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Odeon Capital Group must pay a fired bond trader $1.1 million for unpaid commissions, the U.S. Court of Appeals for the Second Circuit affirmed ( Odeon Capital Grp. LLC v. Ackerman , 2017 BL 252911, 2d Cir., No. 16-1545-cv, 7/21/17 ).
The court joined the Fifth, Sixth, and Ninth circuits in holding that a party seeking to invalidate an arbitration ruling on the ground of fraud must show a connection between the alleged fraud and the basis for the arbitration ruling. That standard is consistent with a 1951 Second Circuit decision, it said.
“This is the first time that the Second Circuit has clarified the standard concerning when an arbitration award can be vacated on the basis of an alleged fraud, focusing only on if the alleged misstatement was material to the award regardless whether the statement was true or false,” Janie Byalik, who represented Bret Ackerman, told Bloomberg BNA in a July 21 email. She is with Pashman Stein Walder Hayden P.C. in Hackensack, N.J.
Any fraudulent misrepresentations Ackerman may have made to an arbitration panel regarding a Financial Industry Regulatory Authority investigation into some of his trades while he worked for Odeon weren’t shown to be material to the arbitration award on his unpaid wages claim, the appeals court found. Neither party had sought from the arbitrators the reasoning for their award, so there was “simply no basis” to link Ackerman’s allegedly perjured testimony regarding the investigation to the arbitrators’ unpaid wages award, the court said.
That Ackerman was the primary witness for himself during the arbitration wasn’t enough for his alleged perjury during one aspect of the hearing to taint all of his testimony, Judge Rosemary S. Pooler said. A contrary holding would be at odds with the Federal Arbitration Act, which permits an arbitration award to be vacated for fraud only where it’s shown that the award was actually “procured” by that fraud, she said. The cases cited by Odeon in its arguments were inapposite, Pooler said.
“We are reviewing the opinion and don’t have any further comment at this time,” Odeon’s lead attorney Mark D. Knoll told Bloomberg BNA July 21. He’s with Bressler, Amery & Ross P.C. in New York. The firm also represented Odeon principals Mathew Van Alstyne and Evan Schwartzberg in the case.
Ackerman also is entitled to collect the attorneys’ fees he incurred in defending the arbitration award, the appeals court said.
Under the New York Labor Law, recovery of such fees is mandatory when a worker prevails on an unpaid wages claim, Pooler said. It doesn’t matter that a lawsuit to confirm an arbitration award isn’t specifically listed in that law as a type of action for which fees must be granted.
The amount of fees will be calculated by the district court on remand, Byalik told Bloomberg BNA. The district court will also determine whether Ackerman is entitled to fees incurred in appealing the matter to the Second Circuit, she said.
Ackerman had testified during the arbitration that the FINRA investigation wasn’t still open at that time. He also testified that FINRA took no action against him for improper trading.
After the arbitration was concluded, FINRA again sought to question Ackerman about his trading while he was with Odeon. However, by that point he no longer was working as a bond trader and had relocated to California. Rather than travel back east to speak with FINRA, he agreed to accept a ban from working as a securities trader.
Those post-arbitration developments showed that Ackerman had defrauded the arbitration panel, Odeon argued. The Second Circuit, however, found the company also needed to establish that the alleged fraud was material to the arbitration outcome before it could overturn the award, and there was no evidence that was so.
Judges Guido Calabresi and Richard C. Wesley joined the opinion.
Sean Mack of Pashman Stein Walder Hayden P.C. also represented Ackerman. Nikolas S. Komyati of Bressler, Amery & Ross P.C in Florham Park, N.J., also represented Odeon, Van Alstyne, and Schwartzberg.
To contact the reporter on this story: Patrick Dorrian in Washington at firstname.lastname@example.org
Text of the opinion is available at http://www.bloomberglaw.com/public/document/Odeon_Capital_Group_LLC_v_Ackerman_Docket_No_1601545_2d_Cir_May_1?doc_id=X1Q6NSQBIQ82&fmt=pdf.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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