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Rogers v. Ausdal Financial Partners, Inc.

United States District Court, D. Massachusetts

March 9, 2016




This is an action to confirm an arbitration award entered by a panel of three arbitrators in resolution of a dispute between petitioner Cindy-Marie Rogers and respondents Joan Norton and Ausdal Financial Partners, Inc. Ausdal and Norton contend that the award must be vacated pursuant to 9 U.S.C. § 10(a)(2)-(4) because the arbitration panel acted improperly. Specifically, they contend that the panel (1) awarded damages that were neither claimed by petitioner nor supported by the evidence, (2) awarded damages in a manner and amount that was contrary to clear law, and (3) denied respondents a fair opportunity to obtain material evidence through discovery.

The essential issue in this case is not whether this Court would have reached the same decision, or even whether the decision is reasonable, sensible, or fair. Rather, it is whether this case falls within one of the narrow statutory grounds that permit an arbitration award to be overturned. Put simply, a party seeking to overturn an arbitration award faces a very steep uphill climb; that is true even if the award is against the great weight of the evidence or otherwise unreasonable or wrongly decided. Respondents here have not satisfied that demanding legal standard. Accordingly, and for the reasons set forth below, the panel’s award will be confirmed.

I. Background

The facts are set forth below as reflected in the record of the underlying arbitration proceeding unless otherwise noted.

In early 2010, petitioner Cindy-Marie Rogers was offered an early retirement buyout package from her employer, Verizon Communications. In considering whether to take the offer, Rogers consulted with respondent Joan Norton, a financial advisor and registered representative of respondent Ausdal Financial Partners. Following that consultation, Rogers accepted the buyout package offer from Verizon, purchased a Prudential variable annuity through Rogers and Ausdal, and retired. (Record at 2-3).

Rogers eventually became dissatisfied with the annuity’s performance. On May 16, 2014, she initiated an arbitration proceeding against Norton and Ausdal. (R. at 1544-47). Her customer agreement with Norton and Ausdal included an “Arbitration Agreement, ” in which the parties agreed to submit “any controversy” between them to arbitration before either the New York Stock Exchange, any other national exchange on which a transaction giving rise the claim had occurred, or the Financial Industry Regulatory Authority (“FINRA”). (R. at 1547, Customer Agreement ¶ 19). Rogers filed her claim with FINRA, and the parties do not dispute that arbitration was therefore subject to FINRA rules governing arbitration proceedings.[1]

The customer agreement also contained an arbitration disclosure clause; among other things, the disclosure stated that “[t]he ability of the parties to obtain documents, witness statements, and other discovery is generally more limited in arbitration than in court proceedings.” (R. at 1547, Customer Agreement ¶ 18). The clause further disclosed that “[t]he arbitrators do not have to explain the reason(s) for their award.” (Id.).

In her claim, Rogers alleged that she decided to take early retirement only because Norton had advised her that the annuity she purchased would support monthly withdrawals of $3, 765; that the annuity was unsuitable because it could not sustain withdrawals of that amount; and that Norton failed to advise her that any withdrawals made before Rogers reached age 59 ½ would be subject to a 10% tax penalty. (R. at 2, Am. Statement of Claim at 1-2). Rogers requested consequential damages, disgorgement of profits, lost opportunity damages, rescission damages, costs, punitive damages, pre-award interest, and attorneys’ fees. (R. at 19, Am. Statement of Claim at 19).

Norton and Ausdal responded to the claim, denying the allegations and asserting various defenses. In countering Rogers’s assertion that she relied entirely on Norton’s advice, respondents argued that Rogers instead actually relied on information in documents given to her by Verizon. Respondents also sought to argue that Rogers’s decision was influenced in part by the fact that had she not retired, her office would have been moved from Boston to Lowell, Massachusetts, necessitating a long commute without the availability of public transportation. (R. at 158).

After Rogers filed her claim, the pre-hearing process appears to have proceeded in normal fashion. Only one issue from the pre-hearing record is relevant to the case as it stands now. On December 31, 2014, respondents filed a motion with the panel, pursuant to FINRA Rules 12512 and 12513, to issue subpoenas to fifteen non-parties for the production of documents and testimony. One of the non-parties from whom respondents sought discovery was Rogers’s former employer, Verizon Communications. In their motion, respondents argued that Verizon possessed documents and information relevant to the following:

. . . the information provided to [Rogers] prior to her accepting early retirement, the early retirement benefits she received, the retirement benefits she would have received if she did not take early retirement, her working conditions at the time she retired, her working conditions if she had not retired, and union contracts affecting the above[.]

(R. at 239-40, Respondents’ Motion to Issue Subpoenas and Requests for Non-Party Production of Documents and Witness Testimony).

On February 19, 2015, the panel chair denied the request without a hearing. (R. at 243-44). The chair did, however, issue a written order on the request, stating:

In general, FINRA arbitration is a forum in which the parties have agreed to waive the typical motion practice and extensive discovery of litigation for “the simplicity, the informality and expedition of arbitration.” The Respondents’ extensive, overbroad, and burdensome motion for issuance of twelve (12) subpoenas requiring extensive discovery by non-parties seeking irrelevant, confidential, privileged and other protected information is hereby denied in its entirety, except for the Order to the Keeper of Records for Prudential Financial, Inc. . .
No further requests for subpoenas for discovery by the Respondents will be considered by the Arbitrator in this case.

(R. at 243, Order on Request for Issuance of Subpoenas and Requests for Non-Party Discovery). In addition, the chair assessed the full costs of reviewing the motion against respondents. (Id.).

Respondents then filed a motion to compel production of the documents from Rogers along with a motion for reconsideration of the denial of their request. (R. at 245-60). In their motions, respondents elaborated on their contention that the documents and information requested were both necessary and relevant to their defense. The chair denied both the motion to compel and the motion for reconsideration, explaining that “Respondents have continued to seek basically the same documents that were [previously] denied.” (R. at 312-13). The chair assessed full costs against respondents, and ordered that “Respondents shall not seek the . . . documents or make any further argument for said documents, or else a monetary penalty and/or other sanctions will be issued against the respondents.” (Id.).

The arbitration panel held a hearing on the substantive claims from May 4 through May 8, 2015. On the second day of the hearing, the chair asked why Rogers’s Verizon early retirement package documents had not been produced:

PANEL CHAIR: There’s one thing that has come to our interest as a panel that we would like to see what the pension offer was. I gather there’s no document that has been produced in this or agreed to in this.
MR. KUHL [Attorney for Rogers]: When you say “pension documents” --- CHAIR: That is the amount of pension offered from Verizon.
MR. KUHL: That would have set forth specifically her monthly amount had she ...

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