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The District of Columbia Court of Appeals held that a party’s failure to produce a transcript of the arbitration hearing was fatal to its motion to vacate the award where the party was challenging the award based on testimony presented during the hearing.
In Dolton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 05-CV-1317, 2007 WL 2489701 (D.C. Cir. Sept. 6, 2007), the Doltons hired Merrill Lynch and two of its advisers, King and Fraley, to diversify their investment portfolio, which was heavily focused on the technology sector.
When a decline in the technology sector resulted in substantial losses, the Doltons filed an arbitration claim with the NASD, alleging that King and Fraley ignored their requests and that Merrill Lynch had failed to supervise them.
After hearing testimony from both parties, the arbitration panel found that the testimony was contradictory and could not be corroborated by a disinterested witness. The panel concluded that there was no evidence that the Doltons complained to Merrill Lynch managers and, accordingly, that the Doltons “ratified the actions” of King and Fraley. The panel thus issued an award in favor of Merrill Lynch.
The Dolton’s moved to vacate the award, arguing manifest disregard of the law and other theories. The trial court denied their motion.
On appeal, the Court held that the evidence submitted by the Doltons was not sufficient to prove manifest disregard. Specifically, the Doltons failed to meet their burden because they did not produce a transcript of the arbitration hearing, even though one could have been produced. Instead, they submitted only the award and an affidavit from Mrs. Dolton describing the evidence submitted by both parties.
In upholding the award, the Court explained that “[w]hile transcripts are not a necessity for every appeal from an award in an arbitration proceeding . . . where the [parties] are seeking relief based upon testimony that they assert came in during the course of the arbitration hearing, their failure to provide us with a transcript of the testimony is fatal to their appeal.”
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