Response (Part 2)
Exhibit C, Submission Agreement, para. 2.
For many years, the National Association of Securities Dealers (NASD), now FINRA, has interpreted this rule to prohibit firms from arguing that arbitrators could not make a particular award based upon the choice of law clause in the customer agreement. In 1999, the NASD sanctioned Merrill Lynch and Bear Stearns for improperly using New York choice of law clauses in customer arbitration agreements. The firms argued in arbitration proceedings that under New York law, arbitrators could not award punitive damages or attorneys fees, because they were not allowed under New York law. The sanctioned firms committed the violations between 1994 and 1997, and were censured and fined, and ordered to withdraw any New York law arguments from pending cases. Copies of the disciplinary actions for Merrill Lynch and Bear Stearns are attached respectively as Exhibits G and H. The NASD had warned member firms as early as 1995 that they should not include nor seek to enforce provisions in customer agreements that restrict or limitthe ability of customers to arbitrate disputes or the authority of
The arbitrators to make an award. Notice to Members8 95-85 is attached as Exhibit I9. More
Recently, in 2002 Prudential Securities attempted to make the same arguments in arbitration and
Available for viewing here
8 The NASD/FINRA publishes Notices to provide firms with timely information on a variety of issues. These Notices are available at the FINRA.org website.
The firm was likewise sanctioned by the NASD. Prudentials disciplinary action is attached as Exhibit J. Each of these sanctioned firms was ordered to withdraw the choice-of-law arguments that they were making in pending arbitrations.
Plaintiff is making the same, sanctionable argument to this Court that [t]he Court should also vacate that portion of the award that grants attorneys' feesbecause [t]he parties' agreements provide that Florida law shall apply and Florida law does not allow an award of attorneys fees. Plaintiffs Challenge, p.4. Plaintiff should be estopped from making this argument because it is a clear violation of FINRA Rule 3110(f)(4).
It should be noted that in 2005, the NASD clarified Rule 3110(f)(4) by advising member firms of the following:
NASD originally proposed to include a provision explicitly prohibiting the use of arbitrary choice-of-law provisions in predispute arbitration agreements in order to indirectly deprive customers of rights and remedies to which they would otherwise be entitled under applicable state law. However, after reviewing the numerous comments received by the SEC on the proposal, NASD concluded that the proposed provision could be interpreted to undermine protections currently afforded investors under state law. Therefore, NASD withdrew the provision, but reminds firms that, as it has in the past, NASD will continue to interpret Rule 3110(f)(4)(A) to require that, if a choice-of law provision is used, there must be an adequate nexus between the law chosen and the transaction or parties at issue in accordance with NASD Notices to Members 95-85 and 95-16.
NASD Notice to Members 05-09, attached as Exhibit K10, p.3.
Plaintiff in its Challenge does not even attempt to show a nexus between Florida law and the parties in this case. The fact that Florida is the location of Plaintiffs corporate offices, alone, is an insufficient nexus. As will be shown, the arbitrators had ample evidence that Texas law applied in this case.
b) Presumably the Arbitrators Considered Plaintiffs Contention That Florida Law Applied, As It Claimed in Its Answer, And Rejected It Over Texas Law
The Tylers Statement of Claim, to which Plaintiff responded, is replete with Texas law. See Exhibit D, Statement of Claim, pp. 19, 20, 21, 22, 24 and 25. Plaintiff responded by filing an Answer that contained the following statement, Additionally, pursuant to the Customer Agreement signed by Claimants, Florida law applies to this proceeding and there is no possible violation of any Texas statute. Exhibit E, Plaintiffs Answer, p.10. Plaintiffs argument that Florida law applied to the case presumably was considered by the arbitrators. The Award itself recites:Other Issues Considered &Amp; Decided
The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties.
Exhibit A, the Award.
