The Southern District of New York has rejected a petition to vacate an arbitration award on the basis that the arbitrators failed to disclose allegedly material information.
Michael Miller worked as a financial advisor in a UBS branch. UBS gave Miller six loans, and Miller agreed any disputes regarding the loans could be arbitrated. A dispute regarding the loans arose after Miller left his job. Miller and UBS selected arbitrators in accordance with FINRA’s rules. The arbitrators ruled in favor of UBS. Miller unsuccessfully sought to vacate their award in the Southern District.
In his effort to vacate the award, Miller claimed the arbitrators failed to disclose pertinent information during the selection process resulting in the award (1) exceeding the arbitrators’ powers; and (2) an award that was the result of partiality or corruption in violation of FINRA’s rules. Specifically, Miller claimed one arbitrator (Teveris) failed to disclose she had represented an investor before FINRA in an unrelated matter in her initial disclosure and failed to sufficiently disclose the representation in her oath. He also claimed that another arbitrator (Rolnick) failed to disclose he was a defendant in an unrelated federal lawsuit. But Miller failed to explain how such information prevented the arbitrators from being objective. The court also rejected Miller’s argument that the information was material and would have affected how he ranked the arbitrators. That was not the standard, and the usefulness of the information was irrelevant, the court explained.
Miller also argued Rolnick had a potential interest in UBS securities that he failed to fully explain after he answered “yes” to a question asking if he or an immediate family member invested in or held securities that were the subject of the arbitration. While interest in UBS was a potential problem, it was disclosed and Miller was therefore on notice of a fact potentially indicative of bias. The applicable rules did not clearly require additional disclosures, and Miller failed to object to the allegedly incomplete disclosure, thereby waiving any right to challenge it. Moreover, Miller had been expressly told that he could object to the arbitrators after he was informed about the potential conflict.
If you don’t act as soon as practical on your right to challenge arbitrators based on information you know (or should know) about them, don’t expect to be able to vacate the award later.
Miller v. UBS Fin. Servs. Inc., No. 1:18-cv-08415 (S.D.N.Y. May 6, 2019)