United States District Court, S.D. New York
May 28, 2004.
ANTOINETTE MARSILLO AND CARMELA BARILE, Petitioners, -against- EDWARD GENITON, Respondent
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
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
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
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,
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
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
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
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
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
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
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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