The opinion of the court was delivered by: Batts, District Judge.
Petitioner-Respondent brought this action to confirm an arbitration
award granted by the National Association of Securities Dealers, Inc.
(the "NASD") pursuant to the Federal Arbitration Act, 9 U.S.C. §
§ 9 and 13. The arbitrators awarded compensatory and punitive damages
as well as injunctive relief to Petitioner-Respondent Raymond J.
Acciardo. Respondents-Cross-Petitioners Millennium, Todd Rome, Richard
A. Sitomer, and Pamela L. Rockley seek to vacate this award on the
grounds that the arbitrators acted in manifest disregard of the law.
For the reasons set forth below, the Court GRANTS the Petition for
Confirmation of Arbitration Award. Respondent-Cross-Petitioners'
Cross-Petition to Vacate is DENIED.
Millennium Securities Corporation ("Millennium") is a registered
broker-dealer with its principal place of business in New York, New
York. On April 26, 1996 Respondent Cross-Petitioners Todd Rome ("Rome")
and Richard A. Sitomer ("Sitomer"), Millennium's senior management, hired
Raymond J. Acciardo ("Acciardo") to serve as Director of Compliance at a
yearly salary of $50,000. (Am. Cross-Petition to Vacate, Ex. J at 1).
Before the Arbitration Panel, Acciardo alleged that Rome and Sitomer
induced Aeciardo to leave his prior position by falsely representing that
Millennium had no regulatory problems or customer complaints. (Petition
to Confirm, Ex. A at 2). Acciardo further alleged that when he refused to
"look the other way" or participate in regulatory frauds proposed by his
employers, Pamela L. Rockley ("Rockley") was hired to replace him.
(Petition to Confirm, Ex. A at 2).
Acciardo claimed that Rockley, Rome, and Sitomer conspired together to
force him out of the firm and punish him by marking his Uniform
Termination Statement ("Form U-5") with false and derogatory
information, thereby preventing him from finding future employment.*fn1
(Petition to Confirm, Ex. A at 2). The allegedly defamatory disclosures
were that Acciardo was terminated for "failure to perform duties pursuant
to NASD 3010,"*fn2 he was under "internal investigation" because he
"removed his personnel files from [the] office," and he was the subject
of an arbitration by a dissatisfied customer. (Id. Ex. A at 2 (quoting
Acciardo's Form U-5); Zamansky Aff., Ex. A at 1-3). Acciardo testified
that as a result of the allegedly false and defamatory statements, he has
not been able to find work in the securities industry. (Petition to
Confirm, Ex. A at 2). Further, Acciardo claimed that his reputation and
career as an attorney and securities compliance officer have been
"severely, if not permanently, damaged." (Id.).
The Panel heard testimony from five former Millennium employees.*fn3
testified that they had observed regulatory violations at the firm.*fn4
(Pet.'s Mem. Law at 12-14). Three former employees testified that when
they left the firm their U-5 Forms were marked with false and derogatory
statements. (Id.). One former employee testified that she was threatened
by Rome and Sitomer that if she made negative comments about the firm,
they would issue a false and damaging Form U-5 against her. (Id. at 12).
Respondents-Cross-Petitioners ("Respondents") denied all of the above
allegations and testified before the Arbitration Panel that they did not
fraudulently induce Acciardo to join the firm, nor did they violate any
rules, laws or regulations. (Petition to Confirm, Ex. A at 3).
Respondents asserted that Acciardo lacked knowledge of the rules and
regulations necessary to perform his job adequately and had taken
documents from the office without consent. (id.). Respondents maintained
that Acciardo's Form U-5 was factually accurate and was not filed with
malicious intent. (id.).
Acciardo arbitrated claims for libel and defamation, tortious
interference with his employment contract, and wrongful discharge, among
others. (Petition to Confirm, Ex. A at 2). NASD arbitrators heard five
days of testimony. (Id.). On April 7, 1999, the Arbitration Panel
rendered its decision and awarded $40,535 to Acciardo in compensatory
damages plus pre- and post-judgment interest. Making a specific finding
of malice, the Panel awarded Acciardo an additional $100,000 in punitive
damages. The arbitrators also ordered Millennium to expunge the U-5 Form
so that the "Reason for Termination" reads only "Failure to Perform
Duties" and question 14 (indicating whether the employee was under
investigation for employee fraud, wrongful taking of property, or
violation of investment-related regulations) reads "no". (Id. at 4).
Acciardo then filed a petition in this Court to confirm and enter
judgment on the arbitration award. On June 2, 1999 Millennium and the
individual Respondents filed the instant Cross-Petition to Vacate the
award of the arbitrators pursuant to 9 U.S.C. § 10, alleging the
arbitrators, inter alia, manifestly disregarded the law.
By Order dated November 10, 1999, this Court remanded the matter to the
Arbitration Panel for clarification of its award. Specifically, this
Court sought further explanation of the blanket $40,535 compensatory
damage award on the grounds that some understanding of the purpose of the
compensatory award was necessary to evaluate the propriety of the Panel's
punitive damage award. See Remand Order (citing Action House, Inc. v.
Koolik, 54 F.3d 1009 (2d Cir. 1995)). See also ConnTech Dev. Co. v.
University of Conn. Educ. Prop., 102 F.3d 677 (2d Cir. 1996) (approving
remand of lump sum arbitration awards for clarification where the award
appears to be the result of precise mathematical calculations).
The Arbitration Panel, by letter dated December 23, 1999, elaborated on
its $40,535 compensatory damages award as follows:
1. Compensatory damages for bread of contract,
consisting of six months pay: $32,500;
3. Compensatory damages for the tort of defamation:
See Taube Ltr dated December 23, 1999.
By letter brief dated January 3, 2000, Respondents filed supplemental
arguments in support of their Motion to Vacate based on the newly
clarified award. ...