PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 15-2148

UBS FINANCIAL SERVICES, INC.,

Petitioner - Appellant,

v.

GARY T. PADUSSIS,

Respondent - Appellee.

Appeal from the United States District Court for the District of 

Maryland, at Baltimore. William D. Quarles, Jr., District 

Judge. (1:14-cv-03721-WDQ)

Argued: October 25, 2016 Decided: November 22, 2016

Before WILKINSON, KING, and HARRIS, Circuit Judges.

Affirmed by published opinion. Judge Wilkinson wrote the 

opinion, in which Judge King and Judge Harris joined.

ARGUED: Francis X. Dee, MCELROY, DEUTSCH, MULVANEY & CARPENTER, 

LLP, Newark, New Jersey, for Appellant. Edward Patrick 

McDermott, Sr., LAW OFFICE OF E. PATRICK MCDERMOTT LLC, 

Annapolis, Maryland, for Appellee. ON BRIEF: Margaret L. 

Watson, MCELROY, DEUTSCH, MULVANEY & CARPENTER, LLP, New York, 

New York, for Appellant.
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WILKINSON, Circuit Judge:

Appellant UBS Financial Services (“UBSFS”) challenges an 

arbitration award that, in practical effect, granted Gary 

Padussis over $900,000 in compensatory damages. The district 

court refused to disturb the award, and we now affirm its 

judgment. Any other result would open arbitration proceedings to 

a host of challenges over the very type of subsidiary questions 

that Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), 

indicated should be left to the discretion of the arbitral body.

I.

Gary Padussis worked for UBSFS as a financial advisor from 

2009 through 2013. When he joined UBSFS, Padussis brought with 

him a team of three financial advisors as well as an established 

business clientele. As part of his initial compensation, UBSFS 

lent Padussis over $2.7 million. Padussis signed a promissory 

note, which provided that any remaining balance would 

immediately come due if Padussis ended his employment with 

UBSFS. Padussis also executed a Letter of Understanding 

describing his compensation and a Financial Advisor Team 

Agreement governing the operations of his team. All the 

agreements provided that any dispute would be subject to 

arbitration before the Financial Industry Regulatory Authority 

(“FINRA”).
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Padussis resigned from UBSFS in 2013, complaining that

UBSFS had ruined his team of financial advisors and cost him 

valuable clients. Upon his resignation, Padussis owed UBSFS the 

remaining balance on the promissory note, nearly $1.6 million. 

When he failed to pay that amount, UBSFS initiated arbitration 

on June 3, 2013. Padussis responded with counterclaims on July 

31, 2013, alleging that UBSFS’s interference with his team was 

both tortious and a breach of contractual duties.

Under the FINRA Code of Arbitration Procedure for Industry 

Disputes, the Director of FINRA Dispute Resolution is 

responsible for the process of selecting the panel of three 

arbitrators required here. First, the Director mails a list of 

potential arbitrators for each of the three panel positions to 

each party “within approximately 30 days after the last answer 

is due.” FINRA Rule 13403. Each “party may strike up to four of 

the arbitrators from each list” and rank the remaining ones. 

FINRA Rule 13404. The parties must return their preferences 

within twenty days of the lists being sent, and the Director 

then combines the rankings sent by the parties to select the 

arbitration panel. FINRA Rule 13405. 

If a party fails to return its ranked lists within twenty 

days, the Director proceeds as if that party has no preferences. 

FINRA Rule 13404(d). The Code allows the Director to extend any 

deadline set by the Code for good cause. FINRA Rule 13207(c). 
4

The Code also gives the Director discretion to “make any 

decision that is consistent with the purposes of the Code to 

facilitate the appointment of arbitrators.” FINRA Rule 13412.

The Director can delegate these duties. FINRA Rule 13100(k).

In this case, FINRA mailed lists of potential arbitrators 

to the parties on August 21, 2013. UBSFS did not return its 

ranked lists by the deadline of September 10 because, UBSFS 

claims, it never received them.

On September 11, UBSFS received a letter, dated September 

3, that reminded the parties of the impending deadline for 

returning their lists. Realizing that it had missed the 

deadline, UBSFS filed a motion to extend the time to submit its 

preferences. Padussis opposed this motion. He argued that UBSFS 

notified him in mid-August that it was transferring the case to 

new counsel but that the new counsel had not yet filed a notice 

of appearance. Padussis claimed that this transfer led to 

confusion over which counsel was responsible for submitting 

UBSFS’s preferences.

FINRA’s Regional Director – to whom the Director had 

apparently delegated responsibility – denied UBSFS’s motion for 

an extension. UBSFS appealed to the Director, who affirmed the 

denial. The Director ruled that good cause to extend the 

deadline did not exist because FINRA had timely mailed the 
5

initial lists of arbitrators as well as a courtesy reminder, and 

had not received any mail returned as undeliverable.

