United States District Court, S.D. New York
ORDER AND OPINION
VALERIE CAPRONI, UNITED STATES DISTRICT JUDGE
Fargo Advisors, LLC (“Wells Fargo” or
“Petitioner”), like many other employers, has
elected to require its employees to arbitrate their
employment disputes. While there is nothing wrong with an
employer making that decision, Wells Fargo appears to want it
both ways: it wants to limit its employees to an arbitral
forum, but then wants to be able to get a court to intervene
when it disagrees with the outcome of the arbitration. In
this instance, Wells Fargo has petitioned this Court to
vacate an award resulting from an arbitration between Wells
Fargoand Respondents Livia Sappington, Ewa
Kelly, and Patrick LaBorde. See Petition to Vacate
in Part Clause Construction Award (“Petition”)
[Dkt. 1]; Notice of Motion to Vacate in Part Clause
Construction Award (“Notice of Mot.”) [Dkt. 4].
Specifically, Wells Fargo seeks vacatur of the portion of the
award that construed Kelly's and LaBorde's contracts
with Wells Fargo to permit class-wide arbitration of their
claims. See Petition.
opted to require its employees to arbitrate their disputes,
Wells Fargo now has to live with the arbitrator's
decision. For the reasons discussed below, Wells Fargo's
request to vacate the arbitration award is DENIED.
the Respondents had employment agreements with Wells Fargo,
and Kelly's and LaBorde's employment agreements (the
“Agreements”), which were executed in 2012 and
2013, are identical. Award at 2-4. See also Kelly
Agreement [Dkt. 5-1]; LaBorde Agreement [Dkt. 5-2]. Their
agreements contain a lengthy dispute resolution provision
that provides for arbitration of disputes, with carve-outs
that exclude certain types of claims from mandatory
arbitration. Award at 2-4. The dispute resolution provision
requires disputes to be arbitrated either before the American
Arbitration Association (“AAA”), pursuant to its
May 1, 1993 rules, or before the Financial Industry
Regulatory Authority (“FINRA”). Id. at
4. Sappington's agreement, executed later in time,
contains a shorter dispute resolution provision that does not
contain explicit carve-outs and requires covered disputes to
be arbitrated before FINRA. Id. FINRA does not
permit arbitration on a class basis. Id. at 5 and
n.3 (citing FINRA Industry Code Rule 13204(a)).
sought class-wide arbitration of their claims before the AAA
and FINRA, and Wells Fargo sought from this Court a
stay of the class arbitration and to compel individual
arbitration. Award at 1-2, 5; see Wells Fargo Advisors v.
Sappington (“Sappington I”),
16-CV-878. This Court denied Wells Fargo's request to
stay class-wide arbitration and, looking to its decision in
an earlier related matter,  determined that it was up to the
arbitrator to decide whether class arbitration was available
under Respondents' contracts. Award at 2; Sappington
I Order. Wells Fargo appealed that decision to the
Second Circuit. See Sappington I [Dkts. 40, 41].
Wells Fargo's appeal was pending, the parties litigated
the proper construction of the contracts before the AAA
arbitrator (the “Arbitrator”). Award at 5.
Ultimately, the Arbitrator determined that Kelly's and
LaBorde's agreements permitted class arbitration of their
claims, while Sappington's did not. Award at 17-21.
Fargo seeks vacatur of the clause construction determination
that the Agreements permit class arbitration, contending that
the Arbitrator exceeded his powers both by making the
determination that he should decide whether the Agreements
permitted class arbitration and by looking beyond the four
corners of the Agreements when deciding that they did.
See Memorandum of Law in Support of Petition to
Vacate in Part Clause Construction Award (“Pet.'s
Mem.”) [Dkt. 6] at 1, 7-21. Wells Fargo also contends
that the Arbitrator manifestly disregarded the law in
reaching his decision. See id. at 1-2, 21-24.
Wells Fargo moved to vacate the Award, the Second Circuit
affirmed this Court's determination in Sappington
I that the Arbitrator should determine whether the
employment agreements permitted class arbitration, holding
that Kelly's, LaBorde's, and Sappington's
agreements “clearly and unmistakably express [the
parties'] intent to let an arbitrator decide whether they
agreed to authorize class arbitration.” Wells Fargo
Advisors, LLC v. Sappington (“Sappington I
Appeal”), 884 F.3d 392, 394 (2d Cir. 2018).
the Federal Arbitration Act, a district court may vacate an
arbitration award if: (1) the award was procured by
corruption, fraud, or undue means; (2) the arbitrators
exhibited evident partiality or corruption; (3) the
arbitrators were guilty of misconduct such as refusing to
hear evidence pertinent and material to the controversy or
any other misbehavior that prejudiced the rights of any
party; or (4) the arbitrators exceeded their powers.”
