United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 97-1857

___________ Jerald R. Kiernan; * Andrew D. Kiernan, *
* Claimants - Appellants, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota. Piper Jaffray Companies, Inc., * a Delaware corporation; * Piper Jaffray, Inc., formerly known as * Piper Jaffray & Hopwood, Inc., * a Delaware corporation, *
* Respondents - Appellees. *

___________ Submitted: November 19, 1997 Filed: February 25, 1998

___________ Before BOWMAN, BRIGHT, and MURPHY, Circuit Judges.

___________ MURPHY, Circuit Judge. Appellants Jerald and Andrew Ki ernan submitted claims related to their alleged unlawfu ltermination by Piper Jaffray, Inc. to the National Association of Securitie s Dealers (NASD) for

arbitration before a three-member panel. After the panel handed down an award in favor of Piper Jaffray, the Kiernans filed a motion in the districtThe Honorable James M. Rosenbaum, United States District Judge for th e 1 District of Minnesota. The parties disagree as to whether th e Kiernans were fired or resigned after the 2 letter was sent to Jerald Kiernan’s clients; the Kiernans claim they were both termi nated at the time, and Piper Jaffray claims that Jerald Kiernan remained o n longterm disability status until he resigned to go to PaineWebber.
-2- cour t to vacate the award on the grounds that one of the arbitrators had failed t o 1 disclose relationships allegedly showing evident partiali ty in favor of Piper Jaffray, that the dispute was not arbitrable, and that the panel had demonstrated a m anifest disregard for the law. The motion was denied and the Kiernans appeal. We affirm.

After twe nty years as a highly successful stock broker at Piper Jaffray, Jeral d Kiernan suffered a cardiac arrest in January 1992 during which he experienced acute oxygendeprivation to the brain. The resulting brain damage left him with cognitiv e deficits in the areas of memory, learning ability, and executive functioning. One year later, h is physician recommended that he return to work on a limited basis in order to try a team approach, in which other brokers would handle details and tasks in the areas where h e experienced difficulty. Piper Jaffray allowed him to return to work i n February 1993 with the assistance of his son, Andrew Kiernan, and to serve as a n advisor to t he brokers who had been working with his clients in his absence. Afte r experimenting with this arrangement, Piper Jaffray decided that it was not working out and placed the Kiernans on l eave at the end of April. During this time, they hired two neurop sychologists and a vocational rehabilitation specialist to evaluate Jeral d Kiernan’s ability to return to work in any capacity. On July 28, 199 3, without notifying him, Piper Jaffray sent a letter to Kiernan’s clients stating he was no longer capable of performing the essential functions of an investment executive and he would not b e returning to Piper Jaffray. In October 1993 bo th Kiernans were hired by PaineWebber to work as a team of investment executives. 2There is some dispute about whether the claims were submitted for arbitration 3 be fore or after the case was filed in state court. The Kiernans signed an NAS D statement of arbitration claim on February 11, 1994 and an NASD submissio n agreement on February 16 and notified Piper Jaffray of their intent to submit the claims to arbitration on February 17. Because the submission agreement was not properl y notarized, the NASD returned it to the Kiernans and it was not officially filed unti l sometime in March. Piper Jaffray filed its statement of answer with the NAS D on April 12, 1994 and signed its own submission agreement on May 5, 1994.
-3- On Februar y 17, 1994, the Kiernans filed an action in state court allegin g violations of Title I of the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101 et seq. and the Minnesota Human Rights Act (MHRA), Minn. Stat. §§ 363.01 et seq., defamati on, breach of contract, and other state law claims. Around the same time, 3 they sought arbitration of these claims under NASD rules. The parties subsequentl y st ipulatedto a stay of the state court proceedings because they agreed to resolve th e claims through NASD arbitration. On March 5, 1996, after fourteen days of hearings

over five months, the arbitration panel denied relief to the Kiernans on all of thei r claims. The Kiernans applied to the pan el for modification and correction of its award

on the groun ds that it had misapplied the burden of proof under the ADA and th e MHRA and that i t had failed to consider evidence relevant to determining the truth of the a llegedly defamatory statement made in the Piper Jaffray letter. They did not , howe ver, challenge the impartiality of the panel members. The application fo r modification was denied on May 1, 1996.