FINRA proceeded to select a panel of three arbitrators 

based on Padussis’s lists of preferences. At the first panel 

hearing, UBSFS challenged the composition of the panel based on 

UBSFS’s lack of participation in the selection of the 

arbitrators. The panel reviewed the evidence, denied UBSFS’s 

challenge, and proceeded with the arbitration. 

On October 27, 2014, the panel issued its final decision. 

The panel awarded UBSFS $1,683,262 and awarded Padussis 

$932,887. The decision denied “[a]ny and all relief not 

specifically addressed.” J.A. 24. Pursuant to the FINRA Code, 

the decision did not explain the panel’s reasoning.

UBSFS was altogether displeased with this outcome. Padussis 

insisted that due to a statutory lien and the prospect of 

bankruptcy, he would be financially unable to pay the balance of 

the note, which left UBSFS in the position of owing him over 

$900,000 for the damage he claimed it had done to his business. 

UBSFS then filed this action to vacate the arbitral award. It 

argued that the arbitrators were not selected in accordance with 

the parties’ agreement because UBSFS had not provided its 

preferences to FINRA. In the alternative, UBSFS sought to have 

the district court offset the awards, citing Padussis’s 

admission that he was unlikely to be able to pay his portion of 
6

the judgment. The district court confirmed the arbitration award 

in its entirety and declined to impose an offset. UBSFS now 

appeals.

II.

The scope of judicial review of an arbitration award “is 

among the narrowest known at law.” Apex Plumbing Supply, Inc. v. 

U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998). Courts 

may vacate or modify an arbitration award only under the limited 

circumstances listed in the Federal Arbitration Act, 9 U.S.C. 

§ 10-11, or under the common law if the award “fails to draw its 

essence from the contract” or “evidences a manifest disregard of 

the law.” Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 

234 (4th Cir. 2006).

This circumscribed scope of review means that “in reviewing 

such an award, a district or appellate court is limited to 

determine whether the arbitrators did the job they were told to 

do - not whether they did it well, or correctly, or reasonably, 

but simply whether they did it.” Three S Del., Inc. v. DataQuick 

Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir. 2007) (internal 

quotation marks omitted). To ensure arbitrators did the job they 

were told to do and did not “exceed[] their powers,” 9 U.S.C. 

§ 10(a)(4), courts will resolve certain threshold questions of 

arbitrability. For example, a court will decide whether parties 

agreed to arbitrate a particular dispute, AT&T Techs., Inc. v. 
7

Commc'ns Workers of Am., 475 U.S. 643, 651 (1986), or whether 

arbitrators were appointed according to the parties’ agreement. 

Cargill Rice v. Empresa Nicaraguense Dealimentos Basicos, 25 

F.3d 223, 225 (4th Cir. 1994). 

Beyond these basic questions of arbitrability, courts defer 

to the arbitral panel both on the merits of the final decision 

and on procedural questions that “grow out of the dispute,” even 

where those questions “bear on its final disposition.” Howsam, 

537 U.S. at 84 (quoting John Wiley & Sons, Inc. v. Livingston, 

376 U.S. 543, 557 (1964)). We need not repair here to the 

standards of review customarily applied to fact finding and 

discretionary procedural rulings because that would simply 

constitute us, contrary to the Supreme Court’s admonitions, as a 

typical appellate court.

The “widely recognized” policy “to encourage the use of 

arbitration” requires this limited scope of judicial review. 

Remmey v. PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir. 1994). 

Parties agree to arbitration to avoid the time and expense of 

litigation. But “to allow full scrutiny of such awards would 

frustrate the purpose of having arbitration at all.” Apex 

Plumbing, 142 F.3d at 193. 

Instead, the narrow standard of review acts as a bulwark

against legal ingenuity. Lawyers can easily find one thing or 

another in almost any proceeding to which they wish to take 
8

exception. There are benefits to such legal creativity in many

contexts but not in the one before us. Allowing procedural 

challenges to every award would force parties into court to 

argue their dispute a second time, incurring the litigation 

costs and delays they intended to avoid by agreeing to 

arbitration in the first place.

In other words, the rules that limit our review of 

arbitration awards are meant to avoid exactly what has happened 

here, which is a protracted set of judicial proceedings that 

have sacrificed the very advantages inhering in the arbitral 

forum.

III.

UBSFS seeks to vacate the arbitral award on two grounds. It 

first contends that the arbitrators were not selected according 

to the parties’ agreement. Section 5 of the Federal Arbitration 

Act provides that if the parties’ arbitration agreement includes 

a method for appointing arbitrators, “such method shall be 

followed.” 9 U.S.C. § 5. This court will generally vacate 

“[a]rbitration awards made by arbitrators not appointed under 

the method provided in the parties’ contract.” Cargill Rice, 25 

F.3d at 226.

