4thCir: Court vacates financial advisors' NASD arbitration award

An arbitration award rendered under NASD rules granting compensatory damages to financial advisors was properly vacated as the award did not rest on the evaluation of the advisors performance but rather on issues that were outside the arbitrators power under the FAA. The advisors had independent contractor agreements with the broker that contained termination-at-will provisions. The broker's in-house attorney had jointly represented the advisors in a third-party arbitration over complaints of serious misconduct against them, even though their individual claims differed in certain aspects. The advisors later brought an action for wrongful discharge, which went before the arbitration panel in keeping with NASD rules. Despite the at-will policy and the termination of agreements provision the advisors had voluntarily signed, the panel awarded damages, and the broker sought to have the award vacated. The basis of the advisors' claims were wrongful joint representation, unauthorized practice of law and breach of the brokers legal and fiduciary duties. These claims fell far outside the arbitration panel's ability to resolve disputes arising out of significant aspects of the employment relationship. The panel in fact had adjudicated a tort claim. Raymond James Financial Serv, Inc v Bishop et al, ___F.3d___(4th Cir. February 22, 2010).

Mitchell H. Rubinstein