The Ki ernans then filed a motion in the district court to vacate the arbitratio n award under the Federal Arbitration Act (FAA), 9 U.S.C. § 10(a)(2), claiming that one of the three arbitrators on the panel, Mary Powers, failed to investigate and disclos e rela tionships which they alleged showed evident partiality in favor of Piper Jaffray

. The y contended that several of the directors, officers, and shareholders of Powers ’ employer (and its holding company ) had relatives who had business relationships with Piper Jaffray and that she had a duty to disclose these relat ionships. Although they had-4-

le arned about some of the relationships through Powers’ amended disclosures to th e parties before the arbitration award, they claimed that the NASD gave them no rea l choice but to allow her to remain on the panel. They also argued that the arbitration

was void because they had never waived their right to bring their claims in court and because the panel’s decision reflected a manifest disregard for the law.

Chief M agistrate Judge Franklin L. Noel issued a report and recommendatio n denying the motion which was adopted by the district court after a de novo review

. Th e magistrate judge determined that the relationships cited for Powers were to o tenuous to show evident partiality and tha t the Kiernans had waived this claim anyway by choosing to proceed wit h the arbitration with Powers on the panel. The magistrate judge a lso concluded that the Kiernans waived any limitation on the arbitrators ’ authority to decide the issues by vol untarily submitting all of their claims to arbitration and that there was no evidence the arbitrators knew and purposefully disregarde d applicable law.

Ord inary standards of review apply on an appeal from an order declining t o vacate an arbitration award, with conclusions of law reviewed de novo an d any findings of fact reviewed for clear error. See First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 947-48 (1995).

The Kiernans argue on appeal that Powers did not disclose a close busines s
re lationship with a party to the arbitration and that this establishes evident partiality , warran ting vacation of the arbitration award under 9 U.S.C. § 10(a)(2). Se e Common wealth Coatings Corp. v. Continental Casualty Co. , 393 U.S. 145, 147-5 0 (19 68). They contend that under this court’s decision in Olson v. Merrill Lynch , Pier ce, Fenner & Smith, Inc. , 51 F.3d 157, 159-60 (8th Cir. 1995), Powers wa s required to disclose her business associates’ indirect ties w ith Piper Jaffray because the

re lationships in question “create[] an impression of possible bias.” Id. (quotin g Commonwealth Coatings , 393 U.S. at 149).At the time he resigned from the board, Jaffray demande d immediate repayment 4 of a $100,000 loan he had made to Dublin in September 1995, and in February 1996 he sued Dublin and Sheffield for repayment of the loan plus interest, c osts, and attorney fees.
-5- The Kiernans complain a

bout two sets of indirect connections between Powers’

em ployer, Sheffield Securities, its holding company Dublin Investments, and Pipe r Jaffray. The first involves Benjamin (Ben) Jaff ray. Ben Jaffray’s late uncle had helped found Piper Jaf

fray in 1913; he died in 1971. After the arbitration hearings closed but before the award, in

early December 1995 the Kiernans read in an article in Corporate Report that Ben Jaffray had bee n one of the founders of Sheffield and that Powers was the chief operating officer (COO) and president of the firm. Powers had disclose d during the arbitration that she was affiliated with Sheffield, bu t none of the other details. The Kiernans’ counsel, Daniel Boivin, wrote to the NASD about the art icle, and Powers provided an amended disclosure stating that Jaffray had served on the board of directors of Sheff ield’s holding company but had resigned on November 7, 1995, that to he r 4 knowledge he was not and never had been associated with Piper Jaffray, and that these facts had not and would not affect her ability to be impartial.