Every reasonable presumption should be indulged to uphold the arbitration proceeding. Peacock v. Wave Tec Pools, Inc., 107 S.W.3d 631, 635 (Tex. App.Waco, 2003). It is
reasonable to presume that the arbitrators considered the application of Florida law and instead opted to apply Texas law.
c) The Panel Acted Within Its Authority and Powers Applying Texas Law
As stated by the Texas Supreme Court, the authority of arbitrators is derived from the arbitration agreement and is limited to a decision of the matters submitted therein either expressly or by necessary implication. Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406,
408 (Tex.1959). There should be no dispute that the agreement between the Tylers and Plaintiff is a broad one. See, 950 Corbindale, L.P. v. Kotts Capital Holdings Ltd. Partnership, 316
S.W.3d 191, 193 (Tex. App.Houston [14 Dist.], 2010)(arbitration agreement clause is broad where it provides for arbitration of any dispute arising between the parties, or any controversy or claim arising out of or relating to the contract thereof, or any controversy concerning the interpretation, performance or application of the contract.).
Since the arbitration clause at issue is a broad one, a dispute between the parties concerning which law applies is just as arbitrable as a dispute concerning the merits of the claim itself. In Millmaker v. Bruso, 2008 WL 4560624 (S.D. Tex. 2008), the defendants claimed that
the arbitrator exceeded his authority in awarding to plaintiff attorneys' fees, expenses, and arbitration costs because his award was contrary to specific language in the parties agreement. The court looked to the language of the arbitration clause that specifically gave the arbitrator the power to decide any disputes pertaining to the meaning or effect of this Agreement and wrote:
Although the [C]ourt might not have reached the same conclusion regarding [the Paragraphs'] applicability, this is not the test. Torch E & P Co. v. J.M. Huber Corp., Civil Action No. H-06-1786, 2006 WL 3761814, at *3-4 (S.D.Tex. Dec.20, 2006) (Lake, J.)(affirming an arbitral award where the arbitrator interpreted the governing agreement not to preclude the eventual award), aff'd, 234 F. App'x 231 (5th Cir.2007), cert. denied, --- U.S. ----, 128 S.Ct. 1074, 169 L.Ed.2d 809. [T]he
question of interpretation of the [Agreement] is a question for the arbitrator. It is the arbitrator's construction which was bargained for; and so far as the arbitrator's decision concerns the construction of the contract, the courts have no business overruling him because their interpretation of the contract is different than his. Kergosien, 390 F.3d at 353 (emphasis in original). The court should not
impermissibly substitute[ ] its own construction of the Agreement over the [arbitrator's]. In re Heritage Org., L.L.C., Civil No. 3:06-CV-0578-H, 2006 WL 2642204, at *5-7 (N.D.Tex. Sept.14, 2006) (affirming an arbitral award refusing to split costs where the agreement provided costs and expenses of the arbitrators for any arbitration shall be split evenly between the parties); NetKnowledge Techs., L.L.C. v. Rapid Transmit Techs., Civil Action No. 3:02-CV-2406-M, 2007 WL 518548, at *6 (N.D.Tex. Feb. 20, 2007) (concluding that an agreement's broad language, which gave the arbitrator authority to resolve [a]ny disputes arising under or relating to the agreement, permitted the arbitrator to interpret the arbitration agreement in such a way as to not give effect to a limitation of liability clause and a merger clause), aff'd, 269 F. App'x 443 (5th Cir.2008).
The broad arbitration clause in this case likewise should compel the conclusion that the arbitrators had the authority to interpret the Agreement and which law would apply to the case. The Court should decline Plaintiffs invitation, based on an authority argument, to redetermine the issue concerning which law applied when the arbitration clause clearly gave the arbitrators the power to make such a determination.
Notwithstanding the fact that the parties agreed to submit the issue of attorneys fees to the arbitrators, Plaintiff argues that the arbitrators exceeded their authority in awarding attorneys fees. Yet, it is clear from the record that the arbitrators acted within their authority by applying Texas law, because the parties had the most substantial relationship with Texas: the Tylers resided in Texas during the time period of the wrongdoing and did business with Plaintiff exclusively in Texas. The brokerage services provided by Plaintiff and its employees were performed exclusively in Texas. And the arbitration itself took place in Dallas, Texas. Since Texas had the most significant contacts with the parties, Texas law was properly applied.
