Source: http://www.brokeandbroker.com/3538/ackerman-odeon-arbitration/
Timestamp: 2019-04-19 20:29:09+00:00

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Today's BrokeAndBroker.com Blog is a smorgasbord. Ya got FINRA in its role as a self-regulatory organization. Ya got FINRA in its role as an arbitration forum. We got the arbitration being appealed to a federal district court. We got the arbitration on appeal to a federal circuit court. At the center of this arbitration, litigation and regulatory buffet is former bond trader, who partially prevailed as the Claimant in his FINRA intra-industry arbitration but, thereafter, found himself barred by FINRA after refusing to cooperate in a regulatory investigation. As the various currents of this story ripple, we find ourselves amid a swirl of questions about what was known, by whom, when. Did the former bond trader commit perjury when answering questions during his arbitration about FINRA's regulatory investigation -- or did Claimant accurately disclose what he knew when he knew it? Prepare yourself for a bumpy ride!
By way of a brief introduction, Respondent Bret Ackerman worked as a bond trader for FINRA member firm Odeon Capital Group LLC, for about three years before he was discharged on March 10, 2014. Online FINRA BrokerCheck files as of July 26, 2017, disclose that Ackerman was first registered in 2001 and by May 2011, was registered with Odeon Capital.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in June 2014,Claimant Ackerman asserted breaches of employment agreement and of the covenant of good faith and fair dealing; violation of New York Labor Law; tortious interference with the employment agreement; violation of the New York City Human Rights Law; unlawful retaliation for having exercised his rights under the Family and Medical Leave Act; disability discrimination; wrongful termination; retaliation; unjust enrichment; and maliciously filing a false and damaging Form U5. Claimant Ackerman sought &dollar;5,000,000 in compensatory damages, economic and punitive damages, interest, liquidated damages, and attorneys' fees as provided under New York Labor Law, New York City Human Rights Law, and the Family Medical Leave Act. Also, Claimant sought an expungement of the matter from his industry record. In the Matter of the FINRA Arbitration Between Bret Ackerman, Claimant, vs. Bonwick Capital Partners, LLC Odeon Capital Group LLC, Evan Schwartzberg, and Mathew Van Alstyne, Respondent (FINRA Arbitration 14-02042, November 20, 2015).
Respondents generally denied the allegations and asserted various affirmative defenses. Respondent Odeon filed a Counterclaim asserting unjust enrichment and seeking over &dollar;100,000 in compensatory damages.
The FINRA Arbitration Panel denied Claimant Ackerman's statutory discrimination claims and his claims against Respondent Bonwick.
The Panel denied Odeon's Counterclaim and Respondent Bonwick's request for attorneys' fees.
Continual disagreements over compensation and job duties interfered with the employer's ability to conduct business in a collegial and effective manner.
In connection with an investigation being conducted by FINRA's Department of Market Regulation ("Market Regulation"), Ackerman refused to appear for testimony that was requested pursuant to FINRA Rule 8210. Ackerman's refusal to appear and testify violated FINRA Rules 8210 and 2010.
In accordance with the terms of the AWC, FINRA imposed upon Ackerman a Bar from association with any FINRA member in any capacity.
2016: Ackerman entered into a FINRA AWC settlement.
Arbitration Respondents Odeon Capital, Van Alstyne, and Schwartzberg petitioned the New York State courts to vacate the FINRA Arbitration Panel's award of unpaid wages to Ackerman and to remand that much of the case to a new FINRA Arbitration Panel. In response, Ackerman's moved to remove the appeal to the United States District Court for the Southern District of New York ("SDNY") and moved to confirm his arbitration award. The matter was removed to SDNY. Odeon Capital Group LLC, Mathew Van Alstyne, and Evan Schwartzberg, Petitioners, v. Bret Ackerman, Respondent (Opinion and Order, SDNY, 16-CIV-274, Rakoff, J., April 25, 2016).
SDNY denied the motion to vacate and confirmed the FINRA arbitration award. Although SDNY awarded Ackerman costs, it denied the award of attorneys'' fees attendant to seeking the confirmation because the Petitioners were not found to have acted "without justification" in seeking a vacatur.
Cross-Motion to Confirm Arbitration Award ("Pet. Reply Br.") at 8-9. Petitioners also seek to amend their original petition to include as an additional basis for vacatur that the award was "procured by corruption, fraud, or undue means" within the meaning of the FAA, 9 U.S.C. § 10a). . .