After the amended di sclosure, Boivin discussed the Kiernans’ options under the circumstances with the assistant director of the NASD arb itration department and asked that the hearings be reopened in order to inquire into Powers’ relationship with Be n Jaffray and to subpoena him for the same purpose. The NASD refused to grant these requests, but it allowed the Kiernans to s ubmit written questions to Powers so that they could decide whether to object to her continuing to serve on the arbitration panel

. Attached to the written questions was a July 1994 amendment to Sheffield’s application to th e Securities and Exchange Commission (S.E.C.) for broker-dealer registratio n which listed Jaffray as chairman and seventy five percent owner of Sheffield. The y received Powers’ responses on February 9, 1996. She explained that Sheffield did not become a licensed broker-dealer until December 21, 1994, the July amendment wa s corrected by a September 1994 amendment deleting Jaffray’s name from theAppellants contend that during the ar bitration Powers was not honest about her 5 relationship to Sheffield because she merelystated she was affiliated with it and it was a newer, startup firm. They say it was really an old firm, incorporated in 1959, that had been renamed as Sheffield. Sheffield’s predecessor, C.D. Mahoney, was founded by Joseph Mahon ey’s father, and Joseph served as its first president. It was deactivated in the 1970s, but Joseph’s sons, Terrence and Michael Mahoney, sought broker-dealer registration with the S.E.C. for it in 1993-94 under the name of Sheffield Securities and organized Dub lin Investments as a holding company for Sheffield. It was at this time that Powers was hired to be COO of Sheffield and joined the board of Dublin.
-6- application, and Jaffray could not serve as an officer or employee of the firm because he was not prop erly licensed as a broker. Powers also disclosed that Ben Jaffray still owned seventeen percent of Dublin’s stock despite his resignation from the board.
On February 13, 1996 Boivin wrote to the NASD, with a copy to Piper Jaffray’s

cou nsel, stating that in light of the options available under NASD rules the Kiernan s had no alternative but to allow Powers to participate in the final dec ision. He explained that a substitute arbitrator was not practicable because several days of hearings had not been recorded due to a malfunction in the recording mechanism. He also stated tha t rearbitration with a new third arbitrator was not an option because of the time and legal expens es involved. Finally, the letter indicated the Kiernans would like Piper Jaffray to agree to have the remaining two arbitrators on the panel decide the issues, but if it would not do so, then Powers would have to remain and they woul d await the decision. On Februa ry 14, Piper Jaffray’s counsel wrote to the NASD, with a copy to Boivin , ind icating his understanding that the Kiernans had decided not to request Powers ’ removal from the panel and stating Piper Jaffray also had no such request. Boivi n never responded to this letter, and the full panel went on to make its award.

The sec ond set of relationships to which the Kiernans object involves th e Mahoney family. Powers’ amended disclosures indicated that Michael Mahoney had hired her as COO of Sheffield’s predecessor in July 1993. The July 1994 amendment

5 to Sheffield’s broker-dealer application, which the Kiernans o btained before the award,There is no evidence in the record indicating that Mahoney and Piper worked 6 with the senator during the same period of time. The Kie rnans argue that Terrence Mahoney was himself a defendant in th e 7 lawsuit, but he was not named as a defendant until May 25, 1996, after the arbitration panel made its award.
-7- indicated t hat Terrence Mahoney had been a direct owner and executive officer o f She ffield. Subsequent investigation by the Kiernans’ counsel revealed that Michae l Mahoney, Terrence Mahoney, and Mary Powers were all at one time officers , managing directors, or shareholders in Dublin Investments, which was incorporated in Delaware in March of 1993 by Michael Mahoney. Michael and Terren ce Mahoney are the sons of Joseph Mahoney, who was emplo yed by Piper Jaffray for eleven years and di d some consulting work for Piper from 1989 to 1994. Joseph Mahoney was als o trust ee for the Mahoney family trust’s shares in Dublin Investments. Brian “Jim ” Mahoney, the uncle of Michael and Terrence, was one of the four hundred and seven vice presi dents at Piper Jaffray at the time of the arbitration. Michael Mahoney’ s former law firm had represented Piper Jaf fray in a matter in 1990 for which it received $34,643 in legal fees, and he may have known Addison Piper, Chairman and CEO of Piper Jaffray, because he did legal work for Senator David Durenberger and Pipe r served as finance committee chair for the senator’s reelection campaign. Finally , 6 Terrence Mahoney was a director of Palace Casinos, Inc., a company a gainst which the Kiernans’ attorneys had personally filed a lawsuit. The Kiernans claim that Powers 7 shouldhave investigated and disclosed all of these relationships at the start of th e arbitration.
Piper Jaffray argues that the Kiernans waiv ed their claim of evident partiality by deciding to p roceed with Powers on the panel after they became aware of many o f these facts and raised their concerns with the NASD. Piper also notes tha t the Kiernans did not raise this claim when t hey asked the panel to modify and correct its award and that they did

