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United States District Court, S.D. New York

May 28, 2004.


The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge



This is a petition to confirm an arbitration award. Petitioners Antoinette Marsillo and Carmela Barile seek to confirm an award in arbitration issued by the National Association of Securities Dealers ("NASD") in their favor against their former broker, Edward Geniton.

  Geniton failed to appear at the arbitration proceedings. Geniton opposes the motion, claiming insufficient notice of the arbitration proceedings and lack of jurisdiction. Geniton moves for a stay to give him time to appeal the arbitration award.

  Petitioners' motion is granted. The court hereby confirms the NASD arbitration award. Geniton's application is denied. Facts

  When employed as a broker with HSBC Brokerage (USA) Inc. ("HSBC"), respondent, Edward Geniton, caused losses to petitioners' investments. Petitioners sought arbitration by the National Association of Securities Dealers ("NASD"), claiming Geniton had engaged in common law fraud, fraudulent misrepresentation, breach of contract, breach of fiduciary duty, breach of supervisory duties and responsibilities, and negligent conduct. Petitioners were clients of HSBC, who had invested in various funds, stocks, annuities and life insurance policies, and had, apparently, been counseled by Geniton.

  Geniton was a registered securities broker from November 1993 until his termination in October 2001, according to Geniton's affidavit. As required by the NASD regulations, he filed a U4 Form ("Uniform Application for Securities Industry Registration or Transfer") with the NASD when he began his employment with HSBC in June of 2000. Portions of his completed U4 application are attached to the motion as petitioner's Exhibit F. The U4 Form requires various disclosures, including disclosures concerning a broker's personal history, contact information, employment history, current firm and type of business in which he engages. On the form Geniton listed the following address as his current residence: 101 Dogwood Drive, Staten Island, N.Y. 10312, Geniton affirmed that he had lived at this address from June of 1999, that is, for one year prior to beginning his new employment with HSBC. (Exhibit F).

  The U4 form contains an arbitration clause, which provides:

I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the SROs [Self-Regulatory Organization, including the NASD] indicated in Item 11 as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction, (emphasis in the original).
The form also contains a consent to service of process, which provides:
I consent that the service of process, pleading, subpoena, or other document in any investigation or administrative proceeding conducted by the SEC, CFTC or a jurisdiction or in any civil action in which the SEC, CFTC or a jurisdiction are plaintiffs, or the notice of any investigation or proceeding by any SRO [Self-Regulatory Organization, including the NASD] against the applicant, may be made by personal service or by regular registered or certified mail or confirmed telegram to me at my most recent business or home address as reflected in this Form U-4, or any amendment thereto, by leaving such documents or notice at such address, or by any other legally permissible means.
  On January 11, 2002 petitioners filed a claim with the NASD, initiating the arbitration proceeding against Geniton and his firm, HSBC. See Antoinette Marsillo and Carmela Barile (Claimants) vs. HSBC Brokerage (USA) Inc. and Edward Geniton (Respondents). NASD Dispute Resolution Arbitration No. 02-00197. HSBC filed an answer in May of 2002 and subsequently settled with petitioners.

  Geniton, however, never responded to any of the notices or correspondence sent to his Staten Island address at 101 Dogwood Drive by NASD Dispute Resolution. Attached to petitioners' notice of motion are at least 10 letters sent or copied to Geniton regarding the developments in the arbitration proceedings, including notices of appearance.

  On January 17, 2002, NASD Dispute Resolution sent Dan Brecher, petitioners' attorney, a letter stating that petitioners had filed a claim against Geniton with the NASD. This letter was copied to Geniton's Staten Island address.

  On April 3, 2002, NASD Dispute Resolution sent Geniton a letter stating that Geniton had been named as a party in NASD DR Case Number 02-00197, Antoinette Marsillo and Carmela Barile vs. HSBC Brokerage (USA) Inc. and Edward Geniton. The letter included the Statement of Claim that petitioners had filed with the NASD. The letter advised Geniton that he was required to file and serve an answer before May 23, 2002. It also detailed what steps Geniton was required to take in order to comply with the NASD Code, and stated that a hearing would be held.

