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In MetLife Securities, Inc. v. Bedford, No. 02 Civ. 3018(JES), 2006 WL 2871978 (S.D. N.Y. Oct. 4, 2006), a United States District Court in New York held that an arbitrator did not “manifestly disregard” corporate law principles, since the complaining party never brought the applicable law to the arbitration panel’s attention.
The Bedfords loaned $7,500 to Gismondi, an employee of Metropolitan Life Insurance Company (MetLife), and also made significant investments in a local health club upon Gismondi’s advice. After the investments failed and Gismondi refused to return the loaned money, the Bedfords initiated arbitration through the National Association of Securities Dealers (NASD). The arbitration proceeding resulted in an award favoring the Bedfords, and holding Gismondi and MetLife Securities, Inc. (MSI), a MetLife subsidiary, jointly and severally liable for damages.
MSI filed a motion to vacate the award, arguing that they were an improper target for the award, since Gismondi was not an employee of MSI. Furthermore, MSI argued that the arbitration panel had manifestly disregarded the law and facts of the case.
The Court disagreed, finding that an arbitrator is “ordinarily assumed to be a blank slate unless educated in the law by the parties.” Wallace v. Buttar, 378 F.3d 182, 190 (2d Cir. 2004). Since neither party brought the applicable corporate law principles to the arbitrators’ attention, they could not have purposefully disregarded them. In other words, the arbitrators would not be expected to know that MSI could not be held liable for the acts of its parent company unless MSI brought these facts and their accompanying legal support to the panel’s attention.
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