Supreme Court lets arbitration award stand

CHARLESTON – A Kanawha County investor has lost in his attempt to have an arbitration award vacated before the state Supreme Court.

The June 24 unanimous opinion affirmed the Circuit Court of Kanawha’s judgment that petitioner Dan Salamie’s complaint seeking vacatur of an arbitration award was not timely served on the respondent, Bruce P. Conrad.

Bruce P. Conrad is a registered investment advisor and sole proprietor of Diversified Investment Strategies. He had a business relationship with TD Ameritrade, Inc. which had formerly been TD Waterhouse.

In June 2009, Dan Salamie filed a statement of claim with the Financial Industry Regulatory Authority, known as FINRA, pursuant to the agreement he had signed with TD Waterhouse. He claimed he had lost $835,000 in October 2010 due to Conrad’s not following explicit instructions Salamie had given him in a phone call three years prior.

After the FINRA arbitration panel granted TD Ameritrade’s motion to dismiss, Conrad remained a party to the arbitration. On Jan. 11, 2011, the arbitration panel made its final award and Salamie initiated separate actions in the circuit court attacking the arbitration award.

This action was filed on April 11, 2011. After motions and cross-motions were filed, on July 9, 2012, the court granted Conrad’s cross-motion on the ground that the application to vacate the arbitration was served on respondent four days late.

Salamie filed a notice of appeal on Aug. 8, asserting three assignments of error. First, he asserted that the arbitration panel should not have heard the claims against Conrad after TD Ameritrade was dismissed because Salamie was not a party to the agreement to arbitrate.

Second, he argued that Conrad waived the defense that the claims were barred by the statute of limitations because he had first raised the defense in a responsive pleading on the merits more than a year after filing an answer.

Third, Salamie argued that he substantially complied with the Federal Arbitration Act.

The court begin its analysis of the first issue with the pertinent part of the arbitration agreement in question:

"I agree that any controversy relating to any of my accounts or any agreement that I have with you will be submitted to arbitration conducted only under the provisions of the Constitution and Rules of the New York Stock Exchange, Inc. or pursuant to the code of the Arbitration of the National Association of Securities Dealers, Inc. Arbitration must be initiated by service upon the other party of a written demand for arbitration or notice of intention to arbitrate. Judgment, upon any award rendered by the arbitrator, may be enforced in any court having jurisdiction"

“Petitioner acknowledged in his complaint that respondent is an investment advisor associated with TD Ameritrade," the court wrote.

"Petitioner’s claims against respondent arose from the management of the accounts described in the agreement. Under the facts presented, it was not improper for the arbitration to proceed against respondent even after the dismissal of TD Ameritrade.”

The court then turned to the statute of limitations and substantial compliance arguments which it dealt with simultaneously.

“We turn then to petitioner’s argument that respondent waived the statute of limitations defense. Under the Federal Arbitration Act, ‘notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered,'" the opinion says.

“In this case, the award was filed on January 11, 2011. Petitioner therefore had until April 11, 2011, to file and serve his motion to vacate the award. However, he did not serve that complaint on respondent until April 15, 2011.

“In light of the clear construction by the Fourth Circuit Court of Appeals that an attempt at vacatur ‘could not be made’ after the expiration of the three-month period, Taylor, 788 F.2d at 225, and inasmuch as respondent preserved in his answer the right to raise a statute of limitations defense, we find that the circuit court did not err in determining that the untimely service barred petitioner’s claims.

“Because this requirement is mandatory, respondent did not substantially comply with the Federal Arbitration Act. For the foregoing reasons, we affirm.”