Insult Added to Injury in Puerto Rico Bond Dispute

From what the Court can decipher from Petitioner's convoluted brief, Petitioner posits that Respondent "knowingly and recklessly made [several] false arguments to the Panel" to procure the arbitration award. ² Docket No. 12 at 30. Petitioner alleges that Respondent lied about the following legal contentions: (1) the securities-related claims were time-barred by the Puerto Rico Uniform Securities Act ("PRUSA") or the federal Securities Exchange Act's ("SEA") two year statute of limitations; (2) the state law claims were not actionable because Petitioner did not provide a contract or identify a contractual provision that Respondent allegedly breached; and (3) the tort and contract fraud claims were also subject to PRUSA or SEA's statute of limitations. Id. at 16-19, 30-31. 

Petitioner supports his "fraud on the Panel" theory by citing three excerpts from the arbitration hearing's transcripts in which the Panel asked questions regarding the applicable statute of limitations. Id. at 17-19. In doing so, what Petitioner really intends is for this Court to determine that the legal theories invoked by Respondent in the arbitration were meritless. Not only is this beyond the Court's ordinary arbitration review capacity, but Petitioner has also failed to show that Respondent engaged in any form of fraud altogether. Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 932 F.3d 1, 9 (2019) (cleaned up) ("[L]imited review applies [e]ven where [a factual or legal] error is painfully clear, [because] courts are not authorized to reconsider the merits of arbitration awards.").

First, the record is devoid of clear and convincing evidence illustrating how Respondent committed fraud or used undue means when arguing that Petitioner's claims were untimely under PRUSA and SEA. The transcript excerpts cited by Petitioner simply show that Respondent posed this legal theory before the Panel, and that the arbitrators asked several questions to better understand the statute of limitations' issue. Docket No. 12 at 17-19. Furthermore, Respondent reasonably presented its arguments by citing both persuasive and binding case law in its prehearing briefs. Docket No. 12-10 at 1-3. And regardless of whether Respondent's legal theories were correct, the Court is in no position to conclude that Respondent engaged in fraud simply because it zealously argued its case based on relevant jurisprudence. PaineWebber Grp., Inc. v. Zinsmeyer Trs. P'ship, 187 F.3d 988, 991 (8th Cir. 1999) ("Undue means does not include sloppy or overzealous lawyering.") (cleaned up); see also Dialysis Access Ctr., LLC, 932 F.3d at 9 ("[C]ourts are not authorized to reconsider the merits of arbitration awards.") (cleaned up). The fact that Petitioner does not agree with Respondent's legal theories is not a basis for vacatur. See P.R. Ports Auth. v. Misener Marine Const., Inc., 233 F. Supp. 2d 266, 268 (D.P.R. 2002). 

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Footnote 2: The Court notes that Petitioner's brief is filled with unsupported and generalized assertions, devoid of specific evidence to support the "fraud on the panel" claim and lacking specific connection between the legal claims and the factual backdrop it recounts. See Zannino, 895 F.2d at 17 ("[I] issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived."). Nonetheless, even if all arguments had been properly briefed, Petitioner still fails to prove procurement by fraud. 

one of the arbitrators, A.J. Seier ("Mr. Seier"), failed to disclose he resigned from his position as circuit judge for the state of Missouri in 1993 after allegations that he made false claims to obtain monetary reimbursement for travel receipts totaling $1,200.00, and that this omission demonstrates dishonesty and bias as to this arbitration. Docket No. 12 at 34- 35. Similarly, Petitioner alleges that another arbitrator, Clarence B. Johnson ("Mr. Johnson"), failed to disclose that he filed for bankruptcy, which Petitioner argues shows Mr. Johnson's "inability to manage his own assets;" and that his company, Johnson Wealth Management Inc., formerly served as financial advisor for Wells Fargo Advisors LLC, which created a "material conflict of interest" as to this arbitration. Id. at 35, 37.

