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ARECA, INC. v. OPPENHEIMER & CO.

April 4, 1997

ARECA, INC. and ENRINEL INVESTMENT CORP., Claimants and Petitioners, against OPPENHEIMER & CO., INC. and LEONEL R. ROCHE, Respondents, - and - OPPENHEIMER & CO., INC., Third Party Petitioner, - against - PALLI HULTON & ASSOCIATES, Respondent.


The opinion of the court was delivered by: CHIN

 CHIN, D.J.

 Petitioners Areca, Inc. ("Areca") and Enrinel Investment Corp. ("Enrinel") move to vacate or modify a March 4, 1996 arbitration award entered in favor of respondents Oppenheimer & Co., Inc. ("Oppenheimer") and Leonel R. Roche ("Roche"), the head of Oppenheimer's Commodity Department, dismissing petitioners' Statement of Claim in its entirety. Petitioners assert three grounds in support of vacatur: (1) the arbitration panel wrongfully refused to hear testimony from Antonio Fernandez ("Fernandez"), the Chief Financial Officer of Oppenheimer, in violation of 9 U.S.C. § 10(a)(3); (2) the arbitration panel demonstrated "evident partiality" in favor of the respondents, in violation of 9 U.S.C. § 10(a)(2); and (3) the arbitration panel dismissed petitioners' claims in "manifest disregard of the law." For the reasons set forth below, petitioners' motion is denied and the award is affirmed.

 FACTS

 Petitioners Areca and Enrinel are Argentinean-based commodities and futures speculators who opened with Oppenheimer both a trading account, which petitioners traded by placing orders with their Argentinean agents Palli Hulton Associates ("PHA"), as well as a managed account, pursuant to which Roche selected independent commodities trading advisors ("CTA's") who then traded the account.

 In July 1993, petitioners commenced an arbitration before a "Member Panel" of the National Futures Association (the "NFA") *fn1" against respondents Oppenheimer and Roche, the account executive responsible for petitioners' commodities accounts at Oppenheimer. Petitioners alleged, inter alia, that respondents violated the Commodity Exchange Act ("CEA") and committed fraud by (1) conspiring with Juan Palli ("Palli"), a principal of petitioners' agent PHA, to churn petitioners' commodities futures accounts, (2) co-opting petitioners' agent PHA, and (3) making unauthorized transactions.

 After petitioners presented their direct case, consisting of seven full hearing days in which they called seven fact witnesses and three expert witnesses, the arbitration panel dismissed all of petitioners' claims by an award dated March 4, 1996. It is this award that petitioners seek to vacate.

 DISCUSSION

 A. Judicial Review Of Arbitration Awards

 The Second Circuit has recently discussed the standard for a district court's review of arbitration awards:

 
The showing required to avoid summary confirmation of an arbitration award is high, Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987), and a party moving to vacate the award has the burden of proof, see generally Matter of Andros Compania Maritima, S.A. of Kissavos (Marc Rich & Co., A.G.), 579 F.2d 691, 700 (2d Cir. 1978); Folkways Music Publishers v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993). Moreover, "arbitration awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation." Folkways Music, 989 F.2d at 111. "The court's function in confirming or vacating an arbitration award is severely limited." Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir. 1960).

 Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997). With the limited nature of this Court's review of the arbitration award in mind, I turn to petitioners' specific bases for challenging the arbitration panel's dismissal of their claims.

 B. Refusal To Hear Evidence: 9 U.S.C. § 10(a)(3)

 Petitioners argue that the award must be set aside because of "misconduct" on the part of the arbitration panel. Specifically, petitioners allege that the arbitrators refused to allow them to present the testimony of Fernandez, the Chief Financial Officer of ...


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