Arbitrators only exceed their powers when they decide matters not properly before them. Ancor Holdings at 829. The issue of the Tylers recovery of their attorneys fees under Texas
law was before them from the outset of the case; they pled for attorneys fees under Texas law. Exhibit D, Statement of Claim, p.25. Moreover, Defendants argued the application of Texas law during the arbitration. In closing argument, Defendants counsel explained to the panel the various grounds upon which they could issue an award of attorneys fees, including breach of contract:By Ms. Stoneman
And let me just tell you about the other bases for attorney's fees, the claim that we have made. Attorney's fees in Texas are recoverable in your discretion for a breach of contract. You saw me put up on the screen the rules and regulations that the firm agreed to follow in their contract with Mr. Hurshel Tyler. You saw Paul Davis' contract with the firm where he agreed to abide by the rules and regulations. And on page 15 of our tab 14 is a provision from the Texas Civil Practice and Remedies Code that says you can recover attorney's fee when you establish a breach of contract.
Volume 5 of Transcript, p. 176.
The arbitrators acted within their power and authority by applying Texas law, because the arbitrators had the authority to determine which state law applied and they had ample evidence and reason to apply Texas law, particularly in view of Plaintiffs failure to offer any countervailing arguments during the arbitration hearing. As the Dallas appeals court recently stated, [W]e are mindful of other courts' caution against a party's use of the authority argument as a ruse to induce the reviewing court to redetermine the factseven just a tiny bit or reach a legal conclusion on them as found or hoped for which differs from that of the arbitrators. [citations omitted]. Centex/Vestal v. Friendship West Baptist Church, 314 S.W.3d
677, 686 (Tex. App.Dallas, 2010).
d) Plaintiffs Failure To Argue The Application Of Florida Law In Either Its Pre- Hearing Brief Or Any Time During The Five-Day Arbitration Constitutes A Waiver
The single sentence in Plaintiffs Answer that states that Florida law should apply to the case appears under the heading Respondent Did Not Violate Any Texas Statute. Nowhere in Plaintiffs Answer is the argument made that Florida law prevents the award of attorneys fees. Plaintiff even has a heading in its Answer: Claimants Are Not Entitled to Punitive Damages or Attorneys' Fees, yet the arguments made thereunder do not mention Florida law. Exhibit E, Plaintiffs Answer, p.10. Plaintiff also filed a legal brief, yet nowhere in the brief does Plaintiff argue that Florida law governs the case or that Defendants are not able to recover attorneys fees under Texas law.
More incredulous, however, is the fact that at no time during the five-day arbitration did Plaintiff raise the issue of Florida law applying, despite having ample opportunity to do so. The Tylers presented evidence to the arbitration panel of their attorneys fees. Defendants counsel, the undersigned, took the stand and testified on the issue of attorneys fees and costs and testified how the factors set out in Texas Disciplinary Rule 1.5 to determine the reasonableness of an attorney fee applied. Volume 2 of Transcript, pp. 487 497. Plaintiffs counsel commented about how in her experience it was only in
Texas where claimants counsel took the stand to testify as to attorneys fees:
MS. REYES: However, I don't want to start his cross-examination and then him go home for the night and reopen it. The two options Tracy and I discussed is she thought about doing her testimony regarding her fees or it's 20 to 5, we could also just wrap for the day.
MS. STONEMAN: My preference would be, because I have, I believe, what I need, and I don't think it would take very long, for me to just testify about the attorneys' fees that we're seeking in addition.
ARBITRATOR FREEMAN: That's fine. Good idea.
MS. STONEMAN: Would you like me to sit over there?
ARBITRATOR FREEMAN: No, it's fine. You probably could be heard better on the recorder.
MS. REYES: As a side note, the only place I see this done is in Texas.
MS. STONEMAN: What done?
MS. REYES: Someone testifying as to their own attorneys' fees.
MS. STONEMAN: Really?
MS. REYES: Yes. In every hearing I have in Texas, I see it, and no place else.
MS. STONEMAN: Well, that's interesting.
MS. REYES: Just random fun fact for you. Volume 2 of Transcript, pp. 485 and 486.
