Court Opinion

ID: 3016970
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:16:23.141402+00
Date Added: 2024-06-11T09:52:07.581401
License: Public Domain

_____________

                                  No. 95-3579SD
                                  _____________

Ernest D. Olson (Bud),              *
                                    *
                 Appellant,         *
                                    *   Appeal from the United States
      v.                            *   District Court for the District
                                    *   of South Dakota.
National Association of             *
Securities Dealers, a               *
Corporation; Edward J. Hentges,     *
an individual,                      *
                                    *
                 Appellees.         *
                              _____________

                          Submitted:     April 11, 1996

                           Filed: June 7, 1996
                                _____________

Before McMILLIAN, JOHN R. GIBSON, and FAGG, Circuit Judges.
                              _____________

FAGG, Circuit Judge.

     This   is   Ernest   D.   Olson's   second   federal   appeal   arising    from
contractually required arbitration of his age discrimination action against
his former employer.       After a panel of arbitrators sponsored by the
National Association of Securities Dealers (NASD) decided in the employer's
favor, Olson learned one of the arbitrators, Edward J. Hentges, had an
ongoing business relationship with the employer.       Olson asked the district
court to vacate the arbitration decision, contending the arbitrator's
failure to disclose the relationship showed "evident partiality."              See 9
U.S.C. § 10(a)(2) (1994).      The district court denied Olson's motion, but
we agreed with Olson and reversed.       Olson v. Merrill Lynch, Pierce, Fenner
& Smith, Inc., 51 F.3d 157 (8th Cir. 1995).         Before arbitrating his age
discrimination claim again, however, Olson filed this separate lawsuit
against the NASD for its
appointment of Hentges.      Olson alleges breach of contract, fraudulent
misrepresentation, negligent processing of arbitration, gross negligence,
breach of warranty, and intentional infliction of emotional distress.
Olson also brought claims against Hentges.    The district court dismissed
Olson's complaint, holding the NASD was immune from liability and the court
lacked personal jurisdiction over Hentges.   Olson appeals the dismissal of
his claims against the NASD, and we affirm.

     Because an arbitrator's role is functionally equivalent to a judge's
role, courts of appeals have uniformly extended judicial and quasi-judicial
immunity to arbitrators.    Austern v. Chicago Bd. Options Exch., Inc., 898
F.2d 882, 886 (2d Cir.), cert. denied, 498 U.S. 850 (1990); Wasyl, Inc. v.
First Boston Corp., 813 F.2d 1579, 1582 (9th Cir. 1987); Ozark Air Lines,
Inc. v. National Mediation Bd., 797 F.2d 557, 563-64 (8th Cir. 1986); Corey
v. New York Stock Exch., 691 F.2d 1205, 1209 (6th Cir. 1982); Tamari v.
Conrad, 552 F.2d 778, 780-81 (7th Cir. 1977); Shrader v. NASD, Inc., 855
F. Supp. 122, 123-24 (E.D.N.C. 1994), aff'd, 54 F.3d 774 (4th Cir. 1995)
(unpublished per curiam).      Like judicial and quasi-judicial immunity,
arbitral immunity is necessary to protect decisionmakers from undue
influence, and the decision-making process from attack by dissatisfied
litigants.   Austern, 898 F.2d at 886; Corey, 691 F.2d at 1211.   The courts
also agree that to give effect to these underlying policies, arbitral
immunity extends beyond arbitrators themselves to organizations that
sponsor arbitrations.      Austern, 898 F.2d at 886-87; Corey, 691 F.2d at
1211; Shrader, 855 F. Supp. at 124; Cort v. American Arbitration Ass'n, 795
F. Supp. 970, 972-73 (N.D. Cal. 1992).     Without this extension, arbitral
immunity would be almost meaningless because liability would simply be
shifted from individual arbitrators to the sponsoring organizations.
Austern, 898 F.2d at 886; Corey, 691 F.2d at 1211.       Arbitral immunity
protects all acts within the scope of the arbitral process.   Austern, 898
F.2d at 886.

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     Olson argues the NASD's appointment of Hentges was not within the
scope of the arbitral process because it occurred before the decision-
making process began.   The appointment of arbitrators is a necessary part
of arbitration administration, however, and thus is protected by arbitral
immunity.    Austern, 898 F.2d at 884; Corey, 691 F.2d at 1208; Cort, 795 F.
Supp. at 972.    Olson also asserts arbitral immunity does not apply because
the appointment of Hentges violated the NASD's own rules.     We reject this
contention as well.      A sponsoring organization is immune from civil
liability for improperly selecting an arbitration panel, even when the
selection violates the organization's own rules.    Austern, 898 F.2d at 884,
886; Corey, 691 F.2d at 1208, 1211; see Cort, 795 F. Supp. at 972-73.

     Our decision does not leave Olson without redress for the NASD's
appointment of a possibly biased arbitrator.       Courts can vacate tainted
arbitration decisions under 9 U.S.C. § 10.     See Corey, 691 F.2d at 1211;
see also L & H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372, 374, 377
(Minn. 1989) (involving analogous Minnesota law).         Indeed, Olson has
already     sought vacation of the arbitration decision under § 10 and
prevailed.      Olson, 51 F.3d at 160.     Thus, Olson will receive a new
arbitration proceeding free from actual or perceived bias.      L & H Airco,
446 N.W.2d at 377.

     Having reviewed the issue de novo, we conclude the NASD is immune
from liability for sponsoring the tainted arbitration proceeding.    We thus
affirm the district court's dismissal of Olson's claims against the NASD.

     A true copy.

              Attest:

                   CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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