Court Opinion

ID: 2961494
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:44:00.620265+00
Date Added: 2024-06-11T11:42:20.117598
License: Public Domain

USCA1 Opinion

	

        September 9, 1992       [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-1214                                  ELIE J. BAGHDADY,                                Plaintiff, Appellant,                                          v.                               LARRY D. SADLER, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. Joseph L. Tauro, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                            Cyr and Boudin, Circuit Judges,                                            ______________                             and Hornby,* District Judge.                                          ______________                                 ____________________            Edward  F. Haber with  whom Andrew  A. Rainer and  Spairo, Grace &            ________________            _________________      _______________        Haber were on brief for appellant.        _____            Bryan G. Killian  with whom  David A. Guberman, Barbara  O'Donnell            ________________             _________________  __________________        and Sherin and Lodgen were on brief for appellees.            _________________                                 ____________________                                 ____________________        _____________________        * Of the District of Maine, sitting by designation.                    HORNBY,  District  Judge.   This  appeal  challenges  a                             _______________          decision compelling arbitration of a dispute between a securities          firm  and  a  customer,  and  the  eventual  confirmation of  the          arbitrator's  award.  The record  satisfies us that  there was an          enforceable agreement between the parties to arbitrate  disputes.          We  therefore conclude  that the  lower court  properly compelled          arbitration under the Federal Arbitration Act,  9 U.S.C.    1-16.          Because  the challenge to the award reveals only frustration with          the results, there  is no  basis to vacate  the district  court's          decision to confirm the award.  We therefore affirm.                                        Facts                                        _____                    Elie J. Baghdady held a substantial number of shares in          a company called Teledyne, Inc.  ("Teledyne").  Unhappy with  the          handling of  his securities account at another brokerage firm, in          July,  1981,  Baghdady transferred  his  Teledyne  shares to  the          Boston  office of  Merrill Lynch,  Pierce,  Fenner &  Smith, Inc.          ("Merrill Lynch").  According to  Baghdady, he opened the Merrill          Lynch account for the  single purpose of containing risks  he was          facing on certain call  options.  He expected the  arrangement to          last only until he could find a broker with sufficient "expertise          in  options  to help  him  out  of  [his]  precarious  investment          situation."  When he opened the Merrill Lynch account on July 29,          1981,  Baghdady signed  an  agreement called  a "Standard  Option          Agreement."    The  agreement  provided  that "[a]ny  controversy          between [Baghdady and  Merrill Lynch] arising out of  such option                                         -2-          transactions or  [the] agreement shall be  settled by arbitration          only before the National Association of Security Dealers . . . ."                    In  November, 1981,  Baghdady met  Larry D.  Sadler and          John  Voll, two  stockbrokers  operating out  of Merrill  Lynch's          Burlington,  Massachusetts,  office  with  expertise  in  options          trading.  Believing that the Burlington office would better serve          his needs  and perhaps find a  way to reduce the  losses that had          continued to  escalate under Merrill Lynch's  watch, in December,          1981, Baghdady directed Merrill  Lynch to open an account  in his          name  at  the  Burlington location.    Merrill  Lynch  did so  by          transferring  the trade balances in the Boston account to a newly          assigned account at Burlington.  Once at the Burlington office, a          slightly  different investment  strategy was pursued  although it          still  involved  options  trading  against  the  Teledyne  stock.          Baghdady's misfortunes continued at  the Burlington office and by          the time he closed that account in 1982 his losses had mounted to          $1,432,248.91.               On  August 2,  1985,  Baghdady brought  this action  against          Merrill  Lynch  and Sadler,  seeking  damages  for their  alleged          mishandling of his securities account.   Merrill Lynch and Sadler          moved to compel arbitration under the Federal Arbitration  Act, 9          U.S.C.     1-16.    That   motion  was  granted  over  Baghdady's          objections  and  the case  proceeded  to  arbitration before  the          National Association of  Securities Dealers,  Inc. (the  "NASD").          On February 26, 1991, following an  evidentiary hearing, a three-          member  NASD panel  awarded  Baghdady the  amount of  $60,720.15.                                         -3-          Baghdady petitioned  the district court to vacate  or correct the          NASD  award, but  on January 14,  1992, the  court confirmed  the          award.  Baghdady has appealed, challenging both the initial order          to arbitrate and the final confirmation of the award.                          The Decision to Compel Arbitration                          __________________________________                    The  document that  Baghdady signed  on July  29, 1981,          explicitly governed  "any transaction" executed by  Merrill Lynch          for  put and  call  options.   It  stated that  "any  controversy          between us arising out of such option transactions . . . shall be          settled by  arbitration. . . ."  The  document did not  limit its          terms  to a particular account.   Instead, its  scope extended to          all  accounts the customer might  have with Merrill  Lynch.1  The          controversy  here  involves put  and  call  options exercised  by          Merrill Lynch on behalf  of Baghdady.  It is  thus clearly within          the terms of the  agreement to arbitrate.  Baghdady  asserts that          he did not read the  printed text of the document when  he signed          it, did not intend to enter into an arbitration agreement and did          not intend that the  agreement would apply to any  other account.          He likewise asserts that when he opened the Burlington account in                                        ____________________               1 Paragraph 3,  for example, provided:   "Any securities and          funds held by you  in any account of mine with  you shall be held          by you as security for the performance by me of my obligations to          you  under this  Agreement."   Paragraph 8  also made  clear that          Merrill  Lynch  contract  documents  applied  to  more  than  one          account:   "Any agreement by  me with you,  whether previously or          hereafter  made applicable to any account of mine with you, shall          also apply to such option transactions except to the extent which          it conflicts with  this agreement.   In the event of  a conflict,          this agreement  shall control,  and where there  is no  conflict,          each provision of each agreement shall apply."                                         -4-          December,  1981, he did not  intend the July  agreement to apply.          Although these  may be disputed  matters, they are  not material.          The  document Baghdady did  sign was  clear on  its face  and its          scope was unrestricted.2   There is  no suggestion that  Baghdady          was prevented from reading the document before he signed it.                    Baghdady argues that  under this interpretation  of the          document,  a  new account  opened  30 years  later  in Melbourne,          Australia, would  still  be  subject  to  arbitration.    If  the          customer's relationship with Merrill Lynch was ongoing during the          30  years (as it was here during  six months), that might well be          the  case.  Neither  in that case nor  in this case  do we have a          situation  where the contractual relationship has  come to an end          such  that  the  parties  might  reasonably  expect  their  legal          agreement  to  have  lost  any  continuing  vitality.    Instead,          Baghdady transferred  his stock directly from  the Boston account          to the Burlington account.                    Baghdady also points to the language in Par-Knit Mills,                                                            _______________          Inc. v.  Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3rd Cir.          ______________________________________          1980),  that "[i]f  there  is doubt  as  to whether  [an  express          unequivocal arbitration  agreement] exists,  the  matter, upon  a          proper and timely  demand, should be submitted  to a jury."   The          "doubt"  in Par-Knit,  however -- and thus  the genuine  issue of                      ________          material fact -- was  whether a company's production  manager had          authority  to bind the corporation for which  he spoke.  There is                                        ____________________               2 Baghdady is bound by his "external expression of intention          as distinguished from [any] undisclosed intention."   Restatement                                                                ___________          (Second) of Contracts   2 cmt. b (1981).          _____________________                                         -5-          no dispute  here that  Baghdady  had authority  to bind  himself.          Since we find the language clear in the contract he signed, there          is no  issue  for a  trial, jury  or nonjury,  under the  Federal          Arbitration Act, 9 U.S.C.   4.                    We conclude therefore that the district court  properly          ordered arbitration under the Federal Arbitration Act.                                The Arbitration Award                                _____________________                    The Federal Arbitration Act permits a district court to          vacate an arbitration award where it finds certain wrongdoing  or          abuses in the arbitration process.  9  U.S.C.   10.  