In presenting their appeal to SDNY, the Petitioners complained that the FINRA Arbitration Panel had allowed Ackerman to introduce belated damages calculations pertaining to transactions for which he claimed he had not been paid or underpaid. By entertaining Ackerman's late presentation, the Petitioners asserted that the arbitrators had prejudiced their ability to adequately respond. In more colloquial terms, the Petitioners argued that Ackerman bushwhacked them and the arbitrators were complicit by sandbagging them when they permitted Ackerman's alleged misconduct.
According to the arbitration panel, therefore, Petitioners had access to information about the trades that Mr. Ackerman had executed and could have analyzed these transactions to determine whether, and to what degree, Mr. Ackerman was underpaid. This determination by the arbitrators also affected their willingness to allow Mr. Ackerman and his expert to present their damages calculations at several junctures soon before and during the hearing, as well as the arbitrators' view that Petitioners were not deprived of a sufficient opportunity to respond to Mr. Ackerman's damages claims.
In declining to find the arbitrators conduct constituted a denial of "fundamental fairness," SDNY conceded that it did "not find Respondent to be blameless in the timing of his production;" nonetheless, the Court did allow that the Petitioners appeared to have been on notice of a "wide array of trades," which apparently lessened the detriment caused by any untimely production. Although SDNY disapproved of Ackerman's evidentiary dawdling, the court refused to accept Petitioners' assertion that his subsequent disclosures materially sandbagged them. It appears that SDNY believed that Ackerman's pleading was done with such wide brushstrokes as to put Respondents on notice that the scope of trades at issue would be expansive, which should have put them on further notice of the expansive nature of likely damages (and the need to calculate same). As such, SDNY may have viewed Ackerman's belated introduction of damages calculation as more a matter of annoyance than a material surprise that raised a fundamentally unfair scenario.
In sum, the arbitrators did not necessarily make the same determinations on the admission of evidence and timing that this Court would have made if considering the issues de novo. But a petition to vacate is not an occasion for de novo review. See Wallace, 378 F.3d at 189.
SDNY rejected the arguments that the FINRA arbitrators had manifestly disregarded the law. In addressing one such argument involving the Panel's award of all requested attorneys' fees by Ackerman when he only prevailed on one out of 11 causes of action, SDNY found that the FINRA Arbitration Panel had "at least a 'barely colorable justification'" for declining to parse the fees among each of 11 causes.
According to Petitioners, Mr. Ackerman committed perjury in front of the arbitration panel by testifying, in response to the arbitrators' questions, that a FINRA investigation into some of his bond transactions was not still pending, and that FINRA took no action regarding these trades. See Pet. Letter at 3-4. In fact, Petitioners state, the FINRA investigation was still pending, and on February 22, 2016, Mr. Ackerman executed a Letter of Acceptance, Waiver and Consent with FINRA, in which he acknowledged that he had refused to appear for testimony in front of FINRA and agreed to be barred "from association with any FINRA member in any capacity." See Pet. Letter at 4; Pet. Letter, Exhibit A, Dkt. 23-1. Petitioners assert that Mr. Ackerman's allegedly false testimony bolstered his credibility in front of the arbitration panel, making them more likely to accept his assessment of the compensation he believed he was owed . . .
crucial issue is whether any allegedly false testimony by Mr. Ackerman was material to the arbitration panel's award of damages for unpaid wages, which Petitioners are contesting in the instant petition to vacate the award. The Court finds that Mr. Ackerman's testimony regarding the FINRA investigation was not material to the award. In particular, the Court finds implausible Petitioners' suggestion that Mr. Ackerman's responses to questions about the FINRA investigation materially bolstered Mr. Ackerman's credibility in making an unpaid wages claim to which the FINRA matter does not relate. The Court therefore declines to permit Respondent to amend its petition to include as a ground that the arbitration award was procured by means of fraud. The Court hence denies Petitioners' petition to vacate the award in its entirety. Since the Court has decided not to vacate or modify the arbitration award, the Court must grant Respondent's petition to confirm the award, and so it hereby does. See 9 U.S.C. § 9.
Finally, SDNY awarded Ackerman his costs but denied an award of attorneys' fees in confirming the FINRA arbitration because Petitioners did not act without justification is seeking a vacatur.
