Alternative Dispute Resolution Te Sixth Circuit’s Corey decision is the first and leading
authority on this point. Corey, 691 F.2d 1205. In that case, an investor brought an action against an investment firm after his portfolio sustained significant losses. Id. at 1207. As allowed under the New York Stock Exchange (“NYSE”) Constitution, in lieu of his remedies at law, the investor requested that the dispute be resolved by an arbitration panel. Id.Te NYSE sponsored the arbitration, appointed the panel members, scheduled the hearing date, and provided written notice of the final decision. Id. at 1208. Te investor appeared without counsel, and, upon deliberation, the panel ruled in favor of the investment firm. Id. Instead of seeking relief under the FAA, the investor sued
the NYSE and the investment firm, alleging that he had been deprived of a fair hearing because the NYSE official selected the panel in violation of NYSE rules and adjourned and rescheduled hearings over the investor’s objection. Id. Tese allegations of wrongdoing fell squarely within the scope of § 10 of the FAA, which provides for vacatur of an award in cases of evident partiality of the arbitrators or adjournments resulting in prejudice. See id. at 1212. After concluding that “the [FAA] provides the exclusive remedy for challenging acts that taint an arbitration award,” the Sixth Circuit determined that the plaintiff's “attempt to sue the NYSE... [was] no
more, in substance, than an impermissible collateral attack on the award itself.” Id. at 1211-12. Corey’s claims “constitute[d] a collateral attack against the award.” Even though Corey attempted to name the NYSE, a defendant different from his original adversary, and sought damages instead of vacatur or modification of the award, the “complaint [had] no purpose other than to challenge the very wrongs affecting the award for which review is provided under section 10 of the Arbitration Act.” Id. at 1213 (suit against arbitration participants, including arbitrators, prohibited by FAA for Corey’s failure to avail himself of the review provisions set forth by the FAA). See also Pilot Freight Carriers, Inc. v. Int’l Bhd. of Teamsters, 659 F.2d 1252, 1257 (4th Cir. 1981); (Nazar v. Wolpoff & Abramson, LLP, 530 F. Supp. 2d 1161, 1169 (D. Kan. 2008) (“Having failed to pursue the exclusive remedy provided under the FAA for challenging conduct that taints arbitration awards... plaintiff Nazar may not now seek to collaterally attack those awards.”) (internal citation omitted). Other circuits – namely, the Fifth, Seventh, Ninth, and
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Tenth, but not yet the Fourth – also prohibit a party from attempting to circumvent the FAA by filing a civil complaint against arbitration participants and their attorneys. (Te Fourth Circuit now has before it a case that, if heard on the merits, presents the opportunity for that court to join the five circuits that reject collateral attacks on artbitral awards.) Te opinion in Gulf Petro Trading Co. v. Nigerian Nat’l Petroleum Corp., 512 F.3d 742, 748-50 (5th Cir. 2008), is instructive. After losing an international arbitration, Gulf Petro and its principals sued the arbitrators, its opponent, and its opponent’s attorneys, alleging violations of the federal RICO Act and Texas common law for conduct in the context of the arbitration. Te Fifth Circuit rejected Gulf Petro’s argument that its claims were “analytically distinct from vacatur,” Id. at 750, and affirmed the district court’s finding that the complaint constituted an impermissible collateral attack on the award. In ultimately finding the reasoning of Corey and Decker persuasive on “the question of when a claim constitutes a collateral attack on an arbitral award,” the Fifth Circuit noted that:
Te relief Gulf Petro seeks…shows that its true objective in this suit is to rectify the harm it suffered in receiving the unfavorable Final [Swiss arbitration] Award… Tough cloaked in a variety of federal and state law claims, Gulf Petro’s complaint amounts to no more than a collateral attack on the Final Award itself.
79 West Street / Annapolis, MD 21401 / 410-269-1484 / 800-754-7029 40 Trial Reporter / Fall 2010
Id. at 748-50; see also Sander v. Weyerhaeuser Co., 966 F.2d 501, 502 (9th Cir. 1992); Foster v. Turley, 808 F.2d 38, 41-42 (10th Cir. 1986) (Te FAA “provides the exclusive remedy for challenging conduct that taints an arbitration award
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