Respondent Merrill Lynch generally denied the allegations and asserted affirmative defenses. On May 24, 2021, the parties settled the dispute and, accordingly, the FINRA Arbitration Panel made no determination as to the causes of action.[T]he causes of action related to Claimants' allegations that Respondent recommended that Claimants open a new account to invest in the Harvest Volatility Management, LLC ("Harvest") Collateral Yield Enhancement Strategy ("CYES"), which Claimants asserted was a high risk and unsuitable options investment strategy that Respondent falsely represented as a low risk strategy.
The Panel finds that Claimants' allegations of unsuitability and misrepresentation of information are false in that they are not supported by the evidence in the record or the testimony or evidence presented at the hearing. There is no indication that the investment complained of was unsuitable for Claimants in conjunction with their entire portfolio and risk tolerance level.During the approximately 3-year period Claimants held their Harvest account, their portfolio generated a significant profit - net of any Harvest losses and of costs and expenses. The Harvest strategy was a suitable fit for Claimants' portfolio because it had the potential to generate a relatively high-level of income while allowing them to retain their principal - a desire repeatedly requested by Claimants. Claimants had been advised that the Harvest account volatility could be significant during market surges and elected a strategy of remaining in the Harvest account while awaiting its return to its basis value. There is no indication of misrepresentation in that the record, evidence, and testimony presented at the expungement hearing show that Harper's communications with Claimants regarding the risks and benefits of the Harvest investment were continuously transparent and complete. Additionally, Claimants had many years of experience investing in securities and trading options.
Here's the problem for Harper: Merrill reported the Kings' lawsuit to the Central Registry Depository ("CRD") and mentioned that the Kings' suit related to Harper. Consequently, people looking through the CRD can see that the Kings' suit related to Harper. Presumably, Harper doesn't want that blight on his CRD record.Merrill thus asked a FINRA arbitration panel to expunge the Kings' complaint from Harper's CRD record. The panel held a hearing, which the Kings failed to attend. The panel then issued an award recommending expungement of all references to the Kings' arbitration from Harper's CRD record (the "Award").In this Court, Harper sought to confirm the Award. Although Harper properly served the Kings, they have failed to appear. Harper thus obtained a clerk's entry of default, and now moves for a default judgment.
at Pages 3 - 4 of the NDTX Opinion/Order[T]he Court finds that (1) there are no material facts in dispute because the respondents failed to file any responsive pleadings; (2) there has not been substantial prejudice; (3) the respondents' continued failure to participate in this litigation clearly establishes grounds for the default; (4) there is no reason to think the respondents are acting under a good-faith mistake or excusable neglect; (5) a default judgment is not harsh because the judgment would merely confirm a FINRA arbitration award; and (6) the pleadings, lack of response, and consequent failure to plead a meritorious defense indicate a lack of good cause for the Court to set aside the default judgment. . . .
Harper "seeks an Order confirming the Award recommending expungement" of the Kings' suit "from Mr. Harper's CRD record." "[J]udicial review of an arbitration award is extraordinarily narrow." Under the Federal Arbitration Act, a district court may vacate an arbitration award only
(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of the party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
Those are the "only grounds upon which a reviewing court may vacate an arbitrative award." Courts cannot vacate an arbitration award "for a mere mistake of fact or law." "The burden of proof is on the party seeking to vacate the award, and any doubts or uncertainties must be resolved in favor of upholding it."Because the Kings have failed to respond, they have not cited any grounds on which this Court could vacate the award. Harper asserts that "there are no grounds for modifying, correcting, or vacating the Award." The Court agrees and finds no grounds to vacate the award.