The parties here agreed to arbitrate according to the FINRA 

Code. UBSFS complains that because it never received the lists 

of arbitrators, the process of appointing arbitrators did not 
9

follow the method in the Code. An examination of the record 

shows, to the contrary, that FINRA adhered to the Code. 

FINRA Rule 13403(b) requires that the Director create three 

lists of potential arbitrators for the panel. FINRA did this. 

Rule 13403(c)(1) requires that the Director mail these lists to 

the parties. FINRA did this. Rule 13404(d) requires that if the 

Director does not receive a party’s ranked lists within twenty 

days of sending the lists, “the Director will proceed as though 

the party did not want to” provide its preferences. FINRA did 

this too. Rules 13405 and 13406 describe how to appoint the 

arbitrators after receiving the lists, and FINRA followed these 

rules as well.

Unable to find a specific rule FINRA violated, UBSFS argues 

that the Code as a whole “ensure[s] that each party ha[s] the 

opportunity to participate in the selection of arbitrators.” 

Appellant’s Br. at 23. UBSFS points to the fact that a few rules 

describe the parties’ participation in selecting arbitrators, 

but this is unsurprising in a Code that sets forth a process for 

the mutual selection of arbitrators. The Code simply does not 

require the participation of each party prior to the valid 

appointment of an arbitration panel. 

In fact, Rule 13404(d) does the opposite. It requires the 

Director to appoint arbitrators without a party’s input if the 

Director does not receive that party’s preferences by the 
10

deadline. Rule 13404(d) could require the Director to contact 

the party before proceeding, or it could allow the party an 

opportunity to rebut any presumption that it did not wish to 

participate in the selection of the arbitrators. Instead, it 

simply instructs the Director to act as if the party did not 

intend to submit ranked lists and to proceed with the 

appointment of arbitrators. That is exactly what FINRA did here.

This case, then, does not involve the question of whether 

FINRA failed to follow the rules for appointing an arbitrator. 

FINRA did. Instead, this is a question of whether FINRA properly 

applied those rules. UBSFS seems to believe that the Director 

erred in not finding good cause to extend the deadline for UBSFS 

to submit its preferences under Rule 13207 and in not 

“exercis[ing] discretionary authority” to ensure that UBSFS had 

a say in the composition of the arbitration panel under Rule 

13412. These questions, though, are procedural questions and 

“are for arbitral, rather than judicial, resolution.” Dockser v. 

Schwartzberg, 433 F.3d 421, 425 (4th Cir. 2006).

While courts decide some questions of arbitrability, the 

Supreme Court has directed that “‘procedural questions which 

grow out of the dispute and bear on its final disposition’ are 

presumptively not for the judge, but for an arbitrator, to 

decide.” Howsam, 537 U.S. at 84 (quoting John Wiley, 376 U.S. at 

557). Thus, whether arbitration rules time-bar a claim is for 
11

the arbitral body to decide. Howsam, 537 U.S. at 85. Likewise, 

the arbitral body decides whether arbitration rules require a 

panel of one or three arbitrators. Dockser, 433 F.3d at 425.

Here, whether good cause existed to extend the deadline was 

for FINRA to decide. UBSFS argues that it did not receive the 

lists of arbitrators. Padussis responds that the mailing was 

never returned to FINRA as undeliverable and that the whole 

problem was due to UBSFS’s negligence – that UBSFS should have 

expected the lists shortly after Padussis filed his Answer and 

Counterclaim but that the matter fell between the cracks at 

UBSFS due to the transfer of the case to different counsel. This 

back and forth is rather beside the point. As with other 

procedural questions, the parties would have expected FINRA to 

decide this issue because the rules “provide specific nonjudicial procedures for its resolution.” Id. at 426. FINRA rules 

expressly give the Director the power to “exercise discretionary 

authority and make any decision that is consistent with the 

purposes of the Code to facilitate the appointment of 

arbitrators.” FINRA Rule 13412. UBSFS cannot complain that the 

Director – rather than the appointed arbitrators – resolved the 

issue because the parties expressly granted this authority to 

the Director. Dockser, 433 F.3d at 428.

Moreover, this claim concerns “the written rules governing 

the parties’ arbitration proceeding,” Id. at 427, and the 
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arbitral body is “comparatively more expert” in applying those 

rules than courts. Howsam, 537 U.S. at 85. This is especially 

true here, where the Director can better determine whether an 

extension of a deadline will help reach a more just outcome or 

simply deprive the parties of a timely resolution.

We will not second-guess FINRA’s decision that there was 

not good cause to extend the deadline. The parties agreed to 

arbitrate their disputes according to rules that clearly gave 

the Director the authority to make that decision. To usurp the 

Director’s authority would be to open courts to legions of 

questions about whether arbitral bodies properly applied one 

rule or another. This would deprive parties of the very benefits 

they sought by agreeing to arbitration – relatively prompt and 

inexpensive dispute resolution.1

IV.