Plaintiffs counsel could have argued here that Florida law applied but she did not. She did not cross examine Defendants counsel nor raise any objection that Texas law applied to the case, including on the issue of attorneys fees. Plaintiff has waived the argument that Florida law applies.
Arguments that affect choice of law can be waived. Entergy Gulf States, Inc. v. Public
Utility Commission of Texas, 173 S.W.3d 199, 210 (Tex. Civ. App.Austin, 2005)(preemption argument that affects forum rather than choice of law cannot be waived and may be raised on appeal; however, an argument that affects choice of law can be waived). And waiver can result from a failure to raise the later-complained of issue to the arbitrators during the hearing. In Orangefield Independent School Dist. v. Callahan & Associates, 93 S.W.3d 124, 128 (Tex. App.- Beaumont, 2001), the court held that the school district (OISD) waived its right to complain on appeal from the trial court's confirmation of arbitration award that the arbitrator exceeded his statutory authority in awarding to the architect prejudgment interest and attorneys' fees, where the school district failed to raise this issue before the arbitrator. In so holding, the court stated as follows:
OISD was required to raise it at arbitration to avoid waiver. See Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 232 (Tex.App.Houston [14th Dist.] 1993, writ denied)(quoting, with approval, Marino v. Writers Guild of Am., East, Inc., 992 F.2d 1480, 1484 (9th Cir.1993) in which the Ninth Circuit stated:
a party may not sit idle through an arbitration procedure and then collaterally attack that procedure on grounds not raised before the arbitrator when the result turns out to be adverse. This rule extends even to questions such as arbitrator bias, that go to the very heart of arbital fairness.
Orangefield at 128.
Despite the scant reference to Florida law applying in Plaintiffs Answer, Plaintiff has waived the argument that the Florida choice of law clause governs the arbitration as a result of
failing to mention the issue in the five-day arbitration and failing to raise it in its pre-hearing brief.
e) Plaintiff Pled Recovery for Its Attorneys Fees, so Plaintiffs Argument is Disingenuous
Plaintiff itself requested attorneys fees from Defendants in the arbitration. Plaintiffs Answer to the Tylers Statement of Claim states as follows:
Therefore, Claimants are not entitled to any recovery against Respondent, this arbitration should be dismissed and attorneys' fees should be assessed against Claimants.
Respondent requests that it be awarded forum fees, costs, expert fees, attorneys' fees.
WHEREFORE, Respondent requests that the Panel enter an award in its favor:
2. Assessing all forum costs, attorneys' fees, expert fees, and other costs against Claimants.
Exhibit E, Plaintiffs Answer, pp. 6, 11, and 13.
If Florida law does not allow an award of attorneys fees (Plaintiffs Challenge, p.4), then how is it that Plaintiff can seek them? If its because Plaintiff was not certain if Florida law would apply and believed that Texas law might apply, its argument to this Court on attorneys fees is disingenuous.
Regardless, the arbitrators had ample authority upon which to award the Tylers attorneys fees. One such authority is the fact that both parties requested attorneys fees. FINRA provides the following instruction to its arbitrators regarding attorneys fees:
The authority for granting attorneys fees must be included in the award. If the arbitrators have doubts regarding their authority to award such fees, they should
request the parties to brief the issue. There are three situations when parties may pursue attorneys' fees:
a contract includes a clause that provides for the fees;
the fees are allowed as part of a statutory claim; or
all of the parties request or agree to such fees.
Exhibit F, FINRA Arbitrators Guide, p.52 [emphasis added].
The record does not reflect that the arbitrators had any doubts regarding their authority to award attorneys fees, nor did they request the parties to brief the issue. It is clear that both Plaintiff and Defendants requested attorneys fees. This was brought to the attention of the arbitration panel by the Tylers counsel in closing argument:By Ms. Stoneman
The Texas Insurance Code, likewise, has a provision that says if you find a violation of the Texas Insurance Code, you have the ability to award court costs and attorney's fees. And as I mentioned, the DTPA. Oh, and the other reason is Raymond James asks for them. If you look at the answer that they filed in this case, you'll see a paragraph at the end that says and we want our attorney's fees. Well, my goodness, what better evidence is there than that.
