hear this evidence during the arbitration. Indeed, the estate concedes the evidence was admitted as
part of defendants’ arbitration exhibits. Memo at 8. Despite this evidence, the arbitrators concluded
there was “insufficient evidence to support the allegation that... Gruttadauria . .. wrongfully took
funds or securities belonging to . .. Cuneo or the Estate...” Memo Ex. A at 5 (emphasis added).
The court lacks authority to vacate the arbitration award based on the estate’s claim that there was
sufficient evidence to establish unauthorized transfers out of the estate’s account. See Eljer Manuf.
14 F.3d atl254.

The Cuneo Estate argues it is not requesting the court to review the sufficiency of the
evidence, but rather, is requesting the court to “remand so that the Arbitrators may consider evidence
that was undisputed and not subject to interpretation, which the Arbitrators overlooked.” Reply at
4. The defendants contend the evidence is not “undisputed” as the estate asserts. Response at 9.
The exhibits filed under seal consist of account statements reflecting transfers made out of the
estate’s brokerage account. Memo Ex. J, K, L, M. Nothing on the face of the exhibits reflects the
transfers were unauthorized. The estate argues Exhibits J, K, L and M irrefutably establish that the
transfers were unauthorized because the parties stipulated to a list of “withdrawals of funds received
by the Estate of Ann Cuneo, or transfers of funds to third parties for the benefit of the Estate of Ann
Cuneo“ and the transfers reflected on Exhibits J, K, L and M are not on that list. Response Ex. 2 at
2. The estate’s argument is based on two inferences — that any transfer not on the list of authorized
transfers was both: (1) unauthorized; and (2) made by Gruttadauria. While these inferences may be
reasonable, the arbitrators were not compelled to draw these inferences from the exhibits and

stipulation.


evidence that Gruttadauria improperly transferred funds out of the estate's account, they did not
consider awarding punitive damages to the estate. According to the estate, the arbitrators “would
have reached a different conclusion and would have awarded punitive damages to the Estate”
because they already found that punitive damages would have been justified if Gruttadauria
improperly transferred funds. Reply at 2. The estate’s arguments must be rejected. As set forth
above, the court lacks authority to review the arbitrators’ factual finding with respect to the
sufficiency of the evidence. Moreover, the arbitrators’ finding that there was “cause to award
punitive damages” likely related to their findings that Gruttadauria did not execute trades that Cuneo
directed him to execute and fraudulently concealed the fact that he was not executing the trades.
Memo Ex. A at 5-6. Because there is no basis to vacate the arbitration award, the motion for remand
must also be denied.
CONCLUSION

The Cuneo Estate has failed to provide a proper basis for vacating the February 11, 2005

NASD arbitration award. Accordingly, the motion to vacate the arbitration award in part and for

remand must be denied.

May 27, 2005 ENTER:

Suzanne a Conlon

United States District Judge


1993); see also Int’l Union of Operating Engineers v. J.H. Findorff & Son, Inc., 393 F.3d 742, 745
(7" Cir. 2004), The Federal Arbitration Act lists the limited grounds for vacating an arbitration
award, 9 U.S.C. § 10(a); Lee v. McDonald Securities, Inc., 2004 U.S. Dist. LEXIS 19293, at * 5
(N.D. Ill. Sept. 27, 2004). An arbitration award may be vacated where: (1) it was procured through
corruption, fraud, or undue means; (2) the arbitrators were evidently partial or corrupt; (3) the
arbitrators were guilty of misconduct in refusing to postpone the arbitration hearing or in refusing
to hear pertinent and material evidence; or (4) the arbitrators exceeded their powers. Jd. Errors in
the arbitrator's findings of fact or an insufficiency of evidence supporting the arbitrator's decision do
not justify vacating an arbitration award. Eljer Manuf. v. Kowen Dev. Corp., 14 F.3d 1250, 1254 (7"
Cir. 1994); Nat'l Wrecking, 990 F.2d at 960. Factual errors by arbitrators — even clear or gross errors
— do not provide a basis for vacating an arbitration award. Hasbro, 367 F.3d at 692; Gingiss Int’!
vy. Bormet, 58 F.3d 328, 333 (7" Cir. 1995); Nat'l Wrecking, 990 F.2d at 961.
I. Motion to Vacate

The Cuneo Estate’s motion does not identify a statutory basis for vacating the arbitration
award. The estate does not contend the arbitration award was procured through corruption, fraud
or undue means, or that the arbitrators were corrupt or partial, guilty of misconduct, or that they
exceeded their powers. Accordingly, none of the statutory grounds exist to vacate the arbitration
award. The estate contends the court can vacate the arbitration award because the arbitrators
overlooked undisputed evidence regarding the unauthorized transfer of funds out of the estate’s

a

brokerage account. The estate argues it would be “denied a ‘fundamentally fair hearing’” if the case
is not remanded to the arbitrators to allow them to consider the undisputed evidence they overlooked.

