Court Opinion

ID: 9378793
Source: CourtListenerOpinion
Date Created: 2023-03-13 17:01:00.256951+00
Date Added: 2024-06-11T17:16:01.409407
License: Public Domain

NOT PRECEDENTIAL

                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT
                                 _______________

                                      No. 22-1295
                                    _______________

              KAYVAN KAROON; KS CAPITAL MANAGEMENT, INC.,
                                          Appellants
                                  v.

                      NATIONAL SECURITIES CORPORATION
                               _______________

                     On Appeal from the United States District Court
                               for the District of New Jersey
                                 (D.C. No. 2:21-cv-16568)
                      District Judge: Honorable Susan D. Wigenton
                                     _______________
                      Submitted Under Third Circuit L.A.R. 34.1(a)
                                  on March 10, 2023

               Before: SHWARTZ, BIBAS, and AMBRO, Circuit Judges

                                 (Filed: March 13, 2023)
                                    _______________

                                       OPINION*
                                    _______________

BIBAS, Circuit Judge.

    Kayvan Karoon and his company, KS Capital Management, broker investments and

advise clients on their finances. In 2012, they joined National Securities Corporation, a

broker-dealer. When their relationship soured, they filed an arbitral claim against National

*
  This disposition is not an opinion of the full Court and, under I.O.P. 5.7, is not binding
precedent.
for delaying securities trades, tacking on extra fees, and lying about Karoon to his clients.

The arbitration panel ruled for National, and the District Court declined to vacate the arbi-

tral award. We review the District Court’s findings of fact for clear error and its legal con-

clusions de novo. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 947–49 (1995). We

will affirm.

   Our review of arbitral awards is narrow. We may not overturn them without proof of

corruption, fraud, undue influence, “evident partiality,” misconduct (such as refusing to

hear relevant evidence or to postpone a hearing for good cause), or abuse of power. 9 U.S.C.

§ 10(a).

   Karoon and KS cannot clear this high bar. Though they now challenge the selection of

one arbitrator, they waived that objection. The rules of FINRA (the Financial Industry Reg-

ulatory Authority) require a three-arbitrator panel to comprise two public arbitrators (those

who have not worked in the securities industry) and one non-public arbitrator. FINRA

Rules 13100(r), (x), 13402(b). In 2017, FINRA sent the parties a list of arbitrators, and they

chose three. Over the next three years, Karoon and KS asked for and got three postpone-

ments. In 2020, one of the public arbitrators withdrew, and FINRA replaced her with Leslie

Nydick. The 2017 list of arbitrators had classified her as a public arbitrator, but an attach-

ment to the 2020 letter correctly listed her past work in the securities industry. Although

Karoon and KS got this information before the hearing, they did not object until after they

lost. That was too late. Goldman, Sachs & Co. v. Athena Venture Partners, 803 F.3d 144,

150 (3d Cir. 2015).

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   Karoon and KS also object that the arbitrators must have been biased. “Evident partial-

ity is strong language and requires proof of circumstances powerfully suggestive of bias.”

Kaplan v. First Options of Chi., Inc., 19 F.3d 1503, 1523 n.30 (3d Cir. 1994) (internal

quotation marks omitted), aff’d, 514 U.S. 938 (1995); see 9 U.S.C. § 10(a)(2). Yet they

have none. They allege only that the panel charged them fees for the three adjournments

that they themselves asked for, split the $200 fee for one of their successful motions to

compel, and declined to impose sanctions on National. But FINRA’s rules do not mandate

certain fee allocations or sanctions. Instead, the rules leave these matters to arbitrators’

discretion. See FINRA Rules 13214(c)(1), (3), 13902(c), 13511. And Karoon and KS have

not explained why the arbitrators’ conclusions were unreasonable, let alone powerfully

suggestive of bias. So we will affirm the District Court’s refusal to vacate the arbitral

award.

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