Volume 5 of Transcript, p.176.
Accordingly, Plaintiffs request for attorneys fees is not only disingenuous; it is an additional basis for the panel to award attorneys fees to the Tylers. See Babcock & Wilcox Co.
v. PMAC, Ltd., 863 S.W.2d 225 (Tex. App.Hous. [14 Dist.], 1993)(trial court was precluded from interfering with arbitrator's jurisdiction and impermissibly modifying arbitrator's decision regarding attorney's fees where parties agreed to submit issue of attorney's fees to arbitration).
Nafta Traders, Inc. v. Quinn, No. 08-0613, 2011 WL 182087 (Tex. 2011) does not compel a different conclusion11. There, the principal question addressed by the court was whether the Texas General Arbitration Act precludes an agreement for judicial review of an arbitration award for reversible error, and if not, whether the FAA preempts enforcement of such an agreement. The agreement between the parties in Nafta is very different from the broad
Arbitration clause here. It provided:
The arbitrator does not have authority (i) to render a decision which contains a reversible error of state or federal law, or (ii) to apply a cause of action or remedy not expressly provided for under existing state or federal law.
Nafta argued in part that by agreeing to these limits on the arbitrator's authority the parties had in effect agreed to expand the narrow scope of judicial review otherwise provided by the TAA and the FAA. However, the above restriction is not akin to a choice of law provision, therefore, the Nafta case is not applicable to the issues before the court.
The arbitrators award of attorneys fees should be confirmed for any one of the five bases stated above - a) that Plaintiff violated a FINRA rule which prohibits firms from using an arbitration agreement to limit the ability of the arbitrators to make an award; b) that presumably the arbitrators considered Plaintiffs contention that Florida law applied, as it claimed in its Answer, and rejected it over Texas law; c) that the panel acted within its authority and powers by applying Texas law, d) that Plaintiffs failure to argue the application of Florida law in either its pre-hearing Brief or at any time during the five-day arbitration constitutes a waiver, and e) that Nor does Plaintiff enlighten the reader how the 45 page opinion supports its claim.
Plaintiff pled for recovery of its attorneys fees, so Plaintiffs argument is disingenuous. Accordingly, Plaintiffs argument should be denied and the Award should be confirmed. The Arbitrators Did Not Exceed Their Authority By Awarding Relief Not Requested Because The Relief They Awarded Was Requested
Plaintiffs argument that Defendants specifically chose rescission rather than damages and emphasized their right to forego damages and insist upon a rescissionary remedy is undercut by the Tylers counsels acknowledgment at the arbitration that it may be too administratively difficult to order a return of the investments at issue to Plaintiff and in that case and that the panel should simply choose a figure to compensate the Tylers (Volume 5 of the Transcript, p.179 lines 9 16). Accordingly, Plaintiffs factual contention made the basis of this argument is not supported by the record.
In any event, the inquiry to be made is not whether the arbitrators correctly determined the remedy to be provided the Tylers, but whether or not the arbitrators had the authority to do so, based upon the arbitration clause and the parties' submissions. Ancor Holdings, LLC v.
Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 830 (Tex. App.Dallas, 2009);
Centex/Vestal v. Friendship West Baptist Church, 314 S.W.3d 677, 688 (Tex. App. - Dallas,
2010)(in addition to arbitration agreement, the authority of arbitrators is also derived from the matters submitted for determination); City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515,
51819 (Tex. App.-Houston [1st Dist.] 1994, writ denied) (considering scope of arbitration pleadings and parties' agreement to determine whether arbitrator exceeded his authority).
Plaintiff agreed to submit to arbitration any dispute or controversy, an admittedly broad arbitration clause. Because there is an absence of any restrictive language in the arbitration clause, great latitude must be allowed in fashioning the appropriate remedy constituting the
arbitrator's decision. Peacock v. Wave Tec Pools, Inc., 107 S.W.3d 631, 639 (Tex. App.Waco, 2003). At the arbitration, the parties acknowledged that the figure that the panel awards is always a crazy number.