Baghdady has          not  asserted that any such statutory  abuses have occurred here.          Rather,  he  contends that  the  award should  have  been vacated          because  there was evidence of a "manifest disregard of the law,"          citing Wilko v.  Swan, 346  U.S. 427, 436-37  (1953) (creating  a                 ______________          judicial standard  for reviewing  arbitration awards  outside the          Federal Arbitration Act), overruled on other grounds by Rodriquez                                    _____________________________ _________          de  Quijas  v.  Shearson/American  Express, Inc.,  490  U.S.  477          ________________________________________________          (1989).                    Cut  to  its  essence,  Baghdady's claim  is  that  the          arbitrators  fully understood  established  legal principles  for          calculating damages, but disregarded  those principles.  Baghdady          insists that such disregard of the law is proven by the amount of          damages  actually  awarded.   He  maintains  that the  $60,720.15          awarded  was  the   "sum  of  [his]   losses  on  precisely   two          transactions  in the  account."   If that was  the basis  for the                                         -6-          award,  he argues, then there must have been a manifest disregard          of the  law because the  arbitration panel could  not justifiably          have  distinguished  those  two  transactions   from  the  losses          demonstrated  on  "the 25  other  transactions  in his  account."          Baghdady's displeasure  with his recovery,  however, provides  no          basis for  vacating  the  award.   For  us  to  find  a  manifest          disregard of  the law, "there must be some showing in the record,          other than the result obtained, that the arbitrators knew the law          ______________________________          and expressly  disregarded it."   Advest,  Inc. v.  McCarthy, 914                                            __________________________          F.2d  6,  10  (1st  Cir.  1990)  (emphasis  supplied)  (citations          omitted).3    Here,  Baghdady  has nothing  but  the  arbitration          result  to buttress  his claim  of manifest  disregard.   That is          simply insufficient.               Advest  left open  one  other additional  possibility:   "In               ______          certain circumstances, the governing law may have such widespread          familiarity, pristine clarity, and irrefutable applicability that          a   court  could  assume  the  arbitrators  knew  the  rule  and,          notwithstanding, swept it  under the rug."  Id. at  10.  But like                                                      __          Advest,  this  is  not  such  a  case.    As  Advest  recognized,          ______                                        ______          "arbitrators  possess latitude  in crafting  remedies as  wide as          that  which they possess in deciding cases. . . .  That leeway is          at  its zenith when, as  here, the arbitration  clause imposes no          limitations on  choice  of remedies."   Id.  at 10-11  (citations                                                  __                                        ____________________               3 Baghdady also  seeks to have  us modify Advest  to include                                                         ______          "consideration  of  how  the law  was  applied  to  the facts  or          otherwise to  avoid a miscarriage of justice."   We see no reason          to do  so.   Such a  modification  would cut  against decades  of          judicial treatment of arbitrators' decisions.                                         -7-          omitted).   Even  if the  award  here was  based on  two specific          transactions as Baghdady suggests, the  panel may have found that          the  defendants   had  breached   a  promise  to   rescind  those          transactions.  Baghdady  argues that this finding would have been          erroneous.   That, however, is a  matter beyond the scope  of our          review.  As we have said before, we "do not sit to hear claims of          factual or legal  error by  an arbitrator as  an appellate  court          does in reviewing decisions  of lower courts."  Advest,  914 F.2d                                                          ______          at 8 (quoting United Paperworkers Int'l Union v. Misco, Inc., 484                _______ ______________________________________________          U.S.  29, 38  (1987)).   "[As]  long as  the  arbitrator is  even          arguably construing  or applying  the contract and  acting within          the scope  of  his  authority,'  a court's  conviction  that  the          arbitrator  made a  serious mistake  or committed  grievous error          will not furnish a satisfactory basis for  undoing the decision."          Advest, 914 F.2d at 9 (quoting  Misco, 484 U.S. at 38).  Whatever          ______                 _______  _____          its reasoning, the  panel's award  here was at  least within  the          realm of possible remedies that could have been fashioned in this          case.  The district court properly confirmed the award.                    Judgment AFFIRMED.                             ________                                         -8-