Reply at 4. This argument must be rejected. The estate does not contend the arbitrators refused to


In support of its argument, the estate relies on Mollison-Turner v. Lynch Auto Group, 2002
U.S. Dist. LEXIS 9491, at *2-3 (N.D. Ill. May 23, 2002), where an arbitration award was vacated
because the “arbitrator's award makes clear that he was operating under a significant mistaken
assumption not about the facts of the case, but about the evidence Mollison-Turner offered.
Although Mollison-Turner submitted sworn affidavits . .. ,the arbitrator stated that Mollison-Turner
provided no such evidence.” /d. at *9. The court recognized arbitration awards should not be
vacated based on factual errors, but distinguished the case because the arbitrator’s award was based
on an erroneous “non-fact” — the erroneous belief that plaintiff had not submitted any evidence on
an issue. /d. at *10.

Mollison-Turner does not provide a basis to vacate the arbitration award here. Unlike
Mollison-Turner, the arbitrators concluded there was insufficient evidence of unauthorized transfers.
They did not conclude there was no evidence. Moreover, contrary to the estate’s suggestion, the
arbitrators did not conclude that “no funds belonging to the Estate were misappropriated after Mrs.
Cuneo’s death.” Reply at 2. Instead, they determined there was insufficient evidence to establish
Gruttadauria wrongfully took funds or securities belonging to Cuneo or her estate. Memo Ex. A at
5. The court cannot review the merits of the arbitrators’ finding that there was insufficient evidence.
See Eljer Manuf, 14 F.3d at1254 (7 Cir. 1994).

Nor do the other cases cited by the estate provide a basis for vacating the arbitration award.
The cited cases are from other circuits and are not binding on this court. Moreover, they are
distinguishable on their facts. For instance, in Nat'l Post Office Mailhandlers v. United States Postal
Service, 751 F.2d 834, 838 (6" Cir. 1985), the arbitrator erred regarding the date of an employee’s

guilty plea. The arbitrator sustained plaintiff's discharge and refused to award back-pay on the


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
ESTATE OF ANN CUNEO, )
Plaintiff, No. 02 CV 9533
v. } Suzanne B. Conlon, Judge
S.G. COWEN SECURITIES CORP., et al., }
Defendants. }

MEMORANDUM OPINION AND ORDER
BACKGROUND

Ann Cuneo was a client of the brokerage firms Cowen & Company and S.G. Cowen
Securities Corporation. After Cuneo passed away, her estate maintained a brokerage account with
the firms. Frank Gruttadauria was Cuneo’s and the estate’s broker. Gruttadauria was arrested and
sentenced to a seven-year prison term for securities fraud. In December 2002, the Estate of Ann
Cuneo filed a ten-count complaint against defendants S.G. Cowen, Cowen & Company, and their
parent company, Societe Generale, S.A., for federal securities laws violations and pendent state law
claims, arising out of Gruttadauria’s conduct. On February 20, 2003, pursuant to a stipulation of the
parties, the court entered an order staying the case pending arbitration before the National
Association of Securities Dealers, Inc. (“NASD”). The Cuneo Estate moves to vacate the stay and
the arbitration award, and for remand to the arbitration panel. The motion to vacate the stay is
granted for the limited purpose of ruling on the motion to vacate arbitration award and remand. The

Cuneo Estate moved for leave to file a reply memorandum. The motion for leave is granted.


ground that plaintiff would have been terminated for cause because of his guilty plea. Jd In
actuality, plaintiff did not plead guilty until four weeks after his discharge. /d. The Sixth Circuit
held:

where the record that was before the arbitrator demonstrates an unambiguous and

undisputed mistake of fact and the record demonstrates strong reliance on that

mistake by the arbitrator in making his award, it can fairly be said that the arbitrator

‘exceeded [his] powers, or so imperfectly executed them’ that vacation may be

proper. /d. at 843.

Rather than vacate the arbitration award, the Sixth Circuit modified the award to give plaintiff back-
pay for the four weeks prior to his guilty plea. /d. at 844.