Volume 5 of the Transcript, p.124, lines 8 23.
It simply cannot be said that the panel rendered an award that was outside of their authority in view of the broad arbitration agreement and the Plaintiffs agreement, if not requirement, to submit the entire controversy to arbitration. Further, the Tylers counsels statements to the arbitration panel during the hearing that the arbitrators should do what you think is right, and do what you think is equitable in this circumstance and that if for some reason you are uncomfortable with that [forcing a return of the investments] or you believe that is too administratively difficult to accomplish, then Mr. Tyler will retain those investments and dispose of them at his choosing. reinforce that the panel was well within its authority in rendering the Award that it did.
Texas courts go to great length to protect the remedies chosen by arbitrators that in some cases, relief is upheld when it is not even requested or allowed. In 950 Corbindale, L.P. v. Kotts
Capital Holdings Ltd. Partnership, 316 S.W.3d 191 (Tex. App.Houston [14 Dist.], 2010), the
arbitration agreement restricted the arbitrators authority to awarding only compensatory damages. The court held, however, that did not foreclose the arbitrator's ability to grant declaratory relief. Likewise, in Baker Hughes Oilfield Operations, Inc. v. Hennig Production
Co., Inc., 164 S.W.3d 438, 443 (Tex. App.-Houston [14.Dist.], 2005, the court held that the
arbitration panel did not exceed its authority in awarding $351,090.43 to the oil company for damages based upon breach of contract, even though breach of contract was not submitted in the arbitration pleadings. The court held that the agreement to arbitrate was so broad that it subsumed any controversy or claim arising out of or relating to corporation's services, including
breach of contract. Clearly, arbitrators are given great latitude in determining the appropriate remedy, particularly where, as here, the arbitration clause is broad.
It should also be noted that none of the arbitrators who served in the Tyler case were lawyers. They were businessmen. FINRA states the following regarding who can serve as a FINRA arbitrator12:
We recruit arbitrators from diverse backgrounds to hear cases and ensure we efficiently meet the important demand of resolving disputes. Among other professions, our arbitrators are:
lawyers; educators; doctors; accountants;
business professionals; and securities professionals.
The FINRA arbitrators Plaintiff unjustly accuses of exceeding their authority, although not lawyers, are highly skilled and experienced in finance and securities arbitrations: (a) Roland Freeman, panel chairman, with 40 years of experience in real estate development, investment, syndication, finance, brokerage and management and veteran of 7 FINRA arbitrations that went to Award; (b) Robert Gregory, an MBA Wharton School of Finance Graduate and the retired Chief Executive Officer of Caltex Oil Malaysia and member of 15 prior FINRA arbitration panels that went to Award; and (c) Robert Chisolm, a former Controller and Vice President of Available for viewing at: HTTP://www.finra.org/ArbitrationMediation/Neutrals/BecomeAnArbitrator/P123458
Finance for several manufacturing companies and a member of 10 prior arbitration FINRA panels that went to Award.13
Moreover, FINRA arbitrators are instructed that they are not required to strictly follow the law but rather are to give consideration to equity, as well. Part One: An Overview of the Arbitrators Guide states the following:
Equity is justice in that it goes beyond the written law. And it is equitable to prefer arbitration to the law court, for the arbitrator keeps equity in view, whereas the judge looks only to the law, and the reason why arbitrators were appointed was that equity might prevail.
Domke on Aristotle
Exhibit F, FINRA Arbitrators Guide, p.8
The Texas Arbitration Act recognizes this principle, as well:
§ 171.090. TYPE OF RELIEF NOT FACTOR. The fact that the relief granted by the arbitrators could not or would not be granted by a court of law or equity is not a ground for vacating or refusing to confirm the award.
Arbitrators are not akin to judges in that they can award relief that the courts cannot. The Tyler arbitrators did not exceed their authority to award the relief they did for all of the foregoing reasons.
the Award numbers represent only those cases that did not settle and went to award; it is not known how many additional arbitration panels these arbitrators served on, but which cases settled before an Award. This background information was pulled from the bios of each of the arbitrators.
