S. D. of Texas Finds Arbitration Award Not Final Before Motion for Clarification Was Denied

The Southern District of Texas has held that an arbitration award was not final before a party’s Motion for Clarification was denied.

In Alvarado v. Wells Fargo Advisors, No. 10-0362, (S.D. Tex., February 15, 2011), Lisa Alvarado was employed as a financial advisor registered with Wachovia Securities. After Alvarado’s employment ceased, she entered into arbitration with Wells Fargo Advisors (“Wells Fargo”) over a promissory note and before a Financial Industry Regulation Authority (“FINRA”) panel. On January 6, 2010, the FINRA panel entered an award for Wells Fargo which was delivered to both parties the next day. Alvarado filed a Motion for Clarification which was denied by the arbitrator on January 21, 2010. Next, she filed a Motion to Vacate the arbitration in the Southern District of Texas on February 5, 2010, but failed to serve Wells Fargo until April 14, 2010. Wells Fargo responded by filing a Motion to Dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure which alleged Alvarado did not file her Motion to Vacate the arbitration “within three months after the arbitration award was “filed or delivered,” as required by 9 U.S.C. § 12.”

Before the Southern District, Alvarado alleged the award was not finalized until the date on which her Motion for Clarification was denied. Wells Fargo argued the award was final “notwithstanding the reasons for Plaintiff’s Motion for Clarification,” and cited “the arbitration procedural rules that were used by FINRA,” in support of its position.

The court began its analysis by looking to the statute,

“Notice of a motion to vacate, modify, or correct an [arbitration] award must be served upon the adverse party or his attorney within three months after the award is filed or delivered.” 9 U.S.C. § 12 (“§ 12”).

Next, the court held,

Plaintiff specifically alleges that two issues in the arbitration that were not addressed in the award that was delivered on January 7, 2010, and that as a result Plaintiff was and is unable to comply with the award. If proven true, these allegations would render the arbitration award non-final, and thus render Plaintiff’s Motion to Vacate timely.

Finally the court stated,

The FINRA rules relied upon by Defendant are not to the contrary. First, although “[w]hether the award indicates that is final and whether the arbitrator intended the award to be final are factors in determining if an arbitration award is final,” Local 36, Sheet Metal Workers Intern. Ass’n, AFL-CIO, 951 F.2d at 949, the FINRA rule stating generally that awards are final “[u]nless the applicable law directs otherwise” is not dispositive of finality for purposes of this motion to dismiss. Plaintiff’s allegations, if proven, could show that the initial award did not “both resolve all the issues submitted to arbitration, and determine each issue fully so that no further litigation is necessary to finalize the obligations of the parties under the award” and was thus not final. Lummus Global Amazonas S.A., 256 F. Supp. 2d at 639. Second, the procedural validity of Plaintiff’s Motion for Clarification is irrelevant to whether the initial award was final. The Court finds not that the filing of Plaintiff’s Motion for Clarification tolled the three-month time period, but that the three-month time period had not begun as of January 21, 2010 because the initial arbitration award was not final.

According to the court, Alvarado alleged facts sufficient to state a claim upon which relief could be granted. Because the arbitration award was not yet final when Alvarado’s Motion for Clarification was denied, the Southern District of Texas denied Wells Fargo’s Motion to Dismiss for untimely filing.

Technorati Tags: ADR, law, arbitration