In confirming the Award, the Court rejects a broker-dealer’s cross-petition to vacate the Award, which argued that a majority of the Panel manifestly disregarded the law.
The Award in question was Han, on which we reported in SAA 2023-27 (Jul. 20), and covered in the last TEE. In addition to the large compensatory damage award, the Panel reformed Han’s Form U-5 (the record of a broker’s termination by a FINRA member) to read, in part: “J.P. Morgan Securities LLC or its affiliate exercised its right to terminate the Registered Representative as an At-Will employee.”
A Strong Dissent
A notable feature of the Award was a forceful dissent to the damages award by Panel Chair Mitchell Regenbogen. After finding that Han and his wife engaged in unlawful financial structuring and that their testimony was not credible, Arbitrator Regenbogen declared: “The majority ignores the law and the facts, and inappropriately treats the Claimant as a victim, in order to ‘compensate’ the Claimant at the expense of Respondent for a situation that was entirely of the Claimant’s making.… They are punishing the Respondent for complying with the law and rewarding the Claimant enormously for ignoring it…. One can only look incredulously at this record and ask ‘compensation for Respondent having done what’?”
Manifest Disregard of the Law?
In response to Han’s Petition to Confirm the Award in the New York Supreme Court for New York County (which, despite its name, is only a trial court), Respondent J.P. Morgan Securities LLC (“JPMS”) filed on Jul. 28 an Opposition to Petition to Confirm and Cross-Petition to Vacate, together with a Preliminary Memorandum in Support of that pleading. According to the Preliminary Memorandum: “JPMS will establish, with appropriate citations to the record, that the majority of the Arbitration Panel manifestly disregarded the law by deciding in favor of Han and against JPMS…. when it ignored governing law and awarded Han $2,500,000 in compensatory damages and granted his Form U5 expungement request. Two of three arbitrators decided in favor of Han, but the Chairperson of the Arbitration Panel wrote a forceful, two-page dissent.[] Han pursued three claims at the arbitration: defamation, wrongful termination, and breach of the implied covenant of good faith and fair dealing (ed: in a footnote, JPMS stated that Han raised other causes of action besides the three addressed below, only to abandon those). Han, however, could not have proven, and did not prove, any of those claims as a matter of law because under New York law, which governed the parties’ dispute:[] (1) An absolute privilege shielded JPMS from liability on Han’s defamation claim as a matter of law;[] (2) There is no cause of action for wrongful termination; and[] (3) There is no cause of action for breach of the implied covenant of good-faith and fair dealing that is independent of a valid breach of contract claim.” JPMS also requested a stay of the proceedings to give it time to obtain a copy of the arbitration hearing transcript and to file a Supplemental Memorandum setting forth their argument in detail, which it promised to do by Oct. 5. However, we have no further information on the outcome of that request or the filing or contents of the Supplemental Memorandum.
No, Says the Court
In any case, the Court confirmed the Award in Han v. J.P. Morgan Securities LLC, N.Y. Sup. Ct., NY Cty. (Oct. 2, 2023), explaining: “J.P. Morgan has failed to demonstrate a manifest disregard of the law. J.P. Morgan’s reliance on one arbitrator’s dissent is misplaced since such a dissent does not make it so. J.P. Morgan has failed to show that the FINRA ‘arbitrators knew of a governing legal principle yet refused to apply it or ignored it’ and that any ‘law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.’… Rather, the two majority arbitrators heard JP Morgan’s legal arguments and rejected them. JP Morgan cannot use a notice of petition to resuscitate its unsuccessful legal arguments to the arbitrators.”
