Unsuccessful Challenge to FINRA Arbitration Shows Durability of Arbitral Awards

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The Massachusetts Arbitration Act ("MAA") provides for judicial review and vacation of arbitration awards, under the specific and limited circumstances enumerated at G.L. c. 251, § 12. These limitations acknowledge the public policy goals that encourage private, binding arbitration of disputes in general. "Absent fraud," the Massachusetts Supreme Judicial Court has held, "errors of law or fact are not sufficient grounds to set aside an award... An arbitrator's result may be wrong; it may appear unsupported; it may appear poorly reasoned; it may appear foolish. Yet, it may not be subject to court interference." Lynn v. Thompson.

Such limited judicial powers to interfere with arbitral awards can become more problematic for parties to arbitrations conducted via the Financial Industry Regulatory Authority's ("FINRA") Office of Dispute Resolution, which, unlike many other commercial arbitration organizations, publishes its arbitral awards in an online database. In Santander Bank, N.A., v. Michael Klein (Suffolk Sup. Ct. No. SUCV2019600D (June 6, 2019)), a financial services company applied to the Business Litigation Session (Wilkins, J.) either to vacate a FINRA arbitration award (the "Award") or modify that Award to strike certain factual findings that the arbitral panel made, allegedly beyond the scope of its authority under the parties' arbitration agreement.

As a preliminary matter, the Court found it lacked jurisdiction to strike the factual findings requested by the financial services company because G.L. c. 251, § 12 only provides a court with the authority to vacate "an award" - noting that "errors of fact do not warrant court intervention."

The financial services company argued that the findings, if not the entire award itself, should be vacated based on G.L. c. 251, § 12(a)(3), which empowers a court to vacate an arbitration award upon a finding that "the arbitrators exceeded their powers." The Court found this argument unavailing for three reasons. First, through the Award, the panel granted the relief requested in the petitioner's statement of claim, which therefore meant that relief fell within the scope of the arbitration agreement between the parties. Second, the panel apparently decided as a matter of law that it had the power to make the factual findings in question, and "the statute does not authorize the court to vacate an award if it disagrees with the arbitrator's interpretation of the law." See Sch. Dist. of Beverly v. Geller. Finally, the Court held that the challenged findings fell reasonably within the scope of the issues submitted to the panel through the arbitration agreement, providing context to the allegations in the statement of claim. Therefore, the financial services company was unable either to vacate the Award or to strike the findings in question, leaving both available for public consumption on FINRA's web site. 

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