Plaintiffs, members of the Harman family, sold their family farm and sought investment advice from defendant Wilson-Davis. The Harmans claimed they were damaged after making certain investments due to forged financial statements by Wilson-Davis, and that Wilson-Davis spoliated evidence pertaining to those investments. At arbitration, the panel found no liability against Wilson-Davis. The Harmans then sought to vacate the panel’s award.
The court considered whether it had subject matter jurisdiction, and whether there were sufficient grounds to vacate the award under either public policy grounds or section 10 of the FAA. Regarding subject matter jurisdiction, the court analyzed whether it could “look through” the face of the petition to vacate the award, and find jurisdiction based on whether federal-law claims were raised in the underlying arbitration. (There is a split among the federal circuits as to whether a court may look through a section 10 petition to vacate an award in order to find federal question jurisdiction; the Supreme Court previously applied “look through” only under section 4.) The Tenth Circuit, in which the district court in this matter is located, has not yet addressed the issue. The court here sided with the Second Circuit, and not the opposing view of the Third and Seventh Circuits, holding that applying the “look through” approach to the entire FAA was the only logical construction of the law, notwithstanding differences in statutory language between sections 4 and 10. The court, however, denied the Harmans’ petition because it found no public policy or statutory grounds supporting vacatur. Harman v. Wilson-Davis & Co., Case No. 2:2016-cv-00229-CW (USDC D. Utah Jan. 6, 2017).
This post written by Gail Jankowski.
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