Pfeffer v. Wells Fargo Advisors, LLC, 723 Fed.Appx.
45, 47 (2d Cir. 2018) (quoting 9 U.S.C. § 10(a))
(citation and internal quotation marks omitted). The
“party moving to vacate an arbitration award has the
burden of proof, and the showing required to avoid
confirmation is very high.” STMicroelectronics,
N.V. v. Credit Suisse Sec. (USA) LLC, 648 F.3d 68, 74
(2d Cir. 2011) (quoting D.H. Blair & Co. v.
Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006)) (internal
quotation marks omitted).
challenge that an arbitrator has exceeded his powers falls
under § 10(a)(4), which is “consistently accorded
the narrowest of readings.” Anthony v. Affiliated
Computer Servs., Inc., 621 Fed.Appx. 49, 50-51 (2d Cir.
2015) (citations and internal quotation marks omitted).
“An arbitrator exceeds his authority only by (1)
considering issues beyond those the parties have submitted
for his consideration, or (2) reaching issues clearly
prohibited by law or by the terms of the parties'
agreement.” Id. at 51 (quoting Jock v.
Sterling Jewelers, Inc., 646 F.3d 113, 122 (2d Cir.
2011)) (alteration and internal quotation marks omitted).
“Under § 10(a)(4), [courts] do not consider
whether the arbitrators correctly decided [an] issue.”
Id. at 52 (citations and internal quotation marks
omitted). See also DiRussa v. Dean Witter Reynolds,
Inc., 121 F.3d 818, 824 (2d Cir. 1997)
(“DiRussa's real objection appears to be that the
arbitrators committed an obvious legal error in denying him
attorney's fees. Section 10(a)(4) was not intended to
apply to such a situation.”).
Second Circuit also permits vacatur if the award was rendered
in manifest disregard of the law. Tully Constr. Co. v.
Canam Steel Corp., 684 Fed.Appx. 24, 26 (2d Cir. 2017)
(citation omitted). “A litigant seeking to vacate an
arbitration award based on alleged manifest disregard of the
law bears a heavy burden [and a court must find] both that
(1) the arbitrator knew of a governing legal principle yet
refused to apply it or ignored it altogether, and (2) the law
ignored by the arbitrator was well defined, explicit, and
clearly applicable to the case.” Zurich Am. Ins.
Co. v. Team Tankers A.S., 811 F.3d 584, 589 (2d Cir.
2016) (citations omitted). “The Second Circuit has
emphasized that the doctrine requires more than error or
misunderstanding with respect to the law.” PDV
Sweeny, Inc. v. ConocoPhillips Co., No. 14-CV-5183 AJN,
2015 WL 5144023, at *7 (S.D.N.Y. Sept. 1, 2015) (quoting
Wallace v. Buttar, 378 F.3d 182, 189-90 (2d Cir.
2004)) (internal quotation marks omitted), amended,
No. 14-CV-5183 (AJN), 2015 WL 9413880 (S.D.N.Y. Dec. 21,
2015), aff'd, 670 Fed.Appx. 23 (2d Cir. 2016).
“The party challenging an award for manifest disregard
of the law must demonstrate that the arbitrator actually knew
about the relevant rule of law.” D.H. Blair,
462 F.3d at 111 (citation omitted).
generally, “[a] federal court cannot vacate an arbitral
award merely because it is convinced that the arbitration
panel made the wrong call on the law. On the contrary, the
award should be enforced, despite a court's disagreement
with it on the merits, if there is a barely colorable
justification for the outcome reached.”
Wallace, 378 F.3d at 190 (citations and internal
quotation marks omitted) (emphasis in original). “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.” D.H. Blair, 462 F.3d at 110
(citation and internal quotation marks omitted). “It is
only when an arbitrator strays from interpretation and
application of the agreement and effectively dispenses his
own brand of industrial justice that his decision may be
unenforceable.” Stolt-Nielsen S.A. v. AnimalFeeds
Int'l Corp., 559 U.S. 662, 671 (2010) (citation,
alterations, and internal quotation marks omitted).
The Arbitrator Did Not Exceed His Powers
The Authority to Construe the Agreements
Award, the Arbitrator acknowledged this Court's ruling in
Sappington I that he had the authority to determine
whether the agreements permitted class arbitration, and,
rather than reassess the basis for his ...