In conclusion, Plaintiffs complaints do not fit within any of the recognized grounds to challenge an arbitration award. Instead, Plaintiffs challenge appears to be a ruse to induce this court to either redetermine the facts or reach a legal conclusion which differs from that of the arbitrators. Tex. Civ. Prac. & Rem. Code § 171.087 provides that unless grounds are offered for vacating, modifying, or correcting an award under Section 171.088 or 171.091, the court, on application of a party, shall confirm the award. Defendants request that Plaintiffs Petition be dismissed, its Motion be denied and the Award be confirmed with interest from the date of the Award.IV. Defendants are Entitled to Interest From the Date of the Award
The arbitrators awarded interest only through the date of service of the award or May 10, 2011. The Award stated that Plaintiff will pay interest on the above-stated sum [$1,129,796.00] at the rate of 5% per annum from and including December 1, 2006 through and including the date the Award is served. The Award was served on May 10, 2011, per p.7 of the Award, Exhibit A. Accordingly, Defendants interest calculation only ran through May 10, 2011.
Plaintiff has not made any payments whatsoever to Defendants pursuant to the Award. Pursuant to FINRAs Code of Arbitration Procedure Rule 12904(j), Plaintiffs failure to pay the Award within 30 days of the date of the Award triggers interest accruing from the date of the Award. Rule 12904(j) provides as follows:
(j) All monetary awards shall be paid within 30 days of receipt unless a motion to vacate has been filed with a court of competent jurisdiction. An award shall bear interest from the date of the award:
If not paid within 30 days of receipt;
If the award is the subject of a motion to vacate which is denied; or
As specified by the panel in the award.
Interest shall be assessed at the legal rate, if any, then prevailing in the state where the award was rendered, or at a rate set by the arbitrator(s).
Since the panel did not specify interest after the Award, Defendants are due that interest pursuant to Rule 12904(j). The panels pre-Award interest rate of 5% is also the post judgment interest rate in Texas. Accordingly, Defendants are entitled to a judgment in the amount of
$1,738,141, the total amount the arbitrators found Plaintiff liable for, plus interest on that sum at the rate of 5% from May 10, 2011 until paid.
There is additional authority for Plaintiffs obligation to pay interest from May 10, 2011. Plaintiff agreed in its Submission Agreement that this Court may enter judgment on the Award plus interest. Paragraph 4 of the Submission Agreement signed by Plaintiff and attached as Exhibit C states:
The parties agree to abide by and perform any award(s) rendered pursuant to this Submission Agreement. The parties further agree that a judgment and any interest due thereon, may be entered upon such award(s) and for these purposes, the parties hereby voluntarily consent to submit to the jurisdiction of any court of competent jurisdiction which may properly enter such judgment.
The Tylers therefore request that Plaintiffs Petition be dismissed, that its Motion to Modify, Correct and/or Vacate Arbitration Award be denied, that Defendants Motion to Confirm Arbitration Award be granted and that a judgment be entered in the amount of
14 Available for viewing at: http://www.finra.org/web/groups/industry/@ip/@reg/@rulfil/documents/rulefilings/p018366.pdf
$1,738,141 plus interest on that sum at the rate of 5% from May 10, 2011 until paid, and for such other and further relief to which the Tylers are justly entitled.
TRACY PRIDE STONEMAN, P.C.
BY S:/ Tracy Pride Stoneman Tracy Pride Stoneman
Texas Bar No. 19309750 Colorado Bar No. 25257 301 Snowcrest
Westcliffe, CO 81252
phone: (800) 783-0748
fax: (214) 853-9300
Boyd L. Richie Attorney at Law
P.O. Box 2256
Graham, Texas 76450-8256
John Perry Brooks State Bar No. 03070300
Law Offices of Brooks & Campbell, LLP 4245 Kemp Blvd, Suite 800
Wichita Falls, TX 76308
ATTORNEYS FOR DEFENDANTS, THE TYLERSCertificate of Service
I certify that this Response was served on Linda Broocks, attorney for Plaintiff, this the 25th day of July, 2011.
S:/ Tracy Pride Stoneman