  Further letters to Brecher on April 3, 2002, June 10, 2002, June 20, 2002, October 11, 2002, November 6, 2002, December 5, 2002, and January 16, 2003 concerning the progress of the arbitration proceedings were all copied to Geniton at the Staten Island address. Undoubtedly, there were additional letters addressed and sent to Geniton by the NASD which are not part of the record. On November 25, 2002 a telephonic pre-hearing was held to schedule the arbitration proceedings. Defendant HSBC appeared, but Geniton was absent. The December 5, 2002 letter gave notice that a hearing would be held on January 23, 2003 and includes a "Case Information Sheet."

  At the January 23, 2003 hearing, petitioners presented testimony and evidence, the content of which is not described in the award letter or in any of the other submission. Again, Geniton made no appearance.

  The hearing resulted in an award for petitioners, dated February 14, 2003. The arbitration panel awarded petitioners compensatory damages against Geniton in the amount of $139,661.44 (petitioners had sought $250,000), but denied punitive damages and other relief requested.

  The award letter noted Geniton's absence as follows:

Upon review of the file and the representations made on behalf of the claimants, the undersigned arbitrators (the "Panel") determined that Geniton has been properly served with the Statement of Claim and received due notice of the hearing, and that arbitration of the matter would proceed without Geniton present, in accordance with the NASD Code of Arbitration Procedure (the "Code").
Geniton did not file with NASD Dispute Resolution a properly executed submission to arbitration but is required to submit to arbitration pursuant to the Code and is bound by the determination of the Panel on all issues submitted.
The award letter was sent to Geniton's residence on February 27, 2003.

  On March 26, 2003 petitioners filed their petition to confirm the arbitration award in the U.S. District Court for the Southern District of New York. Geniton was served on April 26, 2003.

  This time Geniton responded by filing an answer on May 10, 2003. In his answer Geniton denies that he was ever served with notice of the arbitration proceedings, thus claiming that the NASD arbitration panel lacked jurisdiction to make any determinations relating to the services he had rendered to petitioners.

  Petitioners move for summary judgment.

  Geniton cross-moves for an order staying the proceeding in this court pending Geniton's efforts to set aside the decision by the arbitration panel on the grounds that Geniton was never given notice of the arbitration proceeding.

  In his Local Rule 56.1 statement, Geniton alleges that he did not receive the original statement of claim that was filed by petitioners with the NASD and sent to his Staten Island address. Geniton alleges that he failed to receive any subsequent correspondence sent by regular mail by the NASD. He claims he only received notice of the action in this court when the complaint and summons were affixed to the door on the premises of the Staten Island address, but that he did not receive the copies that were mailed to him at that address.

  In an affidavit, Geniton asserts that he never resided at the Staten Island residence despite having listed this address on his U4 form. He explains his circumstances as follows. Geniton divorced in May of 1999. After residing in Colorado, he then returned to New York when he began his employment with HSBC. Apparently Geniton was in transition at this time. Geniton's parents' residence could not serve as a permanent address, because their house was sold during this period. Therefore he used his Aunt's Staten Island address at 101 Dogwood Drive as his own permanent address with her consent, even though he never resided there. Geniton's Aunt is Ann Ahmed.

  Geniton asserts that he did receive "one communication from the NASD which indicated that HSBC . . . had `settled' the matter," based upon which Geniton "assumed that the matter was completely resolved as it was HSBC who had solicited [sic.] the Petitioners." (Geniton Affidavit, at 2). Geniton asserts that this notification was the only notification he received concerning that NASD arbitration and that he was therefore "of the opinion that the matter had been resolved."

  Geniton denies any wrongdoing in managing petitioners' accounts and seeks the opportunity to present his version of the events to NASD Dispute Resolution to show that their claims lacked merit.

  Included in Geniton's submission is an affidavit by his Aunt Ann Ahmed, stating that she consented to his use of her address as a mailing address. Ahmed asserts that she "kept all the mail that was received addressed [sic.] to him at 101 Dogwood Drive . . . and gave him all the mail . . ." She also states that she received no certified or registered mail or any other "official looking" mail for him and that she would have contacted him at once, if she had.