Unlike Nat'l Post Office Mailhandlers, there is no indication the arbitration record contained
an unambiguous and undisputed mistake of fact. The four exhibits filed under seal were admittedly
part of the arbitration record. The exhibits consist of account statements and do not contain any
unambiguous mistaken facts, such as an incorrect plea date. Moreover, the account statements do
not contain information that is expressly at odds with the arbitration award. The arbitrators
considered “the pleadings, the testimony and evidence presented at the hearing” and engaged in
“extensive discussions” before making their factual findings and final award. Memo, Ex. A at 5-6.
They concluded there was insufficient evidence to support the allegation that Gruttadauria
wrongfully took funds or securities belonging to Cuneo or her estate. The court is not authorized
to review the merits of this factual finding. Jnt’/ Union, 393 F.3d at 745. Accordingly, the motion
to vacate the arbitration award must be denied.

II. Motion for Remand

The Cuneo Estate moves for remand to the arbitration panel for re-assessment of punitive

damages. The estate argues that because the arbitrators mistakenly concluded there was insufficient


I. The Arbitration Award

The NASD arbitration hearing commenced on October 18, 2004, and continued through

November 5, 2004 before a panel of three arbitrators. The panel issued its award on February 11,

2005. The panel awarded the Cuneo Estate $1 in nominal damages, $700,000 in attorney’s fees and

costs, and reimbursement of the $600 arbitration filing fee. Memo, Ex. A at 6. The panel denied

the Cuneo Estate’s request for punitive damages. The panel made 12 findings “[a]fter extensive

discussions” in support of its award. /d. at 5-6. Several of the findings are relevant for purposes of

deciding this motion:

1.

There is insufficient evidence to support the allegation that Frank Gruttadauria . . .
wrongfully took funds or securities belonging to Ann Cuneo or the Estate of Ann
Cuneo.

Atall relevant times, Gruttadauria did cause Ann Cuneo and the Estate . . . to receive
funds, which may have been wrongfully taken from clients of Gruttadauria other than
Ann Cuneo or the Estate.

Some or all of the transfers of funds to Ann Cuneo caused by Gruttadauria may have
been the result of fraud or some other wrongful conduct perpetrated by him on other
clients, but not on Ann Cuneo or her Estate.

None of the above-referenced transfers of funds to Ann Cuneo or her Estate caused
Ann Cuneo or her Estate to be financially or otherwise injured.

* *
Ann Cuneo directed Gruttadauria to execute trades on her behalf.

Gruttadauria did not execute trades that Ann Cuneo had directed him to execute on
her behalf.

Gruttadauria fraudulently concealed the fact that he was not executing the trades she
had directed him to execute... .

* *


12. The Panel found cause to award punitive damages against the Respondents, but
consistent with the Panel’s ruling in its Order dated October 8, 2004, the Panel found
it does not have the authority to award such damages under Illinois tort law, since
punitive damages do not survive the death of the injured.

Id.
II. The Motion to Vacate
The Cuneo Estate moves to vacate the arbitration award on the grounds that the arbitrators
overlooked an undisputed fact, and that mistake of fact materially affected the panel’s final award.
More specifically, the estate attacks the arbitrators’ finding that there was insufficient evidence to
support the allegation that Gruttadauria wrongfully took estate funds or securities. The Cuneo Estate
argues it was undisputed that Gruttadauria improperly transferred funds out of the estate’s brokerage
account without authorization. In support of this argument, the estate submits four exhibits under
seal that were part of the arbitration record. Memo Ex. J, K, L, M. The estate argues the arbitrators
failed to consider awarding punitive damages to the estate because they “mistakenly overlooked that
it was undisputed that, after her death, unauthorized transfers were made from the Estate's account.”
Memo at 8. In response, defendants argue the estate has not identified a proper basis to vacate the
arbitration award under the Federal Arbitration Act, 9 U.S.C. § 10(a) (“FAA”).
DISCUSSION

Generally, a court will set aside an arbitration award only in unusual circumstances. Hasbro,
Inc. vy. Catalyst USA, Inc., 367 F.3d 689, 691-92 (7" Cir. 2004). “Judicial review of arbitration
awards is narrow because arbitration is intended to be the final resolution of disputes. Arbitrators do

not act as junior varsity trial courts where subsequent appellate review is readily available to the

losing party.” Nat'l Wrecking Co. v. Int'l Brotherhood of Teamsters, 990 F.2d 957, 960 (7" Cir.