ) ( "We could revisit our own earlier decision if [the appellant] could show that controlling legal authority has changed dramatically; proffer significant new evidence, not earlier obtainable in the exercise of due diligence; or convince the court that a blatant error in the p r i o r decision will, if u n c orrected, result in a serious injustice.") (internal quotation marks and citations omitted). Kashner Davidson did not do so, and now it is faced with the well-settled rule that an appellee who fails to file a cross-appeal may "urge in support ofWe note that this is an odd position for the Customers to 6 take. They specifically asked for a remand in the district court and in the first appeal. -9- a d e c ree any matter appearing in the record" but may not "attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary." El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999) (quoting United States v. Am. Ry. E x p r ess Co., 265 U.S. 425, 435 (1924)); see also Greenlaw v. United States, 128 S. Ct. 2559, 2564 (2008).

Considering the circumstances, we cannot say that we are faced with the sort of "grave, unforeseen contingenc[y]" that would justify the recall of a mandate. Thompson, 523 U
. S . a t 550. By strategic choice or through lack of diligence, Kashner Davidson waited until the last possible moment to raise its Hall Street argument. It cannot now circumvent t he cross-appeal rule by invoking a remedy reserved for extraordinary situations. Kashner Davidson's request is denied.
III.

The Customers advance t w o arguments on appeal. First, they argue that the district court's remand order contravenes our mandate because we did not direct the district court to remand the
matter to FINRA. Seco n d , they argue that the district court 6 abused its discretion in denying the Rule 60(b) motion. Although the second argument is p r i m a r ily a reformulation of the first argument, we address it separately because the parties have raised-10-

distinct concerns about the scope of the district court's Rule 60(b) order. A. Remand Order

The applicable legal principles are straightforward. Subject to a few n a r r ow exceptions not implicated here, "[a]n
ap p e l l a t e c o u r t ' s m a n d a t e c o n t r o l s a l l i s s u e s t h a t w e r e a c t u ally considered and d ecided by the appellate court, or as were necessarily inferred from the disposition on appeal." NLRB v. Goodless Bros. Elec. Co., 285 F.3d 102, 107 (1st Cir. 2002) (internal quotation marks and citations omitted). At the same tim e , "issues that were not decided by the appellate
court . . . are not affected by the mandate." De Jesús-Mangual v. Rodríguez, 383 F.3d 1, 6 (1st Cir. 2004).

When we decided the first appeal, we instructed the dis t r i c t court to enter an order vacating the arbitration award. Kashner Davidson, 531 F.3d at 79. We did not say what, if anything, the district court should do a f ter that. Id. The Custo m e r s seize on that silence, arguing that the district court "impermissibly exceed[ed] the scope of [the] mandate" by issuing a remand order "in the absence of any language
. . . directing it to do so." Their argument rests on a faulty premise, however. The district court was not constr a i n e dto perform only those actions that we specifically listed in the mandate. Although "the mandate of an appellate court forecloses the lower court from reconsidering-11-

matters determined in the appellate court, it leaves to the [lower] court any issue not expressly or impliedly disposed of on appeal."
B i g g i n s v . Hazen Paper Co., 111 F.3d 205, 209 (1st Cir. 1997) (internal quotation marks and citation omitted); see also Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 168 (1939) ("While a mandate is controlling as to matters within its compass , o n the remand a lower court is free as to other issues.").

The dispositive question is thus whether we explicitly or implicitly decided that a remand to FINRA was inappropriate. There is no serious contention that we did so explicitly; our mandate simply did not address the subject. Nor did we decide the issue by necessary implication. As the Customers acknowledg e d below, the FAA provides that a district court "may, in its discretion, direct a rehearing by the arbitrators" after a n a w a r d is vacated. 9 U.S.C. § 10(b). In the closely related context of labor arbitration, the Supreme Court has indicated that remand will often be "the appropriate remedy" following vacatur of an award. Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 511 (2001) (per curiam) (emphasis added); see also United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 41 n.10 (1987). Nothing in our mandate touched on these background rules, l e t alone abrogated them. The Customers contend that remand is incompatible w i th our holding that the entire arbitration award must be vacated in-12-

light of the arbitrators' actions. On their view, fresh arbitration proceedings must be initiated because a fair proceeding b e f o r e t h e same panel of arbitrators is not possible. As the Customers conceded at oral argument, however, the question of whether a new panel of arbitrators should be constituted on remand is distinct from the question of whether a remand is appropriate at all. We address the issue of panel composition below. There is no suggestion that FINRA itself is biased or incapable of providing a fair arbitration proceeding.

Because our mandate did not explici t l y or implicitly prohibit the district court from remanding this matter to FINRA for further proceedings, we reject the Customers' argument that the remand order contravened the mandate. B. Rule 60(b) Order

The Customers' discussion of the Rule 60(b) order is, for the most part, a reformulation of their argument regarding the remand order. One ancillary issue deserves attention, however. The d i strict court denied the Customers' Rule 60(b) motion "[e]ssentially for the r easons stated in [Kashner Davidson's] Opposi t i on." The Customers suggest that this language could be read as " t a c it approval" of Kashner Davidson's argument that the district court intended to re m a nd the matter to the original arbitration panel. Kashner Davidson did take this position in its opposition to the Customers' Rule 60(b) motion. Kashner Davidson-13-

goes further, flatly stating that the district court "remanded this arbitration dispute back to FINRA's original arbitration panel for further proceedings . . . ." FINRA was also confused by the original remand order, stating in a letter that "counsel will need to seek clarification from the district court on the remand issue before FINRA will proceed with this case."

Although we have decided to a f f i rm the remand order of the district court, we are also going to remand this matter to the district court so that it can consider the parties' arguments and then specify whet h e r (1) a new arbitration panel should be

c o n s tituted, (2) the original arbitration panel should be reconstituted, or (3) FINRA should decide the issue i n t he first instance a c cording to its own practices and procedures. The resolution of that issue lies within the sound discretion of the district court. See Aircraft Braking Sys. Corp. v. Local 856, United Auto
. , A e rospace & Agric. Implement Workers, 97 F.3d 155, 162 (6th Cir. 1996); 1 Martin Domke et al., D o m k e o n Commercial Arbitration § 40:6 (3d ed. & Supp. 2009); 4 Thomas H. Oehmke, Commercial Arbitration § 155:4 (3d ed. & Supp. 2009).
IV.
T h i s m a t t e r i s REMANDED to the district court for the limited purpose of clarifying the terms of its remand order, as described in this opinion. In all other respects, the district-14-

c o u r t ' s remand order and order denying the Customers' Rule 60(b) motion are AFFIRMED . Each party shall bear its own costs.

SO ORDERED
.