SCOTUS Declines to Review Case Involving FINRA Award

This article was first published on the Securities Arbitration Alert blog. here.

The Supreme Court on October 31 denied Certiorari in Caputo v. Wells Fargo, No. 22-265, a case involving a FINRA Award. We analyzed in SAA 2022-19 (May 19) the underlying Third Circuit decision, Caputo v. Wells Fargo Advisors, LLC, No. 20-3059 (3rd Cir. May 9, 2022), reh’g den. Jun. 17. There, a unanimous Court held that, even if a finra Panel’s Award was legally erroneous, this alone did not meet the stringent standard for a finding of “manifest disregard of the law.”

Facts Below

Wells Fargo succeeded in a FINRA arbitration brought to recover the $1,663,529.71 balance on a discharged adviser’s promissory note. Respondent Caputo then sought without success to vacate the Award (ed: see the case of the same name, No. 3:19-cv-17204-FLW-LHG (D. N.J. 2020)), and this appeal followed. The issues? “Caputo argues that the award should be vacated because it violates public policy and is in manifest disregard of law. He also argues that it should be vacated because the arbitration panel exceeded its authority and excluded certain evidence.”  After rejecting the exceeding authority and public policy challenges, the Third Circuit says this about “manifest disregard”:

“Even if the FINRA arbitration panel got it wrong, it is hard to see how this would be more than legal error, as required to vacate an arbitration award under the manifest disregard doctrine. Further, despite Caputo’s assertions to the contrary, there is no evidence in the record that Wells Fargo urged the FINRA arbitration panel to disregard the law. The arbitrators’ decisions to cut off the cross-examination of certain witnesses and rule in favor of Wells Fargo do not support the inference that the FINRA arbitration panel disregarded the law such that they exceeded their authority.”

Issues in Cert. Petition

The September 15 Certiorari Petition in Caputo v. Wells Fargo, No. 22-265, presented these issues:

1. Whether this Court’s public policy exception is inapplicable to an arbitral award enforcing contractual provisions that are expressly illegal, void, and unenforceable under applicable statutes, on the supposition that such statutes do not embody sufficiently well-defined and dominant public policy.
2. Whether this Court’s public policy exception to judicial deference toward arbitral awards is displaced by a deferential manifest-disregard-of-law standard of judicial review where, as here, the public policy issue was presented to the arbitrators.
3. Whether this Court’s public policy exception is applicable under the FAA in light of Hall Street Associates v. Mattel, 552 U.S. 576 (2008) (holding that grounds set out in the FAA for vacating arbitral awards are exclusive), as to which lower courts are split.

As usual, SCOTUS provides no explanation.

(ed: *The case appears on page 3 of the October 31 Order List. **The FINRA case is FINRA ID No. 15-0204 (Newark, NJ, Jul. 26, 2019). ***We had thought the Court might want to take up issue # 3.)

George Friedman

George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA…