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In upholding an NASD arbitration award, a federal court in Florida refused to vacate an arbitration award because an out-of-state attorney participated in the arbitration without paying a fee required by the Florida Bar.
In Cartwright v. Roxbury Capital Management, LLC, No. 5:06-cv-283-Oc-10GRJ, 2007 WL 1303033 (M.D. Fla. May 03, 2007), Jack Cartwright obtained investment services from A.G. Edwards, an NASD member. Cartwright subsequently entered an agreement to receive investment advice from Roxbury, who was not an NASD member.
Later, Cartwright initiated arbitration proceedings before the NASD, filing a claim against both A.G. Edwards and Roxbury. Roxbury moved for dismissal. The arbitrators entered an award dismissing Roxbury from the case on the ground that Roxbury was not an NASD member.
Cartwright filed a motion to vacate the award. In moving for vacatur, Cartwright argued that the arbitrators acted contrary to law and exceeded their powers by allegedly violating NASD's procedural rules. The Court rejected this argument because NASD rules are not law and, in any event, the allegations were unsubstantiated.
Alternatively, Cartwright argued that the award should be vacated because the NASD allowed Roxbury's out-of-state attorney to appear without paying a requisite fee to the Florida Bar. In rejecting this argument, the Court explained that Cartwright cited "no legal authority for his proposition that the violation of a bar rule provides ground for the vacatur of an arbitration award, especially . . . where there is no nexus between the purported violation and the grounds upon which the arbitration award was entered."
Having rejected Cartwright's arguments for vacatur, the Court confirmed the award. What's more, given Cartwright's failure to acknowledge the deferential review of arbitration awards, the Court suggested that Cartwright's motion for vacatur was "exactly the kind of challenge to an arbitration award that the Eleventh Circuit in Hercules Steel cautioned against, and for the prosecution of which that court suggested sanctions."
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