SIDE BAR: Yet again, questions are raised about FINRA's role in policing its roster of arbitrators or ensuring the most current, robust disclosures are presented to litigants. This is an issue that I have noted with some frequency over the years and has drawn the ire of courts. See, for example: "Federal Court Troubled By FINRA Arbitration Chair's Non-Disclosure Of Conflict" (BrokeAndBroker.com Blog / January 7, 2020)  http://www.brokeandbroker.com/5002/finra-arbitrator-disclosure/ 

[A]t the very least, "Petitioner should have conducted due diligence in ranking and striking potential arbitrators." Docket No. 13 at 17. The circumstances surrounding Mr. Seier's resignation as circuit judge were made public as far back as December 2015 and, on April 2017, Mr. Seier amended his arbitration disclosures to make reference to the news article that talked about his resignation. Docket No. 12-14 at 2. Had Petitioner engaged in adequate due diligence, through a simple Google Search or by carefully reading the amended disclosures, he would have learned of this issue and he should have raised it during the arbitration proceedings. Instead, Petitioner was notified of the selection of the members of the Panel as early as February 2016 and he still accepted the Panel's composition on more than one occasion. Docket Nos. 13-4; 13-5; 13-6; 13-7. 

The same applies for Mr. Johnson, whose initial disclosures did mention (1) his past association with Johnson Wealth Management Group, Inc., a company that publicly acknowledges providing services to Wells Fargo Advisors LLC, who in turn made transactions with Petitioner in 2001; and (2) the fact that he filed for bankruptcy, which is not only irrelevant to this case, but is also a matter of public knowledge that could have been easily discovered and verified. Docket No. 12-20 at 1-2. The previous findings alone would lead to dismissal of Petitioner's Section 10(a)(2) evident partiality claim. ³

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Footnote 3: To make matters worse, Petitioner falls short of excusing his failure to raise partiality by insufficiently alleging that he only learned of Mr. Johnson's omission after the hearings took place, and that if Mr. Seier had disclosed his bankruptcy in his profile, he "would have stricken him in the arbitrator section process." Docket No. 12 at 34. Not only does this fail to explain why it took him so long to learn this information, but it ignores his duty to perform due diligence. Moreover, said allegations are woefully insufficient for an evident partiality claim considering that the record shows that the information was available prior to the arbitration. Ameriprise Fin. Servs., Inc., 325 F. Supp. 3d at 225; see also Lagstein v. Certain Underwriters at Lloyd's, London, 607 F.3d 634, 646 (9th Cir. 2010) (declining "to create a rule that encourages losing parties to challenge arbitration awards on the basis of pre-existing, publicly available background information on the arbitrators that has nothing to do with the parties to the arbitration.").

Here, nothing in the record shows that Mr. Seier's failure to disclose his resignation as a circuit judge demonstrates personal connection or bias towards any of the Parties. Ameriprise Fin. Servs., Inc., 325 F. Supp. 3d at 226. Moreover, neither Mr. Seier's resignation more than 20 years prior to the arbitration nor the substance of the allegations that led to his resignation are of relevance to the case at bar or "materially relate" to any of the Parties. See, e.g., Lagstein v. Certain Underwriters at Lloyd's, London, 607 F.3d 634, 646-47 (9th Cir. 2010) (finding that "evidence of alleged corruption at some time in the past does not relate to this case or the parties to it, nor does it raise a reasonable impression of corruption in the present case.") (quotation marks omitted). The same conclusion applies to Mr. Johnson's alleged failure to disclose his bankruptcy or that his company formerly served as financial advisor for Wells Fargo Advisors LLC. These are merely "general allegations," which fail to show that Mr. Johnson had any personal connection with the case at bar-for example, whether he was directly involved with certain asset purchase transactions between Respondent and Wells Fargo Advisors LLC in 2011-, much less how or why Mr. Johnson was materially biased in favor of Petitioner. Ameriprise Fin. Servs.,Inc., 325 F. Supp. 3d at 226 ("general allegations" were deemed insufficient to establish personal connection).

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