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Hernandez v. Wells Fargo Advisors, LLC

United States District Court, S.D. New York

July 20, 2017

WELLS FARGO ADVISORS, LLC, et al., Respondents.



         This case arises out of an arbitration award issued in a dispute over control of a brokerage account among Petitioner Blanca Maria Gomez de Hernandez (“Blanca Maria”) and Respondents Wells Fargo Advisors, LLC (“Wells Fargo”), Maria Clemencia Batchelor (“Clemencia”) and Jorge Hernandez (“Jorge”). Blanca Maria petitions to vacate the award and moves for summary judgment on her claim seeking a declaration that she is the sole owner of the account. Wells Fargo and Clemencia cross-petition to confirm the award, and Clemencia moves to recoup her attorneys' fees and costs. For the reasons stated below, Blanca Maria's petition is denied and her declaratory judgment claim is dismissed. Wells Fargo and Clemencia's cross-petition to confirm the award is granted, and Clemencia's motion for attorneys' fees and costs is denied.

         I. BACKGROUND

         The following facts are taken from the parties' statements pursuant to Local Civil Rule 56.1 and are undisputed.

         Blanca Maria is eighty-three years old and lives in Bogota, Colombia. She is the mother of Jorge, who also lives in Bogota; Clemencia, who lives in New Zealand; and three other adult children who are not parties to this action. Wells Fargo operates a securities brokerage with offices throughout the United States.

         Blanca Maria and her late husband Humberto Hernandez (“Humberto”) had a Wells Fargo brokerage account ending in 0100 (the “0100 Account”). Humberto died intestate in October 2007. Pursuant to Colombian law of intestacy, his estate was distributed one half to Blanca Maria and the other half to their five children in equal shares. Blanca Maria opened a new account at Wells Fargo ending in 1285 (the “1285 Account”) to hold the distribution she received from the 0100 Account.

         The application for the 1285 Account lists Blanca Maria as the “Primary Owner” and also lists Jorge and Clemencia under the heading “Account Registration & Instructions.” Paragraph I(16)(a) of the Client Agreement for the 1285 Account provides that, if the account is maintained in the name of two or more persons, each account holder has authority to act individually and without notice to any other account holder. However, Paragraph I(16)(a) further provides that “at any time, [Wells Fargo] may, at [its] sole discretion, require joint or collective action by all Account Holders.” In late 2015, Blanca Maria decided to transfer the 1285 Account from Wells Fargo to UBS Switzerland, AG (“UBS”). Wells Fargo refused to comply with Blanca Maria's instructions unless Jorge and Clemencia joined the request. This effectively blocked the transfer because Clemencia opposed it.

         Blanca Maria filed an arbitration claim against Wells Fargo with the Financial Industry Regulatory Authority, Inc. (“FINRA”). The claim alleged that Wells Fargo's refusal to honor Blanca Maria's instructions was a breach of the Client Agreement and requested that the panel of arbitrators order Wells Fargo to comply with her instructions to move the 1285 Account to UBS. Blanca Maria later amended her claim to add Clemencia and Jorge as respondents and to seek a declaratory judgment that Blanca Maria is the true and/or beneficial owner of the account and Clemencia and Jorge have no ownership interest in the account.

         An arbitration hearing was held over the course of three days in September 2016. The panel heard testimony from, among others, Blanca Maria, Jorge, Clemencia and Maria Torne, the Wells Fargo financial advisor assigned to the 1285 Account. The hearing was recorded, but the testimony of Blanca Maria and Jorge (which they gave via videoconference from Bogota) is inaudible on the recording. Accordingly, the transcript that was made from the recording includes the questions that were posed to Blanca Maria and Jorge, but not the answers they gave. No other record of the proceeding exists.

         The panel issued the award on October 17, 2016. The award denies Blanca Maria's request to require Wells Fargo to transfer the 1285 Account to UBS. It also orders Wells Fargo to allow no more than $7, 500 to be withdrawn from the account per month unless all three account holders submit a signed request. The award does not explicitly address Blanca Maria's declaratory judgment claim but does state that “[a]ny and all claims for relief not specifically addressed herein are denied.”

         II. STANDARD

         The parties cross-petition to vacate or confirm the arbitration award pursuant to the Inter-American Convention on International Commercial Arbitration (“Inter-American Convention” or “Convention”) and the Federal Arbitration Act (“FAA”). Ordinarily, confirmation of an arbitration decision is “a summary proceeding that merely makes what is already a final arbitration award a judgment of the court.” Citigroup, Inc. v. Abu Dhabi Inv. Auth., 776 F.3d 126, 132 (2d Cir. 2015). “A court's review of an arbitration award is . . . severely limited so as not to frustrate the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation.” United Bhd. of Carpenters & Joiners of Am. v. Tappan Zee Constructors, LLC, 804 F.3d 270, 274-75 (2d Cir. 2015).

         The Convention provides a number of possible grounds for refusing confirmation of an award, including that “the decision concerns a dispute not envisaged in the agreement between the parties to submit to arbitration, ” “the arbitration procedure has not been carried out in accordance with the terms of the agreement signed by the parties, ” or “the recognition or execution of the decision would be contrary to the public policy” of the State in which recognition and execution is requested. Inter-American Convention, Art. V(1)(c)-(d), V(2)(b). An arbitration award should be confirmed as long as there is “a barely colorable justification” for the award. D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006). “The arbitrator's rationale for an award need not be explained, and the award should be confirmed if a ground for the arbitrator's decision can be inferred from the facts of the case.” Id. The party opposing confirmation of an arbitral award has the burden of proving that a defense applies. Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d 396, 405 (2d Cir. 2009).

         The Convention does not discuss vacating arbitration awards, but a court applying the Convention may vacate an arbitration award based on the grounds recognized under the FAA. PDV Sweeny, Inc. v. ConocoPhillips Co., No. 14 Civ. 5183, 2015 WL 5144023, at *6 (S.D.N.Y. Sept. 1, 2015), aff'd, 670 F. App'x 23 (2d Cir. 2016); cf. Productos Mercantiles E Industriales, S.A. v. Faberge USA, Inc., 23 F.3d 41, 45 (2d Cir. 1994) (“The Inter-American Convention incorporates the FAA's terms unless they are in conflict with the Inter-American Convention's terms. . . . Since the Inter-American Convention is silent as to the modification of an award, the court's authority to modify an award pursuant to § 11 [of the FAA] is not in conflict with the express terms of the Inter-American Convention”). Under Section 10 of the FAA, an arbitration award can be vacated when: (1) “the award was procured by corruption, fraud, or undue means;” (2) “there was evident partiality or corruption in the arbitrators, or either of them;” (3) “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;” or (4) “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.” 9 U.S.C. § 10(a). An ...

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