The opinion of the court was delivered by: RICHARD J. HOLWELL, District Judge
Memorandum Opinion and Order
This matter comes before the Court as a petition to vacate an
arbitration award. Presently pending is Petitioners' pro se Rule 60(b)
motion to set aside the previous judgment confirming the arbitration
award. Respondent has also moved for attorney fees. Neither motion is
opposed. For the following reasons, Petitioners' motion is denied and
Respondent's motion is granted.
Petitioners in this case are a securities brokerage firm, Congressional
Securities, Inc. ("Congressional"), and a group of investors who
maintained trading accounts at the firm. Respondent Fiserv Securities,
Inc. ("Fiserv"), acted as a clearing house for the brokerage firm. Each
of the Petitioners purchased shares on margin of Interface Systems, Inc.
("Interface"), a company that is not a party to the present action.
Fiserv issued margin calls to Petitioners when the price of Interface
stock declined and later initiated arbitration proceedings against
Petitioners when the margin calls were not honored. Fiserv prevailed in
the arbitration, receiving an award totaling over $10 million plus attorney fees and interest Petitioners then filed this action to
vacate the arbitration award.
This matter was originally assigned to the Honorable John S. Martin,
United States District Court for the Southern District of New York.
Before Judge Martin, Petitioners argued that the arbitrators improperly
denied Petitioners' request to postpone the arbitration. Petitioners also
argued that the arbitrators acted improperly when they permitted David H.
Zimmer, who was a party to the arbitration proceedings and an officer of
the petitioner brokerage firm, to act as the attorney for Petitioners at
an earlier stage of the arbitration. Judge Martin denied Petitioners'
motion to vacate the arbitration award and granted Respondent's
cross-motion to affirm the award. See Cong. Secs., Inc. v. Fiserv
Secs., Inc., 02 Civ. 6593,02 Civ. 7914, 02 Civ. 3740,02 Civ. 8634,
2003 WL 21664678 (S.D.N.Y. Jul. 15, 2003). On January 15,2004, this
matter was reassigned to this Court
A. Petitioners' Rule 60(b) Motion
Section 13 of the Federal Arbitration Act ("FAA") provides that a
judgment confirming an award, once entered, has the same force and effect
as a judgment in a standard civil action and is subject to all the
provisions of law relating to judgments, see 9 U.S.C. § 13,
including the provisions of the Federal Rules of Civil Procedure. See
Clarendon Nat'l Ins. Co. v. TIG Reins. Co., 183 F.R.D. 112,117
(S.D.N.Y. 1998). Rule 60(b)(2) states that, "[o]n motion and upon such
terms as are just, the court may relieve a party . . . from a final
judgment, order, or proceeding [if there is] newly discovered evidence
which by due diligence could not have been discovered in time to move for
a new trial under Rule 59(b)". Fed.R.Civ.P. 60(b)(2). The decision
to set aside a prior judgment under Rule 60(b) is within the sound
discretion of the district court. See Clarendon, 183 F.R.D. at
117-18. In considering relief under Rule 60(b), a party's need for
substantial justice must be weighed against the need for preserving the
finality of judgments. See id at 118. Indeed, because Rule 60(b)
allows for "extraordinary judicial relief', the moving party must
demonstrate "exceptional circumstances" for such relief. See
Paddington Partners v. Bouchard, 34 F.3d 1132,1142 (2d Cir. 1994).
A pro se party is afforded some degree of "flexibility" in pleading
their action. See Boguslavsky v. Kaplan,
159 F.3d 715, 720 (2d Cir. 1998). Therefore, the Court reads Petitioners'
papers liberally and interprets them "to raise the strongest arguments that
they suggest." Id.
Petitioners argue that, in the course of their litigation in the United
States District Court for the Eastern District of Michigan against
Interface and its officers-litigation that occurred after the
arbitration, evidence was discovered that would "exonerate or
significantly reduce the award against Petitioners in the arbitration."
