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Premieretrade Forex, LLC v. Fxdirectdealer

May 16, 2013


The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge:


Petitioner PremiereTrade Forex, LLC ("PT") brings this action pursuant to the Federal Arbitration Act, 9 U.S.C. § 9, to confirm an arbitration award in its favor. Respondent FXDirectDealer, LLC ("FXDD") cross-petitions to vacate or modify the award. PT holds seminars and sells books and software on foreign exchange trading. (Dkt. No. 14 ¶ 7.)*fn1 FXDD is a registered retail foreign exchange dealer. (Id. ¶ 6.) They are parties to an "Introducing Broker Agreement" ("the Agreement") which provides that FXDD will pay PT a brokerage fee or commission for introducing foreign exchange customers to FXDD.

The Agreement has a broad arbitration clause calling for the arbitration of "all controversies, causes of action, and equitable claims" under the commercial dispute rules of the American Arbitration Association ("AAA"). (Dkt. No. 1 Ex. A ¶ 34.) The record is silent on how the three arbitrators were selected, but it would be customary for each party to select one arbitrator, and for the two to select the third. The parties submitted their dispute over brokerage fees and commissions which PT claims FXDD owed for the customer introductions PT made to FXDD. On May 2, 3, and 4, 2011, the three AAA arbitrators heard testimony from seven witnesses and considered more than 150 exhibits to resolve the parties' dispute concerning fees allegedly owed to PT by FXDD.


After hearing testimony about which party had the duty to ensure that customers introduced by PT were correctly identified on FXDD's records as having been introduced by PT, the panel held that it need not decide the issue. It found instead that FXDD's own records concerning accounts for certain customers constituted an admission by FXDD that PT introduced those customers. (Dkt. No. 1 Ex. B (arbitration order) at 5-6.) The panel concluded that FXDD owed PT fees to any extent they were unpaid for those customers. Accordingly, the arbitrators ordered an audit to provide the information needed to make an award.

FXDD recommended Titus, a Milwaukee-based audit firm that FXDD had used on a prior occasion, and PT agreed to FXDD's recommendation. Titus calculated the rebates owed based on FXDD's records and issued two reports. The parties responded to the reports through rounds of comments to Titus, briefings to the panel, and telephone conferences.

Based on the entire record, the panel (1) ordered FXDD to pay Category 1 and 2 claims totaling $945,612.74, but held that PT failed to establish its Category 3A claim of $4,851,157.86; (2) awarded PT $177,346.32 in costs and $122,040.00 in attorney's fees pursuant to Section 34 of the Agreement, and (3) granted post-Award interest at a rate of 9% on damages, fees and costs that are unpaid within thirty days of the award, excluding amounts PT already paid to the AAA. (Dkt. No. 1, Ex. B at 11.) The three arbitrators set forth their award in a thorough, well-reasoned and unanimous opinion, dated July 20, 2012.

When FXDD failed to comply with the arbitrators' award, PT filed its petition, dated September 17, 2012, to confirm the award. In addition, PT seeks attorney's fees and costs for bringing this action, pre-judgment interest from July 20, 2012 (the date of the award) to the entry of judgment at a rate of 9% (Dkt. No. 1 at 5-6, 8), and post-judgment interest at 9% from the date of judgment until PT is paid in full (id. at 8; Dkt. No. 18 at 25). On October 18, 2012, FXDD filed its cross-petition to vacate.


I.The Scope of Judicial Review of Arbitration Awards

"The role of a district court in reviewing an arbitral award is 'narrowly limited,' and 'arbitration panel determinations are generally accorded great deference under the FAA.'" Agility Pub. Warehousing Co. K.S.C. v. Supreme Foodservice GmbH, 840 F. Supp. 2d 703, 710 (S.D.N.Y. 2011) (quoting Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 19 (2d Cir. 1997)). "[A] motion to vacate filed in a federal court is not an occasion for de novo review of an arbitral award." Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004). "A party petitioning a federal court to vacate an arbitral award bears the heavy burden of showing that the award falls within a very narrow set of circumstances delineated by statute and case law." Id. (quoting Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003)); see D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006).

The Federal Arbitration Act ("FAA") provides four specific statutory grounds for vacating arbitration awards. Jock v. Sterling Jewelers Inc., 646 F.3d 113, 121 (2d Cir. 2011); see 9 U.S.C. §§ 10(a)(1)-(4). The grounds enumerated in Section 10(a) are: (1) corruption, fraud or undue means in procurement of the award; (2) evident partiality or corruption in the arbitrators; (3) specified misconduct on the arbitrators' part; and (4) where the arbitrators exceeded their powers. Id. In Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576, 585-86 (2008), the Supreme Court suggested that the statutory grounds for vacatur were the exclusive basis for vacatur. The decision cast doubt on whether "manifest disregard" survives as a basis for vacatur. The Second Circuit read Hall Street, however, as "reconceptualiz[ing] [manifest disregard] as a judicial gloss on the specific grounds for vacatur," and with that interpretation, held that manifest disregard "remains a valid ground for vacating arbitration awards." Stolt-Nielsen S.A. v. AminalFeeds Int'l Corp., 548 F.3d 85, 94-95 (2d Cir. 2008). The Supreme Court held that it would not decide whether "'manifest disregard' survives our decision in [Hall Street], as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U.S.C. § 10." Stolt Nielson S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1768 n.3 (2010). Thus, the Second Circuit "continue[s] to recognize [manifest disregard] as a valid ground in the wake of the Supreme Court's decision[s]." Schwartz v. Merrill Lynch & Co., Inc., 665 F.3d 444, 452 (2d Cir. 2011).

FXDD relies on three grounds for vacating the award: the arbitrators' alleged misconduct, excess of authority, and manifest disregard of the law. FXDD also relies on 9 U.S.C. ยงยง 11(a) and 11(b) in support of ...

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