We hold that to vacate an arbitration award on the ground that the award was fraudulently procured, the petitioner must demonstrate the fraud was material to the award. That is, there must be a nexus between the alleged fraud and the decision made by the arbitrators. The petitioner, however, need not demonstrate that the arbitrators would have reached a different result. In this case, Odeon failed to establish that Ackerman's alleged perjury had any impact on the arbitration award. The district court therefore correctly denied the petition to vacate.
The district court also denied Ackerman's request for attorneys' fees incurred in defending the arbitration award, and Ackerman cross‐appeals from that denial. We agree with Ackerman that the district court applied the wrong legal standard in denying his fees request. The district court based its denial on the ground that the petition to vacate was not unjustified, such that the court's invocation of its inherent powers to make a fees award was unwarranted. However, New York law provides statutory authority for Ackerman's fees request. Where, as here, an employee prevails against an employer on a claim for unpaid wages, New York law mandates that the employee recover "all reasonable attorney[s'] fees." N.Y. Labor Law § 198(1‐a). We therefore vacate the denial of attorneys' fees and remand for further proceedings consistent with this opinion.
[D]uring his testimony, Ackerman was asked about an on‐the‐record interview ("OTR") request FINRA sent him in April 2014. The OTR sought to interview Ackerman regarding a variety of trades he made while working at Odeon in 2011.
[Arbitrator]: Just to be clear, FINRA took no action?
[W]hile the petition to vacate was pending, Ackerman had received a letter from FINRA requesting a second OTR regarding his 2011 trades to be held at its offices in Maryland. The FINRA letter came roughly one month after the arbitration ended. By then, Ackerman no longer worked as a trader and had moved to California. Ackerman declined to travel to Maryland for a second OTR, and instead accepted a ban from working as a securities trader. To that end, he entered into a letter of acceptance, waiver, and consent ("AWC") with FINRA.
Odeon learned of the AWC in March 2016, and sought to amend its petition to vacate to add fraud as an additional ground for vacatur. Odeon argued that the second request for an OTR established that Ackerman committed perjury during the arbitration. Specifically, Odeon argued that Ackerman "misled the arbitration panel concerning the status and outcome of a FINRA regulatory investigation into his trading activity" by falsely testifying that "(i) FINRA affirmatively told him that there was 'nothing improper' about his trading activity, and (ii) the FINRA investigation into his activities was closed." App'x at 1552. Ackerman opposed the motion, arguing his testimony before the arbitration panel was truthful.
[N]othing in the award indicates that the arbitrators relied heavily on Ackerman's truthfulness in making its award. Indeed, given that Ackerman sought damages in excess of five million dollars and received roughly one‐fifth of that amount, and that Ackerman prevailed on just one of his eleven claims, it appears the arbitrators took most of what Ackerman said with a grain of salt. Accordingly, we affirm the district court's finding that the alleged perjury was immaterial to the arbitration award.
[A]ckerman sought fees pursuant to the district court's statutory powers under New York Labor Law, not its equitable powers. New York Labor Law § 198(1‐a) provides in relevant part that "[i]n any action instituted in the courts upon a wage claim by an employee . . . in which the employee prevails, the court shall allow such employee to recover . . . all reasonable attorneys' fees." The arbitrators specified Ackerman's award was for "compensatory damages based on unpaid wages" and attorneys' fees "pursuant to New York Labor Law." App'x at 46‐47.
Odeon argues that because Section 198(1‐a) does not specifically state that that fees are due in an action to confirm or enforce an arbitration award, it does not mandate fees here. We disagree. New York's Civil Practice Law and Rules define "action" to include a "special proceeding," N.Y.C.P.L.R. § 105(b). Applications to confirm, vacate, or modify arbitration awards are made through special proceedings . . .
Neither party asked for a reasoned decision from the arbitration panel. Accordingly, the award does not provide any sort of rationale or explanation for how the panel arrived at its damages award of &dollar;1,102,193.00. There is simply no basis in the record to find that Ackerman's testimony regarding the FINRA investigation played any role in the arbitrators' award on his unpaid wages claim.
To exacerbate matters, FINRA has cynically embedded a &dollar;400 so-called "honorarium" as the price of obtaining what should be provided as the default decision and should always be provided at no extra cost. The problem with that honorarium is that it imposes a further financial burden on parties seeking an explained decision and may well prevent/retard thesua sponte action of the FINRA Arbitration Panel to voluntarily provide a rationale for itsAward. If you're going to try and tell me that it's "only" &dollar;400 and not that big a deal, great, let FINRA pay the fee out of its own pocket since it's no big deal.

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