not conduct a more extensive investigation of Powers’ associations until after they lost the arbitration on the merits. Even if not waived, Piper argues that the-8-

claim fails because the Kiernans have not identified any connection between Powers and Piper Jaffray that rea sonably creates an impression of bias in Piper’s favor. Piper contends that the Kiernans’ reliance on Olson is misplaced because, unlike th e arbitrator’s firm in Olson , neither Sheffield nor Dublin has any business dealings with Piper Jaffrey. See51 F.3d at 159-60. In addition , Piper argues that while Powers may have had a duty to disclose her own relatives’ ties with the parties, she was no t req uiredto investigate or disclose the ties of relatives of her business associates

. Finally, Piper notes that any business contacts between Powers’ business associate s and Piper Jaffrey are minimal and involve business ventures in which she was not a particip ant, such as Michael Mahoney’s former law firm and Terrence Mahoney’ s position as a director of Palace Casinos.

The Kierna

ns waived their evident partiality claim by weighing their options at the time of Powers’ amended disclosures and deciding to go forward with her on the panel. See Cook Indus., Inc. v. C. Itoh & Co. , 449 F.2d 106, 107-08 (2d Cir. 1971) (failure to object when party has knowledge of facts possibly indicating bias on part of arbitrato r constitutes waiver of the objection). The Kiernans argue that they did no t have enough information to have kno wingly waived their objection to Powers and that the NASD gav e them no other meaningful options. The names of Powers’ busines s associates at Sheffield Securities and her position with the firm were available to the Kiernans before

the arbitration award came down, however. Their counsel discussed the alternatives available to them with NASD staff. They had the o pportunity to submit written questions to Powers regarding her associations and to conduct their ow n inves tigationof any individuals’ ties to Piper Jaffray. While they did not have ful l kno wledge of all the relationships to which they now object, they did have concern s about Powers’ impartiality and yet chose to have her remain on the panel rather than spe ndtime and money investigating further until losing the arbitration. Althoug h Boivin’s February 13 letter indicated that the Kiernans wanted Piper Jaffray to agree to a two person panel, they did not contradict the cha racterization of the letter given by Piper’s counsel as a decision not to ask Powers to withdraw. The Kiern ans cannot now-9-

se ek to avoid their tactical decision to await the decision of the three member pane l rather than seek Pow ers’ removal. Cf. Merit Ins. Co. v. Leatherby Ins. Co. , 714 F.2d 673, 683 (7th Cir. 1983) (relief from judgment confirmi ng arbitration award under Fed. R. Ci v. P. 60(b)(6) may not be granted where moving party’s conduct evidence s tactical response to having lost arbitration); Early v. Eastern Transfer , 699 F.2d 552, 558 (1s t Cir. 1983) (as in arbitration cases, parties may not “keep two strings in their bow” by failing to raise bias obje ction to grievance committee at earliest opportunity).