UBSFS next asks this court to impose an offset on the 

arbitration award. As discussed above, the arbitration panel 

here found that (1) Padussis owed UBSFS $1.68 million on the 

promissory note (which Padussis contends he would be unable to 

pay) and that (2) UBSFS was liable to Padussis for $932,000 

 1 UBSFS also contends that we should vacate the award on the 

common law ground that the award “fails to draw its essence from 

the contract.” Patten, 441 F.3d at 234. UBSFS relies on its 

argument that FINRA disregarded the agreed-upon method of 

selecting arbitrators. As discussed above, FINRA followed those 

rules. We thus find UBSFS’s common law claim meritless.
13

based on his various employment claims. Offsetting the damages 

granted to Padussis from the $1.68 million would result in a net 

award to UBSFS of about $750,000, entirely cancelling out 

Padussis’s award and freeing UBSFS of the need to cut a check. 

This court has previously recognized that “an offset of 

arbitration awards might constitute a modification of the award 

in some circumstances.” Nat'l Risk Underwriters, Inc. v. 

Occidental Fire & Cas. Co. of N.C., 931 F.2d 1015, 1017 (4th 

Cir. 1991). While such circumstances did not exist in that case, 

they do exist here. This arbitration award expressly denied 

“[a]ny and all relief not specifically addressed” by the award, 

and the award did not mention an offset. J.A. 24. Thus, applying 

an offset to this award would be a modification of the award.

Under the Federal Arbitration Act, a court can modify an 

award only under specific, narrow circumstances. Relevant here, 

a court may modify an award “[w]here the award is imperfect in 

matter of form not affecting the merits of the controversy.” 9 

U.S.C. § 11. Any order to modify an award must “effect the 

intent thereof and promote justice between the parties.” Id.

Assuming arguendo that imposing an offset would be a 

“matter of form not affecting the merits of the controversy,” an 

offset here would not effectuate the intent of the arbitrators, 

and we thus decline to impose one. The award itself is silent on 

the question of an offset, and there is no evidence in the 
14

record that would enable us to say that the arbitrators intended 

for the award to include one.

UBSFS contends that an offset “would not change the 

arbitrators’ valuation decision” but would provide a “simple, 

fair” result, which must have been the intent of the 

arbitrators. Appellant’s Reply Br. at 25-26. An offset, though, 

changes the practical effect of the award. In a similar 

situation, a FINRA arbitration panel heard arguments for and 

against an offset and declined to provide one. UBS Fin. Servs., 

Inc. v. Mann, No. 14-10621, 2014 WL 1746249, at *3 (E.D. Mich. 

Apr. 30, 2014). We cannot know what the arbitration panel in 

this case would have ruled if UBSFS had asked it to provide an 

offset. That decision, though, was for the arbitration panel, 

and UBSFS should have asked the panel to make it. For whatever 

reason, it did not do so, and the question is simply not one for 

the courts to answer.

UBSFS also argues that regardless of the arbitrators’ 

actual intent, we should recognize a presumption favoring an 

offset. However, imposing such a presumption would place a 

judicial gloss on the arbitration award. Such a gloss is 

inappropriate here, where the award expressly limits itself to 

the relief specifically addressed and was rendered pursuant to a 

detailed set of rules. As the Seventh Circuit has noted, the 

“arbitrator’s failure to mention offsets in his ruling means 
15

that no offset was granted.” Int’l Union of Operating Eng’rs, 

Local No. 841 v. Murphy Co., 82 F.3d 185, 190 (7th Cir. 1996).2

V.

When all is said and done, UBSFS plainly agreed to a 

process and then declined to abide by the result of that

process. It agreed to arbitration; the dispute was within the 

scope of that agreement; and the rules by which the arbitration 

would proceed were openly declared and followed. The arbitration 

here spanned eighteen hearing sessions over nine separate days. 

We can find no basis for overturning the arbitral decision. The 

district court’s denial of UBSFS’s motion to vacate the award is 

therefore

AFFIRMED.

 2 In fact, FINRA has since amended its rules to provide for 

a presumption of an offset, but that amendment is effective only 

for arbitration awards rendered after October 24, 2016. Press 

Release, FINRA, Regulatory Notice 16-36: SEC Approves Amendments 

to the Codes of Arbitration Procedure Regarding Award Offsets 

(Sept. 2016); see also Order Approving a Proposed Rule Change to 

Permit Award Offsets in Arbitration, Exchange Act Release No. 

78557, 81 Fed. Reg. 54,901 (Aug. 11, 2016). For us to rewrite 

that amendment to make it effective for an arbitration award 

rendered in October 2014 would be to displace FINRA’s authority 

over its own arbitral proceedings. We must therefore observe the 

rules in place at the time of the arbitration.