(Rule 60(b)(2) Mot. for Relief from J. Due to Newly Disc. Evid. at 3
(hereinafter "Pet'r Mot.").) Petitioners argue that discovery in (he
arbitration proceedings was more limited in scope than the discovery in
the Michigan action and that, by declining to defer the arbitration
proceedings, the panel wrongfully precluded Petitioners from introducing
exculpatory evidence that would have altered the outcome of the
arbitration hearing.*fn1 (See id. at 3-5.) Petitioners' motion fails for two reasons. First, the alleged
exculpatory evidence does not indicate any fault with Judge Martin's
order confirming the arbitration award. Judge Martin's order held that
"the arbitrators clearly acted reasonably in denying an application for a
continuance made on the day of a hearing which had been scheduled more
than seven months earlier." Cong. Secs., 2003 WL 21664678, at
*2. The order also held that "there was nothing unreasonable in the panel
accepting Zimmer's representation that he was authorized to appear for
all of the [Petitioners]." Id. at 3. The possible existence of
evidence exonerating Petitioners' actions with respect to the margin
calls underlying the arbitration proceedings-evidence allegedly
discovered after the proceedings-does not effect Judge Martin's
conclusion that the arbitration panel acted reasonably considering the
information available at the time of the proceedings.
This brings the Court to the second reason why Petitioners' motion
fails: neither Rule 60(b) nor any other rule involving "newly discovered
evidence" is available to vacate an arbitration award, which is the
apparent intent of Petitioners' motion. Although Rule 60(b) may be used
to modify a judgment confirming an arbitration award, "[i]t is
well-established that Rule 60(b) does not apply" to the arbitration award
itself. Clarendon, 183 F.R.D. at 117. Accord
Washington-Baltimore Newspaper Guild, Local 35 v. Washington Post
Co., 442 F.2d 1234,1239 (D.C. Cir. 1971) ("[W]e think that neither
Rule 60(b) nor any judicially constructed parallel thereto was meant to
be applied to final arbitration awards"); Cook Chocolate Co. v.
Salomon Inc., 748 F. Supp. 122, 125 (S.D.N.Y. 1990) ("Rule 60(b) is
unavailable . . . in contesting the arbitrators' decision"). Section 10 of the FAA outlines the grounds for vacating an
arbitration award, see 9 U.S.C. § 10; "newly discovered
evidence" is not one of those grounds.*fn2 Cf. Grey v. FDIC,
No. 88 Civ. 7452, 2002 WL 959564, at *10 (S.D.N.Y. May 8, 2002) (finding
court lacks power to review arbitration award on the basis of newly
discovered evidence that was not before arbitrators). Absent a statutory
basis for modification or vacatur, the district court has little choice
but to confirm an arbitration award, as mandated by Section 9 of the FAA.
See Cook Chocolate, 748 F. Supp. at 126,30.
Indeed, there is good reason why "newly discovered evidence" is not one
of the grounds specified by the FAA. As the Washington-Baltimore
court explained, the parties to an arbitration agreement bargained to
have disputes settled by arbitration, knowing all of the advantages and
drawbacks of the proceedings. See Washington-Baltimore, 422 F.2d
at 1238 & n.4 (quoting Bridgeport Rolling Mills Co. v.
Brown, 314 F.3d 885, 886 (2d Cir. 1963) ("[T]he parties, having
agreed to an arbitration of their differences, are bound by the
arbitration award made upon the testimony before the arbitrator"));
cf. Paperhandlers Union No. 1 v. U.S. Trucking Corp.,
441 F. Supp. 469, 476 (S.D.N.Y. 1977) (quotations omitted) (`The plight
of a litigant who discovers new and important evidence after an
adverse arbitration award has been handed down, may be an unfortunate
one, but that is one of the risks which he assumed in submitting the
controversy to arbitration"). "Unless parties are bound by the
records made before the arbitrators, the piecemeal or staggered
submission of evidence would be likely to erode the effectiveness of
arbitration as a speedy and efficient forum for resolving . . .
disputes." Washington-Baltimore, 422 F.2d at 1238. Thus,
"[t]he fact that there is an argument against the truth of any of the statements [made during
arbitration] does not establish that the arbitration award" should be set
aside. Cook Chocolate, 748 F. Supp. at 126; accord Hines v.
Anchor Motor Freight, Inc., 424 U.S. 554,571 (1976) ("Petitioners
are not entitled to relitigate [the arbitrator's findings] merely because
they offer newly discovered evidence that the charges against them were
false and that in fact [what petitioners argued was true]").
For these reasons, the Court denies Petitioners' Rule 60(b)(2) Motion
for Relief from Judgment Due ...