The Kie rnans also argue on appeal that the award should be vacated becaus e Jerald Kiernan’s ADA cla

im was not arbitrable under NASD rules and because of the legislative history of the ADA. Appellants initia ted the arbitration process in this case, and t hey cannot now argue, after receiving an unfavorable result, that the arbitratio n panel did not have the authority to decide the issues involved. See Local 238 Int’l Bhd. of Teamsters , 66 F.3d 988, 990-91 (8th Cir. 1995); Ngheim v. NEC Elec., Inc. , 25 F.3d 1437, 1 440 (9th Cir. 1994). The Kiernans’ NASD statement of claim specificall y include d allegations of unlawful employment practices under the ADA, and thi s submission defines the authority of the arbitration p anel “without regard to whether the parties had a prior legal obligation to submit the dispute.” Piggly Wiggly Operators’ Warehouse, Inc. v. Piggly Wiggly Operators’ Warehouse Indep. Truck Drivers’ Union, Local No. 1 , 611 F.2d 580, 584 (5th Cir. 1980).
Appellants contend, however, that they did not voluntarily submit their claims forarbitration because Piper Jaffray’s counsel had taken the position that arbitratio n of all em ployment disputes, including an ADA claim, was mandatory under th e Un iform Application for Security Industry Registration which Jerald Kiernan ha d signed in 19 83. There is no evidence in the record of the discussions that took place between the parties regarding the arbitr ability of the Kiernans’ claims. Even assuming that appellants’ allegation is true, however, it does not affect their failure to preserve the arbi trability issue as a ground for vacating the panel’s award. Piper Jaffray never sought to compel arbitration either through the courts or before the arbitration panel-10-

beca use the Kiernans never refused to arbitrate their claims. Instead, they signed the NASD submission agreement, as did Piper Jaffray, and pursued the arbitrat ion to a final binding decision, including a pplying to the panel for modification and correction of its award, without ever objecting to the a rbitrability of any of their claims. They therefore cannot now avoid being bound by the panel’s decision by claiming that their disput e
was not arbitrable. See Franklin Elec. Co. v. International Union, UAW, Local No

. 1000 , 886 F.2d 188, 192 (8th Cir. 1989); Jones Dairy Farm v. Local No. P-1236 , United Food & Commercial Workers Int’l Union , 760 F.2d 173, 175-76 (7th Cir

. 1985).
Finally, appellants claim that the award should have been vacated by the district court because the panel m anifestly disregarded Piper Jaffray’s burden of showing that itwas unable to accommodate Jerald Kiernan after he made out a prima facie cas e under the ADA. See Benson v. Northwest Air lines, Inc. , 62 F.3d 1108, 1112 (8th Cir. 1995). In its award the panel stated “J[erald] Kiernan failed to meet his burden o f proof that on July 28, 1993 he was able to perform the essential functions of account

exec utive with reasonable accommodations while employed by Piper Jaffray.” Piper contends that this statement shows the panel correctly applied the law to the fact s before it by placing the ultimate burden on Jerald Kiernan to show that he coul d perform the esse ntial functions of an investment executive with or without reasonable accommodation. See id. at 1113.
Judicial review of an arbitration award is extremely limited. Be yond the grounds forvacatio n provided in the FAA, an award will only be set aside where “it i s
com pletely irrational or evidences a manifest disregard for law.” Lee v. Chica , 98 3 F.2d 883, 885 (8th Cir. 1993) (internal quotation marks and citations omitted). Under this stan dard, arbitrators’ interpretation of the law is insulated from review, but when the y “understand and correctly state the law but proceed to disregard” it, manifes t disregard m ay be shown. Stroh Container Co. v. Delphi Indus., Inc. , 783 F.2d 743 , 750 (8th Cir. 1986) (internal quotation marks and citations omitted). The Kiernans-11-

asser t only that the “panel was unversed in the niceties of the burden of proof in civil rights actions,” not that the panel knew the applicable legal standards and consciously chose to disregard them. Even though the panel did not discuss whether Piper Jaffray had met its burden of produc ing evidence that Kiernan could not perform the essential functions of an investment executive even with reas onable accommodation, it correctly placed the ultimate burden of persuas ion on Kiernan to show that he suffered unlawful discrimination. See Benson , 62 F.3d at 1112 (citing St. Mary’s Honor Center v. Hicks , 509 U.S. 502, 5 16 (1993)). Regardless of the wisdom of the panel’s conclusion, it in

no wa y demonstrates a manifest disregard for the law warranting vacation of th e arbitration award in this case.

Accordi ngly, the order denying the motion to vacate the arbitration award i s affirmed.
A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.