  The confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court. Florasynth, Inc. V. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984). Section 9 of the Federal Arbitration Act ("FAA") requires that a court, upon timely application by any party must grant an order to confirm an arbitration award, unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of the FAA. 9 U.S.C. § 9. The grounds on which an award may be vacated are statutorily limited and narrowly interpreted. Thus pursuant to Section 10, a court may vacate the award only:

(1) Where the award was procured by corruption, fraud, or undue means.
(2) Where there was evident partiality or corruption in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. (4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
[In addition:] (5) Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators.
9 U.S.C. § 10.

  Section 11 provides that an award may be modified or corrected only:

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.
(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.
(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.
9 U.S.C. § 11. In summary, the court must grant an order confirming the arbitration award unless the award is vacated, modified, or corrected pursuant to the specifically enumerated grounds as prescribed in Sections 10 and 11. Notice of a motion to vacate, modify, or correct an award must be served within three months after the award is filed or delivered. 9 U.S.C. § 12.

  In addition to the statutory remedies, there is a judicially created ground for vacating an arbitration award where arbitrators have engaged in "manifest disregard of the law." Merrill Lynch, Pierce. Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933-934 (2d Cir. 1986). However, judicial inquiry under the "manifest disregard" standard is extremely limited.

  Geniton's motion for a stay pending efforts to seek reconsideration by the NASD arbitration panel is without statutory basis. A stay of proceedings to confirm an arbitration award is contemplated only in order to permit consideration of motions to vacate, modify or correct an award. 9 U.S.C. § 12. Only where an award is first vacated, can a court direct a rehearing. But Geniton filed only an answer to the petition to confirm the award and a subsequent cross-motion to stay the proceedings. These filings are not properly construed as motions to vacate, modify or correct the arbitration award. Indeed, in his affidavit Geniton asserts that "[w]hile I do not dispute the fact that his clients are entitled to immediate confirmation of the award, I wish to set [forth] the following facts." (Respondent's Affidavit, at 1).

  Assuming the court construes Geniton's cross-motion as a motion to vacate the award, the motion would fail. First, the motion would be untimely, because it was filed on July 2, 2002, that is, more than three months after the award was filed or sent to Geniton's residence. 9 U.S.C. § 12; Florasynth, Inc. V. Pickholz. 750 F.2d 171, 175 (1984) ("a party may not raise a motion to vacate, modify, or correct an arbitration award after the three month period has run, even when raised as a defense to a motion to confirm").

  Second, nothing in the submissions or affidavits suggests that the arbitration award was subject to any of the deficiencies listed in 9 U.S.C. § 10. There are no allegations that the award was procured by corruption, fraud, or undue means. There are no allegations of evident partiality, corruption, or misconduct by the arbitrators.

  Geniton does claim that he did not receive adequate notice, suggesting that the arbitrators exceeded their authority in making the award. Pursuant to the NASD Code of Arbitration Procedure, the arbitration panel has the power to confer an arbitration award where a party fails to appear despite adequate notice. NASD Code of Arbitration Procedure Rule 10318 provides:

  10318. Failure to Appear If any of the parties, after due notice, fails to appear at a hearing or at any continuation of a hearing session, the arbitrators may, in their discretion, proceed with the arbitration of the controversy. In such cases, all awards shall be rendered as if each party had entered an appearance in the matter submitted. (The NASD Code also provides for a default procedure where a terminated broker fails to file an answer to a Statement of Claim within 45 days of service, NASD Code of Arbitration Procedure 10313(e), but such procedure was not chosen here, and thus does not apply.). Rule 13015 of the NASD Code of Arbitration procedure requires that NASD Dispute Resolution:


shall give notice of the time and place [of any pre-hearing conference or hearing] at least 15 business days prior to the date fixed for the first meeting by personal service, registered or certified mail to each of the parties unless the parties shall, by their mutual consent, waive the notice provisions under this Rule.
Notice of the Statement of Claim, however, may be "serve[d] promptly by mail or otherwise on the Respondent(s)." NASD Code of Arbitration Procedure Rule 10314. Service of awards shall be accomplished "by using any method available and convenient to the parties and the Director [administering the NASD arbitration], and that is reasonably expected to cause the award to be delivered to all parties, or their counsel, on the same day. Methods the Director may use include, but are not limited to, registered or certified mail, hand delivery, and facsimile or other electronic transmission/' NASD Code of Arbitration Procedure Rule 10329.

