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The D.C. Circuit Court of Appeals has ruled that an arbitration panel's refusal to hear testimony from a second expert witness in a dispute over major investment losses did not rise to the level of misconduct, as the refusal did not deprive the proffering party of a fair hearing.
In Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 06-7067, 2007 WL 776864 (D.C. Cir. Mar. 16, 2007), Lessin lost $5.6 million over a ten month period – nearly 100% of the value of his account with Merrill Lynch. Having determined that his losses were primarily attributable to Lessin's own aggressive investment strategy, an arbitration panel awarded Lessin only $33,000.
In moving to vacate the award, Lessin argued that the arbitration panel's refusal to hear testimony from a second expert witness constituted "misconduct" in violation of the Federal Arbitration Act (FAA). See 9 U.S.C. Sec. 10(a)(3)). In rejecting this argument, the Court noted that Lessin presented no evidence that this refusal had in any way "deprived him of a fair hearing."
More specifically, the Court noted that the unheard testimony was basically designed to discredit Lessin's broker on one narrow issue, and that even if it succeeded, there was plenty of other evidence in the record to support the broker's basic assertion that he had warned Lessin of the risks involved and that the losses were primarily Lessin's own fault.
Reaffirming that its limited scope of judicial review does not extend to "reweighing equities supported by the arbitration record," the Court refused to vacate the award.
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