  Geniton asserts that he did not receive proper notice of the proceedings, the hearings or any award. The affidavit of Ahmed affirms that she did not receive any registered or certified mail at the Staten Island residence for Geniton. Petitioners do not submit any proof that notice of the arbitration hearings were sent to Geniton by registered or certified mail. Nor do they supply any proof of service for any notices sent by NASD Dispute Resolution to Geniton. Geniton does admit, however, that he had actual knowledge of the arbitration proceedings because of a letter he received stating that HSBC had settled with petitioners. Geniton claims that this letter led him to conclude that the entire claim was dismissed.

  As already stated, the arbitration panel has the power to confer an arbitration award where a party fails to appear but has received adequate notice. Deciding whether notice was adequate thus does not exceed the panel's powers. The question is thus whether under these circumstances the arbitration panels' decision that notice was adequate constituted misconduct or misbehavior affecting Geniton's rights. 9 U.S.C. § 10(a)(3). This section has been interpreted to mean that except where fundamental fairness is violated, arbitration determinations will not be opened up to review. Kolacek, III, v. Gemexco Trading, Inc., No 90 Civ. 5760, 1993 WL 258702, at *2 (S.D.N.Y., July 9, 1993) (holding refusal to adjourn hearing dates was within arbitrator's broad discretion), Transit Casualty Co. V. Trenwick Reinsurance Co., Ltd., 659 F. Supp. 1346, 1354 (S.D.N.Y. 1987) ("misconduct must amount to a denial of fundamental fairness of the arbitration proceeding in order to warrant vacating the award"). In this court's opinion it does not.

  Taking the facts as stated in the affidavits submitted by Geniton as true, Geniton thus had actual knowledge of NASD arbitration proceedings in which he was named as a party at some point before the hearing was held. Geniton had actual notice of the arbitration proceedings when he received and read the letter sent to him by NASD Dispute Resolution stating that HSBC had settled with petitioners. Undoubtedly this letter contained in its subject line the case number and the caption of the NASD case, listing Edward Geniton as a respondent, as does every letter in evidence sent out by NASD Dispute Resolution in this matter. Even if Geniton had not received any other notice of the arbitration prior to this time — which strains credulity — he must have realized at this point in time, that he was not receiving all the mail that was coming to him. He would certainly have known that he should have received a Statement of Claim or other correspondence regarding the arbitration proceedings initiated against him. The Statement of Claim in the arbitration proceedings was properly served when NASD Dispute Resolution mailed it, by regular mail, to the residence he provided on his U4 form. There are no allegations that this letter, or any other, was returned by the United States Postal Service as undeliverable. Indeed Ahmed asserts that she gave Geniton all the mail that she received for him at her Staten Island residence. His failure to make any inquiries at this point suggest that Geniton simply chose to ignore the arbitration proceedings. Geniton's claim that NASD Dispute Resolution failed to send proper notice of the hearings in the form of personal service, registered mail or certified mail, is insufficient by itself to provide a basis for vacating the arbitration award. See, e.g., Shamah v. Schweiger, 21 F. Supp.2d 208 (E.D.N.Y. 1998) (refusing to vacate NASD award where respondent had actual notice of hearing but where notice was not in the form of personal service, registered mail or certified mail); Bernstein Seawell & Kove v. Bosarge. 813 F.2d 726, 729-30 (5th Cir. 1987) (where party did not receive the arbitration notice but received constructive notice of hearing, the court affirmed the confirmation of the arbitration award finding "due process is not violated if the hearing proceeds in the absence of one of the parties when that party's absence is the result of his decision not to attend"). When Geniton filed his U4 form he had a duty to provide a permanent address of residence. Geniton failed to do so, and instead gave his Aunt's address. NASD Dispute Resolution's notices that were sent to Geniton at the address he gave were reasonably calculated to effect notice of the arbitration. Geniton has no grounds for claiming fundamental unfairness.

  For all the above reasons, Geniton's application is denied. Conclusion

  Petitioner's motion to confirm the arbitration award is granted. Geniton's motion is denied.



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